Solved Example

Case - Warehousing

Over the next few slides, we discuss an example case study. Please note:
● It is a fully solved case and there is no deliverable from your side
● The aim of this case solution is to help you familiarise with the requirements of the assignment case
● This solution just represents one of the ways in which case questions can be answered. Feel free to present answers for assignment case in any way that you feel is appropriate.

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 Case - Warehousing

Problem Statement

You are working as the Head of Operations of an e-commerce company. The company procures goods from a list of suppliers and stores them in the
warehouses. Once an order is placed for these goods, they are retrieved from the warehouses and shipped to the customers. As the department head,
you are required to design this warehousing process for the company.

Key Pointers

● Purchase orders for the suppliers are automatically generated by the system

● Company uses an inventory management system to manage the storage of goods and their retrieval once an order is placed

● Finance team requires both invoice as well as the receiving slip in order to release payment to the supplier

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 Deliverables

1. Please design the Blueprint (i.e. top-level block diagram) of this warehousing system.

2. What should be done if an order is received for goods not present in the inventory? What are the options and which one would you pick?

3. How can we manage the problem of goods getting expired in warehouses? What are the options and which one would you pick?

4. List down top MIS Reports that you would monitor, as the Head of Operations, to ensure that the designed system is working properly.

5. Please design an MIS report to monitor the fulfillment rates and acceptance rates in the Goods Receiving Process.

6. Please design an MIS report to monitor the current Inventory status.

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 Solution

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 Problem 1: Please design the Blueprint (i.e. top-level block diagram) of this warehousing system.

Note: Please note that we have used draw.io to prepare the blueprint diagram. Feed free to use any tool you are comfortable with for preparing the diagram.
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 Problem 2: What should be done if an order is received for goods not present in the inventory?

● Option 1: Cancel the order

○ Cancel the order. Inform customer and initiate refund.
○ It provides fastest resolution of all orders and is operationally easy to implement.
○ However, it might lead to bad customer experience and potential revenue loss.

● Option 2: Procure and deliver

○ Procure out-of-stock goods. Inform customer about revised ETA and keep checking for cancellation.
○ It helps minimize revenue loss. Also, decision to wait or to cancel is with customer.
○ However, customer might cancel after the goods have been procured.

● Option 3: Check with customer regarding wait time. Based on that, procure or cancel.
○ Call customer and check if he/ she wants to wait or cancel the order based on new delivery timelines. Procure only if he/ she is willing to wait.
○ It minimizes revenue loss.
○ However, customers might find calling too intrusive.

Final Recommendation
● Option 2 i.e. Procure and deliver.
● This option is preferred as it leads to best customer experience.
● Even if the order is cancelled after procurement, it will not impact the business as we would have procured an out-of-stock item which is in-demand.

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 Problem 3: How can we manage the problem of goods getting expired in warehouses?

● Option 1: Dispatch on FIFO basis. Discard expired ones found in QC.

○ Goods are retrieved from warehouses in the order in which they were purchased
○ Any expired good found during QC is discarded. If expiry is within margin, good is shipped to the customer.
○ It is operationally very easy to implement.
○ However, inventory can contain undetected expired goods due to which it will be difficult to manage purchases.

● Option 2: Dispatch on expiry date basis. Periodic audits to sell near expiry goods.
○ Goods are sent to customers in the order of their expiry date (Sooner expiry first, with some margin in expiry).
○ Have periodic audits. Near-expiry goods are either sent back to supplier or sold to local shops or tier-3 town suppliers cheaply in clearance sale.
○ Near-expiry goods are monetized before they expire and saleable inventory is more predictable.
○ However, audits can be operationally heavy.

Final Recommendation
● Option 2 i.e. Dispatch on expiry date basis.
● This option is preferred as inventory will remain clean and predictable.
● Also, losses are minimized via sale of near-expiry goods.

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 Problem 4: List down top MIS Reports that you would monitor, as the Head of Operations, to ensure
that the designed system is working properly.

1. Goods Receiving Process Summary

○ Provides summary of all goods received and accepted today and the cost of those goods
○ Helps understand if all the purchase orders are being fulfilled and if the quality of goods received is acceptable

2. Summary of Goods Returned during Receipt

○ Provides summary of goods which were returned back to the supplier with top reasons for rejection
○ Helpful to know if there is a dip in the quality of goods supplied by any specific supplier

3. Inventory Status
○ Provides current status of the inventory
○ Can be used to perform random checks to ensure that the inventory status in the system is in sync with the inventory status in the warehouses

4. Order Shipping Rates

○ Provides number of orders not shipped today and the top reasons for not shipping those orders
○ Helpful to improve shipping rates by understanding the top reasons because of which certain orders are not being shipped

5. Delay in Shipping
○ Provides summary of orders which were delayed and the top reasons for delay
○ Can be used to improve customer experience by minimizing the delay in shipping of goods

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 Problem 5: Please design an MIS report to monitor the fulfillment rates and acceptance rates in the
Goods Receiving Process.

MIS - Goods Receiving Process Summary

Order
Units Units Received Units Acceptance Avg Cost per Cost of Inventory
Supplier Name Purchase Order # Fulfillment Units Accepted (#)
Ordered (#) (#) Rejected (#) Rate (%) Unit (Rs) Received (Rs)
Rate (%)
Allied Supplies PO-01-20180601 200 200 100% 187 13 94% 150 28,050

A & E Corp PO-07-20180702 140 140 100% 139 1 99% 172 23,908

Anchor Publishing PO-05-20180706 91 89 98% 89 - 100% 125 11,125

Beets Cooking PO-11-20180604 55 55 100% 55 - 100% 120 6,600

Cellco Inc PO-07-20180701 40 40 100% 36 4 90% 170 6,120

Marshal Farms PO-01-20180718 25 19 76% 18 1 95% 225 4,050

Total - 551 543 99% 524 19 97% 152 79,853

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 Problem 6: Please design an MIS report to monitor the current Inventory status.

Category level - Inventory Status

Per Unit Price Saleable Retail

Item Category Units in Inventory (#)
(Rs) Value (Rs)

Shoes 140 957 134,000

Soap 400 55 22,000

Canned Soup 133 109 14,550

Item level - Inventory Status

Units in Inventory Per Unit Price Saleable Retail

Item Code Item Name Item Category Storage Location
(#) (Rs) Value (Rs)

S011 LOTTO Lorenzo Lace-up - 11 Shoes 100 990 99,000 A12-23-586

S010 Tresmode Edge Grip - 10 Shoes 40 875 35,000 A12-23-587

S250G Lux - Saffron Glow - 250G Soap 400 55 22,000 A13-11-103

CSGEN Campbell's Farro Soup Canned Soup 108 100 10,800 A15-52-671

CSPRE Boulder Organic Soup Canned Soup 25 150 3,750 A15-52-673

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