PROJECT

Group Members:
1. M Mujtaba
2. Shahab Murtaza
3. Zuhair Nasir
4. Mehak Fatima

Submitted to: Sir Usman Akbar

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Contents
1. Introduction .................................................................................................................................................... 3

2. Servis Group Vision......................................................................................................................................... 4

3. Servis Group Mission Statement ....................................................................................................................... 4

4. Project Outline ................................................................................................................................................ 4

5. Warehouse Orientation ..................................................................................................................................... 5

6. Physical Dimensions ........................................................................................................................................ 5

a. Capacity ......................................................................................................................................................... 6

b. Manpower ...................................................................................................................................................... 6

c. IT Systems ...................................................................................................................................................... 6

7. Functions of Warehouse ................................................................................................................................... 7

8. Operating Procedures ....................................................................................................................................... 8

b. Inventory Handling. ......................................................................................................................................... 8

c. Barcoding & RFID. ......................................................................................................................................... 8

d. Third Party Logistics. ....................................................................................................................................... 8

9. ABC Analysis ................................................................................................................................................. 9

10. XYZ Analysis ............................................................................................................................................... 11

11. Manhattan Matrix .......................................................................................................................................... 11

12. Layout & Space Utilization............................................................................................................................. 13

Space Utilization of Current Layout .............................................................................................................................. 13

Utilization of Current Layout ....................................................................................................................................... 14

Proposed Layout ......................................................................................................................................................... 14

13. Other Aspects ................................................................................................................................................ 16

a. Safety and Health Environment ....................................................................................................................... 16

b. Software Implementation................................................................................................................................ 16

c. Humidity control ........................................................................................................................................... 16

d. Workforce Requirement ................................................................................................................................. 16

e. Employee training.......................................................................................................................................... 17

f. Adopting Automation ....................................................................................................17

g. Space Sharing ............................................................................................................17

h. Turn Ratio................................................................................................................17

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 SERVIS INDUSTRIES

1. Introduction
Service Industries limited (SIL) is a public limited Company listed on the stock exchange of Pakistan.
It has annual revenues of about PKR 24 Billion and it claims tobe the largest manufacturer and
exporter of footwear in Pakistan in the past 10 years.The company’s shoe manufacturing plant was
installed in 1954 and it started production in the same year. However, it was late 1959, when the
company’s market group was established. They have a moto of Humility, Fairness and Respect.
Servis Group is member of Lahore Chamber of Commerce & Industry as well as Pakistan Footwear
Manufacturers Association.
Company has two manufacturing plants, SIL footwear (export) plant near Muridke whereas the plant
for local consumption is located in Gujranwala. Company has six warehouses spread in different
parts of the country (Islamabad, Lahore, Multan, Karachi, Faisalabad and Gujranwala). In the
footwear section, it is one of the leading players and its operative business is divided into two
segments, wholesale and retail. Company has more than 500 company owned retail stores and
provides products onwholesale basis to around 1500 independent retailers across the country. It
works under the lines Servis, Cheetah, Don Carlos, Ndure, Shoe Planet and CALZA

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2. Servis Group Vision
“To become a Global, World class and Diversified Company which leverages itsbrands
and its people” (Vision and Mission Statement | Servis Group, 2020).

3. Servis Group Mission Statement

“To be a result oriented and profitable Company by consistently improving market share, quality,
diversity, availability, presentation, reliability and customer acceptance.

a. To emerge as a growth oriented ensuring optimum return and value addition to its
shareholders.
b. To ensure cost consciousness in decision making and operations without compromising the
commitment to quality.
c. To create an efficient resource management and conductive business environment. Evolving
an effective leadership by creating a highly professional team fully equipped to meet any
challenge.
d. To keep abreast with modern technology and designs to optimizeproduction and enhance
brand image to attain international recognition for the Company’s product.
e. To set up highly ethical business standards and be a good corporate citizen, contributing
towards the development of the national economy and assisting charitable cause” (Vision
and Mission Statement | Servis

4. Project Outline
As part of Inventory and Warehouse Management coursework our group has studiedvarious aspects
of Servis shoes warehouse in Islamabad and has carried out analysisof its operations with an aim to
relate best practices of inventory and warehouse management with those of Servis shoes to come up
with suggestions for improvement in the warehouse management. Group physically visited
warehousing facility in Islamabad and had multiple interactions with the warehouse management to
fully understand their operations and draw pertinent lessons. Various aspects of the projectwill be
covered as per the sequence given below: -
a. Warehouse Orientation
b. Warehouse Operations
c. Product Classification and Placement
d. Warehouse Layout & Space Utilization
e. Miscellaneous Aspects
f. Conclusion

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5. Warehouse Orientation
Location.

Warehouse selected for our project is located in Humak Industrial Estate, Islamabad. This warehouse
is not owned by the company (SIL group) and hasbeen sourced on rental basis. Warehouse holds
more than 1000 SKUs which are based on brands, colours and different sizes. This warehouse meets
marketrequirements of Northern regions of the country including Islamabad, Rawalpindi Division,
Khyber Pakhtunkhwa, Azad Kashmir and Gilgit Baltistan.

6. Physical Dimensions
Dimensions of the warehouse are 76 feet * 300 feet * 35 feet (width, length andheight respectively).
It has 3 entry points for the trucks, one at the front and twoat sides. Fabric sheets and insulation
material is used in the walls to keep the heat outside and exhaust fans are used to maintain air flow
inside the warehouse.

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a. Capacity
At its full capacity, warehouse can hold about 313,000 pairs of shoes in existingstorage arrangement.
Different SKUs (Ndure, Calza, Cheetah, Liza, Don Carlos, Skooz, Toz etc) are stacked on ground in
SKU specific stacks. Stow and retrieval process is completely manual and every operation is
performed manually by the labourers hired for the purpose. In present shape, warehouseis not being
utilized to its optimum capacity.

b. Manpower
Although warehouse works on the principle of picker to goods and dependent on manual labor for
all its operations yet it is not labor intensive. Products are inherently lighter and not part of fast-
moving consumer goods (FMCG). Moreover, work load is not very high and on the average almost
four days of every month there is no receipt or dispatch activity. To cater for existing receipt and
dispatch requirements of warehouse, firm has employed 13 individuals include 1 Manager, 1
assistant in-charge, 1 inventory officer, 5 warehouse assistants and 5 laborers. Laborers work under
warehouse assistants to ensure pick accuracy and efficiency.

c. IT Systems
Various departments of Servis Industries Limited are integrated through Microsoft RX (Dynamics).
Warehouse also has an online interface with production, sales and transportation department of Servis
Group Ltd. However,firm is not utilizing full potential of ERP system and most of the warehouse data
(location and status of SKUs, RFID Details and stock position) is maintained manually on a
standalone system using Microsoft Excel. Manual system of record keeping has negatively affected
certain aspects of warehouse management like stock turn over, stock position updates and space
utilization.Moreover, it is prone to human error and may lead to pilferage, if unchecked
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7. Functions of Warehouse
Like any other warehouse, Servis industries uses this warehouse facility to store sufficient inventory
of its products (Shoes) to smoothen out seasonal fluctuations in production and demand. In addition
to storage, warehouse management also looks into certain aspects of reverse logistics, whereby
defective pairs are received and inspected for aspects related to warranty compliance. Major
Functions of warehouse have been enumerated below: -
a. Receiving and Inspection.
b. Sortation.
c. Put away/ Storage.
d. Picking/ Dispatching.
e. Returns/Warranty Claim Inspection.

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8. Operating Procedures

a. Receipt & Dispatches.

Demand for dispatch is generated by Servis merchandizing department on the basis of market
requirements and communicated to warehouse through cloud- based MS Dynamics module.
Inventory management ERP system interface inwarehouse shows accumulated inventory, categories,
SKUs location, lot sizes,date of receipt, turnover requirements and related attributes. In addition,
warehouse management has limited back end access for reporting receipt despatch progress and
generating reports for audit purposes.

b. Inventory Handling.
Although inventory in and out is integrated with sales shipments but system is not thoroughly
integrated with other warehousing operations. Item bin cards aremanually updated when stocks arrive
or when a sales shipment is recorded. Stocks are palletized on the ground and vertical space utilization
is non-existentother than broken articles. Management claimed to follow FIFO method of inventory
handling but same was not being practiced in true letter and spirit.

c. Barcoding & RFID.

Product cartons have barcoding and RFID chips embedded in them, however management is not
using portable or static barcode readers to automatically register receipt and despatches. Instead
Microsoft Excel is used on a standalone PC for initial logging of transactions which are later updated
on ERPinterface. Proper implementation of barcoding and RFID system can not only increase pick/
transaction accuracy but can also provide invaluable insights intoproduct demand and consumption
trends enabling Servis Industries to tailor their production and supply chain more effectively.

d. Third Party Logistics.

To reduce capital expenditure Servis Group has outsourced a number of logisticactivities. In addition
to the warehouse and its maintenance, they have also outsourced outbound logistics to third party
contractors. It has helped reduce costs and maintain efficiency as the management at warehouse
doesn’t have to worry about the full truck load. Whenever they receive an order through the system,
they just arrange the order and notify it to the shipping partner for delivery to intended retailer.

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9. ABC Analysis

Pair Price
Annual Sales
Annual in Rupees Percent Cumula Percenta
in Rupees
Brands Sales (Average) a ge ti ve % Categor ge
Quantity y Category
CHEET 318505 1876.6 597706483 46.57% 46.50% A 69%
A A
N- 166642 1690.2 281658308.4 21.94% 68.44%
DURE
LIZA 194849 615.2 119871104.8 9.34% 77.78% B 25%
CALZA 143354 738.5 105866929 8.25% 86.03% B
DON 47148 1938.5 91396398 7.12% 93.15% B
CALO
SKOOZ 98639 534.6 52732409.4 4.11% 97.26% C 7
T.Z 25198 1270.8 32021618.4 2.49% 99.75% C %
KIDS C
MARC 338 6893.7 2330070.6 0.18% 100.00
KES %
Total 994673 PKR 1
1,283,583,321.60

When we visit service shoes warehouse we noticed that this warehouse has various brands of
service with different SKUs. We consider all SKU same for the brand and calculate the average
price of a pair of every brand stored in this warehouse. This warehouse has eight brands in
total, which are Cheetah, N-Dure, Liza, Calza, Don Carlos, Skooz, T.Z and Marc Kessler.
Annual SKUs stored in this warehouse were 994,673 that were send to different store locations
as mentioned above areas coveredby this warehouse. When we done ABC analysis on this
warehouse we get these results, The Cheetah brand is best selling shoes in this region as it has
46.6% share in sales. Cheetah is sports shoes brand and the purchaser of this is Pakistan Army
and Punjab sports board. N-Dure is second with the addition of 21.9% in sales volumethis men
brand with various SKUs. Liza contributes 9.34% this is women brand and italso has many
SKUs (Colors and Shapes). Calza is low budget brand that adds 8.24%. Don Carlos is formal
shoe brand, which adds 7.12%. Skooz is brand for schoolgoing kids, which have less number of
SKUs and contributes 4.11% in total sales. T.Zis minor kid brand, which have various SKUs,
and adds 2.49%. The Marc Kessler is most premium brand by service shoes Pakistan that have
all kind of shoes (sports, casual, Formal) with very high prices, this is new brand and have less
market share till now its contribution to sales is 0.18%.

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 We categorized these brands as >20% is A category, 20% to 5% is B category and
<5% is C category. Cheetah and N-Dure has 69% of total sales and both lies in A category,
Liza, Calza and Don Carlos have 25% of total sales and lies in B category. Skooz, T.Z and
Marc Kessler these three brand have 7% in total sales and lies in C category. The data used for
ABC analysis is from 2019(January)-2020(January).

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10. XYZ Analysis
When we carried out XYZ analysis on the bases of annual quantity sold, we get following results in
table. In the analysis we consider above 15% is fasting moving brands that are Cheeta, Liza, and N-
Dure. Then we consider medium moving brandsrange 5%-15% that are Calza and Skooz, and lastly
we have slow moving brands thatare Don Calos, T.Z and Marc Kessler with less than 5% share in
annual sales. After calculating these, we give them priority on the bases of ABC and XYZ analysis.

% Range Category Status

>15% X Fast Moving
5-15% Y Medium Moving
<5% Z Slow Moving

Annual
Sales Average per Priorit
Brands Quantit monnth sales XYZ Cateorry y
y
CHEETA 318505 26542.08333 32.02% X A XA 1

LIZA 194849 16237.41667 19.59% X B XB 2

N-DURE 166642 13886.83333 16.75% X A XA 3

CALZA 143354 11946.16667 14.41% Y B YB 4
SKOOZ 98639 8219.916667 9.92% Y C YC 5
DON CALOS 47148 3929 4.74% Z B ZB 6
T.Z KIDS 25198 2099.833333 2.53% Z C ZC 7
MARC 338 28.16666667 0.03% Z C ZC 8
KESSLER
Total 994673 82889.41667 1

11. Manhattan Matrix

Space available for the brands, according to Manhattan matrix we have following layout for brand
placement. We allocate the grids according to our proposed layout as66 girds to store and each grid
can store up to 324 cartons. Cartons have different number of shoe pair ranging from minimum 11 to
max 18 as per brand and size of theshoes carried inside each carton.

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In
Put
and Out

0 1 2 3 4 5 6 7 8 9 10 1 12 13 14 15 16 17 1 19 20 21
Put

1 8

1 2 3 4 5 6 7 8 9 10 11 1 13 14 15 16 17 18 1 20 21 22
2 9

2 3 4 5 6 7 8 9 10 11 12 1 14 15 16 17 18 19 2 21 22 23
3 0

When we put brands on allocated spaces, we get following matrix.

In Put and Out Put

D D
CH CH CH CH C CH C C LI LI LI LI LI N- N- N- C C C SK O O
EE EE EE EE H EE H H Z Z ZA ZA ZA D D D AL AL AL O N N
TA TA TA TA EE TA EE EE A A U U U ZA ZA ZA O C C
T T T RE RE RE Z A A
A A A L L
O O
S S

D
CH CH CH CH C CH C LI LI LI LI N- N- N- N- C C C SK SK O T.
EE EE EE EE H EE H Z Z Z ZA D D D D AL AL AL O O N Z

Exit
TA TA TA TA EE TA EE A A A U U U U ZA ZA ZA O O C
T T RE RE RE RE Z Z A
A A L
O
S

M
CH CH CH CH C CH LI LI LI LI N- N- N- N- C C C C SK SK T. A
EE EE EE EE H EE Z Z Z Z D D D D AL AL AL AL O O Z RC
TA TA TA TA EE TA A A A A U U U U ZA ZA ZA ZA O O KE
T RE RE RE RE Z Z SS
A LE
R

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12. Layout & Space Utilization

Current Placement of SKUs

The layout of the warehouse is simple and each area is assigned to a specific brand.There is no
preference or demand-based setting of the warehouse. Workers know where to find a specific box
and where to stack one. Boxes containing shoes of different sizes, and even boxes of different sizes
are stacked randomly in the specifiedarea. Following the last in, first out rule. Total area of the
warehouse is 75 ft. * 300 ft. (width * length). (For excel, each grid, represents 2*2 ft. area), same is
used in the calculations for space utilization. There are 3 gates, mainly gate 1 is used for and
unloading. Current layout of the warehouse has few limitations and restrictions, which are: -
• Distance from the walls should be 2 ft. (minimum).
• Distance between the two aisles should be 4 ft.
• Pick aisle width is minimum 6ft.

Space Utilization of Current Layout

Current layout is shown above, which has some gaps between the placement and there are
unoccupied spaces throughout the warehouse. Since, the area for each brand is fixed, hence it
remains empty, if the respective brand or it’s SKUs are in shortsupply. This fix area for each SKU
and the unoccupied area accounts for a large partof the total capacity of the ware house. Area colored

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in red, is the area which is fixedfor a particular SKU but is currently empty due to shortage of the
respective SKU, while area covered in the Green is the area being occupied by the respective SKUs
that are assigned to this area.
Another problem in this layout is that different sizes of the cartons were placed on thesame pallets.
Large and medium sized cartons were placed alongside. No uniformity in the sizes of the cartons
was visible. Area in front of GATE 2 and GATE 3 is left empty, these gates are not mostly used for
loading and unloading purposes, so this space can be utilized for placement of more SKUs,
increasing the overall capacity of the warehouse.

Utilization of Current Layout

Total Area = 38 * 150 = 5700
Area occupied: 12(32) + 6(10*4) + 24(28) + 12(8*4) + 3(9*2) = 6216
Area utilization Percentage =1680 /5700 Area
Utilization Percentage = 29.47%
This shows that 30% of the total available capacity is being used by the warehouse management and
it can be increased by utilizing the empty spaces, keeping the constraints in mind.
We proposed a new layout, which is based on same conditions that the managementhas decided to
follow while making the placement plans.

Proposed Layout
Safety/ Emergency aisle and the distance from wall of the warehouse should be 2 ft. While the, the
vertical aisle width is 4 ft. pick aisle width is 6 ft. Area in front of the gates, will be utilized also, as
it is mentioned earlier that gate 1 is mainly used for loading and unloading of the products. Similar
sized cartons will be stacked only, not like the current layout where cartons of medium and large size
are stacked.
Proposed layout is based on Horizontal Pick aisle and is as follows:

300

c
ncy Exxit
Emerge

75
t
i

Area colored in red, is the area that is fixed for certain SKU that is short, as it was in the layout of the
Service Shoes, Area colored in Green, is being used currently by thebrands, specified for that area
while, colored in Blue, is the area that we have proposedthat it can be utilized while satisfying the
constraints.

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This layout caters all the limitations, without the need of any automation and anyexternal resources
used the area utilization now is:
Utilization of the current layout is:
Total Area = 38 * 150 = 5700
Area occupied: 128(10*4) + 2(6*4) + 3(12*2) = 2680 Area
utilization Percentage = 2680/5700
Area Utilization Percentage = 47.01

Increase in space utilization = (47.01 − 29.47)/29.47 = 59.51%Rent saved =

700,000 * 0.595 = 416,500

Capacity used by Service shoes, as proposed in the new layout, is only 60%. Other 40% can be used
by some sister company or it can be rented out to other companies.There is no special equipment that
is used for stacking the cartons above a certain height, stacking and retrieving is done manually using
manual pallet jacks andpowered pallet jacks. These too are used to move the cartons only. Keeping
in mind that the height of the warehouse, is sufficient enough and is not being utilized. It is always
better to increase the utilization of warehouse instead of increasing the foot print of the warehouse,
for this purpose, use of the vertical space in the warehouse isvery critical. Capacity can be enhanced
further, up to 2x, by simply implementing the mezzanine, as the heights of the cartons stacked doesn’t
increase more than 12 ft. So, the area above that can be used and it’ll increase the capacity of the
warehouse,especially for the bulk season where the product flow is much more than the normal
seasons. Picture of the mezzanine is attached for the reference. Though this requiresmoney but it
doesn’t require any special material handling equipment.

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13. Other Aspects
There are many other areas in this warehouse that can be improved for better efficiency and overall
performance of the warehouse.

a. Safety and Health Environment

Strict standards should be implemented for the safety of the employees. In the warehouse, there are
no proper standards for safety of the workers or the equipmentitself. There is no proper personal
protection equipment for the labor. From the hazardpoint of view, especially fire, only some fire
extinguishers are available for such as huge warehouse containing the product that can catch fire
easily. For future, smoke sensors along with shower system should be used in this warehouse to
minimize thedamage to the product, in case of fire. Cartons are stacked on wooden pallets, without
any racking system, which in case of emergency can fall and block the emergency passage, which
will result in great loss.

b. Software Implementation
Service shoes, uses AX systems which provides information to the management aboutthe orders that
are required from the warehouse. But inside the warehouse, manual check sheets are used to keep
record of the inventory and there are no barcode readers to scan and store the information
automatically. Thus, it causes a lot of time waste as after a specific period, whole inventory is counted
and recorded using these check sheets which is then manually fed into the excel sheets by the
management ofthe warehouse. Barcode readers should be used to not only simply the counting of
inventory but also to make sure that no wrong product is delivered by human mistake,as most of the
labor is not educated.

c. Humidity control
To control the air flow and to keep the temperature inside the warehouse low, simple exhaust fans
are being used. There is not humidity control. Humidity can cause the cartons which are made of
paper, to fall and can damage the products or it can injurethe worker. So, proper systems should be
installed to keep the humidity low, thus making sure that the cartons are not damaged by the
humidity.

d. Workforce Requirement
Service warehouse, is completely manual and each and everything is done by the workers, there is
no automation that can help in increasing the output or the work speed. A simple truck unloading
requires 2-3 hours as each step has to be performedby the labor on each box, including checking the
sheet provided with the box, matchingit with the order list they have, placing the cartons at their
respective fixed areas. During the peak seasons, this workforce is not enough to cater the
requirements andmanagement faces the issue of understaffing, so during the peak seasons, workforce
should be increased accordingly to increase the efficiency. Similarly, in the off seasons, excess labor
can be laid off to decrease the expenses of labor related activities.

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e. Employee training
Even the best technologies available, cannot increase the productivity if the people using them are
not trained for those specifically. It is better to first train the employeesfor a new technology. For
example, if barcode readers are implemented, proper training should be given to the staff, about the
optimal use of the technology.

f. Adopting Automation
Newer technologies should be adopted by the warehouse management in the future. As costs of
implementing these technologies is decreasing by the time, so the focus should be on how to adopt
new technologies. This will reduce error chances, increasethe overall productivity of the warehouse,
and also, it’ll help to decrease the labor related cost in the long run.

g. Space Sharing
Since, warehouse is large enough to cater the storage requirement for service shoes,the empty or
unoccupied spaces can be utilized by sharing the warehouse with someother organization or with
subsidiary of service corporation, this will help in covering the monthly expenses related to the rent
of the building itself and other security related expences.

h. Turn Ratio
Turn ratio, is the ratio of total units sold to the average inventory. In this case, Averageinventory,
during the seasons, at the warehouse is 285,000 pairs. While units sold throughout the year from this
warehouse are 994,673.
Turn ratio: Total Units sold/Average Inventory Turn Ratio:
994673/285000
Turn Ratio: 3.49.
Good inventory turn ratios lies in 4-6 range. So, the turn ratio of service shoes warehouse is average.
Keeping in mind that warehouse follows, Last in, First out procedure most of the time. Cartons are
usually stacked on each other and there is noracking system so the carton at the last row, even the
first to come, will be last to dispatch

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