12th International Colloquium of Logistics and Supply Chain Management LOGISTIQUA 2019
June, 12-14
IUT de Montreuil, Université Paris8, France
Development of a new storage structure using a
hybrid procurement policy: case where stock
holding costs are excluded.
Aboubakr MOUBARAK
USMBA, High school of technology, Fez (EST Fès)
Laboratory of international Management, Decision making
and logistics (MIDLOG), Morocco
Mbkaboubakr@gmail.com
Abstract— This article describes how to successfully conduct
an implementation of a new storage structure by using a hybrid
procurement policy in case where stock holding costs are
excluded, the article will start by presenting how to carry out a
description as detailed as possible of the activity of a warehouse
and its business processes. With this description we will be able to
determine the points of anomalies on which the study will focus,
and all this based on a quality approach (the Deming Wheel) to
put the project on rails whose terminus will be getting a better
management and a relevant organization,
This improvement project will be divided into four phases,
the first phase "Plan", will allow us to identify the expectations of
the responsible, know the objectives of the project and make a
planning that will be followed throughout the project period.
The second phase "Do" is the basis of the project, it is the most
important phase which consists to eradicate the causes of the
problems, and forge relevant solutions at the operational and
organizational level of the warehouse, during this phase several
tools and calculation methods will be used to achieve the
previously set objectives, including the rules of stock
management and procurement techniques that will allowed us to
find innovative solutions to problems of stock shortage and
delivery delays,
In the third phase "Check", we will use a control method by
projecting last year's stock data on the new storage structure to
ensure a long-term success of the project, as well as propose
different methods to improve the control and monitoring of the
stock,
And finally, the fourth phase "Act" was reserved for the
implementation of everything that was calculated on the ground
by following Lean and continuous improvement steps.
Keywords— PDCA, Procurement, Stock management,
Delivery delays, stock shortages, continuous improvement,
Fouad JAWAB
USMBA, High school of technology, Fez (EST Fès)
Laboratory of international Management, Decision making
and logistics (MIDLOG), Morocco
Jawabf@gmail.com
I. INTRODUCTION
We often hears saying: "the stock is a necessary evil", but
for some companies, this expression is overestimated, the
stock does not really have a significant impact on the financial
side of the company and stock holding cost is very low
compared to the cost of brand loss due to uncontrolled
volatility of the market by the company, this is the case of a
company that produces items with specific characteristics that
do not degrade quickly in time and with a long expiry date, it
has a low cost of the value locked-in stock that does not make
a big difference if it were invested in production equipment
"Method of ROI-Return On Investment ", for example
(mattresses, pavers, woods, etc. ), but it will always remain
an evil, considering the space that will be occupied, For these
companies the challenge is to find the quantity that will
guarantee a high a service rate, which will reduce the cost and
the number of orders and at the same time respect the space
already allocated to the stock, its form and its implementation
plan, in these cases the use of an hybrid procurement policy
becomes necessary, the latter combines between the control
point and the periodic replenishment defined according to the
layout of the store, instead of using only the control point
policy and make launches according to the economic quantity
to order based on Wilson's formula.
This method will allow to the company to reach the
optimum stock result in stock management which will help it
to play on several aspects of competitiveness in order to be
well positioned on the market compared to its competitors
include among them:
 Avoid shortages in stock by ensuring a high service
rate
 Fast delivery and respect of the deadline.
 Flexibility (ability to adapt to variations in demand
for diversity and volume)
 LOGISTIQUA 2019  June 12-14  IUT de Montreuil, Université PARIS8,
France
 Efficient after-sales service
 Good Brand image (company or product). Business Process Model and Notation (BPMN) [3] is a
business process modeling method for describing an
II. RESEARCH METHOD organization's workflows and procedures in a standardized
The presentation of the project will follow a universal graphical representation, this tool will help us to understand
principle of managerial conduct; it is the philosophy of the the physical flow inside the store and take into account this
American quality specialist William Edwards Deming (1900 - information during the implementation of the project to
1993), and in particular his famous PDCA Cycle [1]. optimize the flow from the upstream to downstream of the
Presented under the following four phases: store, here an example of BPMN cartography of a storage
Phase 1: Plan store:
 How to analyze the actual situation of an existing
warehouse
 How to make a formulation of the existent problems
 How to make a project planning
 The main important technical data to collect
Phase 2: DO
 Definition of the hybrid procurement policy to adopt End
 Definition of the security stock calculation method
based on the probability law followed by the sales
 Calculation of the command Point
 Calculation of the theoretical maximum stock
Fig. 1. BPMN cartography example of a store activity
 Affectation of references and optimization of the
storage space B. How to make a formulation of the existent problems?
 Definition of the real maximum stock After describing the store processes and extract the
Phase 3: Check necessary information on the type of operations performed, the
 Project the new organization of the stock on the data physical and informational flow of the store, the next phase is
from the last year and predict future consumption to formulate the problem and target the anomalies that weaken
Phase 4: Act the store's performance, to do this we will opt for Lean
 Implementation of the new storage structure in the management tools such as the method WWWHW [4], a
field following a lean approach problem-solving tool with an almost exhaustive list of
information on the situation, Very easy to use, the WWWHW
III. PHASE 1: PLAN
will allow us to correctly develop the new improved process
A. How to describe the actual situation of a store. and the implementation of the corrective actions later.
To analyze the current situation of the store in order to get
as much information as possible and position the project on To use the tools correctly, we must start by finding
the right path, we must first begin by making a total answers to the following questions:
description as detailed as possible, by schematizing and  What is it about?
modeling the activity of the store and its business processes, to  Who are the people involved in the study?
do this there are several tools that serve this purpose citing
among them:  Who has the problem?
 Who is interested by the result?
The SIPOC diagram [2], a fairly simple process map that  Who is involved in the implementation?
looks at the process at a relatively high level, a very simple  Where does this happen and does it apply?
visual tool that will allow us to document the beginning-to-end
 How to implement the necessary means?
of the store business process, which is very helpful to the team
at the beginning of our project by establishing a common  What is the state of the current situation of the store?
language for understanding the entire process, the SIPOC  What are the consequences of the problems?
diagrams are very easy to complete. Here an example shows
the steps to follow:

Fig. 2. SIPOC Diagram Steps

 LOGISTIQUA 2019  June 12-14  IUT de Montreuil, Université PARIS8,
France
 What is the risk for the store and the company?
 Since when do these problems occur?
 When does the problem become more critical?
 When does the risk occur?
 What is the utility of the project?
Now after having an idea of the aspects to improve, we
must complete the quest by a brainstorming meeting on which
we need to integrate all stakeholders of the store; a
brainstorming meeting takes the form of a group meeting
where everyone is invited to give ideas or suggestions related
to the subject of the study. This technique of qualitative study
and creativity will allow us to generate more proposals and
ideas and trace the routing of improvement actions to be
applied. It is necessary to mention that there are other tools in
the six-sigma methodology that can be used in the stage of
description, formulation and analysis of the problematic of the
store such as:
 The Ishikawa diagram, [5] a tool that represents
graphically causes leading to an effect,
 VSM (Value stream mapping), [6] which describes
the physical flow and associated information flow
and obeys conventions of representation that make
reading easy and fast for everyone
 SADT method (Structure analysis and design
technics), [7] a very effective communication tool
that describes the input, the output of a process and
the external element that positively or negatively
impact its performance.
C. How to make a project planning?
After completing the formulation phase of the problem, the
project action plan must be drafted, and to ensure the smooth
running of this action plan, a project management approach,
namely the planning of the tasks must be carried out, by using
planning tools such as the GANTT chart [8], a useful way of
showing what work is scheduled to be done on a specific days
and also help view the start and end dates of a project in one
simple view. Before doing the Gantt chart, we must first
prepare a certain amount of information by answering the
following questions:
 What is the start date of the project?
 What are the tasks of the project?
 Who works on each task?
 When do the tasks begin and end?
 How long will each task take?
 How do tasks cluster, overlap, and relate to each
other?
 What is the end date of the project?
 What is the project schedule (the number of
working days in the week, the number of hours
per day, and the non-working time)?
Once these questions are resolved, go to creating the
chart in a logical order and respecting the binding
constraints, you can also use planning software such as
Microsoft Project to draw the chart.
D. The main important technical data to collect
After completing the formulation of the problem and the
planning of the project, the last step of the "Plan" phase is to
collect all the technical data that will be useful to properly
conduct our project.
 Draw the layout plan of the store respecting the
marks and distances between the different areas of
the store to better understand how to implement the
products and easily calculate the different volume
capacities of each space thereafter
Fig. 3. Store Layout Example
 Look for the current location of each product in
stock, its storage area, its storage column and its
position / level in the storage column, if the products
are stored randomly in the store, we must think about
creating an addressing plan to facilitate the
collection operations thereafter,
 Search the total number of stored products divided
into how many storage columns in how many areas,
and how much of their usable storage space is in
Square?
 Calculate the volume capacity of the storage
columns, (the height, the width and the depth of each
column). This data will later be used in the
restructuring of the store, in order to assign each
product to the column which has the most capacity
close.
IV. PHASE 2: DO
A. Definition of the hybrid procurement policy to adopt
After describing the problem and collecting all the necessary
information, now is the time to move to action, the phase DO is
the basis of the project, it is the most important phase in which
our spirit of innovation flourish to forge relevant solutions at the
operational, organizational and financial level of the store.
In a store where the question of costs is not taken into account
and the immobilized value in the stock is not very large, we can
fill the store entirely without affecting the performance of the
company, and to better manage supplies of this type of store we
offer a hybrid procurement policy that is based primarily on the
 LOGISTIQUA 2019  June 12-14  IUT de Montreuil, Université PARIS8,
France
command point, which involves supplies of equal quantity
on different dates, the store will satisfy customer orders via the
stock only, and once the order point is reached, a
information:
production/supply order will be generated and the ordered
quantity will be the number of items needed to reach the
Maximum stock (the level of replenishment) that can be
defined according to the particularities of the company and
based on several criteria that we will treat them later
Fig. 4. The hybrid procurement policy demonstration
In the hybrid procurement policy that has been proposed,
the stock is composed of several levels, the first level is the
safety stock, it’s main purpose is to limit the shortages due to
unforeseen circumstances such as an inadequate forecast
compared to the order received, a longer supply period than
expected, then there is the second level which is the command
point, it is the quantity of products needed to meet the needs of
the customers during the lead time, and then comes the third
level, the theoretical maximum that we will see later how to
define it, and the last level is the real maximum stock, the
amount of product needed to complete the storage capacity of
the column assigned to that reference.
B. Safety stock calculation method based on the probability
law followed by the consumption.
Different methods can be used for the calculation of the
security stock, generally, each of them should be simulated
and the choice of the final method will be based on the one
which reduces the risk of shortages the best.
In practice we can use: The probabilistic method which will
allow us to determine the safety stock taking into account
the variations of the consumption and the delivery date at
the same time, but to choose this method the consumption of
the store must follows the Gaussian law, to verify this
condition Statistical tests can be used such as the Chi-square
test / Kolmogorov- Smirnov test or we can simply us the
Histogram function in the EXCEL complement, “Analysis
tool”. And the second method is a deterministic one called
the "Expert" method [9]
1) The Probabilistic method
First of all, we must start by collecting a certain amount of
 The Service rate, is the percentage expressed of the
consumptions that will be ensured from the total
consumptions, it can also be defined as being, on 100
successive shipments made on a period, the number
of shipments fully satisfied. This is like saying:
Service rate = 1 - probability of stock shortage
accepted.
 Historical consumption and deduct the average
consumption and standard deviation of the
consumption
 Historical delivery times and deduce the average
duration and standard deviation of the delivery time
 Coefficient of security (calculated from the inverse
normal law table based on the chosen service rate)
The calculation by this method is done as follows:
Safety stock =𝑍 ∗ √(𝐶2∗α2) + (𝑑∗ϕ2)
C: Average Consumption
d: Average delivery time
Φ : Standard deviation of consumption
α: Standard deviation of the delivery time
Z: Coefficient of security (calculated from the inverse normal
law table based on the chosen service rate)
This calculation can be done in Excel using the formula:
= NORM.S.INV (Service rate) *SQRT (Average (range
consumption^2) * STDEV.S (Range delivery time^2)) +
((Average delivery time) * STDEV.S (range consumption))
1) Expert method
Like any calculation method, before starting it is necessary to
look for a certain amount of information to be provided:
 Average consumption during the period: C
 Maximum consumption during the period: MC
 Average delivery time: d
Let's move on to the calculations:
 The average weekly excess consumption will be:
EMh = MC - C
 Safety stock: SS = EMh x d
This calculation can be done in Excel using the formula:
= (Max (Range consumption) - Average (Range
Consumption)) * Average (Range delivery)
 LOGISTIQUA 2019  June 12-14  IUT de Montreuil, Université PARIS8,
France
C) Command point calculation point
The calculation of this level of stock is very simple, just
multiply the average consumption by the average delivery
time and add the safety stock.
Command Point = (C * d) + SS
 C: Average consumption
 d: Delivery date
 SS: safety stock
This calculation can be done in Excel using the formula:
= ((Average (Range consumption) * Average (Range delivery
time)) + safety stock)
D) Calculation of the theoretical maximum stock
(Periodic replenishment)
Periodic replenishment method, also known as the
"calendar method", consists of regularly replenishing the stock
to reach a maximum level called PRL, but in the case of an
hybrid policy, the supply of the stock will not be in a regular
way but according to the command point, the challenge that
arises in this step is to correctly define the maximum level of
replenishment without impacting the other stages linked to the
store (supplier, production service, shipping service. ),
indeed, first of all, it is necessary to establish a delivery
contract with a supplier of the warehouse by taking into
consideration several criteria:
 Warehouse capacity
 Supplier capacity
 Minimum order size,
 Diversity to be ordered,
 Minimum time to be respected between 2 launches
 Other technical constraints.......
E) Affectation of references and optimization of
the storage space
columns by optimizing the storage space, minimizing
movements inside the store, the comings and goings of the
storekeepers and the time required to prepare the order. To do
this, several actions must be carried out before making
allocation decisions:
 Classify items according to consumption /
turnover rate by using ABC method
 Define product classes with homogeneous
behavioral patterns using ABZ method by taking
rotation and weight as criteria
 Establish an order of implementation of the
products in the store in such a way that references
with a high turnover and with a heavy weight are
stored near the shipment exit, using double
criteria analysis method by privileging one of the
two preceding criteria over the other according to
the specificities of the store
 Assign each product to the column with the nearest
volume capacity, it is possible to combine between
several storage columns in order to respect the
implementation order and the convergence between
the quantity to be stored and the capacity of the
storage column.
F) Definition of the real maximum stock
After completing the assignments, it is now necessary to
define the real maximum stock of each reference according to
the formula:
Real maximum stock = theoretical maximum stock +
adjustment coefficient
Adjustment coefficient is the remaining quantity to complete
the capacity of the column.
V. PHASE 3: CHECK
Given the volatility of the market, it is necessary to ensure the
success of the new organization of the stock and the calculations
made, First to do this it is necessary to project the new
organization on the consumption data from the last year and
determine peak periods that may create a risk of shortage for the
store in order to take the necessary precautions for future periods,
Secondly, we need to predict the future consumption and redo the
same control to avoid any probable cause that my condition the
success of our project.
VI. PHASE 4: ACT
After the end of the calculation phase and to overcome the
various organizational problems that can be found in the stores in
order to reduce the processing time of articles and accelerate the
internal flow, we will set up the new storage structure following a
5S approach. [10]
The steps in this process are:
• Step 1: Preparation of the 5S yard.
• Step 2: The implementation of the first 3 S in the
store.
• Step 3: Formalization and progression.
A) Preparation of the 5S project
The first step in the preparation of a 5s yard is the definition
of objectives.
• The application of 5S in the store aims to:
• Reduce order preparation time;
• Improve the safety inside de store;
• Facilitate the control and monitoring of stock
statuses;
• Facilitate the work for the storekeepers;
• Improve the work environment through better
organization;
• Establish standards and work rules;
• Improve the motivation and involvement of staff in a
pleasant work environment;
• Preserve the quality of the stored products;
 LOGISTIQUA 2019  June 12-14  IUT de Montreuil, Université PARIS8,
France
• Facilitate communication between
employees through visual aids;
• Benefit from a clean image for visitors
(customers and others).
The second step is to carry out a field diagnosis in
order to label the actions to make on each area, it is
necessary to reveal the existing situation to detect the
anomalies and plan the actions to apply.
B) The implementation of the first 3 S in the store.
This step must begin by training the whole team of the
store on the 5S method, the latter aims to educate the team
to maintain order in the store and specially to show
storekeepers that they are the first actors and the key to the
success of the process. It must focus on:
• The presentation of the method: why, when
and where to apply the 5S?
• The definition of the five axes of the method
with application examples
• The definition of the scope of the approach.
• The definition of the deployment planning
of the approach
1) The first S: Sort
The objective of this step is to keep in the work area
only the objects strictly related to the execution of the
work and has a permanent use and eliminates the all the
other useless objects, by following the steps presented in
the organization chart below.
Fig. 5. Sorting
chart
2) The second S: organize
Once we have got rid of all the elements we do not need,
the next step is to change the locations according to the
affectation plan that was done previously during the study,
following the principle "one place for each article, each article
in its place",
3) The 3rd S: Clean
Cleaning allows a thorough inspection, removing waste
and dirt from the work area. Therefore, all dirt and cleanliness
problems detected after the implementation of the project solution
must be eliminated, and to maintain this state, it is necessary to
establish a daily cleaning schedule where the date, cleaning time
and the person responsible for the action must be identified.
C) Formalization and progression
1) The 4th S: Standardize
The purpose of the standardization action is to define the rules
and standards to be followed to maintain the actions implemented
in the previous stages of the 5S project; This is to explicitly
formalize good practices at the store to keep the work
environment secure and in order to easily find what is needed
when needed. To do this, we need to think of creating a dash
board close to the store containing a set of communication sheets
that are intended to remind the rules and methods of organization,
the best practices to follow and the standards of work to be
respected
2) The 5th S: Sustaining
The principle of this step is to preserve the acquis and to
progress continuously on the basis of a change of culture; It is to
respect the previous "4S" by applying the procedures and good
practices. “Continuous improvement comes from new ideas to
improve the existing state”, for this purpose, we should create a
follow-up sheet that will allow the store manager to evaluate the
respect and efficiency of all the rules related to the 5S after each
daily/weekly/monthly organization of the stock as well as a
proposal sheet for improvement ideas in order to integrate the
store in a continuous improvement approach.
VII. CONCLUSION
This modest work aims at the development of a new storage
structure based on a hybrid procurement policy in a warehouse
where stock holding costs are excluded. The article presents
how to properly identify and analyze the root causes of the
problems that can be encountered in warehouses and proposes
a set of adequate and viable solutions to address them based
on six sigma methodologies, Lean tools as well as the stock
and supply techniques. The gains of this project will be as
follows:
 Optimized and organized storage space
 Avoid shortages and delivery delays
 A clearly defined procurement policy
 Reduction of order preparation time
 Facilitation of control and monitoring of the stock
 Facilitating the work of preparers and handlers
 Preserving the quality of the stored products
 Avoidance of slow-moving stock
 A clean image for visitors (customers and others).
The improvements presented in the article are not the end of
the optimization of the store process in the store. It is indeed
essential to be integrated into a continuous improvement
approach incorporating good management practices. Finally,
any optimization is a chance to question ourselves, so always
have a broader view that is not limited on the daily operating
problem.
 LOGISTIQUA 2019  June 12-14  IUT de Montreuil, Université PARIS8,
France
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