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Logistics

Case 1: When People Can Steal, Some of Them Actually Do

Case 2: A Simple Solution to An Acute Inventory Problem

case 12: Warehouse Relayout

Case 14: The Tales of the Four Stores

Case 1: When People Can Steal, Some of Them Actually Do

Topic

Warehouse, Distribution, IT/ERP, Team, Financial Control

Company

Global Building Material Company

Problem

The inventory record accuracy (IRA) performances of all warehouses were always below 98% every month.

Facts known

Total loss of inventory in a year equals to more than 8% of annual business value, which automatically hit the bottom line by a lot.

Audit process

Take the Jakarta warehouse as the first entity to be audited.

Method: Vouching. All of Delivery Order numbers of the whole year were into excel spreadsheet and review the pattern.

Findings

There were many double DO numbers used to release inventory out of warehouse. And that was because:

  1. Warehouse computer system allowed DO document to be reprinted multiple times.
  2. There was no system at the gate to check whether a DO number has been used before or not.
Suggestions
  1. Change the system to not allow DO to be reprinted more than once without approval from superintendent.
  2. Install a system that allows security at the gate to check if a particular DO number has been used to take product out of the warehouse or not.
Follow up
  1. The same problems were later found nation-wide.
  2. The company followed up the suggestions
  3. They fired the warehouse managers, the security guys, and some admin staff.
Engagement

2 months

Case 2: A Simple Solution to An Acute Inventory Problem

Topic

Production, Planning, Purchasing, IT/ERP, Strategy, Sales

Company

A Global Building Material Company

Problem

A lot of customer orders were delivered late because the products were not available and the total service lead-time for some products exceeded 2 months when the production process was maximum only 3 days.

Facts known

The company has planning team

Audit process

Interview, observation, system audit, process audit.

Findings
  1. Many production delays were caused by unavailability of raw material. Some products were even stopped in the middle of production because raw material unavailability was found in the middle of production process.
  2. There was no process to calculate minimum stock of important raw materials or materials with long lead time.
  3. Production planning process was only for 1 week ahead
  4. There was no inventory planning process
  5. The company had more than 1,000 SKUs, many of which aren’t profitable and there hasn’t been any review for a long time.
Suggestions
  1. Review the SKUs offered to keep only those that are profitable or important for the business, and classify them by agreed criteria and assign minimum stock level for certain items.
  2. Some raw materials and some finished products need to have minimum inventory level.
  3. Production planning needs to be done at least for 4 weeks ahead with some room for changes.
  4. Discussion with production, sales, and warehouse need to be done at least once a week during the transition.
  5. Utilize the ERP for inventory and production planning calculation.
Follow up
  1. All suggestions are implemented.
  2. Inventory level of finished products and raw materials was pushed down to much healthier level
  3. Stocks of old SKUs were cleared
  4. Production planning process run smoothly weekly and service lead-time was lowered to maximum 2 weeks on average.
Engagement

2 months

case 12: Warehouse Relayout

Topic

Warehouse, Distribution, Team

Company

A Medium-size National Company

Problem

After the sales department was improved and sales increased, the delivery capacity of logistics team couldn’t keep up with sales volume increase. Some orders had to be delivered 6 days after incoming order instead of the normal maximum 2 days.

Facts known

Number of items sold was more than 200

Audit process

Interview with the logistics team

Findings
  1. The products weren’t stored in easy-to-find systematic way.
  2. The racking layout was inefficient, making the process of product picking very time-consuming.
  3. Company had extra truck that was idle and pickers on the warehouse floor didn’t have much to do after 10 AM when the trucks have left.
  4. There were 6 staff on the warehouse floor could drive trucks but didn’t have the money to apply for truck driver’s license.
Suggestions
  1. Rearrange the racking for optimal efficiency.
  2. Rearrange the product location systematically for easy pick-up
  3. Add several new racking to keep up with updated inventory level.
  4. Company pays for the truck driver’s license for all workers who could drive truck.
  5. Increase the salary of those who drive truck by 2,5%
Follow up
  1. Company implemented all of the suggestions and the result has been according to plan: Delivery lead time was reduced to only 2 days.
  2. The racking rearrangement not only helped speeding the product pick-up but also product unloading from import containers.
Engagement

2 weeks

Case 14: The Tales of the Four Stores

Topic

Inventory, Control, Team, Warehouse, Strategy

Company

A small company with several clothing outlets in Jakarta

Problem

Company has been losing inventory consistently every month in the past 5 years

Facts known

Company has 4 separate clothing stores in a shopping centre building

Audit process

Observation and interview

Findings
  1. There is no system in place to handover store from one worker to another during shift change.
  2. It was truly impossible to do stock-taking process at the end of the day because the stores were too crowded by too many stocks because owner was afraid of losing potential sales and chose to stock up everything.
Suggestions

Option 1: Merge the stores from 4 separate small stores to 1 big store so that owner can monitor easily.

Option 2: Keep the store open only in 3 and use 1 as ‘warehouse’, and keep the stock level at each store down to countable number e.g. 300 pieces that will be refurbished every morning.

Follow up

Suggestion was not implemented and a year later owner reported that one of the employees has stolen money from the store enough to build her a new house.

Engagement

2 weeks

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