KPI Improvement Plan OMGT 2196 PDF

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Summary

SCHOOL OF BUSINESS AND MANAGEMENTOffice use only Program name Logistics and Supply Chain ManagementProgram code BPCourse name Warehouse and DistributionChannels Course code OMGTAssignmen t no. 2Due date September 12nd, 2021 Name of lecturer Jay Fortenberry Campus HN Class day/time Friday 11:30 Tutor...

Description

SCHOOL OF BUSINESS AND MANAGEMENT Office use only Logistics and Supply Chain Management

Program name

Warehouse and Distribution Channels

Course name

Assignmen t no. Campus

2 HN

Due date

September 12nd, 2021

Class day/time

Friday 11:30

Program code

Course code

Name of lecturer

BP255

OMGT2196

Jay Fortenberry

Tutor/marker’s name

STUDENT Family name DO

Given name LINH NGA

Student number S3877285

"I declare that in submitting all work for this assessment I have read, understood and agree to the content and expectations of the Assessment Declaration."

Word count: 2070 (Excluding References)

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Table of Content I. EXECUTIVE SUMMARY...................................................................................................... 3 II. INTRODUCTION..................................................................................................................... 3 III. INITIATION AND ASSESSMENT.................................................................................3 IV. DESIGN......................................................................................................................................... 5 V. IMPLEMENTATION............................................................................................................... 6 VI. CONCLUSION.......................................................................................................................... 9 VII. REFERENCES...................................................................................................................... 10

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I. EXECUTIVE SUMMARY VinaTalks Corporation, located in Ho Chi Minh City, Vietnam, has been producing cellular electronic devices since 2005. The company sells cell phones to the Vietnamese national market at a reasonable price in order to compete with the well-known brand name phones. Its warehouse is operated in a large area of 30,000 m2, storing both raw materials and finished products. The warehouse management is measured by 3 KPI measurements: Inventory Management, Warehouse Performance, and Order Fulfillment. The Board of Directors aims to lower warehousing expenses by as much as 20% compared with 2017. To reach this purpose, I have worked on an improvement plan by carefully investigating all substandard metrics and their underlying causes. After that, solutions have been provided to deal with such challenges and change the warehouse into a better version. The number one priority in this plan is to solve safety issues since the average number of accidents every year was recorded at a high level. Besides, training employees, improving order picking activities, and redesigning warehouse layout are other implementations that would be conducted to turn all bad metrics into favorable ones.

II. INTRODUCTION VinaTalks Corporation has faced many issues concerning its KPI measurements. The warehouse layout design seems to have challenges with its flows of goods, causing disadvantages and affecting the productivity of the operations. Therefore, by conducting a warehouse improvement plan, I aim to thoroughly examine and evaluate the current KPIs to assess underlying causes that directly and indirectly impact the warehouse performance. Following that, I will redesign the old layout to make necessary modifications for a better warehouse version. The goal is to operate the warehouse safely and apply an effective costcutting strategy into warehouse operations.

III. INITIATION & ASSESSMENT 1. Inventory Management In the warehouse of VinaTalks, there are a total of 6 metrics that need to be improved to reach higher KPI measurements. Firstly, Dock-to-Stock and damaged inventory are two measurements that negatively affect the KPI of inventory management. It takes 1.5 hours to

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complete the Dock-to-Stock cycle, which is the time from unloading goods at the receiving area until once the inventory has been stored. However, according to Figure 1, if Dock-to-Stock Cycle Time needs less than 2 hours, it can be assumed as a best-in-class performance (Manrodt, Vitasek & Tillman 2011). Hence, I don't consider the Dock-to-Stock metric as a challenge in the case of VinaTalks. Notwithstanding, the metric for damaged inventory was recorded at a high level. This can happen due to worker's carelessness or incidents in the warehouse. Also, increased handling can be a reason for higher risks of damaged inventory (Montell, Moein & Samadabadi 2018).

Figure 1: Dock-to-Stock metrics

2. Warehouse Performance Next, high cost per order and the lack of safety lead to lower warehouse performance. According to Stone (2017), lane obstruction negatively affects efficiency and requires vehicles to make unpredictable and unexpected movements to avoid obstacles. This may unfortunately result in an accident. Employees can be injured at work if they don't have the proper safety precautions, whether due to a heavy machinery accident or exhaustion and burn-out. Poor safety, on the other hand, can be enormously costly to a company (The Ramp Doctor 2018). This covers time away from work due to illness and compulsory sick pay for injured staff, as well as potential warehouse damage (The Ramp Doctor 2018). Accidents usually take a long time and effort to handle, from paperwork to closing down a warehouse section (The Ramp Doctor 2018). Meanwhile, the calculation for Cost per Order metric is Whse Cost/Orders Shipped. This indicates that high total warehouse cost can be the direct reason for high cost per order. Coincidently, the recent concern of VinaTalks is how to cut warehouse costs, thus answering this concern can also help the warehouse solve its problem of high cost per order.

3. Order Fulfilment VinaTalks has faced problems with their Order Fulfilment KPI because the metrics of Ontime delivery and Perfect Order Completion fail to reach the standards. With only 83% On-time, the time between when a consumer places an order and when it is ready to ship is too long. This

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indicates that there are problems in the process that needs to be addressed. Whether it's out-ofdate planning processes or disorganized execution systems that can't keep up with rising demand, the issues must be addressed to respond promptly to unpredictable circumstances (Datapine n.d.). Believing that poor on-time delivery performance is acceptable affects every aspect of a company's operations and can irreparably harm customer relationships (OTTO Motors 2017). Four major components of a perfect order include: Delivered On-time, Shipped Complete, Shipped Damage-Free, and Correct Documentation. This means the bad metric of On-time Delivery become one of the main impacts on low Perfect Order Index.

IV. DESIGN

Figure 2: New Warehouse Layout

According to Tom Peters, improvement derives from simplifying processes and procedures (Richards 2018). These processes must be integrated and performed ideally to improve efficiency and lower warehouse operation costs (Richards 2018). In my opinion, the original warehouse layout has complex flows between incoming and outgoing ones, causing possible congestion in the middle area of the warehouse. This cannot only increase productivity but also reduce accidents for workers. Therefore, the redesigned layout aims to solve those issues, suggesting that the incoming and production flows need to separate from the outgoing

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flow. About the new design, the location of finished goods storage is swapped with raw materials storage to make sure no flow intersects or collides with others. Based on Figure, following the red arrows, raw materials are transferred to the quality control area to ensure that all items are of standardized quality after arriving at the receiving area. Next, they are categorized by their characteristics, assigned with appropriate storage locations, and placed temporarily before moving to the raw materials storage. A new passage leading is designed to deliver raw materials to the production area outside the warehouse. After the production processes being finished, workers can use forklifts to take the finished products back to the warehouse for storage purposes through a different passage leading from the previous one. By dividing two separated ways of to and from the production, it can avoid congestion and forklifts colliding from opposite directions, which are underlying accident hazards. The final steps before storing finished goods are final assembly and refurbishment. After that, the goods are transferred by forklifts to the packaging area to be ready for shipping. As shown in Figure, there are no overlapping incoming and outgoing movements. This structure would remove inconvenience in goods flows to enhance productivity and lower accident risks in warehouse operation. Overall, optimizing the layout can bring a smooth product flow to enhance On-time Delivery metrics and Perfect Order Index.

V. IMPLEMENTATION Manrodt, Vitasek and Tillman (2011) indicated that it is essential to first understand the firm's vision and value before setting benchmarking priorities and strategic objectives. Therfore, as the warehouse manager, I believe that safety is the first and foremost goal to improve the overall KPI of VinaTalks's warehouse,

1. Improving Warehouse Safety When working in an area with large machinery, pallets, and racking, it is necessary to prioritize warehouse safety. There are some ways to achieve optimum warehouse safety. First, a safe warehouse starts with a clean, well-organized warehouse. At all times, clear pathways shall be maintained free of merchandise, litter, or other obstructions (Stone 2017). Furthermore, inspecting the warehouse to ensure that all sections are well-lit. Forklift driver and pedestrian visibility are critical for safe operation; thus, adequate lighting inside the warehouse is essential (Stone 2017). Proper brightness allows workers to complete their tasks without risking their

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health and safety and compensate for bad weather, plant shadows, and blind spots that may impair sight (Larsson et al., Horberry, cited in Conde Carvalhal 2020).

Second, the warehouse manager should ensure that vehicles and equipment are operated safely. Fatalities might occur when a forklift collides with pedestrian walkways. With the aim of reducing the risk of accidents, vehicles and pedestrian areas should be separated by floor marking tape or notified by clear warning signs in well-positioned spots. Plus, workers, visiting drivers, and other pedestrians must wear helmets, high-visibility, protective clothing at all working times (Larsson et al., cited in Conde Carvalhal 2020). There should be strict regulations that only certified staff utilize cars and other heavy equipment around the warehouse to avoid accidents (The Ramp Doctor 2018). If an employee misuses the equipment, make sure there is a stringent disciplinary procedure in place. By doing these steps, we can significantly reduce the number of warehouse accidents and the cost of work-related injuries and ill-health every year.

In Vietnam, there have existed many fire accidents that destroy warehouses and cause fatalities as a consequence. Therefore, warehouses must always take fire safety as a serious subject to protect both employees and goods. If a fire breaks out in a warehouse, the priority is to ensure that all workers are able to safely and quickly exit the building (Keystone Fire 2019). Warehouses and manufacturing can create an evacuation plan that helps all workers reach the nearest exit in a calm and controlled manner (Keystone Fire 2019). Furthermore, making employees review the evacuation plan regularly or practice evacuating in a fire drill can help them feel prepared for potential fire and provide them with the necessary knowledge to respond correctly in an emergency.

2. Training Staff Kerridge (n.d.) assumed that regular refresher training is also necessary to ensure that all employees are updated with the way to function in your warehouse securely. The employees should all receive essential health and safety training relevant to their jobs and the warehouse (Kerridge n.d.). Moreover, they have to well understand their duties and the use of equipment before starting to work. Since the products of VinaTalks are electronic devices, the carelessness of staff like dropping items on the ground or even small collisions can affect the inventory

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quality. Therefore, workers should be trained on delivering and taking care of goods carefully to minimize damage to inventory.

Employee safety training has the advantage of lowering the risk of personal injury and product damage. Although not every incident involves both persons and products, there is definitely overlap (All Things Supply Chain 2018). For example, attending the same regular refresher training, forklift operators will keep them safer behind the controls and lower the amount of merchandise thrown away due to workplace accidents.

3. Improving Order Picking Process

Figure 3: Warehouse activities as a percentage of total cost

The data shown in Figure 3 assumed that order picking is the most cost-intensive process among all warehouse activities (Richards 2018). Therefore, to lower operating cost, the warehouse should consider how to improve its order picking productivity. One of the most effective solutions is to install a Warehouse Management System. A WMS is a database-driven computer application that records the movement and storage of materials within a warehouse as well as the transactions that go along with it, such as shipping, receiving, put-away, and picking (Ramaa, Subramanya & Rangaswamy 2012, p. 14). With WMS, the Picking Sequence is operated based on algorithms that can make order picking reach high accuracy and reduce the time needed for this process (Figure 4). Moreover, storing SKUs logically or clustering frequently ordered items together to create a hot zone can save travel time and minimize

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handling (Marks 2016). Aside from reducing cost, order picking also directly affects the On-time delivery metrics since an unorganized order picking process can lead to late delivery and unsatisfactory customer services. On the whole, increasing efficiency in picking activities can directly cut the total cost of warehouse operations; using WMS can minimize paperwork, improve traceability, and increase productivity by reducing the overall time.

Figure 4: Comparison of WMS/Non-WMS

VI. CONCLUSION In conclusion, some solutions, including prioritizing safety, improving order picking, training, and redesigning layout, have been mentioned to deal with issues related to safety, inventory, warehouse cost, and delivery time. Though every implementation is conducted to solve different problems one by one, the warehouse operation is a series of activities with a close relationship. Hence, improvement in any metric can positively affect other metrics as well. If VinaTalks aim to cut the warehouse expense, it must set benchmarking priority regards the safety problems. Once the warehouse is safely assured, employees' health and lives will be safeguarded, workers can work in a healthy workplace, and productivity levels will rise as a result.

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VII. REFERENCES All Things Supply Chain 2018, 'How Warehouse Managers Can Prevent Damaged Stock', All Things Supply Chain, blog post, 3 December, viewed 8 September 2021, . Conde Carvalhal, C 2020, Safety Optimization of Material Handling Forklift Truck Operations, KTH Royal Institute of Technology, Stockholm, Sweeden.

Datapine n.d., Logistics Key Performance Indicators and Metrics, Datapine, viewed 10 September 2021, .

Kerridge n.d., '5 tips on how to improve warehouse safety', Kerridge, blog post, viewed 9 September 2021, .

Keystone Fire 2019, 'Top 6 Warehousing and Manufacturing Fire Safety Tips', Keystone Fire, blog post, 29 April, viewed 10 September 2021, .

Manrodt, K, Vitasek, K & Tillman, J 2011, WERC Metrics, United States.

Marks, C 2016, '5 Solutions to Improve Order Picking Productivity', Sphere WMS, blog post, 20 June, viewed 8 September 2021, .

Montell, C, Moein, D & Samadabadi, A 2018, Reducing Damaged and Returned Inventory at MDS Logistics, viewed 7 September 2021, Google Scholar database.

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OTTO Motors 2017, 'Being on Time, Every Time: On-Time Delivery & Customer Satisfaction', OTTO Motors, blog post, 21 September, viewed 10 September 2021, .

Ramaa, A, Subramanya, K-N & Rangaswamy, T-M 2012, 'Impact of warehouse management system in a supply chain', International Journal of Computer Applications, vol. 54, no. 1, pp. 1420, viewed 9 September 2021, Google Scholar database.

Richards, G 2018, Warehouse management : a complete guide to improving efficiency and minimizing costs in the modern warehouse, 3rd edn, Kogan Page, ProQuest Central database.

Stone, S 2017, '5 Ways to Prevent Forklift Accidents', Inbound Logistics, 12 May, viewed 9 September 2021, .

The Ramp Doctor 2018, 'How to improve warehouse safety', The Ramp People, blog post, 10 October, viewed 8 Seoptember 2021, .

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