KPI Improvement Plan PDF

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RMIT International University VietnamCourse Code OMGT 2196Course Name Warehouse and Distribution Channels Location & Campus RMIT Vietnam – Saigon South Campus Title of Assignment Assessment 2 – KPI Improvement Plan Student Name & Student ID Ton Nu Thi Minh Thu – sLecturer Facilitator in char...

Description

RMIT International University Vietnam

Course Code

OMGT 2196

Course Name

Warehouse and Distribution Channels

Location & Campus

RMIT Vietnam – Saigon South Campus

Title of Assignment

Assessment 2 – KPI Improvement Plan

Student Name & Student ID

Ton Nu Thi Minh Thu – s3878253

Lecturer Facilitator in charge

Dr. Duy Tran

Assignment due date

September 12, 2021

Date of Submission

September 12, 2021

Number of pages including this one Word Count

14 2099 (not including the Reference List or Appendix)

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

Table of content I.

Executive Summary.................................................................................................... 2

II.

Introduction .................................................................................................................3

III.

Analysis ........................................................................................................................3 1. Inventory Management ...........................................................................................3 2. Warehousing Performance ......................................................................................5 3. Order Fulfillment ....................................................................................................6

IV.

Recommendations & Redesigned Warehouse ..........................................................7 1. Redesign warehouse layout.....................................................................................7 2. The improvements of the warehouse ......................................................................8

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V.

Conclusion .................................................................................................................10

VI.

Reference ...................................................................................................................10

VII.

Appendix ....................................................................................................................13

I.

Executive Summary The main object of this paper is to minimize the operations costs and warehousing costs

and simultaneously optimize the warehousing performance of VinaTalks. Firstly, the issues are identified and evaluated based on the given warehouse layout and KPIs. The inefficient product flow, inconsequential location of some departments, and the intersection of inflow and outflow processes cause the delay of delivery, the longer lead time, the higher warehousing costs and accidents for workers. Concerning the KPIs, there are Dock to Stock (DTS) and Damaged Inventory (DI) problems indicated in the Inventory Management metric. Similarly, the Warehousing Performance metric reveals the issues related to the Cost per Order (CPO) and the safety of employees. About the Order Fulfillment metric, the long period of delivery, and the low rate of Perfect Order Completion (POC) is presented that substantially affects the customer’s satisfaction. Thus, the improvements will be illustrated to improve the restrictions and achieve the goal of reducing 20% logistics costs such as the implementation of the automated warehouse management system (WMS), Radio Frequency Identification technology (RFID), Enterprise Resource Planning technology (ERP), using Single-deep Selective Pallet Rack system, etc with significant characteristics to support the picking, storing, receiving, shipping products, and manage inventory. Meanwhile, the redesigning warehouse layout will be conducted to improve the restrictions and improve the goods flow, and the warehousing performance.

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I.

Introduction VinaTalks, which is a corporation producing cellular electronic devices, is situated in Ho

Chi Minh City, Vietnam. The company provides national customers with products at an affordable price that increases their competitiveness. It is noted that the warehouse, plays a vital role within the enterprise’s supply chain and the fulfilment centres, largely change the warehouse models in the flourishing of e-commerce (Richards, G 2018). Moreover, depending on the company and products characteristics, the operations warehouses might account for an average of between 1-5% of the sold product’s price (Boeve, I.B 2016). Particularly, VinaTalks is aiming to reduce 20% of logistics costs. Subsequently, relied on the given three KPIs data, the underlying issues will be analyzed to determine their impacts. The improvements and redesigning warehouse layout will be presented to reduce the warehousing costs and enhance the warehousing performance.

II.

Analysis In order to enhance the performance of warehouses, it is needed to

identify and evaluate the Key Performance Indicator (KPI)(Kusrini, E, Novendri, F & Helia, V.N. 2018). The KPI is referred to as a quantifiable measurement to evaluate the enterprise’s performance in the long term (Gaffney, J 2020). Most enterprises use the KPI to accelerate their performance and competitive edges(Chen, P.S & Huang, C.Y 2017). Furthermore, the KPI helps businesses save time, costs, and resources to measure the productivity and efficiency of their warehouses(Gaffney, J 2020). In this case, the KPIs regarding Inventory Management, Warehouse Performance, and Order Fulfilling are important indicators to evaluate the warehouse performance. 1. Inventory Management

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Figure 1: The Inventory Management KPI

From the table, the Number of Days on Hand and Storage Utilization has positive statistics which means that the warehouse utilizes the space, and has a short period to clear its inventory. In contrast, the DTS and DI witness an alarming sign with negative statistics revealing that the firm takes a long period to store goods on the racks after receiving them, and there is a comparably huge number of damaged inventories in their warehouse. About DTS, VinaTalks spends 1.5 hours storing products on racks after receiving. The low-efficiently the DTS process could be arisen from the product arrival, staff capacity, transportation delays, and technical issues(Boeve, I.B 2016). The schedule of upcoming deliveries is not precisely planned due to traffic jams or other unexpecting circumstances leading to the overcapacity of upcoming products which takes staff a long time to handle(Boeve, I.B 2016). The tight delivery window of suppliers also leads to overcapacity for handling (Pereira et al. 2019). Meanwhile, in the original warehousing layout, the inflow and outflow processes are quite complicated with the intersection. The Sub-Assembly storage is far from the Production and Final Assembly area which increases the period of the assembly process. The process of moving goods from the Production to Finished Goods Storage, and to the Packaging area for shipping takes a long time which impacts the delivery time. These problems affect the DTS and lead to the rise of operational costs, and delivery time. Regarding DI, it is inevitable to avoid damage since normal handling, storage activities, and human errors could cause a number of damages from mishandling in delivery, packaging failures, and damages inside the warehouse causing dropping in aisles, accidents from forks of lift trucks, dropping when filling racks, faulty in palletizing, and etc(Ackerman, K.B. 1997). Otherwise, the packages could be damaged through external factors which mostly occur in transportation such as the abrasion from shifting, the shock damage when suddenly bouncing, transfer handling, improper techniques for vehicle’s blocking and bracing, and etc(Ackerman, K.B. 1997).

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Figure 2: The intersection between the inflow and outflow processes

2. Warehouse Performance

Figure 3: The Warehouse Performance KPI

While the Orders Per Hour, Items Per Hour, and Cost as % of Sales have remarkably positive performances, VinaTalks undergoes negative statistics with respect to the CPO, and Safety(Accidents per year). The main reasons leading to the high CPO is attributed to the high warehouse costs, related to the labour, transportation, equipment, materials, packaging, and other costs(Richards, G 2014), which reveals the inefficient-costly of warehousing operations. In fact, the cheaper products despatched from the warehouse could cause a higher CPO(Richards, G 2014). The transportation and warehousing costs could be increased as the high damaged inventory (4.5%) resulting in higher costs for preventing, storing and repairing product damages(Coyle et al. 2021). About the safety issue, 17 accidents per year are significantly considered as an alarming figure for operating a warehouse. When working in the warehouse, there are various unexpected incidents related to working at heights, operating equipment in slippery floor areas, falling of roof panels or packages in the high racks, etc(Richards, G 2014). Besides, the current warehouse layout could cause accidents for workers due to the intersection between the inflow and outflow processes. Furthermore, the low-efficient equipment might lead to accidents when carrying heavy packages.

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3. Order Fulfillment

Figure 4: The Order Fulfillment KPI

Order Fulfillment, which involves fulfilling and shipping customers orders activities, is essential to promote productivity and customer’s satisfaction(Richards, G 2014). Following the above table, the green-coloured figures indicate that the Order Fill Rate, Order Accuracy, and Order Cycle Time succeeded in achieving the KPI. Reversely, the red-colour figures for the OnTime Delivery(OTD) and POC are attributable to reflect the inefficiency of shipping goods to the customer on the agreed date and time with the right items. Human errors through the manual data process could arise inaccuracy of delivery time, order quantity and goods(Lam et al. 2015). Particularly, there might be a wrong variable in the Enterprise Resource Planning system (ERP) when inserting the data such as wrong variable confirmation date causing the error of handled pick’s quantity in a particular week and shipping date for customers(Boeve, I.B 2016). Likewise, the original warehousing layout issues discussed above, including the intersection and the unreasonable positions of departments, also result in the OTD. Besides, the shipped products might be misdirected by delivery or postal staff leading to the delay of shipping orders(Ackerman, K.B. 1997). The quality of shipped orders is considered an important goal to achieve the POC. The customer’s satisfaction is decreased when receiving inaccurate or damaged packages(Randall, D.R.). With the low efficiency of OTD, the satisfaction of customers would be affected which leading to the low POC.

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II.

Recommendations & Redesigned Warehouse

1. Redesign warehouse layout To accelerate the warehouse performance and meet the KPIs, it is necessary to redesign the current warehouse layout. There are considerable changes of location in the inbound and outbound flows such as the Finished Goods Storage, Raw Materials area, Sub-Assembly Storage, Sorting and Staging Area to move goods more quickly and safely, and prevent congestions between flows which would slow up the process(Ackerman, K.B. 1997). In the new redesign warehouse layout, the Put-a-Way and Final Assembly Area and Refurbishment, which costs 15% of operating costs(Habazin, J, Glasnovíc, A & Bajor, I 2017), will be placed between the Quality Control area and the Sorting and Staging Area to reduce the time for picking, storing items, the travel time(Cyzerg 2020). The Sub-Assembly Storage will be situated next to the Raw Material area to shorten the distance between the production site and the main assembly(TÖRENLİ, A 2009). Meanwhile, the Finished Goods Storage area will swap positions with the Raw Materials area to decrease the distance with the Packaging area, the lead time as well as clear the intersection between the inflow and outflow processes. Furthermore, the wall between the Finished Goods Storage area and Lobby will be removed to provide more space for forklifts movement between the Packaging area and Finished Goods Storage area.

Figure 5: The original warehouse layout of VinaTalks

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Figure 6: The redesign warehouse layout

2.

The improvements of the warehouse  Pallets and equipments The use of pallets is equivalent to the size and characteristics of products helping to

prevent damage(Coyle et al. 2021). It is suggested to apply the Single-deep Selective Pallet Rack system in the VinaTalks warehouse as it provides unimpeded access to racks, and all customizations matching with the warehouse equipment(Storage Equipment Systems 2021) (Appendix 1). The improvement for load building needs to take into consideration to minimize the collapse or overweight events due to the heavy or large-sized packages(Coyle et al. 2021). Meanwhile, the warehouse’s aisles must be kept clear, well-organized, enough space for the movement of equipment. The equipment should not carry the over quantity of goods or move at an excessive speed(Ackerman, K.B. 1997). It is needed to buy qualified-efficiently equipment and recheck regularly for ensuring safety. •

The automation of warehouse

The automation contributes substantially to the performance of detecting and handling the goods placed on pallets to transport as well as mitigates the amount of routine manual and paperwork that accelerate productivity, and employee’s safety, and minimize the lead time(Custodio, L & Machado, R 2020). 8

It is recommended to implement the WMS into the warehousing operation as WMS, which is considered as a bridge linking warehousing software and hardware, provides the optimal material flows, distribution, and real-time of goods receiving and shipping, brings visual location data of goods allowing to manage and identifies goods locations easily(Mingxing, D, Jian, M & Xingwen, G 2018). WMS is integrated with other hardware for optimization including barcode scanners, labelling systems, RFID systems, or ERP systems(Wozniakowski et al. 2018). The applications of these technologies significantly decrease the human resources needed in the warehouse promoting the reduction of human errors(Ting et al. 2013). We

consider

implementing

the

EZOfficeInventory

software,

starting

at

$35/month(Ezofficeinventory), to easy management and control stocks. This system also integrates with RFID and offers a mobile app to scan Barcodes and QR codes. These integrations help to minimize the unnecessary operations processes, enhance the material flows and efficiency of warehousing activities(Lee et al. 2017). RFID system RFID systems will compact the layout and increase efficiency(Wang, Q, Mclntosh, R & Brain, M 2010). RFID system exchanges the data through radio waves and electronic tags attached to the products to reduce the time of processing data, keep track of the flow of materials wirelessly(Chen et al. 2013). This system enables automatic identification and traces accurately the product’s information such as the location, history, and application(Wang, K.S 2014). Hence, the amount of time for DTS, picking and shipping processes will be reduced. The WMS based on the IoT with the utilization of RFID enables to easily management information about raw materials, semi-finished goods, and finished goods which are storing or pending for shipping, inventory and picking problems(Lee et al. 2017). ERP system The ERP system uses to manage the core business processes to improve workflow and keep track of the real-time information(Wozniakowski et al. 2018). The integration brings realtime visibility of material flows, handling including the inbound&outbound flows, tracking inventory, managing orders, etc to increase the efficiency and reduce warehousing costs(Custodio, L & Machado, R 2020). Hence, the DTS, CPO, OTD problems are mitigated. It is suggested to implement the JD Edwards EnterpriseOne software which is an integrated suite of applications based on the automation and Internet of Things(IoT) to provide real-time data and 9

visualizations of warehousing operations, with a reasonable price and high efficiency(Appendix 2).

III.

Conclusion To recapitulate, this paper has discussed in detail the VinaTalks warehousing issues

related to inventory management, warehouse performance, and order fulfilment through evaluating the statistics of KPIs and the original warehouse layout. Since the operation management of Vinatalks is confronting some above issues, their warehousing performance is not efficient and productive. Hence, the improvements, and the redesigning warehouse layout, will be proposed to support VinaTalks mitigate their restrictions and achieve their goals. IV.

Reference

Ackerman, K.B. 1997, Practical Handbook of Warehousing, 4rd edn, Canada Boeve, I.B 2016, ‘Optimization of the inbound process at Wavin NL’, PhD thesis, University of Twente, Enschede. Chen, P.S & Huang, C.Y 2017, ‘The examination of key performance indicators of warehouse operation systems based on detailed case studies’, Journal of Information and Optimization Sciences, vol. 38, no. 2, pp. 367-389. Cyzerg 2020, Warehouse Operations: Optimizing the Putaway Process, Cyzerg, viewed 4 September

2021,

Coyle, J.J, Gibson, B.J, Novack, R.A & Jr., C.J.L 2021, Supply Chain Management: A Logistics Perspective, 11th edn, USA. Chen, P.S & Huang, C.Y 2017, ‘The examination of key performance indicators of warehouse operation systems based on detailed case studies’, Journal of Information and Optimization Sciences, vol. 38, no. 2, pp. 367-389. 10

Custodio, L & Machado, R 2020, ‘Flexible automated warehouse: a literature review and an innovative framework’, The International Journal of Advanced Manufacturing Technology, vol. 106, pp. 533-558. Ezofficeinventory, ‘Simple plans for all company sizes and needs’, Ezofficeinventory, viewed 7 September, Gaffney, J 2020, ‘Implementing Key Performance Indicators (KPI) Metrics In A Warehouse Setting’, PhD thesis, University of Wisconsin, Platteville. Kusrini, E, Novendri, F & Helia, V.N. 2018, ‘Determining key performance indicators for warehouse performance measurement – a case study in construction materials warehouse’, The 2nd International Conference on Engineering and Technology for Sustainable Development (ICET4SD 2017, MATEC Web of Conferences, p. 1-4. Habazin, J, Glasnovíc, A & Bajor, I 2017, ‘Order Picking Process in Warehouse: Case Study of Dairy Industry in Croatia’, Internal Transport Preliminary Communication, vol.29. Lam, H.Y., Choy, K.L., Ho, G.T.S, Stephen, Cheng, W.Y. & Lee, C.K.M. 2015, ‘A knowledgebased logistics operations planning system for mitigating risk in warehouse order fulfillment’, International Journal of Production Economics, vol. 170, pp. 763-779. Lee, C.K.M, Lv, Y, Ng, K.K.H, Ho, W & Choy, K.L 2017, ‘Design and application of Internet of things-based warehouse management system for smart logistics’, International Journal of Production Research, vol. 56, no. 8, pp. 2753-2768. Mingxing, D, Jian, M & Xingwen, G 2018, ‘Development of Automated Warehouse Management System’, MATEC Web of Conferences, China

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Pereira, M.T., Sousa, J.M.C., Ferreira, L.P., Sá, J.C. & Silva, F.J.G. 2019, ‘Localization System for Optimization of Picking in a Manual Warehouse’, Procedia Manufacturing, vol. 38, pp. 1220-1227. Randall, D.R., ‘...