storage & warehouse report

7/30/2019 Storage & Warehouse Report

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Summer

2012

COURSE INSTRUCTOR:

Sir Moin Uddin Ali Khan

GROUP MEMBERS:

Salman Saleh (10992)

Muhammad Misbah-ul-Haq (109

MBA (IM)

Institute of Business

Management

DISTRUBUTION CENTREAUTOMATION STUDY IN

MEDORA PAKISTAN


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DISTRIBUTION CENTER AUTOMATION: MEDORA OF LONDON

LETTER OF TRANSMITTAL

July 22, 2012

Mr. Moinuddin Ali KhanCourse InstructorStorage & Warehouse ManagementInstitute of Business Management

Dear Sir:

We have been assigned to draft a report on Warehousing managementissues & possible solutions of an organization, for which we have selectedMedora of London PVT Ltd.. This report leads us to explore downstreamsupply chain of the company includes warehouse & possibilities of ERP basedintegration with upstream supply chain of the company.

Evaluating supply chain perspective of real work environment had been anexhilarating experience for both of us and is going to help in our professionalcareer.

We express our deep gratitude to you for giving us such great deal of

learning opportunity.

Best Regards,

Salman Saleh (10992)Muhammad Misbah-ul-Haq Siddiqui (10979)

Institute of Business Management- Storage & Warehouse Term Report Summer2012 Page 2 of 27


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LETTER OF ACKNOWLEDGEMENT

July 22, 2012

Dear Readers:

We are thankful to Almighty Allah for giving us the strength and capability to

complete this report on Distribution center automation: Medora of London

PVT Ltd..

We would like to thank our course instructor Mr. Mounuddin Ali Khan for

putting in all the hard work in this course to make it a memorable experience

for all of us. We appreciate his guidance and shall appreciate the valuable

feedback on this report as well.

We are highly obliged to Mr. Zulfiqar Ali (Executive Supply Chain) from

Medora of London PVT Ltd. who shared their valuable time from busy

schedule in order to guide us through the report and provide the relevant

information.

Sincerely,

Salman Saleh (10992)Muhammad Misbah-ul-Haq Siddiqui (10979)

MBA (IM)IoBM



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S. NO. TOPIC PAGE NO.

1. Abstract 4

2. Introduction: FMCG Over view 4

3. About Medora of London PVT Ltd. Pakistan 5

4. Pakistani Breakfast Cereal Industry 11

5. Literature Review 13

6. Medoras Supply Chain 15

7. Distributors Automation Project 15

8. Better Market Opportunities 16

9. Implementation Process 17

10. Findings & Discussions 18

11. SWOT as Conclusion 22

12. Similar Implementations: Kohinoor Soap & Detergent (Pvt) Ltd 24

13. Recommendations 2514. References 27



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ABSTRACT:With the increasing awareness of integrated chain management, demand of

implementation of Information Technology based ERP software

in producing industries specially is on an increase. It is not solely integrates many

to all business processes within the organization; however the most advantage of

integration of suppliers & customers in the light of Extended Supply Chain concept.

In this paper, we are analyzing importance of integration of distributors with such

IT based technologies with taking the case of a FMCG based company Medora of

London PVT Ltd. Well analyze how their downstream supply chain including

improvement in warehouse management will be addressed by ERP implementation.

INTRODUCTION:

FMCG Overview

Productsthathavea quickturn overand comparativelylowvaluearereferred to

asFast Moving Consumer Goods (FMCG). FMCGproductsarethose that get

replacedat intervalsa year.samples ofFMCGusuallyembodya goodvary of

frequently purchasedclientproductliketoiletries, soap, cosmetics, tooth

cleaningproduct, shavingproductand detergents,additionallyasalternativenon-

durableslikeglassware, bulbs, batteries, paperproduct, and plastic merchandise.

Pakistans FMCG sector isone amongthe biggestsectorwithin theeconomy and

creates employment for more than one million people in downstream activities. The

wholeFMCG market is currently growing at double digit growth rate andis

predictedto take care ofa high growth rate. The FMCG sector is dominated

byeachMNC and domestic players.



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The FMCG sector in Pakistan is engaging attributable to the subsequent reasons:

There could be a low level of penetration additionally as low per capita

consumption for many of the product.

An average Pakistan spends 40% of his monthly income on groceries and

8% on personnel care product.

Large population base of Pakistan.

The problems faced by the FMCG sector are as follows:

High deviation in forecasted and actual sales due to inaccurate demand

prediction.

Inability to realize operational excellence due to multiple level of

sales knowledge tracking within the offer chain.

Over production, higher occurrences of stock outs due to the

bullwhip result (lack of information sharing among the members of the

provision chain).

Due to random changing purchasing power, the consumption pattern of average

Pakistan is changing continuously.

Some of the articles have seasonal demands and demand prediction

becomes troublesome for them.



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About The Company

Medora of London (Pvt) Ltd. was established in 1961, , a totally owned Project of

Kohinoor Group of Companies. Medora of London is today one of the leading

cosmetic companies in Pakistan. Its the most important producer of cosmetics in

Pakistan with big selection of product. Its Pakistans most prestigious and largest

cosmetics processing unit, having the newest modernized machinery, ISO 9001-

2008 standards environment for production of quality superior goods. It is the

number one consumer and trade-preferred brand in Pakistan with a really sturdybrand equity and client following in cosmetics industry. It is committed to its

objective of providing high quality products at affordable price.

With brands Medora, Delycia and Diplomat being one of the best sellers in

their respective categories, Medora of London has become a household name today.

The trust gained has been as a result of constant improvement in the products by

our team of chemists who are continuously striving to meet the expectation of the

consumers.

Having a network of more than 200 distributors, the company is able to serve its

consumers all over Pakistan.



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VISION:

BE, ANDBERECOGNIZEDAS, THEBESTCONSUMER

PRODUCTSANDSERVICESINTHEWORLD

MISSION:

MEDORAOF LONDONWILLCONTINUETOSERVECONSUMERSBY

CONTINUOUSLYINNOVATINGPRODUCTSTHATWILLALLOWUS

TOBELEADERSINCOSMETICSANDPERSONALCAREPRODUCTS.

TOPRODUCEPRODUCTSWITHTHEUTMOSTCARETOGIVE

NOTHINGBUTQUALITYTOOURCOMMUNITIES. ANDTO

CONTINUETOGROWSOTHATWECANMAXIMIZEOUR

SHAREHOLDERSWEALTH.

Products Categories

Medora of London has five main product categories,

Color Cosmetics

Fragrances Perfumed Talc

Shampoo

Mens care



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Color Cosmetics

Companys strongest product segment is color cosmetics. The main products in this

segment are,

Matte Lipsticks

Glossy Lipsticks

Glitter Lipsticks

Nail Enamel

Nail Polishes

Fluid Make-ups

Nail Polish Removers

Pair Pack Shades

Compact Powders

Face Powders

Aroma cosmetics

This is companys second largest product segment in terms of sales & revenues. It

contains variety of perfumes & perfumed talcs including,



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Festival Brand

Bouquet Brand

Gardenia Brand

Shadow Brand

Delycia Feelings Brand Delycia Dream Brand

Delycia Beauty Brand

Medora Joy

Medora Season

Medora Passion

Medora Cherish

Medora Pleasure

Skin care & Hair care

Variety of skin creams & hair shampoos comes under this segment which main

products are,

Medora Egg Shampoo

Medora Herbal Shampoo

Medora Clarifying Shampoo

Medora Vanishing Cream

Medora Lemon Moisturizing Cream

Medora Herbal Moisturizing Cream

Medora Honey Lotion.



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Mens Care:

It has products specifically tailored for men and includes,

Diplomat Lather Shaving Cream

Diplomat After Shave Lotion Adventure

Diplomat After Shave Lotion Prime

Elegance Cologne Sprays

Pakistani Cosmetics Industry



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With an estimated market size of Rs. 200 million a year and an estimated growth

rate of 15% every year, this industry in Pakistan is experiencing tremendous

growth. Further, the distinction between cosmetics for beauty and cosmetics

healthy lifestyle is turning into a lot of dominant with

a larger proportion of customers falling in line with the new trend. A lot of players

have additionally entered into this space. Besides some established

ones, native players also are testing the grounds with their international brands.

Another issue propelling the expansion of cosmetics, particularly in Pakistan, is that

the changing lifestyle of various individuals

Still the Pakistan Breakfast Cereal business is facing challenges.

Pakistan population not used to consuming cosmetics on regular basis

Easy availability and low-price ofcheap cosmetics products

Low awarenessconcerning body care.

Low awareness ofthe need of healthy & undamaging cosmetics

Price sensitive customers

Changing Mind set of the Consumers

People are getting aware of hygienic cosmetics. Theres an amendment within

the mind-set of the buyer and currently viewing Money for Value instead of Value

for Money. We've seen willingness in customers to maneuver to evolved products/

brands, due to changing lifestyles, rising disposable income etc. customers are

switching from economy to premium product.

Information Technology in FMCG



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Market share movements indicate that company like UniLever Pakistan Ltd and P&G

Pakistan Ltd, with domination in their key classes, have improved their market

shares and outperformed peers within the FMCGs cosmetics and toiletries sector.

This has significantly been aided by the employment of data technology to

facilitate varied processes and logistics demand.

A competitive edge in sales and distribution provides abundant required muscle to

the corporations to compete in market place as has been epitomized by companies.

Use of IT in sales and distribution guarantees to produce a regular supply of

competitive advantage which will go an extended approach in enhancing the power

of company in market place. Sales and Distribution in Pakistan suggests that a

collection of levels- wholesalers, Stockists, transporters, retailers etc. Automation of

Sales & Distribution guarantees the reduction in storage prices,

administrative prices, communication prices, lesser wastage and lesser

transportation price due to higher route designing. It enhances the revenue due

to higher selling designing, demand volatility management, responsive product

development. The individuals productivity is additionally enhanced due to effective

use of sales knowledge, improved communication flows and PC assisted ordering.

Considering of these blessings, it's prefer to be a natural candidate to be utilized

in warehousing and distribution.

Medora of London, as a corporation, has forever been related to respectable

cosmetics products and this changing shopper mind-set indicates that its poised to

grow at a comparatively higher rate in Pakistan with its massive product portfolio.

To be able to exploit this chance, the warehousing and distribution network ought

to be capable enough to handle the increased masses with reduced logistics price.

Information technology is the answer to needed potency in Warehousing &

Distribution and would undoubtedly act as an enabler.



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LITERATURE REVIEW:

Primary Objective

One of the first objectives is to know the Distribution center automation

project that aims at connecting all the distributors and warehouses on a

standard platform named DBA Manufacturing.

The main aim of the Distribution center Automation study is to try to an intensive

analysis of the project comparing it with alternative such initiatives from alternative

FMCG companies and supply recommendations to confirm successful

implementation of the platform.

This report will also study the vital success factors that make sure the success of IT

automation in warehousing and distribution networks. Finally the report ends with a

collection of recommendations to be followed for the project.

Medora of London Supply Chain



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The manufacturing for cosmetics is done in production plant. After that the finished

merchandise are transported to Carry and Forward Agents (CFA) who further

deliver it to the distributors and super distributors. The warehousing of finished

goods is done at CFA for direct distributors only, whereas, company owned super

distributors have their own warehousing setup.

Super Distributors Warehouse locations:

1. Karachi (two locations)

2. Peshawar

3. Quetta

4. Multan

5. Lahore.

Primary Sales

The requirement for smart delivery comes from the distributor who sends out a

mail to the CFA primarily based on this inventory levels and therefore

the delivery is sometimes done twice for each direct distributor.

Secondary Sales

DVSM (Salesman) sometimes goes to a collection of outlets in a day (called a Beat)

and records the inventory levels in the slightest degree the retailers in that beat.

Then he notes the requirement for new stock based on the average turnover and

retailers suggestion for each retailer that he additional notifies the distributor. The

bills are created at the distributor end and therefore the delivery is either done



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on same day or the next one. Currently most of the distributors use one or the

opposite proprietary software to record all the invoices, stock keeping, payment

settlement et cetera. In majority of the cases, its the DVSM who truly operates the

system to make invoices and prints outline beside alternative reports needed for

the delivery.

Distribution Centers Automation Project

For Visibility in Forward Supply Chain

Project plans to automate most of the aspects of the provision chain using the IT

platform from DBA Manufacturing. The implementation of the software needs that

the MicroERP gets installed on all CFA & super distributor sites that shall aid in day-

to-day operations like receiving, stock keeping, order picking, distributing, Payment

settlement, Claims handling etc.

Better Market Opportunities

OBJECTIVES



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Distributors point of view

Improved sales

Better inventory management resulting inperceivablepricereduction

Problem of stock out (being faced byseveraldistributors)will certainlybe

benefited toa goodextent

Better turnaround time for claims processing

Purchase order processing: Reduced effort

Companys point of view

Improve logistics and warehouse act of managing - Absence of secondary

and tertiary level data blurs the demand-supply graph.

In-depth market understanding - Dealer's/retailers purchase reflects

the buying pattern of outlets. Tracking secondary sales data with the

assistance of a totally integrated Sales Tracking System helps you to

grasp that section, region, and products mix have high and low demands.

Formulating and evaluating warehousing & distribution strategies -

Recognize the distribution channel's performance and strategize ensuing

distribution & warehousing cycles accordingly.

Better stocking:Elimination of lost sales and mal-distribution of stock due

to stock outs or massive inventory levels.

Implementation Process

Initial


Site Readiness check

Installation of the software

Loading the masters Item, Customer etc.Initializing the system with opening inventoryand other dealer specific details like User-

Providing sufficient training to the distributorto ensure usage of the system


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FINDINGS & DISCUSSIONS:

Process Related Issues

Parallel Billing & Stock Keeping Documentation

There are two possible primary reasons for the distributors indulging in parallel

billing and Stock Keeping Documentation:

Lack of trust in ERP Software:Unskilled personnel of Medora who will do the installation at the distributor site and

operate the software are found to be not properly equipped to handle the job at

hand.

Possible Solution

These personnel should be trained properly in the ways of how they are

supposed to interact with the distributors as well as well-versed with the

software to be able to respond to their queries.

Computerized Batch Numbers and Packaging Date (PKD)

The purchase invoice received from the CNF does not contain Batch no's and PKD

and thats the reason that none of the distributors are in a habit to record them

when they receive stock from the Manufacturing Site.

Possible SolutionOnce all distributors & CNF get integrated with the organization, computer

readable Batch numbers & PKD are required to be pasted on the products

when they are leaving manufacturing site to CNF. Radio-frequency

identification (RFID) or bar coded labels can be used for this purpose.



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BENCHMARKING:

A benchmark is typically a quantitative assessment of some aspect of performance

of an enterprise. Benchmarking is the process of gathering and sharing those

assessments and developing an improvement plan of action based on the

assessment.

The three perspectives of benchmarking are internal, external and competitive.

Here we are doing Internal benchmarking which looks at firms conducting

business in the same company/group. For internal benchmarking Kohinoor

Soap & Detergents (Pvt.) Ltd has been decided which already go through the

same procedure of automation.

WAREHOUSE PERFORMANCE GAP ANALYSIS



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Productivity

Dock-to-

StockTime

Warehouse

Order-CycleTime

Inventory

Accuracy

Shipping

Accuracy

Storage

Density

Annual Volume 60,000 PKR 100,000,000.00 PKR 100,000,000.00 3,000 40,000 8,000

lines/PH on-hand inventory on-hand inventory locations lines / year SKUs

Current

Performance4 50 24 75% 99.60% 2.5

lines/PH hours hours % locations % lines SF/SKU

Current Resource

Requirement15,000 750 160 20,000

person-hours locations lines / year SF

Benchmark

Performance8 24 12 95% 99.95% 1.4

lines/PH hours hours % locations % lines SF/SKU

Benchmark ResourceRequirement

7,500 150 20 11,200

person-hours locations lines / year SF

Resource Saving 7,500 26 12 600 140 8,800

person-hours hours hours locations lines / year SF

Rate PKR 60.00 0.10% 0.10% PKR 200.00 PKR 3,000.00 PKR 450.00

PKR / hr % / day % / day PKR location PKR / line PKR / SF *Yr

Annual Savings PKR 450,000.00 PKR 100,000.00 PKR 50,000.00 PKR 120,000.00 PKR 420,000.00 PKR 3,960,000.00

Total Savings

(PKR / year)PKR 5,100,000.00

WAREHOUSE FINANCIAL OPPORTUNITIES ASSESSMENT




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INVENTORY TRACKING METHOD

The most important aspect of an inventory control program is tracking the

inventory and locating it as required for a warehouse transaction or customer

order. Inventory tracking is a vital function for an accurate floating-slot

system and for an effective, productive fixed position pick system.

There are two inventory tracking methods, manual and computer.

Before implement the ERP software Medora was using manual method for the

tracking of inventory. They are using card slot method to track the inventory.

Now Medora will use computer-controlled tracking system to track the inventory in

which warehouse reserve and pick position is discretely identified and each

unit load has a discrete label. This unit load label identifies the assigned

reserve or picks position.

Possible Solution



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Bar-Code Scanning: With the bar-code scanning system, the paper document

directs the employee to the reserve position. At the reserve position, the

employee scans the unit-load reserve position, transfers the unit load to the

pick position and scans the pick position label. The scanned information is

entered on line or delayed in the host computer to update the on-hand

inventory.

Disadvantages:

Disadvantages are investment and employee training.

Advantages:

Advantages are that it handles a high volume, provides an accurate record,

provides an accurate transfer of data, is online and handles a large number ofSKUs.



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METHOD OF PHYSICAL INVENTORY COUNT

A very important activity of the inventory control function is the activity to verify

the SKU actual on-hand inventory level. The objective of the actual on-hand

inventory level verification (count) is to ensure and to establish confidence in the

book on-hand inventory levels.

Current Practice of physical cycle count in Medora: Medora is using manual

count method, in which an employee walks the warehouse aisles with a physical

inventory form and counts the product. On the form the employee indicates the

actual on-hand inventory by SKU by reserve or picks position, family group, or anentire warehouse zone. After the count is completed in the warehouse, the actual

cost is compared to the book inventory.

Possible Solution

Bar-Code Scanning Count: The bar-code scanning count is similar to the manual

count method, but an employee uses a hand-held bar-code scanning device to scan

bar-code labels on the product and storage-pick positions. In a unit load

warehouse, the employee scans the unit load and rack position. This represents an

exact inventory count by warehouse location.

When all required scans are made, the information is entered into the computer.

The entry updates the on-hand inventory level by the reserve and pick position

counts in the warehouse.



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BULLWHIP EFFECT

Fluctuation in orders increase as they move up the supply chain.

Demand information is distorted as it travels within the supply

chain, so that different stages have different perspectives and

estimates of the chain demand

Manufacturing cost

Inventory cost

Replenishment lead time

Transportation cost

Labor cost for shipping and receiving

Level of product availability

Relationships across the supply chain

distorts

Profitability

Possible Solution

Implementation of ERP in downstream supply chain helps a lot in

improvement in accuracy in demand forecast, thus reduces overall cost of

holding inventory at warehouse.



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CHANGE MANAGEMENT

Gaining Trust of Partners

Supply chain automation is uniquely difficult because its complexity extends beyond

your company's walls. People will need to change the way they work and so

will the people from each distributor that company adds to its network. Most

of the larger FMCG players have also faced issues trying to force such radical

changes down distributors throats.

Possible Solution

Distributors have to be convinced that the system just does not sit to benefit the

company, rather theres something in it for the distributors as well. Increased

ROI with reduced stock outs, and better managed inventory should be

something that can be highlighted here.

INTERNAL RESISTANCE TO CHANGE

If selling supply chain systems is difficult on the outside, it isn't much easier inside.

Sales people are accustomed to dealing with phone calls, faxes and hunches

scrawled on paper, and will most likely want to keep it that way. If we our sales

people cant see the benefits that it has for them and using the software will be

worth their time, they will easily find ways to work around it. Also they wont have

the conviction to convince the distributors to use the system.



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SWOT ANALYSIS AS CONCLUSION OF THE REPORT:

STRENGTHS

Medora experience with DBA Manufacturing software as an ERP application

for upstream supply chain from supplier to manufacturing products is a great

leverage point to understand distributor's preferences and that knowledge

should be used to improve the system.

DBA Manufacturing is matured software with most of the features at par with

the other software which is available in the market.

User friendliness of the software will go a long way in driving the usage

among the warehouse managing personnel.

WEAKNESSES

Dissatisfaction among the warehouse managing personnel while adopting

ERP software should be well & timely taken care of in order to win their trust.

Initial investment cost to implement ERP in the downstream supply chain is

high and payback period is around 5 years.



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OPPORTUNITIES

Auto-replenishment of stock at the warehouse end shall help manage the

inventory well.

Use of ERP software at downstream supply chain will give company accurate

information about the tertiary sales which can be used for market research

understanding consumer behavior

Sales forecast module can be used for better demand planning for the

company which helps in improving warehousing of finished goods which

ultimately reduce holding cost.

Automatic data upload eliminates the need for manual data retrieval saving

time for other activities

Centralized upload of price lists leaves no room for manipulations at the

distributor end

Real time sales data facilitates intervention at the right time for declining

sales

THREATS

In downstream supply chain, personnel at warehouse may not ready to

accept change in the operating procedure.

Lack of exposure to the ERP software among the distributors might require

addition efforts in the future to get the necessary support.



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RECOMMENDATIONS: We need to make sure that distributors trust the system and the

processes behind it. One thing which is most important behind successful

implementation is the involvement of the channel partners and the

critical role of top management in ensuring that.

Another important thing is to take care of trying to be responsive to the

queries raised by the distributors in a prompt and satisfactory manner.

This is not to suggest that we fix all the issues as they come but probably

a convincing reply as to assure them that we understand the issue, and

will go a long way in maintaining a healthy relationship.

Just as distributors need to be convinced about using the system, the

same effort needs to be put into training the warehouse personnel as

well. This is very important since the translation of all these efforts into

results will only come if they use the system to its potential and are

committed to it.

Re-implementations are being done at all the distributor sites so that

everyone is on the latest version of the software and also includes

refresher training on it. From now on, the usage of the software shall be

strictly monitored and distributors would be required to maintain the

daily usage.

Regular audit of sale and channel partners should be done to identify

improvement like reduction in inventories, reduction in stock outs

increase in sales owing to availability, increase in coverage, expiry of

perishable items etc.

Implement ISO 28000 for security management system for the supply

chain.



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REFERENCES

http://www.erp.asia/scm-implementation.asp

http://www.medora.com.pk/

http://en.oboulo.com/information+technology+as+an+enabler+of+sales+an

d+distribution/

http://www.dbamanufacturing.com/contact/

http://fmcg-marketing.blogspot.com/2007/12/maricos-distribution-

network.html

http://howtogetfasteratrunning.com/botree-software-international-bags-

order-from-nestle-globe/

http://eng.hi138.com/?

i261762_Distributor_of_FMCG_industry_how_to_make_money

http://books.google.co.in/books?

id=orimz5E6IO4C&pg=PA88&lpg=PA88&dq=marico+

+MidAs&source=bl&ots=-tl9DR4Ksa&sig=VexQsXyiHT0sChGAfHghxBm2-

xM&hl=en&ei=9wPJTf3mIJS-

tgfjrayECA&sa=X&oi=book_result&ct=result&resnum=9&ved=0CFcQ6AEwCA

#v=onepage&q=marico&f=false

http://www.itcinfotech.com/CPG/mobility-application-service.aspx

http://www.slideshare.net/WayneGoodrich/how-automation-can-help-fmcg-

sales-managers

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