Assesment of the central warehouse location ...............................................................................15
Conclusions ………………………………………………………………………………………..16
References ………………………………………………………………………………………....17
Presentation of the Company:
Oto Top Ltd. was established in Bulgaria in 1996 as a local branch of one of the biggest
Greek companies - K.A.Theodoridis S.A.
In 2001 Oto Top became SDP (strategic distribution partner) of Exxon Mobil lubricants division
for Bulgaria.
Now the Company is a market leader in autoaccesories, autocosmetics and lubricants.
Net income of the Company for 2008 is over 5 mln EUR.
Company`s portfolio include more than 3000 SKUs.
Active clients of the Company are more than 3500.
Oto Top works with most of the key players on the Bulgarian market as:
Metro Cash & Carry,Praktiker,Kaufland,Carrefour,Briko,Shell,Lukoil,OMV,EKO,Petrol and others.
Supply chain of Oto Top is formulated in two main stream parts
- Upstream supply chain
- Downstream supply chain
Downstream supply chain of Oto Top is separated in two divisions:
- Supply chain to Key Accounts using 3PL
- Supply chain to other clients using own transport
Critical analysis of supply chain operations:
- Description of the supply chain activities of Oto Top
The core concept is that of supply chain management (SCM), which consists of low inventory, vertical disintegration, outsourcing of services and cost measurement (D.Bovet ,J.Martha,Breaking the Supply Chain to Unlock Hidden Profits, Mercer Management Consulting,2000,p.132),
give us possibility to make more profit and to improve customer service.
First of all location of warehouses is very important for optimizing cost of delivery.
Last year Company moved to one of the biggest in Sofia logistic center, located near to
main highway and main ring road.
This perfect logistic location was chosen by 60 days location analysis of possible places.
Now the Company has central warehouse – 1000 m2, height - 11 m. and 1500 Euro pallet’s places.
The Company is importing products from Greece, Turkey, UK, Italy, Romania and Germany.
On the map of Bulgaria is shown that there are four local warehouses, located in the big cities-
Plovdiv, Varna, Bourgas and Sevlievo.
This strategic locations giving us advantage to cover all of the Country with low cost and faster.
This process of SCM is defined by logistic department of Oto Top.
The overall responsibility of a traffic department is to oversee day-to-day shipping.
The logistic operations management involves a wide variety
of administrative responsibilities.By implementing Transportation
Management Systems (TMS) with key elements of transportation
management are equipment scheduling, load planning, routing, and carrier
administration the Company is manage to sinhronize all of the logistic operations.
Location of Oto Top`s warehouses
Figure 1 Supply Chain flow chart of Oto Top
In Figure 1 is shown complete process of SCM.
Upstream SCM processes include all of the operations regarding supplying of
central warehouse.
The only one critical measurement in upstream SCM is proper forecasting of market
Demand.
Figure 2 Processes of upstream SCM
The usage of ERP system for supplying central warehouse is very critical for every single cost expenditure in most logistics operations.
Transportation services were standardized and intflexible,
resulting in limited ability to develop a competitive advantage.
The primary drivers of transportation costs are distance, volume and type of freight.
The safety inventory stock (SIS) period for Oto Top is 3 months.
Downstream SCM
In Figure 1 is shown that there are three base supplying activities from the central warehouse:
- Daily deliveries to customers in Sofia Region – SREPs working with PreSales order taking
system
- Weekly deliveries to local warehouses in the Country – using WMS for inventory control
-
Daily load planning for Key Account customers by 3PL operations
Critical analysis of KPIs of downstream SC operations
- Forecasting and planning of products flow – it is mean that regarding sales forecast ,
using ERP software, it is possible to keep SIS in the warehouses.
- Order entry and processing – in first case SREPs are taking the orders and in the second case the key accounts directly send their orders by fax or by e-mail.
- Invoicing – purchasing department is in charge for this operation.
- Warehouse operations – there are a lot of problems with preparing the orders
- Transportation – it is one of the most inflexible activities because of usage of TPL.
In part of usage of our own transport there are some possibilities for optimization
- Decision Support – this support usually is connected of usage of ERP and
WMS for planning and optimization.
Proposals for improving downstream supply chain:
For order taking by SREPs I propose to implement Handheld devices.
Base improvement will be that generating order by using bar codes and available
stock directly from the ERP base.
It will reduce mistakes with 30%.
Also it is possible by handheld devices to see purchasing and credit history of the clients
from the CRM module.
The time for processing order with handhelds will be with 50% less.
For receiving orders from Key Account clients I propose to implement EDI software.
EDI is module of ERP system for direct receiving orders and generating automatically stock
orders to the central warehouse.
It is mean no dilays, loss of information and less usage of paper.
By handheld devices the invoicing process will be easier and faster.
For SREPs we can install mobile printers in their vans and there is possible to print
invoices directly from the CRM system if the stock is delivered by EXVAN directly.
By EDI the invoices will be generated directly from the order.
Inventory availability: ABC category segmentation of products
90% for category A products,
75% for category B products,
50% for category C products;
It is mean safety stock to be defined by turnover of products
It will reduce inventory cost with 20%.
Also implementing of WMS will improve processes of making orders and possible out of stock.
Reducing stock inventory of local distribution warehouses is other way to reducing costs.
Also the gate control will minimize mistakes and back ordered deliveries.
One of the possible way to reduce trasportation costs is Freight Control
Other important responsibilities of transportation management are tracing and expediting.
Tracing is a procedure to locate lost or late shipments.
Shipments committed across a transportation network are bound to be misplaced or delayed from
time to time.
It is possible to tarck fright delivery by using GPS system.
H.L. Richardson,Pooling with Competitors, Transportation and Distribution. November 1998
All of the TPL providers are using GPS and special software module to track their deliveries.
The primary drivers of transportation costs are distance, volume,density, stowability and handling
Supply chain system design includes components for planning/coordination, operations,
and inventory deployment. Based on the firm's strategic and marketing plans.
the planningl coordination component manages the firm's production, storage, and
movement capacities. The operations component provides the information transactions
to initiate orders, assign inventory, select orders in the warehouse, transport, and invoice
customer and replenishment orders. Based on sales and forecast levels, the inventory
deployment component manages supply chain inventory to meet required service
levels while minimizing inventory.
APS – advance planning system is one way to optimize all of the processes of taking decisions.
Assessment of the central warehouse location
The location of the warehouse was chosen after careful consideration of 4 possible
Alternatives.
The optimal location is that it was new logistic center with warehouses and offices class A
and perfect infrastructure.
The storage area was equipped with stands 11 meters height.
For upstream supply chain operations the location is perfect because of the place-
Between two highways and easy access for trucks.
For downstream operations there are two entrances and two loading platforms.
There are possibilities for increase the storage area according to demand.
24 hours video control and security are good factors for safety operations.
Regarding preparing orders for distribution warehouses,local clients in Sofia ,
big key account clients and TPL orders , loading control and strict picking schedule
are premises for possible in time deliveries.
Conclusions
After critical analysis of supply chain operations of Oto Top Ltd. it is shown that it is possible
to improve the KPIs of supply chain.
What are the main driving forces for performance measurement?
In nowadays number one force will be benchmarking costs.
In this case our strategy will be mostly focused on in cost cutting activities as:
- Investments in new technologies and devices for accelerating performance
- Implementing new techniques in logistic and warehousing operations
Improvement of logistics and SCM operations lead to better customer level of service and
Brand awareness.
Going further we managed to predict future hardships and threats in logistic and supply chain
for operations improvement.
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