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Assignment 1 OSCM

1. The key action steps advised were to implement a bin card system, cycle counting process, and IT solution to improve forecasting, safety stock calculations, and inventory visibility. 2. Expected benefits included reducing inventory levels across the supply chain by 25-35%, achieving 95% inventory record accuracy, better management of damaged goods, and ensuring fresher stock for customers. 3. Additional steps included setting processes for damaged goods, training staff, and regularly updating inventory information.

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367 views

Assignment 1 OSCM

1. The key action steps advised were to implement a bin card system, cycle counting process, and IT solution to improve forecasting, safety stock calculations, and inventory visibility. 2. Expected benefits included reducing inventory levels across the supply chain by 25-35%, achieving 95% inventory record accuracy, better management of damaged goods, and ensuring fresher stock for customers. 3. Additional steps included setting processes for damaged goods, training staff, and regularly updating inventory information.

Uploaded by

rishabh rai
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOC, PDF, TXT or read online on Scribd
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Advise the action steps for improvement and the expected

benefits thereof for the following case:


Organization Background:
The firm was a leading consumer Products Company dealing in cosmetics and personal care products with its
head office located overseas. The company had a supply chain network of 3 factories with bonded stock rooms
(BSR) attached for dispatch to the depots and 35 depots for servicing distributors. Goods move from the factory
to the BSR. BSR dispatches stocks to Mother CFAs (depot). Other depots receive stocks from the Mother depot
and sell them to distributors.

Key Concerns for the Company:


1. To reduce inventory level at the BSR and depots.
2. To improve inventory accuracy at stocking points including both BSR’s and depots.
3. To identify the damaged stocks across the chain and initiate action in a timely manner.

Focus of Study
A study was completed focusing on the
1. Inventory-related issues at BSRs and depots. These included:
-Inventory holding as a proportion of sales
- Practices employed to track goods in the warehouse
- Proportion of fast and slow moving stocks to the total inventory
- Linkages of factory dispatches to BSR with patterns of BSR dispatches to depots
- Accuracy of inventory records especially of fast selling lines
2. Demand Planning process. The study looked at:
- Forecast Accuracy and process of reviewing and revising forecasts
- Level of safety stock at each location combined with process to review and reset the same
- Linkages of forecasts and consequent dispatches with relevant available closing stocks at depots
Makes Supply Chains Lightning Fast
Findings
Key Business Indicators
1. Total average inventory holding at BSRs was 8.2 weeks of sales
2. Average inventory holding at the depots was 6.5 weeks of sales
3. Depots were holding
- High inventory of old/withdrawn stocks
- Damaged stocks for a long time (over 3 months)
4. Book and physical stocks had discrepancy of over 30%

Conclusions
1. High Inventory Levels: Inventory levels were very high across the distribution chain on account of:
- Sales and dispatch forecasts that were not in line with actual primary / secondary sales
- There was no process to periodically review and refine the Annual Forecasts, in line with market feedback
-Stocking across all points in the distribution chain was driven by a push-oriented system that did not have
provisions to be tuned to market requirements
- Actual safety stocks maintained at depots were significantly higher than target safety stocks agreed at the
beginning of the year.
No system was in place to monitor and correct the same during the year
- Stock allocation from depots was manual. Orders received from distributors were manually processes and no
process was in place to automatically collate orders and allocate stocks
2. High Levels of Old / Withdrawn / Damaged / Slow-moving stocks: Dead stocks were allowed to accumulate
in the system mainly because:
- There was an absence of visibility into inventory details across stocking points
- The process to monitor and act on dead stocks was not adhered to
- Records of slow-moving / old / withdrawn / damaged stocks were not maintained methodically at the stocking
points. Records were inaccurate.
- Communication of details of dead stocks to the relevant teams was based on manually filed reports which was
time-taking and open to error

3. Inaccuracy in inventory records:


- The organization did not have a clear policy on periodic reconciliation of physical stock with book records
- Inaccuracies grew over time, compounded with process failure on accounting for dead stocks.

Solution 1
Action Steps Advised and Undertaken
Process Improvements
1. Bin card system was implemented for each rack at the CFAs
and the delivery staff was trained in relevant bind card
maintenance practices.

2. A process to regularly reconcile physical and book stocks


using the cycle-count process was mandated.

3. An IT solution was identified and implemented for


 Accounting the Cycle count process, providing MIS on
deviations and accounting the adjustment notes.
 Computing the forecast using consolidated orders, with
factoring for promotions and seasonality.
 Calculating safety stock level based on number of weeks of
sales target.
 Facilitating communication of closing stock data from BSR and
depots to logistics department.
 Facilitating communication of damaged and un-saleable stock
quantity to commercial department.
 Automatically allocating stocks using FIFO principle at the
depots.
4. Demand planning and forecasting were made a periodic
activity using the above IT solution to align forecasting with
market orders and actual sales. The process of setting safety
stocks at depots was made periodic and dynamic, based on
updated sales data.
5. Norms were set to act on damaged / old and other dead
stocks. Clear action steps were laid down to liquidate or destroy
these stocks. Responsibility and accountability were set to in the
organization to monitor and authorize activities in this regard
based on visibility provided by the IT solution.

Benefits:
1. The organization achieved an inventory record accuracy (book
stocks correctly reflecting physical stocks) of 95% within 2
months.

2. The company achieved (Within 2 Planning cycles i.e. 2


Months)
a. Stock level reduction
i. From 8.2 weeks to 5.5 weeks at the BSR.
ii. From 6.5 weeks to 4 weeks at the depots which
included Damaged Inventory.
iii. Reduction in stock Value holding across the supply
chain.
b. Transparency of saleable and damaged stocks quantities
across the supply chain resulting in more accurate
demand planning, stock allocation and production.
c. Better management of damaged and un-saleable stocks:
i. Sales realization on salvaging and selling damaged
stocks at a discounted price.
ii. Timely destruction of unusable and potentially
harmful products.
iii. Timely action on transport, handling, stock
management and product.
d. Reduction in proportion of old and damaged stocks;
Facilitation of ensuring fresher stocks in the market. This
was achieved mainly by reducing inventory levels across
the chain and also by better stock management at the
depots.
Solution 2
Improvements:
1. A process of regularly checking the physical and the book
records of stocks using cycle count method rather than
traditional method.
2. A Software Solution should be implemented for the following
purposes:
a. Calculating safety stock level on the basis of number of
weeks of sales target.
b. Automatically allocating stocks using FIFO at the depots.
Accounting the Cycle count process.
c. To help in assisting communication of closing stock data
from the BSR and depots to the logistics department. •
Computing the forecast using consolidated orders.
d. Communication of damaged and un-saleable stock
quantity to commercial department
3. Demand planning and forecasting should be made a periodic
activity using the software solution to support forecasting with
market orders and actual sales. The process of setting safety
stocks at depots should be made dynamic as well as periodic,
based on updated sales data.
4. Rules to be set to act on damaged or old or dead stocks.
Action to be taken to be clearly defined to liquidate or destroy
these stocks. Responsible and accountable person to be
decided in the organization to monitor and authorize activities
in this regard based on information provided by the software.
5. Use a mechanism to ensure all information related to stocks is
regularly updated and available, like using Kanban or Tag
Cards for racks.
6. Training the staff to update and maintain the Kanban or Tag
Cards.

Benefits:
1. The book stocks will correctly reflect the physical stocks.
2. The company can achieve significant reduction in stock level
and stock value holding.
3. More accurate demand planning, stock allocation and
production as a result of the clarity of saleable and damaged
stock quantities.
4. Reduction of old and damaged stocks, ensuring fresher stocks
are available in the market, by reducing inventory levels and
by better stock management at the depots.
5. Better management of damaged and un-saleable stocks:
a. Sales realization on salvage value and selling damaged
stocks at discounted prices.
b. Timely destruction of unusable products.
c. Timely action in the areas of transport, handling, stock
management and product development to reduce
damages to products.

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