Herbalife Products (M) Sdn Bhd

(02820282141M)

ABSTRACT

Herbalife Nutrition is a global multi-level marketing (MLM) corporation that develop and
direct selling for nutritional products such as meals replacements, nutrition supplements and
skin care products with a mission to improve nutritional habits around the world with great-
tasting, science-backed nutrition products that help people get the right balance of healthy
nutrition. Herbalife Nutrition operates in more than 90 countries with over 8,000 employees
around the world and Herbalife Products (M) Sdn Bhd is one of the organization under Asia
Pacific (APAC) region and local management that serves the facility and distribute the
products among its members through independence distributors in Malaysia. In this report,
we are going to identify, explore and discuss the standard operation procedures implemented
by Herbalife Malaysia in Supply Chain Management process. The main objective of this
report is to analyze the organizational activities through current practice, process flows, job
description, job analyses and technology used by the firm in their operation management. In
the First Chapter, writers will introduce the history of organizations and its local operations,
including the type of access point and sales orders channels. Next, a further detail about main
activities in mother warehouse which Herbalife has appointed to their Third Partly Logistic
(3PL), DB Schenker Logistic can be found in Chapter Two where Inbound process, Home
Delivery Procedures and Inventory Control are being touched. After that, writers are
highlighting three major problems or issues that happens in Herbalife process that are
focusing more in home delivery activities in Schenker. Number one, Herbalife always
received late parcels or incomplete parcels from new courier, Ninja Van (NJV). Second,
wrong picking or shortage items when fulfill the orders by warehouse manpower. And
thirdly, logistic cost control due to Approval to Ship (ATS) procedure for lost parcels in
transit. Based on issues addressed, writers have come out with propose solutions,
enhancement or ideas that can may be help in resolving the problems faced by Herbalife
company in Chapter Three. And lastly, Chapter Four will show the summary report that
presenting our findings and conclusion from the project assigned related to internal and
external operational issues in Herbalife corporation under Supply Chain Management.
 CHAPTER 1

1.0 INRODUCTION

1.1 COMPANY BACKGROUND

Herbalife Nutrition is a global leader in meal replacements, nutritional supplements and skin
care products. The company was founded by Mark Hughes in 1980, and incorporated in the
Cayman Islands, with its corporate headquarters located in Los Angeles, California. The
history behind the building of Herbalife Nutrition was started in February 1980, when Mark
Hughes selling the original Herbalife weight management product from the trunk of his car.
Hughes often stated that the genesis of his product and program stemmed from the weight
loss concerns of his mother Joanne, whose premature death she attributed to an eating
disorder and an unhealthy approach to weight loss. The Herbalife Nutrition core philosophy
of providing access to personalized nutrition to millions of people around the globe is even

more relevant today than it was when the company was founded in 1980. Quality control
throughout the manufacturing process ensures every product meets exacting standards.
Ingredients and products are tested at five different points throughout the ‘seed to feed’

process. If it’s on the label, it’s in the canister, bottle or box.  Herbalife Nutrition is
committed to setting the standard by which all nutrition companies are measured. They are
advancing the science of nutrition through research conducted around the world. Since 2003,
they’ve increased the research and development expenditures dramatically to advance the
product-development process. At Herbalife Nutrition they do not sell through shops but
through their network of Independent Members. All of Independent Members have received
training programmes on how to best use the products and they are all driven by a common
purpose – to provide comprehensive and personalised coaching to anyone wishing to lead a
healthier and happier life. Among the product lines that offers by Herbalife Nutrition other
than famous Formula 1 protein shakes are protein bars, teas, aloes, multi-vitamins, heart
health set, F1 sports hydration and personal care products such as shampoo, hair conditioner
and skin care items.
1.2 LOCAL OPERATION

Herbalife Products (Malaysia) SDN BHD is one of the organization that operates locally in
Plaza See Hoy Chan, Jalan Raja Chulan, 53100 Kuala Lumpur which consist warehouse and
office floor for employees and top management. After 15 years of operation Herbalife
Products has open about 20 access points around Malaysia included in Sabah and Sarawak.
The location is divided into four types of category for access points, i) Sales Centre ii) Home
Delivery (2) iii) Pick Up Centre (PUC) and iv) Partner Pick Up Points (PPP). Every access
points have different function and operations like for example, Herbalife office in Kuala
Lumpur consider as the Headquarters (HQ) and also sales centre where the customers can
meet directly with Herbalife Member Services and Sales Team for any inquiry. Meanwhile
for home delivery was managed by outsourced vendors that handle for stock inventory, home
delivery orders and warehouse management. As for PUC and PPP, both are operating the
same which is the customer is only allowed to come and collect their products at respective
locations. No money changing or payments is accepted in PUC and PPP. The difference
between these two access points are the capacity storage and number of SKU available in
PUC which are more bigger compared to PPP. Some items are not available in PPP such as
set orders like kitting items and other literature products like water litre bottle, measuring
spoon, skincare products where it only limited to 23 product SKUs. As a growing company,
Herbalife Malaysia is in top 3 ranking best performance in APAC region and were expected
to open new more branch in following years to make it easier for the customer to reach out
and have their products. Below table is presenting the locations of Herbalife operations in
Malaysia.

Table 1: Access Points of Herbalife Malaysia as per Year 2021.

Access Point Category West Malaysia East Malaysia

1) Home Delivery DB Schenker, Shah Alam GD Logistic, Kuching,
Sarawak (RDC)
2) Sales Centre Kuala Lumpur Kota Kinabalu, Sabah
3) Pick Up Centre  Penang  Kuching
(PUC)  Kuantan
 Johor Bahru
4) Partner Pick Up  Kuala Terengganu  Sibu
Point (PPP)  Air Keroh, Melaka  Miri
  Batu Pahat, Johor
 Seremban, Negeri Sembilan
 Bangi
 Puchong
 Setia Alam
 Alor Setar
 Ipoh
 Jelutong, Penang
Total Access Point 15 5

Source: Herbalife Nutrition Malaysia, 2021.

1.3 ORDER SALES CHANNELS

Every customer which are interested to buy Herbalife products must register as a member and
have Purchaser ID to enjoy some percentage of discount offers by Herbalife based on
Volume Point (VP) achieved per orders and Members level or category. The customer is able
to place orders through 6 order sales channels either via internet, mobile, POS, phone in,
iKiosk and walk in. POS is a new sales channels effective on July 2020 which allows
customer to place their orders through new mobile application. Previously, for iKiosk and
walk in is only available in access point for sales centre, but now since pandemic Herbalife
have close these two sales channels to minimize the physical contact and push all the orders
via online ordering. Customer can choose either to want home delivery or do self-pick up in
PUC or PPP. The major websites or platform that are using by customer to place the orders
are through MyHerbalife system. Meanwhile for other channels like phone in, Member
Service Department will assist to key in customer new orders through Global Order Capture
2.0 (GOC). For every type of purchasing orders will include the operation fees, freight
charges for home delivery and marketing fund. All these orders will be reflected in Oracle
system and catch every data of sales history and stock level or product availability. Below is
the summary for fees applied for different type of freight code orders.

Table 2: Freight Code Charges

 Source: Herbalife Nutrition Malaysia, 2021.

CHAPTER 2

2.1 INBOUND SHIPMENT

Herbalife's products are produced at the company's five manufacturing facilities in the U.S.,
Europe country such as Italy and Germany and as well China as third-party manufacturing
partners. The company's production process is based on a 'seed to feed' strategy which the
company initiated in the 2010s and allows it trace where the ingredients in its nutritional
products originated. For inbound process in Herbalife Malaysia there are 2 types of Tariff
Code system that are currently used; Harmonised System Code (HS Code) and ASEAN
Harmonised Tariff Nomenclature (AHTN) where these tariff code numbers are implied for all
imported or exported goods. HS Code is a tariff code numbers which are provided for in the
Customs Duties Order, CDO 2017 or Perintah Duti Kastam, PDK 2017. This applicable to
international transactions between Malaysia and Non-asean countries. Meanwhile for AHTN
is a tariff code numbers provided for in the Asean Customs Duties Order, ACDO 2007 where
it applicable to international transaction among Asean countries. Example of HS code
explanation can be review from Appendix parts (give number**). Next, for standard shipping
documents Herbalife Malaysia are using 2 types of shipments; Sea Freight and Air Freight.
Under Sea Freight there are 3 categories for Bill of Lading (BOL) documents which is
Original BOL, Surrender BOL and Seaway Bill. In order to expedite the sea shipment
delivery, Herbalife Malaysia is using Seaway Bill because it was express released. For Air-
Freight shipment usually Herbalife are using to fly particular items or products that are
sensitive towards temperature, emergency stock due to low level of inventory or out of stock
(OOS). The remaining important documents involves are commercial invoices, packing list,
certificate of Origin and certificate of analysis. Delivered at Terminal (DAT) or named
terminal at destination for Herbalife Malaysia are located in DAT Port Klang and DAT
KLIA. The full process of this inbound flow might be get in Appendix page(no.) Table 3
below is showing the summary of overall the shipping documents needed for export or
inbound process by Herbalife Malaysia.

Table 3: Standard Shipping Documents

Source: 3PL Management Meeting Forum, Supply Chain Management – Herbalife

Nutrition2020.

2.2 HOME DELIVERY PROCESS

After custom clearance process, all the export cargo is ready to release and delivered to
mother warehouse which located in Shah Alam for inbound receiving. This warehouse was
managed totally by DB Schenker Logistic team. Upon receiving, there is another step process
before all these goods are received into the systems. This include a proper quality check,
picking items for sample, pallet allocations, stock count, hologram stickers and many other
physical process which require time consuming and number of manpower. However, this step
is not going to discuss in this report because we try to focus on the domain activities in
Schenker which is handling for home delivery order process. During early pandemic in
March 2020, many locations for pick up centre have to be closed when Malaysia’s
government first announce the forces of Movement Controls Orders (MCO). Impact from the
MCO period, all the order sales are directed to home delivery and create a huge traffic. Even
for now, home delivery is still showing as the biggest contribution to Herbalife Products that
taking about 60% from the overall volume of sales orders. And now, we are going to explore
what are the standard operation practiced by DB Schenker and how they fulfilled the orders.

Generally, home delivery orders will receive by Schenker Logistic through

Warehouse Management System (WMS). All these orders were auto printed and be passes to
the ‘pickers’ or manpower to do the packaging and quality check. There is one work station
where all these staff will do the checking orders such as the SKU involved, the number of
quantity, the expiration date, scanning 2D Barcode and product condition. The picking
process must have to follow by First Expired First Out (FEFO). This whole process was
monitored by close-circuit television (CCTV). In case there is a complaint from customer like
receiving short items this CCTV footage will help in checking which time and date orders
was issued, by whom it was been processed or person in charge (PIC) and clear image of
video on what products was been put into box carton before the orders ship out. After that,
once the product is ready, the boxes were distributed to courier services based on coverage
area. As for now, there are 3 names of courier services that are working on behalf for home
delivery orders which are ZOM, GDEX and NinjaVan (NJV). The status of delivery will be
updated in Oracle system as ‘shipped’ and customer are able to track their parcels in courier
systems. By the end of business day, each courier company must have send a daily report to
Herbalife Malaysia on the progress of each locations for home delivery performance. Every
parcels must have completed not more than 7 working days from the date of orders created.
For orders that are yet to ship either it was pending from Schenker side or courier, Member
Service Department will run the list report of the numbers of orders that need to give
attention for expedite delivery.

** Give sample of the report **

2.3 INVENTORY CONTROL

In Herbalife Malaysia, each access point or warehouse are mandatory to do cycle and
physical count for every week of the month. This usually carried out during Saturday to
monitor closely the movement of inbound and outbound of the stock to ensure there is
minimize variance or shortage in physical stock versus on hand quantity in system. Some
locations required to do daily count, especially when there is a lot of variance occur in that
particular access point. Herbalife also do end-year stock count in Schenker, where all the staff
from logistic and warehouse department, companied by one auditor from finance gain
experienced to do the stock count which involved the checking over pallet and using crane to
go up for pallet allocation in 9 feet tall. Next, the latest report can be generated and pull out
from the Oracle. Before the stock count activities start, the full checklist of the total SKU of
product must be listed, prepared and approved. Example of checklist details before end year
stock counts are; housekeeping of physical items, outstanding report, clear physical and
system back orders, view and clear any pending and stuck transaction, ensure all move orders
is transacted correctly and in-transit was cleared. The KPI for stock count accuracy must be
achieved to 99.98%. After that, count group will be allocated to separate team for example
Team A and Team B. Both team will do the same stock count SKU and all the count sheets
report will be key in into excel file and match the differences. If there is found a variance for
one SKU counted by team A and team B, 3rd cycle count must be conduct again for that
particular SKU. Once the group get the final or actual number of the counts, the count data
will then cross check with the on hand system. For any discrepancy between physical count
and the system record, an investigation must be run to get the finding where the stock
variances is coming from. After getting the approval from Head of Department (HOD), next
step is generating a report for Business Suite (BS) approval. This is for submission to APAC
region and must be submit before the end date. Any stock adjustment during the cycle count
and reconciliation must be done before submit the full report to BS. Finally, an analysis
report for Herbalife physical inventory accuracy will be generate for summary. The result
will then share among employees to see every performance by the vendor-warehouse manage
at each location.

CHAPTER 4

In previous page, we have described the process flow of operation management activities
from Herbalife Product (M) Sdn Bhd. Started from the inbound process, 3PL vendor
warehouse operation in home delivery services and material control in inventory monitoring.
Taking all these three big scopes we have overview many types of OM activities involved in
general. Taking this opportunity to understand more on operation issues, we have identified
three problems that always bring up in home delivery order process. Compare to other access
point in terms of operation, home delivery is a major concern because in technically it
involves many parties to run the whole process of orders, like example for Shenker, they
were in charge for picking order process, courier to delivers the parcel product and Member
Service Department to handle customer complaint for their orders issues. In this chapter,
writers are going to highlight the cause or the main problems in home delivery services and
provided with the solutions that may be suit to implement and practiced by all parties
involved in Herbalife’s vendors.

4.1 HOME DELIVERY SERVICE QUALITY

In Herbalife Products (M) Sdn Bhd, mostly all the transportation and warehouse facility was
run by 3rd Party Logistics or we called as ‘vendors’. Same goes to mother warehouse and
courier used by Herbalife in home delivery process. Previously, Herbalife is having contract
with courier services such as Mxpress, Citylink, DHL, ZOM and Gdex. But now, as per
mention in previous page in home delivery process, Herbalife have standardized their
vendors with maintaining the contract with three main courier which is ZOM, GDEX and
NinjaVan (NJV). Recently, after company is shifting to used new courier (NJV) many
unpleasant complaints were received from the customers such as, the orders received was
incomplete parcels, courier send the parcels without customer notice or did not confirmed
through phone calls before proceed to delivery and the product received in spills canister or
damages on product. This incident will surely cause Herbalife’s customer to feel frustrated
and disappointed. Not only that, in prolong effect it will give a bad reputation to Herbalife
name as well. Therefore, from the situation above, we have analyzed the factors and come out
with problem solving issue.

*Suggestion pending from Jun*

4.2 PRODUCT MATERIAL CONTROL

Herbalife is very committed in ensuring all the products are safe and delivered to
customer in a good condition. This include with a proper product handling, pick and pack as
well as the accuracy of product issued out from the warehouse. Despite of having current
standard operation for every process flow in home delivery, there is still an error occur in
work station when it involving human activities. Although daily or weekly cycle count for
inventory checking might be help in tracking those miss shipped orders, it will not guarantee
the consequences of mistake done by internal organization. To be more clear on this
statement, we will provide a few scenarios of what usually happens in home delivery
services. Number one, there is an issue reported for manpower in warehouse that pick a
wrong item due to confusion of the same canister of product. This mainly because of the
bottle canister have the almost similar color or size between two distinctive SKU. Second,
Member Service (MS) have received a new complaints regarding customer who did receive
product that near to expiration date. According to Herbalife policies, any product that meet
potential obsolete must be off shelf from the store and prohibited from selling to customer.
However, this incident was slipped from Schenker monitoring when one of their staff have
proceed to release the order with expired product. This obviously make company to question
the reliability of Schenker to follow the exact procedures and guidelines from Herbalife.
Taking from these two incidents, we are suggested to use the triple check system
where the puller initials the upper left corner of the pull ticket, a checker checks the order and
initials the right upper corner the driver or loader then checks it as its loaded and signs the
bottom when it is delivered. Then have proof to the customer the products are there and when
they sign for it, now have four different signatures verifying the order was pulled
properly.Assuming that cost has been taken into consideration, utilize the paperless picking
using the RF scanner might be a solution.  Together with necessary labeling on respective
goods, RF scanner will be the first gate to prevent picking error.  The picker who validates
goods when picking-up will serve as another filter/gating to achieve accuracy.
Besides that, random audits of orders while in process of being pulled and inventory
slot verifications should assist. Involvement of management on the floor, visual presence will
support the auditing process and on the spot communication of errors upon audits should help
perhaps about 50 percent reduction. If there is no communication there will be no
improvement.
Another suggestion to prevent manpower in warehouse that pick a wrong item is, use a
process call Pack-Check. In short, all shipments pass through a weight scale in where the
carton gets weighed and checked against what was setup in the system. Any carton that does
not match the system is spurred off to a Pack-Check station where it is hand checked and any
errors are fixed before the customer is impacted. 

To prevent the customer from receive product that near to expiration date, courier services
should develop a system for managing expired products and have trained frontline staff to use
it. Here is accomplish key prevention goals suggested;
1. Ensure products nearing expiration are rotated for first-use
At every check interval, make sure the closed-dated items are in the front position so they are
pulled first when used. In baskets and loose bins, bring closed dated items to the top and
consider using a separator sheet between close dated and the remaining inventory if products
easily shift.
2. Ensure items nearing expiration are labeled as such
Expiration dates can be printed too small, illegibly, or only on master cartons making proper
expiration date management very difficult. Adding a vibrant, “Use First” sticker to these
items will add additional visibility, and increase the likelihood of use prior to expiration.
3. Ensure items nearing expiration are moved to where they’re most likely be used
For high-value and frequently expired items, evaluate usage by location. If a low usage item
is nearing expiration, consider transferring it to a different location within the facility that has
higher usage levels.
To accomplish these goals without excessively burdening staff, start by implementing a
quarterly expiration monitoring program to ensure all supply storage locations are checked
for outdates and soon-to-expire items regularly.
1. Implement quarterly storage checks to rotate items and document accordingly
Each quarter, assign material handling staff to check and rearrange items in storage so the
oldest products (those set to expire first) are clearly positioned in front. During this check,
staff should remove any expired items they find and document their actions in detail.
2. Use color-coded markers to easily identify close-dated items
Apply color coded stickers to items in storage associated with each month of the year so
material handlers can arrange items accordingly. Reserve one color to denote items that will
expire within the quarter (before the next check). This simple system makes training a matter
of memorizing colors while also making it easy for supply staff to both notice and use items
set to expire soon.
3. Consider which items are used more frequently in certain departments and move
them accordingly
If certain items are used more frequently in some departments rather than others, move short-
dated items to those areas of higher-use.
4. Pull items with that month’s sticker and document it at the end of each month
Conduct a quick storage check at the end of each month to pull all items marked with that
month’s sticker off the shelf, documenting those discarded items in detail. This task can be
handled by supply techs in each department, or by a single individual.
4.3 COST CONTROL

Every organization were struggling to control their cost from every side of angle in daily
operation activities. Herbalife Products also no exemption. There are many strategies carried
out by logistic and warehouse department to cater the issue arise from the parcel shipment
problems in home delivery. Due to the long list of problem delivery orders, especially during
the end of the month, promotions period and Enhanced Movement Control Order (EMCO)
gives a big challenge and constriction to Shenker Logistic to maximize their output to process
all the orders since the capacity of workers was reduced to 60% during this pandemic. Not
only that, for the orders stuck at courier in transit, lost or damage must be follow up from
time to time to get the actual status for each of the parcel orders affected. Inadvertently, this
scenario brings customer satisfaction level to drop and have a poor experience with Herbalife
home delivery services. In order to dealing with the flaws of quality services from vendors,
Herbalife have set a policy called ‘Approval to Ship’ which allows the product to be shipped
out from sales center (HQ) sending directly to the customer. However, there is a condition for
this ATS to be applied, which is when the orders have reach more than 100 Volume Point
(VP), products return for exchange were verified for its damage or quality issue and when the
parcel was lost during in transit. Basically for each movement of the parcels will use courier
transportation to ship and return. This process was eventually incurred the cost and money.
Hence, to cater overspending on logistic cost for this issue, writers have suggested to **refer
to Hilda points**
To be edit
 CHAPTER 5

CONCLUSION