Storage & Wareousing (Quiz3)

7/21/2019 Storage & Wareousing (Quiz3)

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Syed Muhammad Farrukh Azeem Roll# 15853

Quiz 3

CASE STUDY 1

!MS DR"ES F$E%"&"$"TY

Que'(io) #1*

When implementing the warehouse management system the

apparel manufacturer needs consider the following strategies:

1. Ease of use: All employees must be able to use WMS easily

the software environment must be user friendly.2. Flexibility: WMS should be a long term solution it should be

able to meet the company’s reuirements.3. Maximum Functionality: A good WMS ma!imi"e the things

it can do automatically and minimi"e the wor# on the

customer end.

4. Complete transaction management: A good WMSshould include everything which is related to the operations.

$ncluding% &eceiving

'ut away

(rder pic#ing

Shipping

$nventory counting etc

). Proven track record: WMS should be able to generate the

multiple reports as pre customer reuirements.



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Que'(io) #+*

*here are di+erent ways to predict and forecast demand need tobe ta#en for seasonal inventory. Some companies leverage

historical information to forecast demand so that you have theright product in the right uantity at the right time.

While others used to analy"e recent purchasing trends, mar#ettrends and what’s going on in the industry. Whatever yoursystems of record are along with the tools used to forecastdemand, consider these uestions when si"ing up demand:

What type of products are you selling- What type of customers are you selling to-

ow far in advance can you/should you 0nali"e the planning

and forecasting process- o supplier minimum order uantities impact your planning

hori"on- What are your storage capacities-

our ne!t challenge is providing trading partners with accurate

demand data so that they can meet production capacitiesand reuired delivery deadlines. epending on your product andcustomers, that might mean placing orders three, four, 0ve oreven si! months out depends on operations. $nstead of dealingwith seasonality variance when it’s too late, developing ane+ective strategy to demand planning is critical.

Que'(io) #3*

$nventories can be considered seasonal we can segregate themon the basis of Sales, Months, $tem wise sales and by using the

demand patterns.

$t ma#es little sense to bring in more inventory at any given time

than you need to set your displays, support your planned sales



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until the ne!t vendor delivery, and provide a safety stoc# in the

event of an une!pected sales spi#e or a late delivery.

Some of the most important techniues of inventory controlsystem are:

1. Setting up of various stoc# levels.

2. 'reparations of inventory budgets.

3. Maintaining perpetual inventory system.

4. 5stablishing proper purchase procedures.

). $nventory turnover ratios.

6. A78 analysis.

. !etting up of various stock levels:

*o avoid over9stoc#ing and under stoc#ing of materials, the

management has to decide about the ma!imum level, minimum

level, re9order level, danger level and average level of materials

to be #ept in the store.

Example:

"a# $e%ordering level:

$t is also #nown as ordering level’ or ordering point’ or ordering

limit’. $t is a point at which order for supply of material should be

made.

"b# Maximum &evel:



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Ma!imum level is the level above which stoc# should never reach.

$t is also #nown as ma!imum limit’ or ma!imum stoc#’.

"c# Minimum &evel:

$t represents the lowest uantity of a particular material below

which stoc# should not be allowed to fall. *his level must be

maintained at every time so that production is not held up due to

shortage of any material.

"d# 'verage !tock &evel:

Average stoc# level is determined by averaging the minimum and

ma!imum level of stoc#.

"e# (anger &evel:

anger level is that level below which the stoc# should under no

circumstances be allowed to fall. anger level is slightly below the

minimum level and therefore the purchases manager should

ma#e special e+orts to acuire reuired materials and stores.

"f# Economic )rder *uantity "E.).*.#:

(ne of the most important problems faced by the purchasing

department is how much to order at a time. 'urchasing in large

uantities involve lesser purchasing cost. 7ut cost of carrying

them tends to be higher. ;i#ewise if purchases are made in

smaller uantities, holding costs are lower while purchasing costs

tend to be higher.

+. Preparation of ,nventory -udgets:



)

(rgani"ation having huge material reuirement normally prepare

purchase budgets. *he purchase budget should be prepared well

in advance. *he budget for production and consumable material

and for capital and maintenance material should be separately

prepared.

Sales budget generally provide the basis for preparation of

production plans. *herefore, the 0rst step in the preparation of a

purchase budget is the establishment of sales budget.

As per the production plan, material schedule is prepared

depending upon the amount and return contained in the plan. *o

determine the net uantities to be procured, necessary

ad<ustments for the stoc# already held is to be made.

3. Maintaining Perpetual ,nventory !ystem:

*his is another techniue to e!ercise control over inventory. $t is

also #nown as automatic inventory system. *he basic ob<ective of

this system is to ma#e available details about the uantity and

value of stoc# of each item at all times. *hus, this system

provides a rigid control over stoc# of materials as physical stoc#

can be regularly veri0ed with the stoc# records #ept in the stores

and the cost o=ce.

4. 5stablishing 'roper 'urchase 'rocedures:



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A proper purchase procedure has to be established and adopted

to ensure necessary inventory control. *he following steps are

involved.

>a? 'urchase &euisition

>b? $nviting @uotations

>c? Schedule of @uotations

>d? Approving the supplier

>e? 'urchase (rder

). $nventory *urnover &atio:

*he ratio indicates how uic#ly the inventory is used for

production. igher the ratio, shorter will be the duration of

inventory at the factory. $t is the inde! of e=ciency of material

management.

*he comparison of various inventory turnover ratios at di+erent

items with those of previous years may reveal the following four

types of inventories:

>a? Slow moving $nventories:



*hese inventories have a very low turnover ratio. Management

should ta#e all possible steps to #eep such inventories at the

lowest levels.

>b? ormant $nventories:

*hese inventories have no demand. *he 0nance manager has to

ta#e a decision whether such inventories should be retained or

scrapped based upon the current mar#et price, conditions etc.

>c? (bsolete $nventories:

*hese inventories are no longer in demand due to their becoming

out of demand. Such inventories should be immediately scrapped.

>d? Bast moving inventories:

*hese inventories are in hot demand. 'roper and special care

should be ta#en in respect of these inventories so that the

manufacturing process does not su+er due to shortage of such

inventories.

6. A78 analysis:

$n order to e!ercise e+ective control over materials, A.7.8.

>Always 7etter 8ontrol? method is of immense use. Cnder this

method materials are classi0ed into three categories in

accordance with their respective values. Droup A’ constitutes



E

costly items which may be only 1F to 2FG of the total items but

account for about )FG of the total value of the stores.

A greater degree of control is e!ercised to preserve these items.

Droup 7’ consists of items which constitutes 2F to 3FG of the

store items and represent about 3FG of the total value of stores.

A reasonable degree of care may be ta#en in order to control

these items. $n the last category i.e. group @’ about F to EFG of

the items is covered costing about 2FG of the total value. *his

can be referred to as residuary category. A routine type of care

may be ta#en in the case of third category.

*his method is also #nown as stoc# control according to value

method’, selective value approach’ and proportional parts value

approach’.

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Storage & Wareousing (Quiz3)