Personal Care limited (PCL) is a large and premier FMCG company in India with a turnover of about Rs 1,200 crore. It has 25 production plants and 10 contract manufacturers spread over the whole country, producing about 120 products ranging from personal care to household goods. Again out of 120 products, about 60 percent have different variants as well as package sizes.
The company has four own central warehouses situated in the four zones of north, south, east and west that receive products from almost all the plants on a regular and consignment basis in container by road.
These warehouses are responsible for taking care of stocks, order placement for next arrivals, loading and unloading, protective storage, stock recording, apart from order processing and replenishment of good to distributors of respective zone whose numbers come around 150 per warehouse.
After receiving goods from various plants, these warehousing are first entered into the computer for inventory recording purposes. Suitable storage location spaces are then assigned after taking into consideration the quantity to be stored, the physical dimension, characteristics of items, frequency of flow, and availability of the space, which is quite variable and flexible. For storage of goods, a flexible racking system is used so that the size of a rack's space can be changed as per the size on the product's package. Furthermore, racing is back-to-back in pallet blocks which are 5-storied, and in one block there are about 400 back-to-back racks.
In certain area, for selected heavy weight and bulky items, 50 selectors drive forklift trucks and in the remaining area, as many as 350 selectors pick the goods manually and use hand trolley. Selectors are normally less educated and highly experienced, who have well-defined areas of selection.
With this existing system, there have been a lot of practical problems, such as underutilization of space, traffic congestion in between the racks as one selector blocks another's progress while he is picking item from a location, wrong assortment, difficult to track goods, difficult to fill one single order as it contains a variety of items, etc. this result into frequent complaints lodged by distributors.
Furthermore, a trucker is required to collect items from different places of the warehouse to make up the order. Frequently, they have to wait for a full load. Then, the driver has to collect challan and other required papers. Normally, this whole process takes seven to ten days, subject to ready availability of the goods in stock. In the case of stock-out item, it may goes anywhere between 15 and 30 days. That is why replenishment cycle time for nearby distributors is about 10-15 days and for others, it comes to around 3 weeks.
Due to a gradual increase in the quantum of competition and increasing customer expectations, along with increasing awareness about the overwhelming contribution of logistics in cost reduction and service improvement, the top management of PCL have appointed highly qualified and experienced professionals at all four warehouses with the following objectives:
- To improve the efficiency of the warehouses
- To reduce the replenishment cycle time by percent
- To reduce the total logistical costs by 10 per cent
- To have transparency in dispatch of premium products.
The chief warehouse manager, who joined the north zone warehouse as had a very successful career of 25 years. He wants to redefine the whole warehouse operating system.
Questions:
1. How should the chief warehouse manager of PCL approach this problem?
2. Develop a warehousing operational strategy to overcome the problem and fulfill the redefined objectives of the firm.