Stassen Food
Transcript of Stassen Food
STOCKSTOCKSTOCKSTOCKMANAGEMENTMANAGEMENTMANAGEMENTMANAGEMENT SYSTEMSYSTEMSYSTEMSYSTEMWayWayWayWay ForwardForwardForwardForward –––– ProfitProfitProfitProfit MaximizingMaximizingMaximizingMaximizing ThroughThroughThroughThrough StreamliningStreamliningStreamliningStreamlining StockStockStockStock ManagementManagementManagementManagement ProcessProcessProcessProcess
ASSIGNMENTASSIGNMENTASSIGNMENTASSIGNMENT –––– OPERATIONSOPERATIONSOPERATIONSOPERATIONSMANAGEMENTMANAGEMENTMANAGEMENTMANAGEMENT
PresentedPresentedPresentedPresented ByByByBy
Sahan Perera (2010/PGDBM/046)
POST GRADUATE DIPLOMA IN BUSINESS MANAGEMENT
UNIVERSITYOF COLOMBO
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1.01.01.01.0 EXECUTIVEEXECUTIVEEXECUTIVEEXECUTIVE SUMMARYSUMMARYSUMMARYSUMMARY
This report underlines the need and importance of having proper inventory control system
for every firm in this kind of business, so as to increase its profitability, efficiency and
sustain the pressure given by competition. Further its stated high inventories are leading
to have aged products in the market where the ultimate results will be excessive market
returns due to expiries and damages.
The company selected for this study is Stassen Foods is incurring heavy losses due to
high inventories which are resulted in paying more interests to the bank for blocked
financial resources of the company. This high inventories are leading to have aged
products in the market where the ultimate results will be excessive market returns due to
expiries and damages. On the other hand Stassens experiencing sales losses due to
unavailability of fast moving products.
To overcome this situation new solution proposed understanding the time value of money
and utilized their financial resources to achieve maximize profits and minimize wastage.
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2.02.02.02.0 STASSENSTASSENSTASSENSTASSEN FOODSFOODSFOODSFOODS
In the subject matter of Operation Management, I have selected Stassen Foods which was
established in April 1991, recognizing the need to develop top quality international
consumer food products in Sri Lanka. Stassen Foods is pioneered in importing and
distributing wide range of world renowned brands in Sri Lanka. Stassen’s brand portfolio
comprises of well established consumer brands such as Happy Cow Cheese, Heinz range
of products, Kellogg’s breakfast cereal, Mars chocolates, Red bull energy drink, Pedigree
dog food etc.
Diversified product range of Stassen Food’s well supported by a visionary management
team and driven through dedicated team of front line field force enabled them to stand tall
in today’s modern trade market and their contribution is more over 25% as a single player
and holds market leadership in many a categories which simply meeting the company’s
mission that of achieving “excellence and leadership in all business ventures”
The Stassen Foods team includes 115 sales representatives and 85 distributors. The
distribution network extends to 46,500 retail and wholesale outlets throughout the island.
Stassen Foods sends representatives to each of their distribution outlets at least once
every ten days, the highest frequency of calls being twice a week to supermarkets.
Stassen Foods also boasts modern and efficient warehousing facilities including chillers,
freezers, air-conditioned and dry storage, stacking trucks and electrically operated
forklifts.
3.03.03.03.0 SELECTIONSELECTIONSELECTIONSELECTION OFOFOFOF INTERNATIONALINTERNATIONALINTERNATIONALINTERNATIONAL BRANDSBRANDSBRANDSBRANDS
4.04.04.04.0 CRITICALCRITICALCRITICALCRITICAL ASSESSMENTASSESSMENTASSESSMENTASSESSMENTOFOFOFOF STASSENSTASSENSTASSENSTASSEN FOODSFOODSFOODSFOODS STOCKSTOCKSTOCKSTOCKMANAGEMENTMANAGEMENTMANAGEMENTMANAGEMENT SYSTEMSYSTEMSYSTEMSYSTEM
Stassens being a company handles a wide range of high value consumer food products,
sometimes struggling with their bank facilities (Letter of Credit) to meet up with the
pipeline inventories from suppliers of various countries which will boiling down to high
interests paid to the banks. And also company does not have proper system to monitor
their dealers and supermarkets stock levels in real time which will result of losing sales
due to out of stock situation and also slow moving stocks will remain in the warehouse
resulting huge losses to the company.
Further this issue affect at the stage of product ordering due to no proper system to check
the stock balance of dealer warehouse at given time had to consider only the main
warehouse stock which will result of submitting wrong order quantity for the given
product. (Table 1)
Another drawback of current stock ordering system is that the people involve of product
ordering process do not capture sales return volume in previous months of each product
to identify actual movement will be given as a wrong forecast for future months.
It is recommended if there is a proper stock management system they can minimize the
monetary resources blocked on high inventories and utilize those financial resources on
the products that goes out of stock which will give immediate revenue for the
organization and slow moving products can be redistributed among high movement
locations before getting expire.
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5.05.05.05.0 STASSENSTASSENSTASSENSTASSEN FOODFOODFOODFOODDISTRIBUTIONDISTRIBUTIONDISTRIBUTIONDISTRIBUTION PROCESSPROCESSPROCESSPROCESS
5.15.15.15.1 SALESSALESSALESSALES FORECASTFORECASTFORECASTFORECASTMETHODMETHODMETHODMETHOD
Stassen Foods practices Moving Average Sales Forecast method to judge the base
quantity and increase sales volume by marginally considering various external factors
affect to the sale from each month. (Distribution expansion, Outlet upgrades, Season etc)
5.25.25.25.2 SETSETSETSETNORMSNORMSNORMSNORMS FORFORFORFORMANAGINGMANAGINGMANAGINGMANAGING STOCKSSTOCKSSTOCKSSTOCKSATATATAT STASSENSTASSENSTASSENSTASSEN FOODFOODFOODFOODSSSS
1. Stock holding period maximum 45 days at main warehouse
2. Dealers can hold maximum of 14 days stock
3. Retail shops will not purchase products less than 6 months from the expiry date
Manufacturer
Transit
Distribution
Distribution
StassenWarehouse
DistributorWarehouse
Retail Shop
Customer
6.06.06.06.0 PRODUCTPRODUCTPRODUCTPRODUCTORDERORDERORDERORDERDOCUMENTDOCUMENTDOCUMENTDOCUMENT ---- KELLOOG'SKELLOOG'SKELLOOG'SKELLOOG'S CORNCORNCORNCORN FLAKESFLAKESFLAKESFLAKES
TableTableTableTable 01010101
Table 01 shows sample product order sheet includes 3 months sales forecast for Kelllogg's breakfast cereal. Order 1 is already in the
pipe line and confirming order 2 based on last 6 months average sales. Stock balance mentioned only at Stassen warehouse and didn't
consider stocks at distributor point. And also previous months sales figures contained market reruns will misinterpret the forecast.
7.07.07.07.0 PROBLEMPROBLEMPROBLEMPROBLEM IDENTIFICATIONIDENTIFICATIONIDENTIFICATIONIDENTIFICATION
7.17.17.17.1 PlacingPlacingPlacingPlacing thethethethe ordersordersordersorders fromfromfromfrom distributordistributordistributordistributor endendendendStassen foods order placement process is having many loop falls due to poor
communication with main warehouse and the distributor point. And also it is time
consuming task for distributor when placing orders since they do not have any interface
to view available stocks at the warehouse. The current practice is distributor place orders
as per their requirement and products will be invoiced based on the availability at main
warehouse and no coordination will happen to keep inform distributor about non
available items at the warehouse for distributor to place alternative product instead.
7.27.27.27.2 PlacingPlacingPlacingPlacing newnewnewnew ordersordersordersorders fromfromfromfrom StassenStassenStassenStassen FoodsFoodsFoodsFoods endendendendProduct managers are facing difficulties to identify stock availability at distributor point
and also stocks in transit due to no system integrate with main stock management system
(AS400) at head office and distributor warehouse. This leads to place orders with out
considering stocks at distributor and transit, ended up with excess inventories at main
warehouse.
7.37.37.37.3 EliminateEliminateEliminateEliminate returnreturnreturnreturn salessalessalessales totototo dodododo aaaa correctcorrectcorrectcorrect forecastforecastforecastforecastMarket return happen due to many reason and it is not filtered when abstracting sales
history from the system and requires to deduct market returns manually by a human will
leads to poor productivity.
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8.08.08.08.0 SUMMARYSUMMARYSUMMARYSUMMARYOFOFOFOFCURRENTCURRENTCURRENTCURRENT PROBLEMPROBLEMPROBLEMPROBLEMAFFECTSAFFECTSAFFECTSAFFECTS INTERNALLYINTERNALLYINTERNALLYINTERNALLYANDANDANDAND EXTERNALLYEXTERNALLYEXTERNALLYEXTERNALLY
TableTableTableTable 02020202
ProblemProblemProblemProblem TheTheTheThe waywaywayway itsitsitsits affectaffectaffectaffect totototo thethethethe businessbusinessbusinessbusiness
InabilityInabilityInabilityInability totototo monitormonitormonitormonitor availableavailableavailableavailable stockstockstockstockatatatat warehousewarehousewarehousewarehouse
1. Distributor cannot schedule monthly salestargets results losing sale opportunities affect tomarket demand2. Stassen Foods will lose their sales revenue andmarket share3. Competitors will capitalisze their productavailability in the market
InabilityInabilityInabilityInability totototo monitormonitormonitormonitor availableavailableavailableavailable stocksstocksstocksstocksatatatat distributordistributordistributordistributor pointpointpointpoint andandandand transittransittransittransit
1. Unable to place orders as per the requirementand high inventories resulting stock holding cost.2. Unable to rotate slow moving items or excessstock available at distributor point resulting expireproducts which is a cost to the comapny
SalesSalesSalesSales returnreturnreturnreturn 1. Incorrect sales forecast and placing orders fornon moving items make company losses
9.09.09.09.0WAYWAYWAYWAY FORWARDFORWARDFORWARDFORWARD TOTOTOTOOVERCOMEOVERCOMEOVERCOMEOVERCOME THETHETHETHE PROBLEMPROBLEMPROBLEMPROBLEM
In terms of minimizing the Stassen problem of high inventories and stock out situations
by way of linking the stock level at distributor’s warehouse and the eliminating market
returns in order to have a better understanding of optimal level of stocks required to run a
smooth operation. Instead of stick into set targets, Stassen should adjust there orders in
accordance with the stock holding of the distributors and set monthly targets with real
potential considering current sales trends and keep on adjusting the pipeline inline with
the stock on hand to meet up the real demand of the market.
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10.010.010.010.0 PROPOSEDPROPOSEDPROPOSEDPROPOSED SOLUTIONSOLUTIONSOLUTIONSOLUTION
Stassens already posses a system to maintain their own stocks in their head office (AS400)
and proposed to link the distributors stock levels with the system to understand more
actual situations of stocks. Therefore Stassen will have to provide the system facility to
the distributors to link with main system.
In the event of implementing this project company needs to provide electronic
equipments such as computers, wireless conectivity and well trained staff who are
friendly with the system while setting pipe line forecast in a more realistic manner by
understanding the current trends.
SystemSystemSystemSystem DiagramDiagramDiagramDiagram
Information requested by dealer from Head Office
Information received from Head office to dealer
DistributorDistributorDistributorDistributor@@@@ColomboColomboColomboColombo DistributorDistributorDistributorDistributor@@@@GalleGalleGalleGalle
DistributorDistributorDistributorDistributor@@@@ JaffnaJaffnaJaffnaJaffna DistributorDistributorDistributorDistributor@@@@MannarMannarMannarMannar
StassenStassenStassenStassen HeadHeadHeadHead OfficeOfficeOfficeOffice
AS400 ServerGSMGSMGSMGSM
NetworkNetworkNetworkNetwork
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10.110.110.110.1 ConnectivityConnectivityConnectivityConnectivity - GSM wireless modems provide the connectivity at distributor points
to accsess head office warehouse through AS 400 system to view main warehouse stock
level in real time. And also in the AS 400 system each distributor has their own
warehouse (virtually) and all product orders, delivery of goods will be updated in real
time. This will always match with physical stock at distributor warehouse.
01.201.201.201.2 InterfaceInterfaceInterfaceInterface totototo distributordistributordistributordistributor - Distributor will receive a web based software to view
his stocks, option to place orders, and report sales returns in real time.
10.310.310.310.3 DistributorDistributorDistributorDistributor webwebwebweb interfaceinterfaceinterfaceinterface totototo viewviewviewview stockstockstockstock levellevellevellevel atatatat everyeveryeveryevery locationlocationlocationlocation ----
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11.011.011.011.0 NEWNEWNEWNEWPROCESSPROCESSPROCESSPROCESS AFTERAFTERAFTERAFTER IMPLEMENTINGIMPLEMENTINGIMPLEMENTINGIMPLEMENTING SALESSALESSALESSALESAUTOMATIONAUTOMATIONAUTOMATIONAUTOMATION SYSTEMSYSTEMSYSTEMSYSTEM
DistributorDistributorDistributorDistributor orderorderorderorder processingprocessingprocessingprocessing PlacingPlacingPlacingPlacing newnewnewnew ordersordersordersorders
Check head office warehousestock balance prior to place theorder
Generate the order from thesystem itself
Purchase order will beautomatically send through an email to head office
Stocks will be transferred torelevant distributor'swarehouse from the mainwarehouse and start loading
Once distributor receive thestock, inventory will beregistered to his warehouse formthe system
Distributor needs to update hisdaily sales, market returns andbalance stock end of the dayand on hand stock will becalculated automatically
Generate sales report excludesales return from the system
Download main warehouse anddistributor stocks separately(includes transit stock)
Consider pending shipments,market returns , entire stockbalance and set forecastaccordingly.(Moving avg method)
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12.012.012.012.0 OBSTACLESOBSTACLESOBSTACLESOBSTACLES ANDANDANDAND RISKSRISKSRISKSRISKS
01.01.01.01. AdjustingAdjustingAdjustingAdjusting pipelinepipelinepipelinepipeline ordersordersordersorders accordingaccordingaccordingaccording totototo currentcurrentcurrentcurrent trendstrendstrendstrends VsVsVsVs setsetsetset targetstargetstargetstargets agreedagreedagreedagreed
withwithwithwith thethethethe principalprincipalprincipalprincipal suppliers.suppliers.suppliers.suppliers. (There(There(There(There cancancancan bebebebe aaaa mismatch)mismatch)mismatch)mismatch)
02.02.02.02. ResistanceResistanceResistanceResistance totototo thethethethe behavioralbehavioralbehavioralbehavioral changeschangeschangeschanges ofofofof currentcurrentcurrentcurrent practice.practice.practice.practice.
03.03.03.03. AdaptabilityAdaptabilityAdaptabilityAdaptability totototo thethethethe newnewnewnew system.system.system.system.
Company will have to face a problem in implementing the proposed system in terms of adjusting
pipeline forecast since the pipeline is set in agreement with the suppliers and therefore the
management will have to convince the suppliers on the new system which will help both parties
avoiding aging products in the market.
People resist for changes since they feel their used system gives much comfortable
lifestyle. Therefore the staff involved in the new system should be given a behavioral
change by making them understand that the new system will improve their competencies
and comforts.
Company will have to face an initial challenge of making the sales force adapting to the
new system since they also have to play a roll in the new stock management system by
updating with distributor stock balances through the network provided at the stockiest.
13.013.013.013.0 NEWNEWNEWNEWPRODUCTPRODUCTPRODUCTPRODUCT ORDERORDERORDERORDER DOCUMENTDOCUMENTDOCUMENTDOCUMENT ---- KELLOOG'SKELLOOG'SKELLOOG'SKELLOOG'S CORNCORNCORNCORN FLAKESFLAKESFLAKESFLAKES
Warehouse andDistributor Market returnsStock Balance
14.014.014.014.0 BENEFITBENEFITBENEFITBENEFIT OFOFOFOF IMPLEMENTINGIMPLEMENTINGIMPLEMENTINGIMPLEMENTING THETHETHETHE NEWNEWNEWNEW SYSTEMSYSTEMSYSTEMSYSTEM
The objective of proposing this solution is to best used the organizational financial
resources efficient and effective manner which achieves the optimal level of revenue
through proper management of inventories by understanding ever changing market trends
and meet-up with the market demand all the time and avoid wastage, damage, and
expiries due to high inventories. Further this will provide correct answers to following
operational issues in inventory management.
• What is selling
• What is not selling
• Which items are slow moving
• Which items are obsolete
• What the trends/seasons are