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Page 1 of 14
CIO Entry Number: CIO-2017-018
Project Name: Stand Alone 2.0
I. INTRODUCTION
Monde Nissin Corporation (MNC) is one of the Philippines leading manufacturer and
distributor of food and beverages today. MNCs partnership with LF Logistics in the
Visayas and Mindanao (Vismin) region started in Cebu with only a floor stacking pallet
capacity of 3,000 on May 1, 2005. Now, the business has grown to 8,000 which is almost
triple the value of the starting capacity. For 12 years, LF has been MNCs partner in
distributing a wide array of products under renowned brands in the industry like MY San,
Dutchmill, Mama Sitas, Kellogs, Pringles, Kratos, Jelly Vit, Peckish, in addition to its own
brands, Lucky Me! Noodles and Monde Nissin biscuits.
LF Logistics Cebu handles all warehouse transactions from receiving to dispatch for
MNCs on-site warehouse. With an average monthly volume of 2.9 million cases serving
236 accounts across Vismin with a daily dispatch of 48 trucks. The current requirement
for manpower is a headcount of 66, operating 31 jack lifts and 3 forklifts which cover
both the plant warehouse and the overflow warehouses. These overflow warehouses
have been rented to support the limited storage capacity in the plant warehouse. The
number of SKUs maintained in the overflow are almost equal in both sites, requiring
dedicated and disciplined personnel stationed to closely monitor the transactions.
Other services rendered for MNC include maintaining agreed service levels, inventory
accuracy, and standard KPI. Given the consistent performance in operations, MNC has
also expanded their business with LF by awarding their bundling service requirements
for preparation and packaging of their promo products.
LF-MNC Cebu has operated manually in dispatching and receiving transaction for the
past 12 years using a mode of inventory monitoring called Stand Alone. LF-MNC Cebu
came up with this idea to closely monitor the IRA since LFs Exceed WMS was
discontinued due to connectivity issues and the lack of an interface between both
companies systems.
Despite the manual nature of operations, LF-MNC Cebu was not exposed to any
gargantuan charges and has not contributed to the companys financial leakages.
Furthermore, this manual nature molded the operations team to stay vigilant, take
ownership, develop high level of execution, and continuously seek improvement.
Page 2 of 14
CIO Entry Number: CIO-2017-018
Project Name: Stand Alone 2.0
The plan was almost effective however most of the time the encoder cannot finish
encoding all the pick lists prior to loading transactions for the following reason:
1. Encoding is too intensive using the current stand alone template (see Figure 1).
Encoding would often end at around 9 am negating the purpose of advance
encoding
2. Less accuracy in posting
Without an existing WMS in LF-MNC Cebu, the team resorted to revision of the template
to increase encoders productivity. With the newly implemented Stand Alone 2.0, the
transfer plan has become effective since the exact data of the dispatch quantity is
readily available before 6:00 am.
Activity Jan Feb Mar Apr May Jun Jul Aug Se Oc No Dec
p t v
1. Project Team 27
Formation
2. Understanding the 31
Present Condition of
BU
3. Problem 3
identification and
Selection
4. Root Cause Analysis 17
and Verification
5. Objective Setting 18
6. Action Planning 1
7. Implementation of 1
Action Plans
8. Project Evaluation/ 1
Effectiveness Check
Page 3 of 14
CIO Entry Number: CIO-2017-018
Project Name: Stand Alone 2.0
9. Standardization 28
10. Next Project 11
Planning
Identifies stocks for Wait Projected Constantly checks Ensure that transfer
transfer by comparing outgoing (TOTCB) stand alone for actual requests are executed
plant balance with provided by monde stocks dispatched and by overflow in charge
overflow stocks as basis for stock update the stocks
transfer If not transfer monitoring
available, makes
initial request for
stocks with critical
inventory
LF-MNC Cebu needs to ensure that majority of the stocks transfer happens in the morning to
avoid/lessen transfer activity after the truck ban (5:00 am to 8:00 pm). This can be done by
starting the transfers at exactly 8:00 am upon availability of the forward trucks. MNC provides a
daily projected outgoing file (referred to as TOTCB), however they often provide it at around 9:30
am already limiting the time for the ICC to properly plan the transfer (see Figure 4). The Team
Leader can give feedback to the ICC of the needed stocks only when the picker complains of an
empty pick face. In return, the ICC must revise the initial request to insert the priority stocks
which have been depleted in the pick face.
Aside from the unavailability of the projected outgoing at an earlier time, there are also
inaccuracies with the contents of the transfer plan causing over stocking of less needed items in
the plant warehouse further limiting storage space. These inaccuracies are due to advanced/late
order processing of orders on the MNC Customer Service Specialist (CSS) (see Figure 5). Overall,
the process of using the TOTCB is ineffective and requires extra processing since the ICC will still
have to check the actual outgoing in the stand alone to correct any inaccuracies .
Page 4 of 14
CIO Entry Number: CIO-2017-018
Project Name: Stand Alone 2.0
7:12
6:00
4:48
2:24
0:00
Days
10
0
Ja n Feb Apr May Jun Jul
Page 5 of 14
CIO Entry Number: CIO-2017-018
Project Name: Stand Alone 2.0
Aside from waiting, there are instances of stocks shortages discovered but the overflow in
charge has already gone home. During this situation, the ICC will request the Team Leader to
act as overflow in-charge to facilitate transfer.
In the worst-case scenario, wherein no one is available to facilitate transfer and trucks are no
longer available, the Team Leader will communicate to the client to transport the needed
stocks via motorcycle risking personnel safety and stocks security.
Warehouse
Over stocking of Complaints
less needed
items Affected cycle
Incorrect count
count
No Actual
Dispatch Data Delays in
Waiting OT extension
loading
Delays in
Short stocking OT extension
loading
Figure 7: Encountered Problem due to the absence of accurate data for dispatch
Page 6 of 14
CIO Entry Number: CIO-2017-018
Project Name: Stand Alone 2.0
Encoder filters the projected data by shipment number of the physical pick lists and copies it to the
new stand alone template. This way, projected dispatch data will be 99% accurate by eliminating
advanced and late processed orders. This data is available earlier than 6:00 am, giving ample time to
the ICC in creating the transfer plan.
Page 7 of 14
CIO Entry Number: CIO-2017-018
Project Name: Stand Alone 2.0
The ICC uses this data as basis for the transfer. Picture at the side shows the ICC in the actual
planning of the stocks transfer. Since data is readily available, planning is finished before 7:00 am.
The ICC will only have to ensure that all transfer requests are executed by the overflow in charge. The
ICC will also know the priority and sequence of the stocks for transfer due to the first five feedback
mechanism.
30
33 32 31
20 27
22
10
12
0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct
Month
The team tried to compute the projects influence on overtime of the personnel involved in transfer
transaction such as receiving, replenishment and overflow operating hours. During implementation,
the OT of the transfer receiver declined at an average of 7 hours monthly.
Page 8 of 14
CIO Entry Number: CIO-2017-018
Project Name: Stand Alone 2.0
OT - TRANSFER: RECEIVER
60
5056
40 49.5
OT Hours
30 40.5
20
10
0
JULY AUGUST SEPTEMBER
Month
The team also checked if the project influenced the overtime extension of the personnel in charge of
replenishment. The OT also started to decline on the month of September by around 18 hours.
OT - TRANSFER: REPLENISHMENT
70
60
58.5
50 60.4
OT Hours
40
42
30
20
10
0
JULY AUGUST SEPTEMBER
Month
The previous inaccuracies have been mentioned to affect the day to day operations resulting in
increased operating hours of the overflow sites and consequently, the utility costs in electricity.
Based on the actual electricity billings, consumption has decreased in September and October. If this
continues, LF can save around PHP 3,000 monthly on electricity cost. Figure 14 shows the monthly
electricity billings and savings, while Figure 15 shows the graph.
Page 9 of 14
CIO Entry Number: CIO-2017-018
Project Name: Stand Alone 2.0
Overflow Warehouse
12000
10000
10,379.39
8000
7,738.09
6000 6,943.33
4000
2000
0
Aug Sep Oct
Also, improvement in the productivity of the encoder has greatly improved. Four pick lists/loadings
were used for testing of the Stand Alone 2.0. These are all accounts under the customer, Sanford,
considered as the most intensive pick lists to encode in LF-MNC Cebu. Four personnel were tested to
do actual encoding of the old template versus the new one. The result showed improvements in
encoding time by 70%. This also attributed to the required outgoing data to be ready before 6:00 am.
The average OT billed to the client for the encoder is 3 hours. With the Stand Alone 2.0
implemented, OT billed is reduced to an average of 1 hour only: a 66% improvement. If this will be
computed on a daily basis, 2 hours saved for 2 encoders (1 encoder per shift) for 26 days over 5
months at an OT rate of PHP 50.00 is equivalent to PHP 26,000.00 billed to MNC Cebu. This supports
MNCs initiative in cutting down costs and maximizing their resources including that of their service
provider.
Using a year to year comparison, there is also a significant decrease in the OT extension of the
encoder at around 75% from the month of August and October.
Page 10 of 14
CIO Entry Number: CIO-2017-018
Project Name: Stand Alone 2.0
Y.O.Y. Encoder OT
Encoder (OT) 2016 Encoder (OT) 2017
90 84
80
66
70
52.5
60
50
40
30
20
26.5 23.5 21
10
0
Au g Sep Oc t
MNC started to require LF to improve traceability procedures and one of the requirement was to
assign a dedicated personnel for the job. This is evident in the new contract of MNC Davao. Since
stand alone encoding has been improved and can be completed earlier, the traceability job has been
delegated to the stand alone encoders, requiring no additional manpower to be billed to MNC. Given
the daily rate is PHP 366 over 26 working days a month, savings from avoided additional manpower
is PHP 9, 516 monthly.
In addition to the tangible savings, consequential savings have been included consisting mainly of
prevented costs and/or charges to LF due to the project.
First, is the safety of warehouse personnel tasked to get the stocks from the overflow warehouse late
at night due to short stocking as a result of ineffective stocks transfers. Accidents can happen that
can implicate LF financially in terms of disability charges.
Second, a total of 9 personnel resigned from the stand alone encoder position from 2010 to 2017
due to the stressful and repetitive task. Employees are easily discouraged from continuing in the job
resulting in high employee turnover, resulting in repeated turnover and teaching of the critical task to
new employees. This risks smooth execution of operations due to the learning curve of new
employees. Implementing this project also aims to lessen the hassles and stress of the job, and lower
the job turnover. That way, there are better chances of retaining and developing personnel assigned
to the job in the long run.
Lastly, MNC has a total of 5 DCs in Vismin; just like Cebu DC, the other 4 DCs face the same
challenge. The only means of monitoring and controlling inventory is through the stand alone. With
an effective and improved stand alone, there are very minimal risks of incurring inventory charges to
LF due to inventory variances: a feat proven time and time again since LF has never incurred any
major inventory charges with MNC, earning savings through preventing any financial leakages. This
can be computed below at a 0.10% inventory variance against each DCs inventory holding cost
multiplied against the average cost per case:
Page 11 of 14
CIO Entry Number: CIO-2017-018
Project Name: Stand Alone 2.0
Overall savings and avoided costs from Stand Alone 2.0 were considered based on the following:
1. Reduction in OT hours of encoders
2. Reduction in OT hours related to inter-warehouse transfers
3. Reduction in overflow warehouse electricity billings
4. Avoided manpower cost from additional headcount for traceability
5. Prevented inventory losses
6. Other consequential savings
Page 12 of 14
CIO Entry Number: CIO-2017-018
Project Name: Stand Alone 2.0
Above all these financial savings, its the continued improvement and the effective use of the stand
alone together with operational discipline that has provided LF-MNC Cebu operations with an
advantage that cant be put in numbers: a strong relationship with the client built on trust and
confidence from quality service. Its this relationship that has helped LF-MNC Cebu to continue as
MNCs service provider for the past 12 years and counting, and is the base for the expanded
relationship with MNC after having been awarded the opportunity to service them in a built to suit
DC in Cebu.
The stand alone 2.0 project can be adopted by all MNC operations or even its concept on
improvement by other operations. But this project stands not only to provide a template for
cascading and improvement, but to influce fellow LF DCs and employees and their mindset on
addressing operational problems through both simple and creative solutions design.
Page 13 of 14
CIO Entry Number: CIO-2017-018
Project Name: Stand Alone 2.0
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