Consumer Electronics Case Study
- June 4, 2014
- Posted by: Value
- Category: Article
Consumer Electronics Manufacturer’s Case Study
- The case study is about a leading global manufacturer of consumer electronic goods such as audio, video, communications and information technology products for consumer and professional markets.
- The partnership between Value and the consumer electronics manufacturer began with the provision of distribution services and later evolved into a complete warehousing and distribution solution.
- Previously a majority of the consumer electronics manufacturer’s warehousing function was outsourced to logistics service providers which did not meet their service level expectations.
Problems Experienced By the Consumer Electronics Manufacturer with its Previous Logistics Service Provider
- The CE manufacturer was exposed to a sub-optimal IT environment where processes needed improvement but remained sub-optimal as a result of their previous warehousing service provider’s inability to develop their IT system.
- The service provider’s system was unable to scan and track serial numbers which is necessary for the purpose of customer service related queries, determining warranty of stock, stock collections and crediting of customers.
- The warehouse operation was limited to the number of inbound containers which could be received within a day which resulted in container terminal charges being incurred as well as a lack of availability of stock required for sale.
- Picking and dispatch was limited to only 500 invoices per day leading to limitations in daily sales volumes as well as delays in deliveries to customers.
- Previously stock was shuttled from the CE manufacturer’s service providers warehouse to Value’s Cross-Dock which increased the time and cost of the distribution process. In addition, the CE manufacturer was exposed to the risk of delays in the delivery of orders to their customers. Stock which was picked was only handed over to the Value In-House dispatch function after 12:00 PM which added pressure to and created inefficiencies for the distribution function.
- During the process of handing the stock over from the warehouse to the Value InHouse, arduous security checks which were in place in the warehouse to verify stock integrity created delays and caused disruptions for the dispatch function.
- The process for booking Sales Orders for delivery at store was reactive in the sense that stock could only be booked with the stores once the order reached Value’s Cross-Dock, resulting in longer order cycles.
- Scheduling of orders only took place after the warehouse handed over the stock to the Value In-House. This resulted in an increase in order cycle time.
- The reverse logistics process was fragmented between the warehouse and distribution and as a result added complexities to the return process, grading of stock and issuing of credits to customers.
- Visibility of stock and information reporting was limited which made it difficult for the CE manufacturer to track all of their stock movements and delivery statuses.
Design and Implementation of the Solution
- The initial approach taken by Value was to obtain a clear understanding of m CE manufacturer’s requirements from a warehousing perspective in order to provide an optimal solution.
- Best practices and IT expertise was brought into discussions on warehouse setup and process design, interface development and Warehouse Management System (WMS) setup. The result of the discussions was the development of an optimal configuration of the warehouse which ensured that the CE manufacturer’s requirements would be met and that their logistics model would be optimised.
- The primary considerations for the design of the warehouse were efficiency, throughput, optimal product flow and security. The joint effort with the CE manufacturer’s team yielded innovation and optimisation in the system. The warehouse design and the necessary infrastructure requirements were determined by Value in order to align to best practices and produce efficient operational flows.
- The selection of Value City as the warehousing site was based on the advantage of having the Cross-Dock and warehouse all housed within the same first class facility, thus eliminating shuttling costs and delays in the distribution process.
- 11.2m high racking was installed to fully utilise the height of the facility in order to ensure that maximum storage capacity is realised.
- A WMS was implemented and fully automated interface architecture was developed, allowing for optimal distribution planning, receiving, putaway, picking and dispatch.
- Value’s front end application allows for the scheduling of orders to be done prior to them being released into the WMS. By 12:00 AM all orders are scheduled and available to be picked from opening of business each day, which allows for orders to be picked and dispatched on time as required for delivery.
- Presentations were also given to CE manufacturer’s sales team to ensure that the sales order process was understood. The training and knowledge which was shared facilitated the change management process to ensure a seamless transition to the new logistics mode.
- Orders which require a booking to be made with stores are now performed proactively by Value which contributes to order cycle reduction through this order lead time reduction.
- The WMS and warehouse processes were configured to enable for the recording of serial numbers which are tracked through the WMS. This allows for serial numbers to be tracked on a consignment level. In addition the CE manufacturer has the ability to locate stock in the event of a product recall as well as to ensure that in the event of a return that the correct stock is returned and credited.
- Standard Operating Procedures (SOPs) were documented and all staff were trained on the procedures to ensure that they had the required knowledge of processes and understanding of the system and operating model.
- The fragmentation between the Reverse Logistics function and the warehouse was eliminated and the process now allows for returned stock to be reconciled and received back into stock at the warehouse through a streamlined process.
- The security of the warehouse is maintained through the use of fencing, security guards, CCTV cameras, controlled access into the warehouse and a separate high security warehouse for high risk stock. There is controlled access at all entry points of the warehouse to ensure that maximum security is maintained at all times.
Post Go-Live Initiatives
- Value takes pride in providing a service of the highest quality and as a result Value continues to improve the operation through ongoing initiatives.
- IT development was done which allows the customer master file to be sent as an EDI message resulting in proactive updates of distribution addresses for orders in the WMS.
- Once bookings are made by Value, the sales orders are automatically removed from the ERP bookings workflow screen to a separate location on the system allowing for effective differentiation between booked and un-booked orders.
- A pick list history report in the WMS was developed and implemented allowing for daily operational reports to be viewed and analysed in order to measure productivity and make improvements within the operation.
- Serial scanning on WMS validation was developed which allows for the CE manufacturer to track and trace serial numbers at the point of picking. The product code is scanned at point of picking to confirm that the correct stock is picked which reduces the number of cross pick errors.
- EDI communication is sent during the reverse logistics process within the ERP so that customers can be credited accurately and stock can be receipted back into the warehouse seamlessly.
- Stringent operational KPI measuring and reporting was developed specific to the CE manufacturer’s KPI’s through IT enablement.
- Automated stock-on-hand comparisons are carried out daily between the CE manufacturer and Value through the interface and comparisons are made which results in the resolution of variances allowing for book-to-book accuracy to be achieved.
- Content returns can now be debriefed and the actual quantity received is reported to the CE manufacturer at a product level, which allows for the CE manufacturer to credit customers accurately. An additional search field was added to the client Invoice Monitor application which enables the operational management and reconciliation of sales orders versus invoices printed.
Results and Achievements
- A highly automated flow of information to the WMS and Transport Management System (TMS) has been achieved enabling optimal throughput and the efficient operation of the warehouse, sales order receipt, invoice cancellation, stock location transfers, stock on hand comparisons, pick confirmations, dispatch confirmation and receiving returns.
- Transactions between the CE manufacturer’s ERP and Value’s applications are stable and include receiving advice (RA) messages, scheduling of orders, planning of shipments and information on delivery (IOD). Return messages are also being relayed to the CE manufacturer.
- Between 95% and 97% of bookings made with stores by Value are done within 48 hours.
- 99.9% of orders are picked and dispatched the same day.
- Inventory accuracy is 99.99%.
- All stock received is putaway into storage locations on the same day which allows the CE manufacturer to invoice against the stock and make it available for sale at the earliest possible time.
- In an interview with a selection of general retailers, it was revealed that there is an increase in total delivery performance of 17% from 2011 to 2012. Total delivery performance included the ease of ordering, deliveries of sufficient products, communication on delivery, lead times, accurate delivery and promises kept on delivery times. (Nielson, 2013)
- On time delivery (OTD) measured between 95% and 97% in the first quarter of 2013 with close monitoring of the OTD KPI to ensure continuous adherence to the CE manufacturer ’s delivery performance requirements.
- Over 500 invoices can be successfully picked and dispatched per day.
- More than 6 inbound containers can be successfully offloaded and receipted daily, and due to Purchase Orders (PO’s) being fulfilled the same day, the CE manufacturer’s stock availability improves and costs are reduced.
South Africa is the only market in the world where the CE manufacturer has outsourced their warehousing function to a service provider other than their worldwide logistics service provider.
The CE manufacturer has remained highly competitive in service delivery to their customers due to Value’s positive contribution to ensure that deliveries are accurate, in full and arrive on time.
Value is proud to be in partnership with the CE manufacturer and has put in every effort to ensure that their solution and service delivery has added to the CE manufacturer’s competitive advantage in the consumer electronics industry in South Africa. As a result of strong IT architecture to support the required transactions and an innovative warehouse design, the logistical solution is a seamless warehouse and distribution process which reduces the CE manufacturer’s order cycle time, ensures that orders are fulfilled on time and in full and allows for real time visibility of stock to ensure that sales is enabled and customer service requirements are met.