Abstract
The Spirit company is one of the largest alcoholic importers and distributers located in Israel, established 18 years ago. The company is the official distributor of international brands. As it stands todays, the company is facing a rapid growth, both in terms of import capacity and in the range of SKU's (Stock Keeping Units), resulting high and growing stock costs. This research aimed to reduce working stock costs at Spirit company.
Methodology included data collection, forecasting methods, Lean management principals, linear programing and financial evaluations.
Evaluating current ongoing process and inner warehouse occupancy, it appears, that 67% of the total imported pallets are maneuvered to outer warehouse storage despite the fact the 34% of the warehouse shelves are unoccupied. Applying Benchmarking method, indicated that between the years 2017-2019 the company absorbed additional charges of 9% which is not coherent to the growth in quantities. Analyzing company's financial reports for year 2019 expenses for outer warehouse summed up to 2.8M NIS, clearly demonstrates rapid growth vs. previous years.
Utilizing a fishbone diagram and a survey sample, simulation model findings indicated that main blockers for a more efficient process were technology and work procedure utilization (75%). Using 5S model, enabled a safer and more effective working environment in the warehouse by implementing several actions such as marking designated areas for unloading imported goods. Executing Pareto model, enabled focusing on products that consume 60% of the storage requirements, for which forecast methods were employed. Based on the Double Exponential Moving Average (DEMA) forecasting method chosen (by minimum historical error by MAD and MSE measures), future demand expectancy calculated, for products categorized as Class A. It will be used as a tool for Spirit company warehouse manager in planning long term warehouse layout and occupancy. Forecasting results indicated that current warehouse shelves do not comply with storage requirements.
A simulation model in Linear planning (Lindo) characterized by the inner warehouse dimensions, while taking into consideration constraints such as shelf dimensions and height limitation, indicated that additional shelves can be added to current warehouse layout. Drilling down furthermore, by using decision making model WFM enabled comparison between three possible scenarios: current process unchanged, building tent in company's facilities or purchasing additional shelves. Result indicated additional shelves as the best alternative- by characteristics, by benefit and by NPV model.
This work has shown that process and technology solutions, along with additional efficiencies, can substantially improve logistics process and reduce costs. Results are reduction by 54% the yearly expenses on stock resulting from outer warehouse charges by dropping down yearly usage by 36%. Spirit management is currently evaluating implementation of the recommendations presented in this study.
Future efficiencies should include viewing stock management process to enable diverse focus on products based on Class ABC (Pareto) to reduce stock hold of products that are categorized as Class A which cover 60% of the demand, and possibly increase stock hold for the rest of the products.