Aung Kyaw Moe / Task 1 Warehouse and Inventory

Memo
To: From: Date: RE:

Francois Damba Aung Kyaw Moe

28 May 2013

TASK 1 WAREHOUSE AND INVENTORY

Location and Purpose of SCILaid Warehouses in Betaland

SCILaid Warehouses in Betaland SCILaid Betaland has 2 main warehouses in Betaland

(1) First one is a big store of 2000 Sq. meter and situated at Mugla Port. (2) Another is a small one which has space of 500 Sq. meters but it is sufficient to store food temporarily before sending them to the camps

Mugla Warehouse This is a big warehouse of SCILaid Betaland and it is 4 times bigger than one warehouse in Chagong. All food items and other supplies are mainly store in this warehouse since Mugla port is the main entrance of all kind of importations by SCILaid to Betaland. In terms of transportation from Mugla to Chagong, we need only 2 full days. So SCILaid is dumping its main inventory at Mugla warehouse. It is a kind of central warehouse for SCILaid Betaland because it control all supply and logistics operation permanently from that warehouse. As the main warehouse it is Operate permanently Housed in large purpose built building (2000 sq. ft) Run by permanent recruited staff who are well trained in logistics matters Utilized computer based information management systems and software Mugla is a port city and it is quite away from the border which is the problematic area and relatively has safer environment and stable situation Main principle in this warehouse is based on the principle of the efficient and cost-effective running to support the programmes

Chagong Warehouse This is the smaller warehouse of SCILaid Betaland and it is meant to be temporary storage of food and other supplies before distribution to the targeted beneficiaries. Chagong is a town situated near to the border and the refugee camps are just at hand. From Chagong to Camps we need only 1 day for roundtrip. But it is difficult to reach to the camps in wet season if there are torrential downpours. Anyway, it is quite a convenient location to store the supplies before sending to the refugee camps. Chagong warehouse is just a field warehouse type and it has the following characteristics: Mainly catered for the service of beneficiaries who live in the refugee camps Small in area (500 sq ft.) Not properly built warehouse Paper based inventory control and management Chaotic and dangerous environment/ near to the conflict zones Purposed for urgent delivery of supplies Management style is result-oriented Mainly focused on the hand-on availability of aid materials

Therefore, warehouse management in Chagong is not rigid type, but it is to adapt and apply warehouse management principles as much as possible under the limited situation.

Adding value of Warehouses to the Programme operation

These above-mentioned SCILaid warehouses are supporting Programme operation in the following different ways: (1) AS THE TRANSIT POINT STORAGE Warehouses SCILaid Betaland act as places to hold goods and supplies along the supply chain starting from suppliers and the onward journey to the next stages in the supply chain and ultimately to the beneficiaries. Mugla warehouse is the main warehouse that dumps the supplies coming by sea freight to Betaland. Then these supplies are moved to Chagong warehouse batch by batch according to the indents come from the field. Chagong warehouse is really transit point storage of supplies just before distributing them to the beneficiaries. (2) FOR DIVISION OF BULK DELIVERIES Basically supplies are delivered from suppliers in bulk/large quantities and these quantities are often much larger than the size of consignments required for onward delivery to beneficiaries. Therefore, SCILaid warehouses act as places for dividing bulk deliveries into smaller quantities for onward delivery. In this case Mugla warehouse plays this role where supplies are mainly stored and divided according to the capacity of local transportation means (3) FOR COMBINING AND SET PACKING DIFFERENT GOODS Sometimes, supplies for Family Kit, Child protection Kit and Essential Drug Kit come from the different suppliers and need to be combined and set packing according to the prescribed lists because beneficiaries normally require a mixture of the goods that have been purchased. Therefore, warehouses in Mugla and Chagong can be used as the places where these supplies are combined a selection of different goods to make up consignments ready for delivery to beneficiaries. (4) FOR MAINTAINING A SPEEDY RESPONSE Since SCILaid programmatic activities are catered for responding to a humanitarian need, the speed of response is often important for its programme operation. Out of all response time, a hefty part is taken by transportation process, so it is necessary to store inventory physically close to the beneficiaries in order to reduce the length of transportation. Chagong warehouse is a key for SCILaid to get a speedy response for emergency needs since it is situated near the refugee camps at the border area. (5) FOR PROTECTION OF STOCK AND INVENTORY Generally, warehouses of SCILaid provide a physical barrier which helps protect inventory from theft and keeps the inventory in good condition by preventing damage from pests and the weather. Since it provides a secure place for storage in potentially unsafe surroundings like in Chagong, within the humanitarian aid environment of Betaland, this is playing a particularly important role,. Both stores provide safe conditions for the goods, but it also provides safe working conditions for the SCILaid staff performing warehouse tasks.

Support of the Network of warehouses for the aims of SCILaid as a humanitarian aid organisation

The network of warehouses in SCILaid is assisting its humanitarian aid programmes in two parts: one is that of warehouse management itself and another is helping programmes to control and manage Inventory. In essence, the function of warehouse management is concerned with all the activities that take place in the warehouse including stock management and handling of supplies. In general, the warehouse management is responsible for the management of all the warehouse activities in order to achieve the specific objectives of the organisation, in the case of SCILaid Betaland, the programmes implemented in the refugee camps. In order to achieve the objectives, the Logistics personnel who take care of warehouse management have three types of resource to handle. They are(1) Space. (location and place to store the supplies) (2) People (staff member who take care of day-to-day management of warehouse) (3) Equipment (such as forklift, ladders, weighting machines and any other quality control apparatus) These resources represent a cost to SCILaid. Therefore, the main objective of the warehouse managements job in SCILaid is to achieve the objectives of the organisation in supporting programmes at the lowest possible cost. All of these space, labor and equipment should be used efficiently and cost-effectively by adhering to the policies and procedures of SCILaid. Besides this, warehouse management concerns about the security and safety of supplies by protecting from fire hazard, theft, pest and weather. Warehouse in-charge should be accountable for Maintenance of the building and equipment, the health and safety of all warehouse staff and the recording of warehouse activities and the provision of reports for the organisation and for use in reports to donors. Differing from the warehouse management, the function of inventory management is to manage the stock levels in the supply chain by managing inventory supply to meet demand. Therefore, inventory management is internally linked with the programmatic activities. The key issue for SCILaid inventory management is to keep inventory in an appropriate and adequate level, by balancing supply and demand. (1) In the first case, the rate of demand pulls the products from inventory. If the rate of demand exceeds the rate of supply the level of inventory will decline and eventually it reaches zero. There will be shortage of supplies required by the beneficiaries. If the rate of supply is too low, there is a risk that the stocks will be used up and that some beneficiaries will not receive aid. This can result in a loss of lives and/or increased suffering. (2) Secondly, the rate of supply pushes product into inventory and if supply exceeds the rate of demand the inventory level will increase requiring a bigger place to store it. The will be excess of unused supplies and extra cost for storing them. If the rate of supply is too high, there is a risk that stock levels will rise, which could lead to overflowing warehouses, the deterioration of product because of being kept in stock too long and stock write-offs. It also means that the organisation has spent more money than necessary and/or the donors contribution is not being utilized to the best extent i.e. a Inventory

represents a significant cost in humanitarian supply chains. This cost includes the cost of buying goods from suppliers plus the cost of storing these goods in warehouses. However, there is also an exceptionally high cost if goods are not available for delivery to beneficiaries. Of course, this cost is one of human suffering and possibly of lost lives, rather than a financial one. Usually this humanitarian cost will outweigh the financial considerations. Inventory management in SCILaids objective is to have balance and harmonizing the level of demand and the capacity of the supply. But the most important thing is that inventory management must minimize the human cost by optimizing the level of availability of humanitarian goods for delivery to beneficiaries and achieve this at an acceptable supply chain cost (i.e, a little bit high level of supplies to reduce the human cost). When an emergency situation like hurricane striking happens, at first there will be a heavy pushing of product into inventory by temporarily overlooking the well-defined needs and of the high demand later. The level of this push activity is likely to be outside the control of the inventory or warehouse manager. As the scale of the emergency situation becomes clearer and come in picture, the pull activity will then start to move the product into the places where it is required and the level of inventory will stabilize at an appropriate level. The resultant interaction between push and pull activities will create a fluctuating level of inventory which poses challenges for inventory management to control and coordinate it all and for warehouse management to store it safely before distribution to the beneficiaries. The rate of demand is not stable but depends on the characteristics of the progrommes situation. We can not exactly predict what will happen and what kind of supplies will be needed, but it is likely that some similarity will be displayed by identical events. On the other hand, not only demand level is fluctuating, but the supply of goods can also vary over time depending upon the various factors. For example, foodstuffs manufacturing depends on the timing of growing seasons. Betaland is prone to hurricanes and torrential rain, which sometimes has devastating effects on the flat coastal regions. This can result in serious disruption to transport, destruction of crops and in some cases has resulted in the loss of life. In addition, the manufacturers schedule production in batches in order to minimize production costs and ad hoc purchase orders cannot work well in this situation. Finally, the key player is the Donors who make contributions only when funds are available since funding are the life-blood of the running of an operation. Therefore, inventory managements job is to adapt the rate of supply in order to maintain a stock level that allows the always changing demand for humanitarian goods to be met. In order to achieve proper balance of demand and supply, inventory management is responsible for the following activities: Analyzing the demand for goods and forecasting the demand in the future.

Placing orders on suppliers in order to replenish stock and maintain an adequate stock level to meet demand. Monitoring the delivery performance of suppliers and taking action in the case of any supplier problems. Monitoring the levels of stock in order to decide what to order, when to order and how much. Maintaining stock records and ensuring the accuracy of these records. Keeping records of these activities and providing reports on inventory management performance.

Checking inventory level and coordinating with the programme sections in order for moving supplies speedily is the one of the major concerns of SCILaid logistics department. We can see that inventory management is important for coordinating with programmes referred to the following points: (1) FOLLOWING PROCEDURES AND POLICIES IN SCILaid As a humanitarian organization, SCILaid has its own in-house procedures and policies to operate a warehouse and it has a set of standard documents to record the warehouse transactions. By using these warehouse management tools that define the procedures in all activities and the policies that will govern these procedures, it can operate its warehouses with efficiency and consistency. These procedures and policies will normally be documented by SCILaid and it is the responsibility of the warehouse /inventory manager to make sure that these are adhered to. Having these records can help the programme in the following ways: Get access to the items easily and assist day to day in and out movement of warehouse Tracking and tracing of the supplies along the supply chain Assisting programme by reporting the monthly inventory level

(2) DECOUPLING SUPPLY AND DEMAND As we have already seen that the inventory management is fundamentally for the sake of balancing supply and demand. To achieve this ideal situation, at least we need to know exactly in advance what humanitarian goods will be required. And we also need to ascertain that there is enough time to order goods from suppliers and have the goods in stock ready to meet the need. Moreover, our suppliers must deliver exactly when we need it and in full quantity. If these things are already placed in, there would be no need for a buffer since we could order from a supplier and ship it on to beneficiaries in time to satisfy their need. But in our actual world of uncertainty that depends on multifactor, this ideal situation does not exist in most cases. There are two scenarios for this imbalance (1) For some goods, supply is seasonal, perhaps as a result of a harvest, but the associated demand is constant throughout the year. (2) In other situations it may be that supply is constant, but the demand is erratic and the required time to supply is too short to allow us to make or acquire the items. Therefore, SCILaid is trying to maintain its inventory to allow the beneficiaries needs to be satisfied at any time.

(3) GETTING PREPAREDNESS FOR INCREASED DEMAND We cannot date with an emergency situation because it is an Act of God and totally out of our control. In this regards, we need to prepare the Anticipation stocks to meet a planned or expected increase in demand during the emergency situation. In such a situation, what is the most important is to scale up the speed of response because we do not have enough time to identify a supplier and place a purchase order before being distributed to the places where it is needed. Human cost is dearer than the financial cost of having inventory high; SCILaid decides to have its stock level sufficient to response an unexpected emergency situation. (4) HANDLING UNCERTAINTY OF SUPPLY AND DEMAND It is said that life is what happen to us when we planned the other. We cannot predict surely the level of demand for humanitarian goods in the future. On the other hand, the timing and volume of supplies is always uncertain to some extent. Therefore, inventory is held as a buffer in case demand is higher than expected or in case supplies are later or less than expected, or both because the purpose of humanitarian supply chains is to meet the demand for humanitarian goods by the beneficiaries. Best Regards, Aung Kyaw Moe Logistics Officer Sub-Office (SCILaid Betaland)