PROJECT ON

“Supply Chain Management”

SUBMITTED TO
Kohinoor Business School
BY
Sunil Kumar Yadav
Roll No.119
Batch: 2017-2019

IN PARTIAL FULFILLMENT OF
MASTER OF MANAGEMENT STUDIES (MMS),
UNIVERSITY OF MUMBAI

March, 2019

1
 DECLARATION

I, Mr Sunil Kumar Yadav, hereby declare that this project entitled “Supply Chain
Management” is an outcome of my own efforts under the guidance of Prof. Dr.
Bharti Deshpande. The project is submitted to KOHINOOR BUSINESS SCHOOL
for the partial fulfilment of the Master of Management Studies (MMS), University
of Mumbai.

Signature

Name of the student: Sunil Kumar Yadav

Date

2
 CERTIFICATE

This is to certify that Sunil Kumar Yadav of Kohinoor Business School has
successfully completed the project work titled “Supply Chain Management” in partial
fulfilment of requirement for the completion MMS as prescribed by the University
of Mumbai.

This project report is the record of authentic work carried out by him during the
month of March 2019.

He has worked under my guidance.

Signature

Name: Prof Dr. Bharti Deshpande

Project Guide (Internal)

Date:

3
 ACKNOWLEDGEMENT

Any accomplishment requires work and effort of many people. This project work
is no different. I sincerely appreciate the inspiration; support and guidance of all
those people who have been instrumental in making this project a success.

I am grateful to Kohinoor Business School for giving me an opportunity to pursue

MMS program. I wish to thank Dr. Abbasi Attarwala, Director of Kohinoor
Business School who has been a perpetual source of inspiration and offered
valuable suggestions.

I am highly indebted to my faculty guide Prof. Dr Bharti Deshpande for his

guidance and constant supervision as well as for providing necessary information
regarding the project and also for his support in completing the project.

Last but not the least I place a deep sense of gratitude to my family members and
my friends who have been constant source of inspiration during the preparation of
this project work.

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 TABLE OF C O N T E N T S

Sr No. Title Page No.

1 Introduction 6
1.1 Introduction To The Industry 8

1.2 Introduction of the Topic 10

1.3 Executive Summary 12

1.4 Introduction To The Company 13

Project Management &

1.5 20
Consultancy

1.6 Introduction To The Project 25

2. Project Details 28

2.1 Objective 28

2.2 Literature Review 29

2.3 Methodology 34

3. Limitations Of The Project 35

4. Analysis & Finding 36

5. Conclusion & 42
Recommendations
6. Appendices /Annexure 43

7. Bibliography 44

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 INTRODUCTION

2.1 INTRODUCTION TO THE TOPIC:

What is SKU?

In the field of inventory management, a Stock Keeping Unit or SKU is a distinct

type of item for sale, such as a product or service, and all attributes associated with
the item type that distinguish it from other item types. For a product, these
attributes could include, but are not limited to, manufacturer, description, material,
size, colour, packaging, and warranty terms.
SKU can also refer to a unique identifier or code that refers to the particular stock
keeping unit. These codes are neither regulated nor standardized. When a company
receives items from a vendor, it has a choice of maintaining the vendor's SKU or
creating its own.
The code for a particular SKU under McDonalds is of 5 letters, the first letter is an
alphabet among(D,B,C,E,F,G,R) where each alphabet signifies the group under
which it falls i.e
 D,B-Freezer
 C-Chiller
 E-Paper item
 F-Chemical
 G-Toy
 R-Card and Return Gift
The Remaining 4 Digits are numerical assigned to the SKU Randomly e.g.:
E0542etc.

What is Inventory Optimization?

The entire construct of “supply-demand balancing,” that is at the heart of what

supply chain management is, gets down to optimizing inventory levels. The
ultimate goal: having the right amount of inventory, in just the right places, to meet
customer service and revenue goals - but no more than that.
So that’s the quest, but it’s more of a journey rather than a destination. Or rather,
maybe the right way to say it, to borrow from a historic political quote, is to
consider that “The price of inventory optimization is eternal vigilance.”
It’s not easy, many companies still swing between “eras” of high inventory, when
customer service concerns top the priority list, and low inventories, when business

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 Slows and suddenly someone looks at the cost of holding that entire inventory.
Many companies have tamed these inventory cycles to an extent, but many others
have not.
Inventory Optimization can be obtained by reviewing safety stock levels and
policies. There are a number of consultants who make a good living simply serving
as a catalyst to help companies update safety stock decisions across their SKU
base.
Inventory Optimization is also a comparatively new and fairly hot category of
software that has been adopted by a growing number of companies, Inventory
Optimization software seeks to do three primary things:
Look at inventory levels holistically across the entire supply chain, considering the
impact inventories at any given level or “echelon” have on other upstream or
downstream levels. This includes raw materials and component inventories through
internal channels and nodes and, in some cases, all the way down to the retail shelf.
Optimize and continually update safety stock levels across these echelons.
Take into better account the impact of variability in demand or supply plans in
recommending inventory levels.
Given the market dynamics and the increasingly brutal level of global competition,
gaining even a small edge in inventory management efficiency can pay huge
customer and financial dividends.
Many companies are now also embracing an extension of S&OP called Sales,
Inventory and Operations Planning (SIOP).

What is profiling of SKU?

SKU/Order Profiling: The analysis of historical and future/forecasted SKU and

order data to gain an understanding of the impact of picking and replenishment to a
sub-line level (each, case, pallet). Objectives include:
 Gain an understanding of customer order profiles e.g. lines per order, units per line,
etc.
 Determine proper order picking methodologies and
 Determine optimal storage media profiles for the SKU population.

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2.2 INTRODUCTION TO THE INDUSTRY:

Third Party Logistics (3PL)

Typically, a core company providing services or products is considered the first

party; the customer (or customers) the second party. A third-party, then, is a firm
hired to do that which neither the first or second party desires to do. A third-party
logistics firm is a firm that provides outsourced or “third party “logistics services
to companies for some portion or all of their supply chain management functions.
3PL typically specializes in integrated warehousing and transportation services that
can be scaled and customized to customer needs based on market conditions and
the demand and delivery service requirements for their products and materials. 3PL
is evolving from a predominately transactional role to one that is more strategic in
nature.

The 3PLindustry evolved in the 1970’swhen during a time of expanding

globalization and an increased use of information technology. These trends
resulted in increased demands on firms, and possibilities for companies to operate
more competitively in the marketplace. The first generation 3PL’s (1970’s-1980’s)
offered services such as transportation, brokerage, and shipping. Second generation
3PL’s (1980-1990) was mostly asset or non-asset based companies with increased
service offerings. The third generation 3PL’s (2000 onwards) was mostly web-
based 3PL’s with increased supply chain integration.

Fig 1: Evolution of 3PLs

Source: Supply Chain Management by Rahul.V.Altekar

3PL Characteristics:

Some of the characteristics of 3PL’s are that they perform a variety of outsourced
Logistics matters, provide customized services, and handle multiple activities.
These may involve transportation, distribution, warehousing, material handling,
inventory control, packaging and inspection. Some of the services offered by 3PL’s
in the current market are:

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Dedicated contract transportation and transportation procurement.
Inventory management
Logistics management and consulting
Freight audit and consulting
Shipment tracking and tracing
Reverse logistics and value added services

Growth and Structure of the Third-Party Logistics Industry:

In these challenging economic times, it may be difficult to think of industries that

achieve meaningful growth irrespective of the economic cycle.
Historical trends, however, suggest that the third party logistics ("3PL") industry
has been able to accomplish just that. During the last recession, gross revenues for
the domestic industry grew 17.8% from $65.3 billion in 2001 to $76.9 billion in
2003. By comparison, GDP growth for the same period of time was 4.1%.

State of the Industry and Growth Drivers

Despite current and historical growth rates, the industry growth has yet to hit an
inflection point. Demand for extreme efficiency of inventory and working capital
management continues to drive reliance upon third parties for assistance with
managing operations across multiple geographies and with many suppliers.
Once economic weakness recedes and transportation demand again escalates
logistics costs will raise quickly. Significant capacity exits during this downturn
and a continued driver shortage imply a future need for sophisticated solutions,
which will position 3PL providers for even more rapid rates of growth.
Another key driver of growth will be increased outsourcing of 3PL functions by
middle market companies. Most middle market manufacturers, wholesalers, and
retailers lack the sophisticated internal controls necessary to address logistics
challenges and (particularly in today's fuel environment) can no longer take
transportation and supply chain costs for granted. Historically, smaller companies

were relatively slower at adopting and implementing outsourcing as a strategic

solution. By contrast, 3PL providers have significantly penetrated the Fortune 500
sector.74% of the domestic Fortune 500 used at least one 3PL in 2007 and today,
the three domestic automotive OEMs each utilize more than 30 3PLs. Small-to
mid-size companies' need for greater efficiency in their supply chains is expected
to drive even more robust 3PL industry growth rates over the next decade.
Providers to this customer segment stand to benefit as middle market companies
tend to have a lower switching rate and offer slightly greater profitability.

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 Market Participants and Industry Structure

The 3PL industry remains very fragmented with several thousand industry
participants and a continued stream of new entrants that are attracted by the high
industry growth rates. The broader selection of providers in the marketplace has
empowered customers to be selective and manage the number of providers that
they use.
Acquisitions enable 3PL providers to secure add-on offerings to further penetrate
customer relationships, realize growth in new geographies, and diffuse customer
concentration. This strategy has been observed in the marketplace as several
notable transportation industry participants have utilized acquisitions as a means
for repositioning their service offerings, adding capabilities, and entering new
segments.
With new small companies continuing to enter the market and extremely large
providers continuing to grow rapidly, a barbell dispersion effect has taken place. It
is estimated that the top 10 providers generate approximately two-thirds of
aggregate industry revenue in North America. The vast majority of the remainder
is made up of companies under $50 million of revenue.
Given the notable disparity between small niche players and large players,
providers that exceed this revenue threshold with differentiated service offerings
are scarce and highly sought-after acquisition targets, particularly by private equity
buyers looking for a platform investment.

3PL Market in India:

 The 3PLIndustry’srevenue in India is expected to increase to Rs.190-195 billion by

2014-15 from Rs.57-60 billion in 2009-10.
 India’s GDP is expected to grow by 8-8.5% over 2009-10 to 2014-15 driven by a
strong growth in Industry and services.

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 Fig 2: Growth of Indian Logistics Industry

The major 3PL Growth Drivers in india in the coming years are:
 Goods & Service Tax (GST)
 Make-in-India Initiative
 Emergence of E-commerce market

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 EXECUTIVE SUMMARY

A Supply Chain Company’s main objective is to deliver right Products, at the right
Quantity, &at the right Time thereby marrying Supply with Demand without
hampering any process.

Radhakrishna Foodland Pvt. Ltd is a leading Supply chain Organization which

provides 3PL support to major Clients like McDonalds, Dominos Pizza, KFC just
to name a few. Under the brand McDonalds there are around 463 SKU’s in its
Kalamboli DC.

This project is an attempt to Profile those 463 SKU’s based on parameters like
Length, Breadth, Width, Weight per case, Stacking Level, Case per pallet, Lead
Time etc, and thereby find out Active and Non-Active SKU’s. Under that Active
SKU’s further Classification was done based on Temperature requirements into
CFD (Chiller, Freezer and Dry).

After Profiling, the active SKU’s were categorized into Classes (A, B, C, D) by
considering the parameters of Volume and Velocity based on the past one year data
from June 2014-May 2015.

Pareto Principle was done on the SKU’s to study their factor contribution to the
revenue of the organization and thereby suggested recommendations based on my
Findings.

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2.3 INTRODUCTION TO THE COMPANY

History:

Radhakrishna & Company was established by Mr.Radhakrishna Shete

in the Marine Catering and Ship chandelling business in 1966.
It focused on consolidating multiple product categories (46 product
categories) of food, non-Food, ambient and temperature controlled
products (3500 SKUs) and supplying these to merchant ships. These
supplies needed to be on time, in right quantities and of right quality;
since these ships had fixed turnaround schedules with no option to
procure supplies once they set sail. RK Group was the leading Ship
chandler in India and at peak, delivered to 100+ ships – a feat still
unmatched in India.

Fig 3: Logo of Radhakrishna Foodland Pvt. Ltd

Source: Google images

RK Group extends its experience and expertise to managing turnkey

food service and hospitality services to oil & gas, remote construction
sites, defence installations, maritime, vessels, in India and worldwide.
RK Group sets up Radhakrishna Foodland Pvt. Ltd. (RFPL) to launch
the first western style supermarket in the prestigious suburbs of
Mumbai under the name of “Foodland”.
Simultaneously RFPL sets up a wholesale distribution centre to cater
to the food service business in Mumbai.
RKHS teams up with Eurest, an Accor SA group company, in a Joint
Venture to extend its geographical reach and to serve its clients in the
food service and hospitality business.

13
This includes hospitals, schools, colleges, venues, business and
industry.

To offer more value to clients, RKHS introduces facilities

management and vending services to become a one-stop service
provider to clients.

RKHS become the no. 1 food service and hospitality company in India
employing 20,000+ people across 1400 sites pan-India serving 400
customer companies across all sectors.
Accor SA divests its food service arm – Eurest, to Compass Group Plc
in 1996. RKHS teams up with Compass to continue its journey.
RFPL is awarded the distribution and logistics contract for
McDonald’s in 1996 in India. Currently manages Distribution and
Logistics for its 200+ restaurants across India.
Foodland expands its retail stores under Radhakrishna Consumer
Services (P) Ltd. to 48 stores in Mumbai and becomes the single
largest chain of supermarket operations in Mumbai.
Foodland sets up first of its kind world class integrated multi-
temperature distribution centre and processing facility in Kalamboli,
Mumbai, India. This facility services hotels, restaurants, cafes, QSRs,
institutional food service, retailers, importers, exporters, Agri
producers, FMCG companies, pharmaceutical companies and does
value-add processing of meat, fish, poultry, deli and produce. This
facility was entirely project managed from concept, design,
engineering, procurement, construction, installation and
commissioning, in- house.

To support its retail and wholesale trading, Foodland imports food

products and also builds co-packing capability.
Pepsi awards distribution and logistics contract to RFPL to manage 6
DCs pan-India. RFPL currently thruputs 68 Million cases per annum,
with street value of 2300 crores p.a.
Bharti Walmart awards Distribution Centre management and
Transport management for the first DC located at Banur admeasuring
80,000 sq ft. and 6000 SKUs servicing 59 retail stores.

14
RKHS sources all its needs from Foodland. Foodland undertakes to
deliver to remote locations including the high seas with complex
logistics.

Foodland implements SAP and receives the Best Implementation

Award.

Foodland continues to expand its services (Warehouse Management,

Transport Management, Project Management and Value Added
Services) serving the QSR, Agri, Pharma, Retail, Institutional and
Commercial Food Service sectors.

QSR

FMCG

Food Services Distribution

Retail

Fig 4: Clients of Radhakrishna Foodland Pvt. Ltd

Source: www.rkfoodland.com

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 Realizing the potential and the need, Foodland decides strategically, to
focus its resources an experience to develop integrated Supply Chain
Management (SCM) Solutions. Consequently, it exits its wholesale
trading, distribution and other allied activities.

Foodland emerges as a leading supply chain solutions company to

serve the Agri, Retail, QSR, Food Service and Pharma industry and
expands its footprint pan-India. Sodexo acquires RKHS and continues
to utilize Distribution & Logistics platform of Foodland. Currently
Foodland supports 170 units in remote locations on a turnkey basis.

Foodland with its vast experience and track record decides to self-
manage its Warehouse and Fleet, to get better control over both its
operations and people. Foodland introduces sales support in terms of
managing sales people to ensure no lost opportunity of sales and a
seamless operation from factory to shelf.

We want to partner with you in a strategic and collaborative manner to

better address customer’s needs and buying decisions. Our results and
solutions based attitude coupled with our VIGS (Value Improvement
Guaranteed System) will enable you to profitably grow your business
in quick time & establish a footprint in all high consumption location
in India.

Fig 5: Strategic, Collaborative and Integrated Approach of the Organization.

Source: Radhakrishna Annual magazine of 2013
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Foodland with its vast experience and track record decides to self-
manage its Warehouse and Fleet, to get better control over both its
operations and people. Foodland introduces sales support in terms of
managing sales people to ensure no lost opportunity of sales and a
seamless operation from factory to shelf.

We want to partner with you in a strategic and collaborative manner to

better address customer’s needs and buying decisions. Our results and
solutions based attitude coupled with our VIGS (Value Improvement
Guaranteed System) will enable you to profitably grow your business
in quick time & establish a footprint in all high consumption location
in India.

Radhakrishna Foodland

Corporate Background:
Radhakrishna Foodland Private Limited (RFPL), India’s leading
National Supply Chain Management Specialist, has over 30 years of
rich and varied experience in the Foodservice, Retail, Quick Service
Restaurants (QSRs), and Distribution and logistics businesses. RFPL
is committed to delivering seamless, customized, and functionally
excellent and “Fit To purpose” Supply Chain Management solutions
in terms of cost, service and schedule to every customer.

Our commitment to customer service and our ability to anticipate,

adapt, evolve and innovate with each customer or situation has
enabled us to emerge as the trusted partner to some of the world’s
most prestigious brands.

With a carefully managed growth strategy and agile adaptation to our

customers’ needs, we have successfully established a leading position
in one of the most demanding growth markets in the world.

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Our dedication to operational excellence applies across every sector in
which we operate and is underpinned by an on-going program of
product and service development to anticipate future requirements of
our customers.

Serviced Sectors:

 Food Service
 Retail
 Consumer Products
 Agri Food Products
 Pharma
 Industrial

RFPL offers a comprehensive range of supply chain solutions for its

customers that cover the entire gamut of Warehouse Management,
Transportation Management, Value Added Services and Project
Management requirements.

Warehouse Management
Our range of streamlined warehouse solutions that maximize
productivity, are amongst the most diverse in India. It encompasses
dedicated, shared-user, automated and multi-temperature operations.
We deal with all types of products – from raw materials to finished
goods. A unique combination of engineering, information technology,
human resources and supply chain skills enables us to provide
functionally excellent solutions that are fit to purpose. By working in
close partnership with our customers, we identify the optimum
operational model based on variables such as product type, customer
geography and technology requirements.
Our trained, certified, experienced, motivated and empowered unit
managers and teams deliver operationally excellent service standards.

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Transport Management
RFPL has responded adeptly to modern supply chain challenges with
a comprehensive range of transport services, which cater to local,
regional and national requirements.
We add value and build in flexibility through advanced solution
design and supply chain modelling where required. We effectively
leverage technology to optimize routes, track consignments,
Maximize driver and vehicle efficiency. Systems integration ensures
total visibility whilst transport is managed across multiple depots and
state lines.
Our team of experienced drivers ensures that the integrity of the
products is always maintained. We invest in training and motivating
them to ensure accurate and timely deliveries.

Valued Added Services

RFPL offers organisations various standardized options in their
logistics solutions through collaborative services across the entire
spectrum in the supply chain. Whether it is flexibility, pay-as-you-go
warehousing space, shared transport to optimize capacity or a co
packing facility, our width of experience makes us to ideal shared-user
partner for all businesses – small, medium or large.
Our in-depth understanding of each project’s unique characteristics
coupled with our ability to challenge and re-engineer existing
solutions, enables us to differentiate our service offerings and bring
additional value to our clients.

Our ability to work across different technology platforms including

SAP and integrate management information allows our clients to
make informed decisions in lesser time. Our experience across varied
industries and our belief in continuous improvement allows us to
deliver on our Key performance indicators, often surpassing
expectations.

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Project Management and Consultancy

RFPL offers Project Management services to the Supply Chain

Industry by providing a renewed approach to Supply Chain solutions.
We present independent and non-conflicting services backed by our
experience garnered over three decades of work across industries.

We have specialists who conceptualization, design, engineer and

commission, Optimal National Supply Chain networks to clients
through Supply Chain

Improvement Programs, Network, Warehouse Design, Supply Chain

Planning, Transport Management and Systems Optimization.

Our detailed understanding of the supply chain allows us to effectively

identify key areas for improvement that impact the cost effectiveness,
efficiency and reliability of the entire supply chain network.

McDonald's Distribution Partner

Radhakrishna Foodland (P) Ltd. is a part of the Radhakrishna Group,

which is engaged in food and related service businesses.
From July 1993, much before McDonald's started its operations in
India, sincere efforts were made by Foodland to carefully understand
McDonald's operations and requirements for the Indian market. Better
facilities and infrastructures were created and new systems were
adopted to satisfy McDonald's demands. Finally, all those efforts put
in by Foodland culminated into a handshake agreement with
McDonald's India, to serve as Distribution Centres for their restaurants
in Mumbai.
The division has focused all its resources to meet McDonald's
expectation of 'Cold, Clean and On-time Delivery'. From this evolved
the mission statement, "To ensure that all McDonald's restaurants are
supplied without interruption, products conforming to acceptable
standards at lowest local costs to the system."

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The Distribution Centre (DC) is responsible for procurement, quality
inspection programme, storage, inventory management, deliveries to
the restaurants and data collection, recording and reporting. Value
added services like repacking of promotional items are also carried out
at the DC. The DC plays a very vital role in maintaining the integrity
of the products throughout the entire 'cold chain' - the distribution
system that ensures the products, which arrive at McDonald's
restaurants from suppliers all over India, are absolutely fresh and as
per McDonald's Quality Standards. All these operations need to be
managed in the most cost- effective manner. The operations and
accountings are totally transparent and are subject to regular audit.
McDonald's introduced Foodland to F. J. Walkers of Australia, which
resulted in an affiliation between the two companies to develop the
distribution set-up in India. The association has helped Foodland to
refine its operations to achieve the following:

 Designing and establishing the distribution system to handle

large volumes.
 Engineering the storage and delivery network to service the
unique requirements at each of the customer's locations.
 Devising delivery schedules to minimize business interruption
and maximize efficiency so that store managers know exactly
what to expect and when.
 Maintaining open communication lines with customers,
suppliers and all business associates.
 Emerging as a key system player after realizing the inter-
dependence of all the associates in the McDonald's business
system.
 Transferring some of the good distribution practices to other
divisions of the group.

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 Supplier to Distribution
Center

Unloading sheet is
prepared, SKUs
stacked(Put Away)

FIFO/FEFO is
Acknowledges followed for storing
Discrepancy
Shortage/Damage the LR accepts SKUs
the qty received
in system as per GRN prepared
invoice

GRN sent to HO

Payment to vendor

Fig 6: Process Chart for McDonald’s (Supplier to DC)

Source: Radhakrishna Annual magazine of 2013.

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 Stores place order

Distribution Center to
Store wise compilation of stores
order

Outbound plan send to logistics

department

Run the dispatch plan

Generate pick SKUs picked & Verification of

Adequate stock list from stage store wise picked stock
available system

Discuss any priority with store Invoice

managers generation

Reduce quantity to be supplied to Dispatch

the store as per discussion with
store managers

Delivery to
store

Store
Acknowledgement

Fig 7: Process Chart for McDonald’s (DC to Stores)

Source: Radhakrishna Annual magazine of 2013.

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Availability:-
Radhakrishna Foodland Pvt.. Ltd is a supply chain specialist it offers
services like third party logistics warehousing, transportation,
inventory management, supply chain solution it has its warehouses in
following location
Distribution Centres:-
 Kalamboli DC (Navi Mumbai)
 Noida DC
 Hyderabad DC
 Bangalore DC
 Kolkata DC
 Vapi DC
It also has its registration office in Thane and International Office in
Texas USA.

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 INTRODUCTION TO THE PROJECT:

SKU Profiling
 The Analysis carried out on SKU’s based on certain Parameters to
gain an understanding of the Characteristics of it and thus
categorize them into groups.
 It used in planning and forecasting.
 It is an annual activity at best but more likely once every 2-3
years.

Benefits gained by SKU Profiling

 Inventory Optimization.
 It allows companies to effectively fulfill demand while keeping
minimal Stock in Inventory.
 Increase in service level, improved performance against customer
request dates.
 To understand the SKU’s as per their categorization.

SKU Categorization
SKU categorization is done on the parameters of volume of SKU
shipped & Velocity i.e No. of times the SKU is shipped out of the
warehouse.

Based on this it is classified into 4 Classes:

 Class A- High Volume& High Velocity

 Class B – High Volume& Low Velocity
 Class C- Low Volume& High Velocity
 Class D- Low Volume& Low Velocity

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The figure below shows the Classification in a better way:

Fig 8: SKU Categorization

Parameters included in SKU Profiling:

 Length of case: The length of the case in cm

 Breadth of case: The breadth of the case in cm
 Width of case The width of the case in cm
 Weight of the case: The weight of the case in Kg
 Case per pallet: The maximum no. of a particular SKU that can be
kept in a pallet as per stacking norms.
 Temperature Required: whether the storing condition for a
particular SKU is Chiller, Freezer or Dry condition.
 Shelf Life: Incase of food products and Chemicals (Both food &
Non-food) the shelf life is considered in Days.
 Lead Time: (Production time + Transit time) Lead time for a
particular SKU includes its production time taken to make the
product and its transit time from the supplier end to the DC. It is
taken in Days.

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  Stacking Level: The height up to which a particular SKU can be
stacked as per the Stacking norms.

Fig 9: Stacked SKU on a pallet

Source: Google images

Additional Parameters included:

 Dividers: Presence of Divider for a particular SKU
 Inners: No. Of inners
 Ply: 2 or 3 ply
 Packaging: The label is printed or pasted on a SKU

Fig 10: Image depicting Additional Parameters

Source: Google images

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 PROJECT DETAILS

3.1 OBJECTIVE:

To Study SKU Profiling of McDonalds, suggest recommendations thus resulting

in Effective Inventory Optimization.

At the Kalamboli DC of Radhakrishna Foodland Pvt. Ltd, there is taking care of

the Supply Chain of Key Clients, one of them being McDonalds. Inventory
Management becomes an integral part of this process as the goods have to reach
the Clients i.e the outlets in Desired Quantity and Quality and on Time. Proper
Inventory Management depends upon SKU profiling. Categorizations of SKU
are into classes and thereby do an 80:20 Analysis.

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 LITERATURE REVIEW:

Introduction

SKU/Order Profiling: the analysis of historical and future/forecasted SKU

and order data to gain an understanding of the impact of picking and
replenishment to a sub-line level (each, case, pallet). Objectives include
 Gain an understanding of customer order profiles e.g. lines per
order, units per line, etc.
 Determine proper order picking methodologies and
 Determine optimal storage media profiles for the SKU population.
Additionally, think of profiling as a planning function. The data set reviewed
for profiling activities mainly focuses on historical SKU and order data to set
the baseline for future operations. SKU/Order profiling should be performed
as necessitated by overall business changes such as acquisitions, shift in order
fulfillment dynamics, SKU growth etc. Normally speaking, this is an annual
activity at best but more likely once every 2-3 years.

Slotting: The ongoing analysis and maintenance of current individual SKU

placement within a defined set of storage media. Think of slotting as an
ongoing maintenance function. The data set review for slotting mainly
focuses on future sales forecasts or advanced order information attainable
through an order management system. SKU lifecycles and/or seasonality
aspects of the SKU base will determine frequency. As seen in these
definitions, there’s a clear correlation between the two activities. The next
step is to clarify why each of these activities are necessary for a finely tuned
operation.

Why Profile?

It would be a safe assumption to say that majority of distribution

professionals are or should be striving to reduce internal DCoperational costs.
The fine line however is that depending on the SKU base and order volumes,
congestion in the picking area may cause productivity robbing bottlenecks.
SKU seasonality / lifecycle Examining in depth reveals that profiling can help
alleviate many issues. Examining order profile information (e.g. daily orders,
daily lines, daily units, units preorder, lines per order, units per line, etc.) and
slotting profiles (SKU velocity, cubic volume Page movement, etc.)

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How to Get Started?

The first requirement is need for ideally twelve full months of actual SKU and
Order historical data. If the profiling engagements being utilized to evaluate
the entire DCoperation, then other data relating to in bound activity should be
included. At a minimum, the following data should be available:
SKU Item Master:
 SKU
 SKU Class
 SKU Description
 Unit of Measure
 SKU Dimension (L x W x H) plus weight
 Inner quantity (if applicable)
 Inner Dimension (L x W x H) plus weight
 Master Carton Quantity
 Master Carton Dimensions (L x W x H) plus weight
 # of Master Cartons / Pallet
 # of Master Carton / Pallet Layer (Tie)
 Pallet Dimension (L x W x H)
 Conveyable (Y / N)
Order Detail:
 Order #
 SKU
 SKU Description
 SKU Order Quantity
 Order and SKU Velocity Profiling is Key to Picking System
 Design and Technology

What is Activity Profiling?

The process of gathering and analyzing data is about both order profiles
(orders per day/shift, lines preorder, items per line, etc.) and individual SKU
activity (volumes, breakdown by unit of measure, etc.).
SKU profiling is key to order picking system design and technology selection,
few companies seem to have the data readily available, even in this age of
ERP, WMS, data warehouses and other software systems, which one would
think would contain the required information. In some cases, the data is
available or largely available, but is in different software systems.

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The data from these different sources must be merged. In other cases, key
data is not available or is very hard to get at.
Examples of the former might include product dimensions and weight;
examples of the latter might include order line detail, which can be obtained
but only after a decent effort by the IT department to massage archived data.
In all cases, companies must carefully look at both that data is available and
how accurate that data is.

3PL

Typically, a core company providing services or products is considered the

first party; the customer (or customers) the second party. A third-party, then,
is a firm hired to do that which neither the first or second party desires to do.
A third-party logistics firm is a firm that provides outsourced or “third party”
logistics services to companies for some portion or all of their supply chain
management functions. 3PL typically specializes in integrated warehousing
and transportation services that can be scaled and customized to customer
needs based on market conditions and the demand and delivery service
requirements for their products and materials. 3PL is evolving from a
predominately transactional role to one that is more strategic in nature.
The 3PL industry evolved in the 1970’s when during a time of expanding
globalization and an increased use of information technology. These trends
resulted in increased demands on firms, and possibilities for companies to
operate more competitively in the marketplace. The first generation 3PL’s
(1970’s-1980’s) offered services such as transportation, brokerage, and
shipping. Second generation 3PL’s (1980-1990) was mostly asset or non-asset
based companies with increased service offerings. The third generation 3PL’s
(2000 onwards) was mostly web-based 3PL’s with increased supply chain
integration.

SKU Categorization:

Companies can better match supply to demand for the product if they have a
complete demand profile that includes both volume and velocity. Many
companies today are only performing routine volume-based SKU analysis. In
volume based analysis, products are segmented into different classes or
“buckets” depending on the volume of demand. For example, fast-moving,
popular items are classified as “An” items, while slower-moving products are
characterized as “C” items. Most companies use a rule of thumb that “A”
SKUs account for 80 percent of their overall demand volume, “B” SKUs
account for 15 percent, and “C” SKUs account for the last

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5 percent. Yet, “A” SKUs are only 5 percent of all items, “B” is another 15
percent, and “C” items make up the remainder.

Using this approach, a company with 500 SKUs would expect to have a total
of 25 “A” SKUs (5% x 500), 75 “B”SKUs (15% x 500), and 400 “C” SKUs
(80% x 500). In the past 20 years, companies have increased their use of
volume-based analysis, particularly for determining the product’s
manufacturing and distribution strategies.

For example, in the 1980s, some companies began using manufacturing cells
for their lower-volume products. Distribution departments also began looking
at volume analysis for the design of their warehouse layouts, using a zone
approach for more efficient picking. Under this approach, higher-volume “A”
SKUs are placed in a zone that would need less travel. Warehouse design also
began moving to specialized flow racking for lower-volume SKUs. What is
missing from this traditional analysis is the dimension of velocity. Given the
volume being shipped, we would argue that most “An” items experience
relatively less demand variation than the other 3 product groups.

This makes production stratification much more predictable. Lower-volume

SKUs, however, usually have much more variable demand. For this reason,
we suggest augmenting the traditional SKU classification to include
variability. In a volume-variability demand profile, each SKU is classified by
both its volume (based on unit volume or dollar volume) and its velocity
(represented by No. of times Sipped out).

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 Volume- Possible Manufacturing Possible Distribution
Variability Strategies Replenishment Strategies
Profile
A  Assembly Line  Fill from Stock
 Made-to- (Finished- Goods
Stock(Component Inventory on hand)
Inventory on hand)  Rate based planning to
 Factory Level trigger Manufacturing
Loading Replenishment
B  Assembly Line or  Fill from Stock
Cellular Finished- Goods
manufacturing Inventory on hand if
 Build to Order from Long manufacturing
kanbans(Component Lead-timeor
Inventory on hand) kanban/JITReplenish
ment from
Manufacturing if
Shorter Lead-times are
available
 Kanban planning to
trigger Manufacturing
Replenishment

C  Cellular  No Finished- Goods

Manufacturing inventory on
 Make to Order(No hand(Fulfill from
Component manufacturing via
Inventory on hand) Make-to-Order)
 On Demand
Manufacturing( if
available)

D  Assembly Line  Finished- Goods

 Make to Order inventory on hand for
Maximum Order
Quantity Projections
Only
 Orders Exceeding

Table 1: Manufacturing & Replenishment Strategies for each Class

Source: Supply chain management review, September/October2003

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 METHODOLOGY:

There were around 900 SKU’s in the database of Radhakrishna Foodland Pvt.
Ltd. Out of which many were inactive because of their Obsolescence but still
existed in the system. The project started with the identification of Active and
Inactive SKU’s, along with the profiling of each Active SKU’s. The profiling
was done on various parameters that included the Dimensions of the
package(L*B*H), the Weight of the package along with the no. of inners,
Expiry date if any, the lead time of the particular SKU, Stacking level, Case
per pallet, and Temperature Requirement.

Data Source: Primary

 Data for each SKU was collected in the warehouse.

Once the data was collected the Database was updated with the Active SKU’s
along with their parameters. The next process was studying the previous one
year (June 2014-May 2015) data of each SKU on its Volume and Frequency
Shipped. Based on the Analysis the SKU’s were categorized into classes
ranging from A-D.
 Class A- High Volume& High Velocity
 Class B – High Volume& Low Velocity
 Class C- Low Volume& High Velocity
 Class D- Low Volume& Low Velocity
The Final Step included performing Pareto Principle on the SKU’s and
finding out 20% of the SKU’s that contributes to the 80% of the revenue, and
80% of the SKU’s that contributes to just 20% of the revenue. Thereby
suggesting suitable Recommendations to the Organization.

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 LIMITATIONS OF THE PROJECT

It is a time consuming task as each SKU needs a lot of time to be checked

with respect to the above mentioned parameters.

Because of which organizations don’t do the profiling once a year they do it

once in 2-3 years, although it needs to be done once a year to understand the
Classes into which each SKU belongs.

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 ANALYSIS & FINDINGS:

Item Master Correction:

 Total No. of SKU’s under McD : 463
 No. of SKU’s found Inactive : 111
 No. of Active SKU’s: 352
 No. of Ambient SKU’s: 300
 No. of Chiller SKU’s: 17
 No. of Freezer SKU’s: 35

SKU Profiling based on Volume:

Data Considered: June 2014 to May 2015

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Analysis of Volume Data

 No. of SKU’s in Volume Class AB: 89

 No. of SKU’s in Volume Class CD: 251

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SKU Profiling based on Velocity:

Data considered: June 2014 to May 2015

Analysis of Velocity Data:

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 No. of SKU’s in Line Class AC: 120
 No. of SKU’s in Line Class BD: 220

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 Pareto Principle:

Pareto Principle for Volume:

Class Count of SKU Contribution of %

(A+B) Contribution
A 86
B 3 89 26.17
C 34
D 217

Class Sum of Volume Contribution of %

(A+B) Contribution
A 1574554
B 10887 1585441 94.93
C 42472
D 42104

Though A and B’s contribution in terms of SKU is only 26% of the total No. of
SKU’s but its volume contribution is nearly 95%.

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Pareto Principle for Velocity:

Class Count of SKU Contribution of %

(A+B) Contribution
A 86
C 34 120 35.29
D 217
B 3

Class Sum of Velocity Contribution of %

(A+C) Contribution
A 592669
C 51728 644396 94.91
D 33373
B 1184

Though A and C’s contribution in terms of SKU is only 35% of the total No. of
SKU’s but its velocity contribution is nearly 95%.

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 CONCLUSION & RECOMMENDATIONS

5.1 CONCLUSIONS
 Class A and Class B SKU’s contribute to the maximum Quantity shipped
out of our warehouse.
 Class A and Class C SKU’s should never be stocked out as it is
frequented out on a regular basis.

Table 2: Conclusion Table

5.2 RECOMMENDATIONS

 Damaged SKU should be trashed as soon as possible and should not be

kept beyond a certain time.
 Pallet Utilization for a particular SKU should be optimum.
 Make-to-Stock: Strategy should be approached for SKU’s which go out
on a regular basis, i.e Class A & Class C SKU’s.
 Critical Vendors need to be prior informed so that they can calculate their
Cycle time accordingly.
 Make-to-order: Strategy can be followed for Class D SKU’s.
 Need to do SKU Profiling once a year.
 Warehouse Management System (WMS) needs to be put in place so that
the supply chain and logistics function for each SKU can be carried out
effectively.

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 ANNEXURES

A List of Figures:

Figure Name of the figure Page

Number No.
1 Evolution of 3PLs 4
2 Growth of Indian Logistics Industry 7
3 Logo of Radhakrishna Foodland Pvt. Ltd 8
4 Clients of Radhakrishna Foodland Pvt. Ltd 10
5 Strategic, Collaborative and Integrated Approach of 12
the Organization
6 Process Chart for McDonald’s (Supplier to DC) 17
7 Process Chart for McDonald’s (DC to Stores) 18
8 SKU Categorization 21
9 Stacked SKU on a pallet 22
10 Image depicting Additional Parameters 22

B List of Tables:

Table Name of the Table Page

No. No.
1 Manufacturing & Replenishment Strategies for each 28
Class
2 Conclusion Table 37

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 Bibliography

Books Referred:
 Supply Chain Management, Rahul V. Altekar.
 Frazelle, Edward. International Edition 2002.World-Class Warehousing and
Material Handling. s.l. : McGraw-Hill, International Edition 2002.
Articles Referred:
 Order and SKU Velocity Profiling is Key to Picking System Design and
Technology, Supply Chain Digest, July 14, 2008.
 A Practitioner’s Perspective On The Role Of A Third-Party Logistics
Provider, Forrest B. Green, Will Turner, Stephanie Roberts, Ashwini
Nagendra, Eric Wininger- Radford University, Journal of Business and
Economic Research, June-2008.
 Profiling Vs Slotting: Continuous Optimization of your Picking Operation,
White Paper –Fronta, 2006.
 Solving the Supply-Demand Mismatch-Kate L. Vitasek, Karl B. Manrodt,
and Mark Kelly, Supply Chain Management Review, September/October-
2003.
 80/20 Pareto Principle in Project management communication, Evelin
Vanker

Websites Referred:
 http://www.crisil.com/research/research.jsp
 www.rkfoodland.com

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