Warehousing is a process that involves the storage of wares or merchandise in large scale, in an orderly and systematic manner, for the sole purpose of making them suitably available when they are needed. Ideally, it involves a preservation process of goods in bulk from the moment of purchase or manufacture up to the time when their need arises. Warehousing is one crucial component of trade that demands great mastery and dedication if trade is to be successful (Nelson, 2000). This is because it creates utility of time by providing an over pass between manufacture and final use of any good. In any warehouse, it is imperative that there is efficient and effective utilization of management strategies in order to achieve overall integration.
Of particular importance is the role which warehousing plays in the whole supply chain network. It is a useful element in the distribution and supply of goods from their raw forms and production process until the final products are released for consumption. Warehousing is a fundamental part of the supply chain and it does operate within the same network. In line with this, its roles should coordinate with the supply chain objectives to create a strong link in the overall supply chain (Frazelle, 2002). Amenities needed, human capital and equipment make warehousing costly in terms of implementation. In any warehouse design, therefore, cost becomes a key factor to consider so that effectiveness and performance can be raised on the whole supply chain. Any inadequacy in the design and management of a warehouse puts the client service levels and supply integrity under pressure, resulting in unwarranted high costs (Shippen, 1999).
The project seeks to design a supply chain network in Melbourne, Australia. This supply chain will incorporate full warehouse operations for the purpose of managing the smooth flow of goods from Australia to the United States. Inside the warehouse, technology will be given priority since digitizing warehouse operations will be a plus to the overall success in the supply chain. Any warehouse must incorporate the use of technology in every aspect of its operational scope to boost productivity. It will also seek to develop a strong organizational structure that carries with it successful management principles. In line with this, the project will also present considerations for workforce management and develop the best export and import strategies to link up the company’s distribution centers (DCs). Supply chain risks and their mitigations will be outlined as well as the elements that the company will outsource to increase the efficiency of the overall company’s budget. Lastly, the project will delve into analyzing the company’s budget line. Here, the budget items required in the warehouse will be considered and outlined. Further, as a conclusion measure, the metrics for measurement of success in the warehouse and supply chain will be considered to determine whether there exists any loophole in the warehouse network.
Supply Chain Design
The warehouse is to be based in Melbourne, Australia. The successful design of the supply chain will be achieved by the deployment of assets in a way that will enhance company’s profitability and maximum value to the shareholders. The strategies for marketing and supply sourcing that will bring about the best rewards ought to be considered. In the supply chain design, the personnel to be involved are required to have tools that take into account the business objectives and resource use and their subsequent impacts on finances. This will help in optimizing the chain structure from the supplier to the consumers as well as offer cost-cutting measures while increasing overall profitability. The warehouse will run in concurrence with the Australian government’s regulations and synchronize all data from every sector of the regional warehouse in order to streamline the supply chain structure.
Supply chain disruptions, safety concerns and consumer quality are always the major areas that compromise warehouse management. By focusing on the supply chain design and management, most challenges in the supply chain network will be solved. Factors to consider are product quality and government regulations. Consumers are always on the lookout for more quality products and services in the market (Grant, Trautrims & Wong, 2013). In order to attract a larger pool than competitors, it is imperative to increase product quality as well as stay within the government regulatory framework. By being within the framework of regulation, mistrust issues between the government and the company are eliminated. Further, consumers tend to trust a company’s products and/or services from the regulatory perspectives.
Another crucial factor to consider in the supply chain design is automation through technology. In order to meet the demands of export/import clients, automation of warehouse operations becomes critical. Access to real-time data helps in cutting costs of having to travel to access it somewhere else. Thus, automation will lead to quick responses to the fast changing supply network environment and reduce the costs for warehouse operations. It is required that supply chain manager in the region be proactive from the word go in order to avert any disruption that may occur in the supply chain (Sehgal, 2009). This will be achieved by leveraging on the present administrative consoles in order to monitor the key indicators of performance (KPIs). It will be required that the supply chain managers in the region employ powerful metrics for assessing and reporting any warehouse operation.
Another consideration to be made is in the construction of valuable and sustainable supply chain networks. This is particularly concerned with the cost of the products to the consumers, and that are to be delivered via sustainable processes. It will be a requirement to reduce on the waste and power expenditure in a continuous process of improvement across the supply chain. Caution should be observed to ensure that the planned processes are the ones that go to the execution stages. This will be attained through increased quickness to solve problems arising out of the chain and the facilitation of lean supply operations to reduce unnecessary complexity in the supply chain operations. The leaner the operations in the warehouse, the more the integration will result among all the processes in the warehouse (Nelson, 2000).
In ensuring a leaner and more efficient warehouse management strategy, it is better to utilize the Irvin’s organization model structure. The structure makes use of a leaner strategy of management but one that seals all the loopholes and weaknesses in the whole warehouse design. It also eliminates any complexity arising from too much bureaucracy. The structure is as shown below (Figure 1).
The supply chain design should encompass the following five components of an effective warehouse:
Optimum levels of stocks: The warehouse coordinator will check to ensure that optimum levels of stock are always maintained at any one time. Excess stock proves to be costly to the company since it does not meet the order fulfillment required for profitability. In line with this, a stock management system will be installed to enhance stock optimization and better warehouse management.
Quick processing of sales orders: Sales and orders at the warehouse will be processed in a timely manner from the moment the orders are filled and deposited in the facility. This will increase the turn daily turnover volume of goods cleared and released to the consumers as well as reduce the excess turnaround time bureaucracy demands (Manzini, 2012).
Control of storage and movement of goods: A Warehouse Management System (WMS) will be installed to ensure accuracy in the detailing of stocks and their levels. The system will also help in correct order fulfillment and tight control of storage and movement of goods in and out of the warehouse.
Efficient transactions processing: Every transaction in the warehouse will be transacted efficiently through the management system in a process meant to integrate all warehouse processes and reduce redundancies in the operations. Efficiency in this sector will have to start from the shipping procedures to the receiving of goods and final release to consumers.
Warehouse management linkage to sales: Warehouse management plays a vital role in the supply chain. It is therefore important to link it with other crucial areas of operation in the warehouse and distribution centers. These areas include logistics and sales sectors which provide critical support to the smooth flow of goods in and out of such facilities (Frazelle, 2002).
Figure 1: Irvin’s organizational structure.
In any warehouse, labor is of utmost importance since almost all operations involve human capital at one or more levels. It is imperative, therefore, to consider and develop effective workforce management procedures that are in line with the operations of the warehouse. Workforce Management involves processes geared at optimizing and linking up the labor to the operations being carried out in the warehouse (Shippen, 1999). Efficiency in the warehouse results when the workforce management is linked to warehouse management systems for easier follow up. When implemented in tandem, these processes usually eliminate the costly independent units that tend to form bureaucracies in a system.
Bureaucracies increase costs of operation and subdivide a system into units that might reduce turnover volume of goods. By integrating workforce management and warehouse management system, worker safety and overall productivity is increased resulting in financial gain for the company or warehouse unit. Integrated workforce management ensures that quality of the product is maximized since an integrated workforce and warehouse management system optimizes people and practices. Through the optimization process, focus is directed to the development of quality products and/or goods. It also ensures that there is a clear tracking path for the goods produced and the people who have worked on them throughout the supply chain. This, then, is meant to ease the processes of follow up in cases where products recall arises.
There should also be strategies in place to prevent labor drain. Through the integration of both the Workforce and Warehouse Management Systems, the employees can get quick and direct response on their performance against their stated goals. This is a process that will also ensure honesty and fairness in labor management (Shippen, 1999). Through incentives for good performance, workers will be highly motivated to inject more solid performance and create quality goods and services. Further, the poor performing workers will be easily identified and coaching strategies developed in order to make them appreciate top performance.
The warehouse will utilize the bundled business model in its role of integrating the warehouse and workforce management systems. In this model, the warehouse will study the labor market and the movement of goods in Melbourne and beyond in order to come up with an interaction strategy to link up labor and movement of goods. Such a combination will offer additional benefits to the optimization of warehouse labor (Grant, Trautrims & Wong, 2013).
Another consideration in workforce management is leverage strategy. This model leverages the intelligence in Warehouse and Workforce Management Systems in order to schedule appointments efficiently. In this case, the Warehouse Management System will ensure that the number of inbound stock is known prior to the delivery date. On the other hand, the Workforce Management System will take into account the information relayed and help in the planning of labor based on Advanced Shipping Notification (ASN). This will enable the warehouse coordinator to organize receiving workers in advance. The strategy will also help in knowing the amount of time it will take to offload the stock. With this knowledge, the coordinator may decide to reduce the offloading time by increasing the receiving staff prior to the stock arrival. In summary, therefore, it is a strategy that aids in planning and adjusting for the future with minimal risks (Manzini, 2012).
The Australian government considers the importance of regulation in its quest for the establishment of honest and quality trade. As a result, the major regulation regarding the development of this warehouse will focus on the employment, export and tax laws. Major issues regarding the workforce in Australia will also need to be analyzed. The labor climate in Australia is quite friendly since the country has a large pool of human capital ready to work in such areas. It has also got a larger pool of professionals who fit well in the management levels of an organization. Therefore, the Australian labor climate may be considered healthy for investment of such a warehouse in the country. Government regulations that will affect the warehouse, however, needs to be addressed with much caution since it is important that every aspect of the regulatory framework is considered, together with the implications that may arise in the event that they are not implemented.
The first thing in employment law is recognizing the need for including employment contracts to all employees, be they casual and temporary or formal and permanent. The contracts ought to address the nature of employment, the role and seniority of the employee, termination procedures, and the requirements for the employees during their course of employment. This is a must for all employees in the warehouse since it governs the mechanism for the relationship between the employer and the workers. Within the law, there are certain benefits and rights that the employees are entitled to. Such benefits include personal care and compassionate leave, community service leave, parental leave of up to a year, rights for the unions to access employees’ information and contractual agreements, among many others. Failure to comply with such obligations may result to the cancellation of the warehouse license.
On tax laws, the management will be obliged to comply with the Australian tax requirements for non-resident companies on certain factors such as the deposition of shares in an Australian subsidiary firm. Other obligations are disclosure of transactions by a non-resident company to the Australian Tax Office (ATO). The warehouse management will be required to submit additional documentation detailing the percentage of total transactions carried out as well as their nature and quantum (Nelson, 2000). The warehouse will also be supposed to oblige to the payroll tax that is a state-based tax levied on employers, whether or not they are foreign. In the export sector, the laws to be applicable regard the customs duty requirements. These are supposed to be paid prior to the goods leaving Australia. The Act regulation customs duty in Australia does provide an assessment of the amount required based on their destination port. As a general guide, the rate payable on almost all goods is five percent (5%).
Export and Import Procedures
Effective export and import procedures are required to allow faster clearance of goods at the port. The use of technology in the processes will be a step further in enhancing the operation ability of the entire supply chain. Some of the major requirements will involve legal matters, the structure and coordination of the business system. The management will have to open a bank account with an international bank, preferably in Australia in order to accommodate special transactions and foreign payments (Sehgal, 2009). Such banks are also very important when it comes to offering credit letters. The legal matters will involve the use of professional legal services from attorneys and law consultants on the best export-import processes to adopt to avoid persistent conflict with the authorities.
The procedures to be implemented will involve the subdivision of operations in line with vital competencies. This is to ensure maximum responsiveness to the environmental realities. Another consideration will be in the centralization of export-import functions. By centralizing, coordination of every activity will be achieved among the separate units of the export and import entity. Centralization will also bring about information sharing among the units, be they local or foreign. Organization of the export-import unit should be based on geographical line. This type of organization is based on classification of markets according to the regions where they are located. The regions, thus, are self-regulating units and carry out their own marketing and research. This method of developing the export and import market will allow the warehouse to respond to change in market demands.
Supply Chain Risks and their Mitigations
In implementing the supply chain design, there are several challenges and risks that are bound to be witnessed. These risks and challenges are mainly concerned with the supply chain management (Frazelle, 2002). They include:
- Supplier failure compensation: Current supply chain networks have often proven complex because of the numerous processes and steps that they incorporate. Normally, these processes are vague and murky, resulting to failures in the supply chain. It is therefore crucial to ensure that such failures are addressed with diligence. The failures can be addressed through accurate control of the entire supply process and monitoring the performance of the suppliers for any given time, say monthly or semi annually. Also, flagging of critical events that occur daily is helpful in averting such failures (Frazelle, 2002).
- Disruptions in the supply chain: Disruptions can result from numerous sources, including poorly performing merchants as well as natural disasters. To stem this risk, it is important that real-time information is accessed fast so that the response time is also reduced in the entire supply network milieu. The access of real-time information can only be made possible through the incorporation of technology across the supply chain. Also, the use of monitoring tools can be very effective in mitigating this risk. This involves the leverage on administrative platforms for key performance indicators to ensure that there are powerful metrics and evaluation criteria for reporting (Manzini, 2012).
- Lack of sustainable supply chains: There are some instances when the processes planned to take place are not the ones being executed. In this instance, what is executed is often very different from what is planned. This results in unsustainable supply chains that kill efficiency. To mitigate this, however, the supply chain management should provide metrics and insight into every process that has been planned and that which has been executed. In this way, incomplete or costly procedures can be identified and rectified or withdrawn, altogether (Grant, Trautrims & Wong, 2013).
Outsourcing criteria will be based on cost-cutting measures as well as maintaining or maximizing efficiency in the supply chain network. Before settling on any deal to outsource, it is prudent to consider other alternatives present and their contribution or lack of it to the supply chain. If the outsourcing needs sound more convincing and profitable from analysis, then their use is recommended. Accordingly, an analysis of the Strategic Warehouse recommends the outsourcing of such functions as logistics and accounting. Smooth running logistics offer excellent customer experience and satisfaction while lowering overhead costs (Nelson, 2000). Logistics accounts for more than half of the warehouse expenses since shipping, inland transport, and final delivery to consumers is part of the expansive process. By carrying out an outsourcing measure, the company will eliminate the unnecessary costs associated with this and concentrate on developing other areas of interest.
Accounting is also another area that should be considered for outsourcing needs. Employing additional accountants and clerks seems to duplicate processes in this function. Therefore, it is only practical that such a function is outsourced.
In performance measurement, it is critical to use those metrics that provide a wide scope of measurement (Manzini, 2012). By this, we refer to those metrics that are not only functional based but those that address the whole supply chain. Performance measurement is important in the control of a company’s behavior as well as providing a trimming tool of unnecessary tasks. There are two metrics that will be of help in evaluating the performance of the supply chain. These include:
The Balanced Scorecard: This metric measures the drive performance using its recommended executive information system. This system tracks limited metrics that are balanced and closely linked to strategic objectives. It utilizes four main measurements namely financial measurement, customer satisfaction measurement and other internal business measurements, and an innovative perspective focused on the cycle time of product development (Manzini, 2012).
Logistics Scoreboard: This performance criterion utilizes logistics aspects of a supply network (Manzini, 2012). It recommends using integrated performance measures in the following categories:
- Financial performance in the logistics sector. These include expenses incurred during logistical practices as well as the returns realized from assets.
- Productivity on the logistics: these include such measures as the orders shipment per every hour as well as container utilization.
- Quality logistical measures: These are inventory records accuracy and damage in case of shipment.
- Cycle time: These measures include entry time of the orders as well as the time the orders are in transit.
Companies utilizing this model usually use a scoreboard to measure processes and entire supply chain performance. Therefore, the model is regarded as a prescriptive measurement model compared to the former model of Balanced Scorecard.
Frazelle, E. (2002). Supply chain strategy: The logistics of supply chain management. New York: McGraw-Hill.
Grant, D. B., Trautrims, A., & Wong, C. Y. (2013). Sustainable logistics and supply chain management. London: Kogan Page.
Manzini, R. (2012). Warehousing in the global supply chain: Advanced models, tools and applications for storage systems. London: Springer.
Nelson, C. (2000). Import Export: How to Get Started in International Trade. New
Sehgal, V. (2009). Enterprise supply chain management: Integrating best-in-class processes. Hoboken, N.J: Wiley.
Shippen, B. (1999). Labor market effects of import competition: Theory and evidence