A221 BPMG3133
WAREHOUSE MANAGEMENT
GROUP A
INDIVIDUAL ASSIGNMENT
PREPARED BY:
AINI SOFIAH BINTI SHAMSUDDIN
MATRIC NO:
271400
PREPARED FOR:
DR. FARIZA BINTI AHMAD MAHYADIN @ MAHIDIN
DATE OF SUBMISSION:
1 DECEMBER 2022
BACKGROUND OF THE WAREHOUSE
Bunnings Warehouse or Bunnings is an Australian household hardware chain.
Since 1994, the chain has been owned by Wesfarmers and has stores in Australia and
New Zealand. It was found in Perth, Western Australia in 1886. Bunnings Warehouse
became a public company in 1952 and subsequently expanded into retail sector,
purchasing several hardware stores. Bunnings runs community events outside or in its
stores including sausage sizzles and do it yourself workshops.
Since the development of the Bunnings Warehouse stores, three general
operational formats exist Bunnings Small-format Store (SFS), Bunnings Warehouse
(WH) and Bunnings Trade Centre (TC). The smaller "Bunnings" stores stock a more
limited range of hardware, whereas the larger "Bunnings Warehouses" contain a more
comprehensive hardware range and garden supplies, including plants.
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SWOT ANALYSIS
STRENGTHS WEAKNESSES
Inventory control can be accurately Unavailability of online purchase
monitored. platform.
Everyday low prices and loyalty People will associate it with
programs. self-service and thus the perceived
One of the biggest household level of service will be less.
hardware retail in Australia.
OPPORTUNITIES THREATS
Can offer online purchasing Competition from similar hardware
platform. retailers in the country.
The increasing number of home An increase in the number of
owners in the country. companies taking on contract
More people want to build outdoor maintenance jobs will reduce
hangouts in their homes. hardware purchases among domestic
consumers.
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6 KEY QUALITY INDICATORS
1. SHIPMENT ACCURACY X 100%
Definition: The percent of order lines shipped without errors.
Formula: Shipment accuracy = Number of perfect orders shipped
Total number of orders shipped
Question:
Company Bunnings Warehouse has received 10 000 total orders and a total of 8352
such orders have been shipped perfectly without any errors involving incorrect
location problems, incorrect total quantities, incorrect line items and cross -shipment.
So, the calculation that will be done to find out the shipment accuracy of the ordered
goods is:
Shipment accuracy = 8352 X 100%
10 000
=83.52%
Based on the calculation above, it shows that the percent of order lines shipped
without errors is 83.52% which is the percentage of error is low.
2. INVENTORY ACCURACY
Definition: The percent of warehouse locations without inventory discrepancies.
Formula: Inventory accuracy = Total physical quantity verified X 100%
Total system quality
Question:
What is your correct inventory records compared to sales if you stored and threw out
800 input and sold 1000 inputs?
Inventory accuracy = 800 X 100%
1000
= 80%
In comparison to sales, your inventory records are 80% accurate.
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a) Inventory Location Accuracy (ILA)
Definition: The percentage of locations without discrepancies.
Formula: ILA = Total number of storage locations without discrepancies X 100%
Total number of storage locations verified
Question:
What is the accuracy if you calculate and verify the physical count is 680 locations
and in it a total of 660 locations are correct?
ILA = 660 X 100%
680
= 97.1%
The inventory would be accurate which is 97.1%.
b) Inventory Discrepancy Accuracy (IDA)
Definition: A true measure of inventory accuracy is based on the line item
discrepancies.
Formula: Inventory accuracy = Total no. of line items without discrepancies X 100%
Total of line items stored
Question:
Assume that for a given accounting quarter, company Bunnings Warehouse has 80
000 in inventory documented in its accounting records. Stock shrinkage is 5000 if the
corporation does a stock inventory and discovers that the stock on hand is 75 000.
What would the accuracy of the inventory discrepancy be?
Inventory accuracy = 70 000 (75000 - 5000) X 100%
80 000
= 87.5%
The accuracy of the inventory discrepancy might be 87.5%.
c) Inventory Liability Accuracy (ILA)
Definition: To determine the financial liability of the 3PL provider.
Formula: Inventory liability = Total value of discrepancies X 100%
Total value of products stored
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Question:
For a certain accounting period, company Bunning Warehouse has RM200 000 in
inventory documented in its accounting books. If company Bunning Warehouse does
a stock inventory and discovers that it has RM80 000 in stock on hand, the stock
discrepancies are RM8000. What would the accuracy of inventory liability?
Inventory liability = 8000 X 100%
200 000
= 4%
The accuracy of the inventory discrepancy is 4%.
3. ORDER FILL RATE
Definition: Measure the number of orders and lines that can be filled by the current
inventory.
Formula: Order Fill Rate = Total # of orders fulfilled by existing inventory X 100%
Total number of orders shipped
Order Fill Rate = Total # of orders fulfilled by existing inventory X 100%
Total number of line items shipped
Question:
a) Order Fill Rate
Type Item System Order Qtty Physical Variance
Qtty Qtty
Order #1 A 10 10 8 (2)
Order #2 B 10 10 8 (2)
Order #3 C 10 10 10 0
D 30 30 28 (2)
E 30 20 20 0
F 50 5 5 0
Order Fill Rate = 1 X 100%
2
= 50%
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In the conclusion from the table above, it shows that only 50% of the fill rate is
achieved. It means that the supplier is unreliable.
b) Order Line Fill Rate
Type Item System Order Qtty Physical Variance
Qtty Qtty
Order #1 A 10 10 8 (2)
Order #2 B 10 10 8 (2)
Order #3 C 10 10 10 0
D 30 30 28 (2)
E 30 20 20 0
F 50 5 5 0
Order Fill Rate = 3 X 100%
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= 50%
Based on calculation, for order line fill rate, it shows that only 50% are achieved.
4. PICKING ACCURACY
Definition: The percent of order lines picked without errors.
i) Formula: Picking rate per labor hour = Total no. of line items picked for shipment
Total no. of labor hours
Question:
Bunning Warehouse has 8 workers and each of them working an 8 hours shift, and
each of them also could do 7 order lines in the same shift, calculating the picking
accuracy based on the situation given.
Picking rate per labor hour = 8 workers x 7 order lines
8 workers x 8 hours shift
= 56
64
= 0.875
Based on the calculation, Bunning Warehouse has a higher rate of picking accuracy.
This is because the picking accuracy for the total line picked for shipment is 0.875.
The lower the rate the higher the rate of picking accuracy.
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ii) Formula: Picking rate per labor hour = Total quantity picked for shipment
Total no. of labor hours
Question:
Bunning Warehouse has 8 workers and each of them working an 8 hours shift and
they have picked a total of 1000 units in that shift. What is the picking accuracy for
the company?
Picking rate per labor hour = 1000 units (picked for shipment)
8 workers x 8 hours shift
= 15.63
Based on the calculation, Bunning Warehouse has a lower rate of picking accuracy.
This is because the picking accuracy for the total line picked for shipment is 15.63.
The higher the rate the lower the rate of picking accuracy.
5. PUTAWAY ACCURACY
Definition: The % of items putaway correctly.
Formula: Putaway Accuracy = Total Inventory Putaway Correctly
Total Inventory Putaway
Question: Supplier Units Product Product Non-compliance
Date ABC 300 Code Location
123 250 units of
Received A wrong location B
1/1/2022 456
B 250 units of
3/2/2022 DEF 550 789 wrong location A
321 C
1/3/2022 GHI 250 654 D
2/4/2022 JKL 700 E
5/5/2022 MNO 950
From the following report, 2250 units inventory were correctly put away and 500
units were overlooked. The KPIs for the put away accuracy in week 1 for company
Bunning Warehouse will be calculate as below:
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Putaway Accuracy = 2250
2750
= 0.82
= 82%
Based on calculation above, it shows that 82% of items putaway correctly.
6. PRODUCTIVITY RATIO
a) Unit handled per labor hours
Definition: Measures the number of completed units realized per hour of work.
Formula: Unit handled per labor hour = Total number of units handled (in and out)
Total number of labor hours
Question:
The company wants to measure labor productivity (a year). If they make 200 000
pairs of black eyeglasses in the year and it takes a combined total of 250 00 hours of
labor to produce them. Then the output is 200000 and the input is 22 500.
Unit handled per labor hour = 200 000
25 000
= 8 per labor hour
Based on the calculation above, it shows that unit handled per labor hour is 8 per hour
labor.
b) Order Processing Rate
Definition: It measure the productivity of order processing staff when received order
from customers.
Formula:
Line items processed per labor hour = Total number of line items processed (in and out)
Total number of labor hours
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Question:
Suppose a manager wants to calculate the productivity of all the employees at their
company. The manager defined that the company had a line item processed of 100
000 units last month, while its input was 5000 hours of labor.
Line items processed per labor hour = 100 000
5000
= 20 units per hour
The productivity for the company is 20, it means the employees produced 20 unit per
hour in the previous month.
c) Inbound turnaround performance
Definition: The elapsed/pass by time from the arrival of the goods at the warehouse to
the time the goods are putaway into storage.
Formula: Order Fill Rate = # of orders that meet agreed turnaround time X 100%
Total number of orders received
Question:
Company ABC received 125 orders from Company DEF. However, company ABC
were only able to ship out only 75 orders.
Order Fill Rate = 75 X 100%
125
= 60%
In this calculation, it shows that the order fill rate is 60%.
d) Warehouse order cycle performance
Definition: The elapsed/pass by time from the order released by the customer to the
warehouse to the time the order is processed, picked, packed, labelled and ready for
shipment.
Formula: Order Fill Rate = # of orders that meet agreed order cycle time X 100%
Total number of orders shipped
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Question:
The company ABC has sent around 5000 orders to customers during that period. Then
determine the number of orders that customers place in total for the period you
measure. Using an example value of 5000 total completed orders, suppose customers
place a total of 8000 orders. This means that the fill rate is the percentage of
completed orders out of 8000 total orders.
Order Fill Rate = 5000
8000 X 100%
= 62.5%
Based on the calculation above, it shows that order fill rate is 62.5%.
e) Storage cost per unit
Definition: The amount of money incurred as a result of storing inventory.
Formula: Total storage cost
Storage cost per unit=
Average units stored over the accounting period
Question:
The average unit = 850 000 pallets, the overall storage cost = RM1250 000, resulting
in a warehouse storage cost of RM 1.47 per unit over the course of a year.
Storage cost per unit = 1250 000
850 000
= RM 1.47 per unit
It shows that the storage cost per unit is RM 1.47 per unit.
f) Handling cost per unit
Definition: The various expenditures connected with inventory preparation and
transportation. Typically, the costs include order fulfillment fees such as shipping and
packaging.
Formula: Handling cost per unit= Total handling cost
Total throughput units over the accounting period
v
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Question:
Assumed that 800000 pallets in a year from the storage cost above and the handling
cost for company ABC is RM 550000 a year.
Handling cost per unit = RM550 000
800 000 units pallet
= RM 0.69 per unit
It shows that the handling is only RM 0.69 per unit.
g) Order processing cost per line item
Definition: Measures the efficiency of the warehousing and order processing in
relation to revenue.
Formula: = Total processing cost
Total line items processed over the accounting period
Question:
ABC is a company that produces sparkling water. For the current month, the filling
department accumulates RM50 000 of direct material costs and RM85 000 of costs
consisting of direct labor and factory overhead. During that month, the company
processes 250 000 bottles. The per unit cost for the filling department in that month
was RM0.20 (RM50 000 divided by 250 000 unit bottles) for direct materials and
RM0.34 (RM85 000 divided by 250 000 unit bottles) for conversion costs.
Order processing cost per line item = RM50 000 + 85 000
250 000 unit bottles
= RM0.54 per line item
It shows that order processing cost per line item is only RM 0.54 per line item.
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REFERENCES
MBA Skool Team (2020, April 26). Bunnings Warehouse SWOT Analysis,
Competitors & USP. Retrieved from
https://www.mbaskool.com/brandguide/lifestyle-and-retail/9229-bunnings-warehouse.
html
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