271590 INDIVIDUAL ASSIGNMENT 2

FIRST SEMESTER SESSION 2022/2023
(A221)

BPMG3133 WAREHOUSE MANAGEMENT
INDIVIDUAL ASSIGNMENT 2
MUNCHY’S
GROUP A
PREPARED FOR:

DR. FARIZA BINTI AHMAD MAHYADIN@MAHIDIN
PREPARED BY:

RABIATUL SANIAH BINTI AZMI
271590

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TABLE OF CONTENT Pages
3
NO Title 3-4
1. Background of the
4-12
warehouse
2. SWOT ANALYSIS -
3. 6 KEY QUALITY

INDICATORS:
i. Shipment accuracy
ii. Inventory accuracy

iii. Order fill rate
iv. Picking accuracy
v. Put away accuray
vi. Productivity ratio
4. REFERENCES

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BACKGROUND OF THE WAREHOUSE

Munchy’s company have becoming one of the successful Malaysia’s business with over
60 countries area of exporting, delivering the best of home-grown biscuits and wafers. The brand
name ‘Munchy’s’ was derived from Chinese word ‘Mai Qi’ which means flour and magical
quality respectively. The brand name only launched in 1993 replacing Original Equipment
Manufacturer. Munchy’s started in 1991 and owned by five brothers from the Tan family whom
lived in Johor. Initially, the business was started with only two of the brothers. They were
influenced by the skills that their father had, who owned a biscuit factory at that time. And so,
they finished their free times helping out their father with making and packaging the biscuits.
Living with an entrepreneurial environment, the brothers seeks financial support from their
fathers to open up their own biscuits company. Hence, their journey started off with an amount
of RM80, 000, which is used up to bought a second- hand wafer- stick machine. Since then, the
business started to grow significantly well that Munchy’s had been receiving several recognitions
including Super Brands Status and Most Promising Brand of the Year.

SWOT ANALYSIS

Strength:

Munchy's delicious wafers are made from the finest ingredients. By using the best
ingredients, Munchy’s is able to develop high quality products. Munchy’s lays the
foundation on continuous innovation and development on their products. Therefore, their
products are one of the best products that emphasize on health conscious nutritious
ingredients. Munchy's products are different than other competing snack products, it
offers healthy nutrients by using healthy ingredients. Munchy’s also implements creative
ideas on packaging, brand image and all its aspects.

Weaknesses:

Munchy's offer is only for snacks and wafer products. In future consideration,
product variations needs to be emphasized in order to be able to compete with other
competitors in Malaysia. Oat Krunch among the products that give advantage to
Munchy's as a healthy product but other competitors started offering similar features
products too, for example Julie's cookies have a nutritious snack Oat 25. Oat Krunch
included 16 mini packs, while Oat Julie's 25 comes with 12 mini packs per package and

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is much cheaper from Oat Krunch. Munchy's needs to strengthen the price by giving
promotions for their products.

Opportunities:

Munchy's products featuring healthy ingredients that have attracted not only
Malaysian consumers but also consumers whole world. The increase in demand for their
products has opened opportunities to export more Munchy's products worldwide.
Munchy's is not only available in grocery stores or supermarkets, it is also available on
online markets such as Amazon.

Threats:

Expanding the market business globally seems as favourable task but to maintain
its competitiveness through endless enhancing the operations, marketing, sales and
distribution, research and development might take a lot of effort. A part of that, most of
these heavy investments derive from world-class machinery and automation,
computerization, and engagement for its management. To execute them, Munchy’s need
to increase the sales by a certain target to afford the market expansion.

6 KEY QUALITY INDICATORS

1. Shipment Accuracy:
a. Definition: Delivery accuracy is the consistency between a customer's order and
what Munchy's delivers. This means that the exact quantity with the order and
the SKU should match the customer's invoice and that it is delivered to the
correct address at the specified time. Accurate fulfillment ensures that
customers get their products correctly and exactly as ordered. For example, in
terms of the right make, model and color, at the right time and to the right place.
b. Formula:
Shipment accuracy = Number of perfect order shipped X 100%
Total number of order shipped
c. Question:
Shipment accuracy is the consistency between a customer's order and what
Munchy's warehouse delivers. A percentage of order lines must be shipped
without error by the warehouse. To avoid delivery errors, how can Munchy's

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ensure that their orders are perfect with the correct quantity and items are

delivered to the correct location to avoid shortages?

Example:

ITEMS Number of perfect order Total number of order

shipped shipped

LEXUS 700 680

CRACKERS 300 300

OAT 500 450

CRUNCH

So, the calculation:

Shipment accuracy of Lexus = 700 X 100%
680

= 1.02% @ 102%

Shipment accuracy of Crackers = 300 X 100%
300

= 1%

Shipment accuracy of Oat Crunch = 500 X 100%
450

= 1.11% @ 111%
 So, shipment accuracy for lexus is 102%, for crackers is 1% and the oat crunch is

111%

2. Inventory Accuracy:
a. Definition: Inventory accuracy measures the difference between stock records
and the actual physical inventory in Munchy's warehouse. In most cases,
inventory accuracy is about comparing what is recorded in the warehouse's own
inventory management system versus what is available at the warehouse
location.
b. Formula:

Inventory Accuracy = Total physical quantity verified X 100%
Total system quality

ILA = Total number of storage locations without discrepancies X 100%
Total number of storage locations verified

IDA = Total number of line items without discrepancies X 100%
Total of line items stored

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ILA = Total value of discrepancies X 100%

Total value of products stored

c. Question:

Example 1 : Let's say Munchy's sells their product with a physical quantity of

3000 units in its warehouse. According to warehouse records, there should be

3050 units in stock. So how accurate should inventory be?

Answer:

Inventory accuracy = 3000 x 100
3050

= 98%
* This means that Munchy's products have an inventory accuracy rate of 98%.

Example 2: Munchy's found that warehouse flow went wrong where 20% of

80 storage locations were inconsistent. The total storage in the warehouse is

100 but only 70 are verified, so the warehouse needs to find the correct

inventory location.

So,

= 20 x 80
100

= 16
ILA = 16 x 100

70
= 22.85%
 So, the inventory location accuracy for the munchy’s is 22.85%

Example 3: total lines items = 200
Discrepancies = 30%
So, 30 x 200 = 60
100
200 – 60 = 40 (lines items without discrepancies)
IDA = 40 x 100
200
= 20%

 So, IDA in warehouse Munchy’s is 20%

Example 4: A warehouse inventory count might show that Munchy’s has 100

units of the cookie variety, but the report shows that the company ordered 95.

Employees should re-count the physical stock, if necessary, and do some

investigation to find out what might be causing that.

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Answer:

ILA= 95 x 100
100

= 95%
 So, ILA for the ware house is 95%

3. Order Fill Rate:
a. Definition: Order fill rate is the percentage of wholesale orders that Munchy's
successfully fills. For example, if their customer orders 100 items and 30 of
them are out of stock, their fill rate is 70%. These metrics give them insight into
how well warehouse inventory is managed and how effective the company is at
fulfilling orders. A higher order fill rate is better because it means the company
has enough inventory and has an effective enough fulfillment process to meet
their customers' needs.
b. Formula:

Order fill rate = Total of orders fulfilled by existing inventory X 100%
Total number of order shipped

Line fill rate = Total of orders fulfilled by existing inventory X 100%
Total number of line items shipped

c. Question:

Example 1: The customer orders 40 units of Product A, 20 units of Product B,

25 units of Product C, and 15 units of Product D. However, the warehouse is

only able to fill the demand for Products A, B and C but cannot fill the demand

for Product D. So what is the order fill rate which can be solved by the

warehouse?

Answer:

Order fill rate = 40 + 20 + 25 x 100
100

= 85%
 The order fill rate of the warehouse is 85%

Example 2: If the warehouse operation ships 1000 orders totalling 10,000 lines
and you have 7,500 lines filled perfectly, what is the warehouse's line fill rate?
Answer:

Line fill rate = 7500 x 100
10000

= 75%

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 The line fill rate for this warehouse is 75%

4. Picking Accuracy:
a. Definition: Accuracy is one of the most critical warehouse indicators. It can help
workers identify the number of orders being picked and packed without error.
If the accuracy rate starts to drop, this is a sign that the bandwidth is insufficient
or the warehouse team needs more training.

b. Formula:

Picking rate per labor hour = Total number of line items picked for shipment
Total number of labor hours

Picking rate per labor hour = Total quantity picked for shipment
Total number of labor hours

c. Question:
Example 1: Munchy's warehouse provides 10 line items, each line has 30 units
of biscuits. Employees are only able to make picks for shipment at 5 lines only,
and the rest are not. The total labor time to complete the pick for the shipment
is 15 hours. So how much is the rate per hour of warehoused labor for process
picking accuracy?
Answer:
Picking rate per labor hour = 30 + 30 + 30 + 30 + 30
15
= 10

 Its mean the picking rate per labour hour work in warehouse is 10

Example 2: Every day warehouse activity is to make the most picks to achieve
a satisfactory warehouse filling. At Munchy's warehouse every day the total
number of picks is as much as 500 can be ship for a period of 12 working hours.
If the warehouse operates 24/7 hours, what is the picking rate per labor hour?
Answer:

24/7 = 500 x 7
= 3500 (total quantity picked for shipment)
= 12 hours x 7 weeks
= 84 hours

So, picking rate per labor hour = 3500
84

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= 41 @ 41.67
 So, the picking rate for the quantity shipment in picking accuracy of warehouse is

41

5. Put-away Accuracy:
a. Definition: The percentage of goods that the warehouse accurately and initially
stores is known as put-away accuracy. The warehouse selection process and the
precise products that are loaded can be affected by these factors, thus it is crucial
to pay attention to them. Having trouble finding things in the warehouse when
filling orders might also slow down warehouse teams later in the process.
b. Formula:

Put-away Accuracy = Total Inventory Put-away Correctly
Total Inventory Put-away

Question: Warehouse managers suggest that inventory control (53%), picking
(47%), putaway & replenishment (45%) are the most inefficient warehouse
processes
So, :

Put away accuracy = 45
145

= 0.31%
 The total correctly put away is 0.31%

6. Productivity Ratio:
a. Definition: A quantifiable figure that gauges warehouse output over a specific
time period is called a productivity ratio. Production is the ratio of the
organization's output to its input in terms of items or things. This ratio examines
factors of the firm like labour, materials, sales, and client loyalty and accounts
for both inputs and outputs. Productivity ratios are commonly used by
businesses and managers to gauge effectiveness and assess their business
strategies.
b. Formula:

Units handled per labor hour = Total number of units handled (in and out)
Total number of labor hours

Line items processed = Total number of line items processed (in and out)

per labor hour Total number of labor hours

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Inbound turnaround = Total of orders that meet agreed turnaround time X 100%

Performance Total number of orders received

Warehouse order = Total of orders that meet agreed order cycle time X 100%

Cycle performance Total number of orders shipped

Shortage cost per unit:
Total storage cost
Average unit store over the accounting period

Handling cost per unit:
Total handling cost
Total throughput units over the accounting period

Order processing cost:
Total processing cost
Total line items processed over the accounting period

c. Question:

Example 1: Let say in a day warehouse workers are able to handle 400 units

during their 6 hour shifts. What is the most successful productivity ratio for

employees?

Answer:

Units handled per labour hour = 400
6

= 66.67

*successful productivity ratio with, 66.67
Example 2: Let's say the munchy's warehouse has 8 lines of cookies and each

line has 25 types of cookies. A total of 200 cookies and a working shift of 10

hours a day. The total capacity of the warehouse per day is 2000 hours (200

cookies X 10 hours). If the warehouse produces only one type of flavour 25

minutes and uses all 200 cookies of the daily production capacity at 50%. So

how much does a line item process per labour hour?

Answer:

= (2000 x 60/25) x 50% pieces

= (2000 x 60 x 50) / (25 x 100) pieces

So,

Line item processed = 6000000 =2400

Per labour hour 2500

 The line item processed per labour hour for the warehouse is 2400

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Example 3: if the company's total order total is 3000, suppose the customer places

4000 orders. This means the rate is the percentage of completed orders out of total

orders of 4000. So substitute this value in the formula and divide:

Answer:

Inbound turnaround = 3000 x 100

Performance 4000

= 75%

 The inbound turnaround performance warehouse with 75%

Example 4: Order cycle time is the total time it takes all orders to process or

complete. For example, if Munchy's ships 1000 orders in 9 hours. what is their

order cycle time.

So, :

Warehouse order = 9 hours x 60 minutes x 60 seconds x 100

Cycle performance 1000

= 32.4 % @ 3240

 For warehouse order cycle performance is at 32.4%

Example 5: Munchy’s ecommerce business which produced 100 units of an 80 packs
of premium biscuit in February 2022.
In terms of salaries, rent, and other overhead, their monthly fixed cost of production is
$5,000.In February 2022, the variable cost incurred was $3,000, which includes raw
materials, electricity, and labor.

Shortage cost per unit = 5000 + 3000 = 80
100

 the cost to produce one unit of their very large biscuit in February 2022 was $80.

Example 6: the controller of Munchy’s Company estimates the amount of materials
handling overhead cost should be allocated to the company's two products using the
data that are given below:
 handling cost for the year is expected to $18,305
Total expected unit produce
1. oat crunch = 7600
2. crackers = 2500
total expected material moves:
1. oat crunch = 760
2. crackers = 960
direct labour hour per unit:
1. oat crunch = 6
2. crackers = 6

handling cost per unit = 7600 + 2500 = 10100

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= 18305
10100

= 1.8123

 The total handling cost for the year is expected to 1.8123

Example 7: Let’s look at an example of how the cost per order is calculated for a

single month where warehouse received 300 orders that each brought in $25 worth of

revenue:

Marketing/ads (CAC) – $4,000
Packaging – $180

Shipping costs – $900
Fulfillment costs – $100

Storage costs – $100
COGS – $1,000

Total costs = $6,280

Order processing cost per line item = 6280
300

= 20.93 (cost per line item)
So,

$25– $20.93 = A total profit of $4.07 per line item

 The cost per line item is 20.93 on profit 4.07

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REFERENCES

1. Optimoroute, 2022. Shipping and delivery accuracy. Retrieved November 26, from:
https://optimoroute.com/shipping-accuracy/

2. Cogsy, 2022. 5 best practices to improve accuracy. Retrieved November 26, from:
https://cogsy.com/inventory-management/inventory-accuracy/

3. Alibaba, 2021. What is order fill rate, why it is important for wholesaler? Retrieved
November 26, from: https://seller.alibaba.com/businessblogs/pxno4212-what-is-order-
fill-rate-and-why-is-it-important-for-
wholesalers#:~:text=The%20order%20fill%20rate%20is,you%20are%20at%20fulfilli
ng%20orders.

4. Eshopbox, 2020. Order picking accuracy. Retrieved November 27, from:.
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November 27, from: https://www.shipbob.com/blog/warehouse-kpis/
6. Studocu, 2022. Shipment accuracy. Retrieved November 27, from:

https://www.studocu.com/my/document/universiti-utara-malaysia/warehousing-
management/shipment-accuracy-and-order-line-rate/30249005
7. Calculator academy, 2022. Pick rate calculator. Retrieved November 28, from:
https://calculator.academy/pick-rate-calculator/
8. Shopify, 2022. Physical inventory count. Retrieved November 28, from:
https://www.shopify.com/retail/physical-inventory
9. Indeed, 2021. What is customer order cycle time? Retrieved November 29, from:
https://www.indeed.com/career-advice/career-development/what-is-customer-order-
cycle-time
10. William Adkins, 2019. How to calculate the overhead rate base on direct labour cost.
Retrieved November 29, from: https://smallbusiness.chron.com/calculate-overhead-
rate-based-direct-labor-cost-10313.html
11. Redstage, 2022. Order cycle. Retrieved November 29, from:
https://redstagfulfillment.com/order-cycle-time/
12. Bsc designer, 2022. KPIs and scorecard calculation. Retrieved November 29, from:
https://bscdesigner.com/calculate-metrics.htm
13. Excel forum, 2022. Hoe to formulate pick rate in warehouse. Retrieved November 30,
from: https://www.excelforum.com/excel-formulas-and-functions/1096730-how-to-

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formulate-pick-rate-in-warehouse-where-picks-have-different-variances-lines-
cases.html
14. Shipbob, 2022. How to calculate cost per order? Retrieved November 30, from:
https://www.shipbob.com/blog/calculating-cost-per-order/
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year-is-expected-to-18-305-10-if-the-materials-handling-cost-should-be-allocated-to-
the-wall-mirrors.html

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