ASSG 2 WAREHOUSE

SESSION A221
BPMG 3133 WAREHOUSING MANAGEMENT

(GROUP A)

INDIVIDUAL ASSIGNMENT
( HOCK CHEONG LOGISTIC COMPANY:
WAREHOUSE PERFORMANCE MEASURE)

SUBMITTED TO :
DR. FARIZA BINTI AHMAD MAHYADIN @ MAHIDIN

PREPARED BY: CHE NUR QHAIRAWANI NADHIRAH
BINTI CHE AMRAN (277294)

TABLE OF CONTENT

Contents

1.0 BACKGROUND OF THE COMPANY........................................................................................... 3
2.0 KEY QUALITY INDICATORS ...................................................................................................... 4

2.1 SHIPMENT ACCURACY ........................................................................................................... 4
2.2 INVENTORY ACCURACY ........................................................................................................ 4

2.2.1 INVENTORY LOCATION ACCURACY (ILA) ................................................................. 5
2.2.2 INVENTORY DISCREPANCY ACCURACY (IDA).......................................................... 5
2.2.3 INVENTORY LIABILITY ACCURACY (ILA) .................................................................. 6
2.3 ORDER FILL RATE .................................................................................................................... 7
2.4 PICKING ACCURACY ............................................................................................................... 8
2.5 PUTAWAY ACCURACY ........................................................................................................... 9
2.6 PRODUCTIVITY RATIO............................................................................................................ 9
2.6.1 UNITS HANDLED PER LABOR HOURS ........................................................................10
2.6.2 ORDER PROCESSING RATE ...........................................................................................10
2.6.3 INBOUND TURNAROUND PERFORMANCE................................................................11
2.6.4 WAREHOUSE ORDER CYCLE PERFORMANCE .........................................................11
2.6.5 STORAGE COST PER UNIT .............................................................................................12
2.6.6 HANDLING COST PER UNIT ..........................................................................................12
2.6.7 ORDER PROCESSING COST PER LINE ITEM ..............................................................12
3.0 REFERENCES ...............................................................................................................................14

1.0 BACKGROUND OF THE COMPANY

Figure 1: Logo of the Hock Cheong Logistics Company

Hock Cheong Logistics company is a Malaysian logistics company with a long history of
providing top-notch services and extensive industry knowledge. Leading third-party logistics
service company Hock Cheong connects China, Malaysia, Brunei, Singapore, and the former
three. With more than 90 years of experience, we can deliver items for our customers in a
secure, efficient, and timely manner. We are dedicated to getting to know our clients so that
we can provide tailored logistics solutions that satisfy every requirement. Hock Cheong, a
provider of logistical and transport services, is aware of the vital role our offerings play in the
economy of the nations we serve. As a result, we consistently work to provide our clients with
the most dependable services we can. Hock Cheong Transport takes pride in being a logistics
firm that offers a comprehensive spectrum of door-to-door logistic services by sea, air, and
land throughout Malaysia, Singapore, Brunei, and China. Hock Cheong Transport combines
warehousing and transport services with our distribution network in concert with our expanding
fleet of more than 150 vehicles and several warehousing facilities. Using technology and a
committed workforce, we are able to deliver end-to-end premium logistics solutions. For every
client, whether they are a retailer or a third-party service provider, our staff strives to provide
top-notch logistic services.

2.0 KEY QUALITY INDICATORS

2.1 SHIPMENT ACCURACY

Shipment accuracy mean the percent of order lines must be shipped without errors. To prevent
from shipment errors happen, the perfect order is correct quantities and items shipped to the
correct location can be prevent shortages (Tibah, 2021). However, the formula to calculate the
shipment accuracy as follows:

Number of perfect orders shipped
×100

Total number of orders shipped

Example of questions:

No. of Number of perfect orders Total numbers of Calculations
orders shipped 680/700 × 100% = 97%
items shipped 680

1 700

2 100 100 100/100 × 100% = 100%

3 50 45 45/50 × 100% = 90%

From the above question and related answer, we can see that only item no 2 that the company
shipped the orders without errors. The more highest the percent the more better service shipped
by the company.

2.2 INVENTORY ACCURACY

Inventory accuracy is the percent of warehouse locations without inventory discrepancies. The
formula to calculate the inventory accuracy as follows :

Total physical quantity verified

Total system quality ×100

Example of questions: Let say you’ve counted 5000 units in your storeroom. Your electronic
records show that you should have 5100. So using the formula the calculation will be as
follows:

= 5000 / 5100 × 100%

=98% inventory accuracy rate

Based on the answer we can conclude that the inventory accuracy benchmark is 97% or higher
so that 98% is above of the benchmark. The higher a company's inventory accuracy percentage
is, the more organized and efficient they are.

2.2.1 INVENTORY LOCATION ACCURACY (ILA)

Inventory Location Accuracy (ILA) it refers to the percentage of locations without
discrepancies. Location discrepancies can occur because of the cargoes are physically moved
from their system locations without updating, or human errors made. The formula to calculate
as follows :

Total number of storage locations without discrepancies

Total number of storage locations verified ×100

Example of questions: Let say, there are 20 total of storage location in the system and 15 of
the storage locations are without the discrepancies. So the calculation will be:
= 15/20 ×100%
= 75%
From the answer we know that 75% of the storage locations are physically moved without
errors.

2.2.2 INVENTORY DISCREPANCY ACCURACY (IDA)

Inventory Discrepancy Accuracy (IDA) is a true measure of inventory accuracy is based on
the line item discrepancies. The formula to calculate is as follows:

Total no. of line items without discrepancies × 100%
Total of line items stored

Example of questions: Items stored
Item Without discrepancies
A
B Discrepancies
C Without discrepancies
D Without discrepancies

So the calculation will be :
= 3/4 × 100%
= 75%

From the answer, we can conclude that the warehouse only can store the item without
discrepancies 3 out of 4 line. The discrepancies can occur when receving activites which is as
incorrect locations or wrongly labeled.

2.2.3 INVENTORY LIABILITY ACCURACY (ILA)

Inventory Liability Accuracy (ILA) its involved lost ratio. ILA usually used to determine the
financial liability of the 3PL provider. To compute the financial liability, the value of the
product with discrepancies is used as follows:

Total value of discrepancies
× 100%

Total value of products stored

Example of questions: If there are 10 units of a $10 item in warehouse , it should be valued
at $10/each for a total of $100. If the item is incorrectly valued $9 in warehouse so the total
lost will be $10. So the calculation will be:

=10/100 ×100%

=10%
Meaning that’s only 10% values of the product is lost in the warehouse.

2.3 ORDER FILL RATE

Order fill rate is the measure number of orders and lines that can be filled by the current
inventory. The fill rate can give the indication of the likely inventory accuracy and the level of
damages in the warehouse. It can be calculated by using the following formula:

Total number of orders fulfilled by existing inventory

Total number of orders shipped × 100%

Total number of orders fulfilled by existing inventory
× 100%

Total number of line items shipped

Example of the questions:

Type Item System Order Physical Variance
quantity quantity quantity
Order 1 A 0
Order 2 B 10 10 10 0
Oredr 3 C 10 10 10 0
D 10 10 10 (2)
E 30 30 28 0
F 35 25 25 0
50 15 15

So the calculation will be as follows:
= 2/3 × 100%
= 67% order fill rate
From the given answer, the 65% of order fill rate means that you are able to fulfil 67% of the
customer requested. The order fill rate shows how well managed your inventory is and how
effective you are at fulfilling orders
Line fill rate:
= (5/ 6) × 100%

= 83% line fill rate
From the answer given, for line count fill rate is 83% its mean 5 out of 6 line items can be fulfil
for the orders. It is ideal to have a higher line count fill rate because it shows that you have
adequate inventory on hand and an efficient enough fulfilment system to satisfy your
consumers' expectations (Sean, 2020).

2.4 PICKING ACCURACY

Picking accuracy is the percent of order lines picked without errors. Picking rate is computed
as follows;

Picking rate per labor hour =
Total no. of line items picked for shipment

Total no. of labor hours

Example of questions: Let say in your warehouse you have 2 employees each working a 20
hour per week and they are 80 line items picked for shipment and you would calculate:
2×20 = 40 total hours
80/40 = 2 line item per hour
From the given answer, we can say that the workers are able to pick 2 line items per hour for
each worker.

Picking rate per labor hour =
Total quantity picked for shipment

Total no. of labor hours

Example of questions: If there are 5 employees each working a 40 hour per week, and they
are processed 10,000 units, you calculation will be as follows:
5×40 = 200 total hours
10000/200 = 50 units per hour

Based on the answer given, we can say that 50 units of item per hour that a worker can
completed picked for shipment without errors.

2.5 PUTAWAY ACCURACY

Putaway accuracy is the percentage of items putaway correctly. Its also the percentage of

inventory accurately put into the correct locations. Putaway accuracy can highlight problems

with putting away newly received inventory. It can be measured by using the following

formula.

Total inventory putaway correctly

Total inventory putaway

Example of questions: You putaway 1,000 items in warehouse in the month of jun out of
these, 900 items were putaway accurately and 100 items were putaway incorrectly. Based on
this data, your putaway accuracy in the month of jun is

= 900/1000

= 0.9 putaway accuracy (%) for the month of Jun

= 90%

Based on the answer, we can conclude that 90% of the inventory accurately put into the correct
locations.

2.6 PRODUCTIVITY RATIO

Productivity ratio is a metric expressing the number of work units produced per time worked.
Productivity ratios essentially quantify output/input, with input being time worked and output
being work units (Ivy, 2019).

2.6.1 UNITS HANDLED PER LABOR HOURS

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

Total number of labor hours

Example of question: For example, your 5 employees handled a 15000 unit pallet of product
with a total number of labor hours is 40 hours per week of each employees. So the calculation
as follows:
5×40 = 200 total hours
15000 / 200 = 75 units per hour
From the answer we can conclude that each of the workers can handled 75 units pallet of
product in one hour.

2.6.2 ORDER PROCESSING RATE

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

Total number of labor hours

Example of question: For instance, in your warehouse the total number of line item processes
are with the total number l0 line item processes with of one employees and working for 5
hours per day. So using the given formula, the calculation will be as follows:
= 10/5
=2 line item processed per labor hour
So meaning that, a worker can processed 2 line item for one hours.

2.6.3 INBOUND TURNAROUND PERFORMANCE

Order Fill Rate =

Number of orders that meet agreed turnaround time
× 100%

Total number of orders received

Example of questions: For example, if you have received 500 orders and only 400 of them
were delivered on time, so the calculation will be as follows:

= 400/500 × 100%

= 80%
From the 80% of order fill rate, we can say that the warehouse has met 80% of orders that meet
the time. The highest rate will be better for the company it mean that the service provider has
meet customer satisfaction regarding on time service.

2.6.4 WAREHOUSE ORDER CYCLE PERFORMANCE

Order Fill Rate =

Number of orders that meet agreed order cycle time

Total number of orders shipped × 100%

Example of questions: For instance, you received 20 order on January that meet agreed order
cycle time and you are expected that the you will received 30 of inventory in next February.
But then, its not happen as expected. On that time you have a total of 30 stocks in your
warehouse that wants to ship to the customer. So the calculation will be as follows:

= 20/30 ×100%

= 67%

So from the answer we can conclude that only 67% of the order that we can fulfil the customer
request.

2.6.5 STORAGE COST PER UNIT
Total storage cost

Average units stored over the accounting period

Example of questions: For example, the operating cost (rent, utilities, security miscellaneous
services, staff salaries and etc) is 200,000. In addition, the beginning inventory stored in your
warehouse is 40000 and ending inventory at the end of the period is 10,000. So the calculation
will be as follows:
= (40,000+10,000)/2
=25,000 (average unit stored over the accounting period)
=200,000/25,000
= $8
From the answer given we can conclude that the storage cost per unit is $8 for our product.

2.6.6 HANDLING COST PER UNIT
Total handling cost

Total throughput units over the accounting period

Example of questions: Assume that your warehouse has a total fixed cost and variable cost is
200,000. The unit in your warehouse is 25,000 so the calculation will be as follows:
= 200,000/25,000
=$8
Through the calculation we can see that the handling cost is $8 per unit for our warehouse

2.6.7 ORDER PROCESSING COST PER LINE ITEM

Total processing cost
Total line items processed over the accounting period

Example of questions: Let say in your warehouse the total processing cost is 3,000,000 and
the total line items processed over the accounting period is 20 line. So the calculation will be
as follows:

= 3,000,000/20

=150,000

From the answer we can say that the order processing cost per line item is 150,000.

3.0 REFERENCES

Chini, T. (2021). Shipment accuracy. Retrieved from
https://www.studocu.com/my/document/universiti-utara-malaysia/warehousing-
management/shipment-accuracy-and-order-line-rate/30249005

Cho, S. (2020, May 25). What is order fill rate and why should you care?. Retrieved from
https://emergeapp.net/wholesale-business/what-is-order-fill-rate-and-why-
wholesalers-should-care/

Wigmore, I. (2019, July). Labor productivity ratio. Retrieved from
https://www.techtarget.com/whatis/definition/labor-productivity-ratio

Kane, M. (ND). 5 Best Practices To Improve Inventory Accuracy [+ Formula]. Retrieved from
https://cogsy.com/inventory-management/inventory-accuracy/