ABSTRACT

            The term warehouse is quite a common term used in businesses as it is used to refer to any profit-making building that is used as the storeroom of goods mainly used by the producers, importers, wholesalers, exporters and transportation companies. They are majorly geographically located in quite large, plain constructions which are found within the industrial areas of the municipality, township and the community. With the current world that we are living in, so much technological advancement has occurred thus leaving the businessmen to adapt to the new changes as there is no other way that can lead them to success unless adhering to these changes. Warehouse optimization is one of the advancement that is currently emerging in many businesses as it is one of the vital significant improvements in so many companies. It is through this optimization that so many businesses have benefited as they are able to save on time, space of goods occupancy, decrease in picking errors as well as manual handling of goods with reduction in resource requirements as well. In addition to these benefits the rate of improvement in flexibility, ergonomics, organization and communication has been enhanced.  Therefore the core goal of so many entrepreneurs is to fully optimize their warehouses with an aim of maximizing the warehouse performance. Thus to achieve this major goal, all the single resources that affects the warehouse routine must be completely optimized as well as utilized. Through the internship program that I was able to attend in the Savala Group I was able to practically study and as well completely utilize forklifts and warehouse capabilities and optimization process.

ACKNOWLEDGEMENT

            My deepest appreciation goes to every participant who encouraged me all through the co-op training and offered me the opportunity to complete this project as well as the report.

Special gratitude are geared towards Savala project manager who greatly contributed into guiding me through the co-op training and stimulated suggestions and motivated me to coordinate my project even while writing this report.

            I would also not fail to recognize the fundamental role that my fellow staff colleagues in the Savala Group who assisted me in acquiring the relevant data that I needed for my project. I would also like to acknowledge and even appreciate my superiors who constantly assisted and guided me through my bachelor degree in SCM and in the Co-op training.  I would also like to appreciate my family members who really helped me out during the internship period especially my parents who constantly provided all the resources that I needed for me to be effective in the training, be it finances, encouragement and even moral support.

 

 

 

 

 

 

 

 

 

            TABLE OF CONTENT

            CHAPTER 1: INTRODUCTION

Project problem and objective                                              4

Savala Group Profile                                                            5

Savala Strategy                                                                    6

Afia International Warehouse in Jeddah                             7

General overview of the Afia’s warehouse operation         8

            CHAPTER 2: METHODOLOGY

Data collection method                                                                           9-12

Questionnaire                                                                                               9

Interviewing                                                                                              10-11

Observation                                                                                                  12

CHAPTER 3: DATA ANALYSIS AND FINDINGS                           13-15

CHAPTER 4: CONCLUSION AND RECOMMENDATION             15-16

 

 

 

CHAPTER 1

INTRODUCTION

BACKGROUND OF THE STUDY

• Project problems

            Afia international company warehouses located in Jeddah was my main interest study area in the   project. Therefore in my study project I was able to identify some of the major problems that the company faced in the warehouses (Frazelle 2002). Within my first months in the company especially in the warehouse department where I mostly spent my time I was able to identify some of the core challenges that these warehouses faced.

• Inadequate forklifts
• Inadequate forklifts mechanics
• Broken/damaged rack
• Broken/damaged dock leveler
• Miscommunication between Haraj and the main warehouse
• Inadequate utilization of the shelves
• Inadequate utilization of the shifting trucks.
• Objectives

In the process of the co-op training I had so many goals that I had set for this project. Among these goals there was the specific objective which drove me to carry out this project while others were just along my area of study and I had also to research on them also.

 

• Specific objective
• To examine the whole supply chain and how it operates in the Afia international company warehouses
• Other objectives
• To create a new warehouse optimization strategy
• To determine the warehouses utilization capacity
• To determine the 2016 strategy for the optimal number of forklifts
• To determine the 2016 plan for the optimal number of shifting trucks
• To determine the 2016 strategy inventory levels.

Throughout the report, the data collection methods that will be used and data collected will be actually trying to meet these objectives and will elaborate more on the same in the data analysis and results part.

• Company profile

            The Savala group was founded in the year 1979 with an aim of producing and selling of edible oil and vegetable ghee based in Saudi Arabia. Over the years it has increased its sales and hence increasing its fame and as well as diversifying in the products they are dealing with (Beekun 2006). This company is rated as the most flourishing and fastest increasing multinational food groups in MENAT which is an acronym that represents Middle East Area, North Africa and Turkey and also in the Gulf region (Savola Group Annual Report 2009). The organization has a wide selection of businesses as well as entrepreneurial products such as the fit for human consumption oils, vegetable ghee, sugar and pasta with other activities such as the hypermarkets, well-located stores and supermarkets. The company is effectively investing in most important widely listed Saudi organizations, real estate’s commerce and investment finances.

            Afia International Cooperation is one of the center business of the Savala group and is basically based in Jeddah in Saudi Arabia formed in the year 1979. The cooperation usually is involved in producing well-known brands such as the Al Arab and the Afia brand (Savola Group Annual Report 2010). The cooperation continuously enjoys the market share management across its main working markets, where Saudi Arabia has the highest shares in the market (56%) while the Gulf nation is the second in market share ranking with approximately 21%, followed by Levant market palce with 30%, Kingdom sugar market with 75%. There are also around one hundred and eighty one retailing outlets as well as one hundred and forty five hypermarkets and supermarkets in Kingdom market n Saudi Arabia state (Savola Group Annual Report 2009).

• Savala strategy
• Clear vision

            To provide consumers with fair and affordable prices, however putting into consideration that the profits towards the group’s investors and all other stakeholders that they are successfully attained.

To establish proper working experience for all the employees in Savala through inspiring individual responsibility as well as enthusiasm for opportunity.

• Marketing skills

            To do extremely well competitively by constantly looking for better methods to generate superior offers for our clients. This is what the company usually refers to as “offer advantage” (Savola Group Annual Report 2009).

            To continue being responsive and alert in increasing markets share through the company’s market evaluation, in-depth examination and twenty five years of experience.

• Ethics and values

            To uphold a commitment to the Savala business ethics while conveying value to all the company’s stakeholders. This commitment is identified by the balanced way.

To ensure humankind class transparency in the company’s corporate management.

• Synergistic Investments:

            To endeavor to make complete utilization of the core competences and to also enhance the company to offer advantage in basic food firms through working in relevant support industries and sustenance of an active investment group. To grow a deliberate selection of complementary brands as well as manufacturing capabilities is also part of the synergistic investment (Savola Group Annual Report 2010).

• Allah’s assistance

Savala group strongly believes that Allah’s blessings as well as his aid will always be present hence supporting all those people who will uphold good and genuine intentions.

• Afia warehouses

            Afia International Company is the major key areas of discussion in this report specifically the Afia international warehouses. There are three warehouses that are found within Jeddah and they deal with goods that are referred to as finished goods and also the returned goods. These warehouses therefore deal with different types of goods.

1. Main warehouse: this warehouse basically deals with finished goods and is geographically located next to Afia’s industry. This warehouse has a storage space of 11949 pallets and uses the racking organization for storage.
2. Haraj warehouse: is geographically located in the Haraj locality with a total number of 36 supply warehouse, a storeroom on the ground and palletized store space up to three pallets far above the ground with a total store space of 27562 pallets. However this warehouse has no racking system that is installed.
3. Salama warehouse; this warehouse is geographically neighboring the Afia firm and it highly deals with the returned goods and damaged goods as well.

 

• General overview of the Afia’s warehouse operation

            All these firms utilize the pallets in the stocking and shipping process in the warehouse. In 2013, there were 446,146 Pallets recorded supply movement which were subdivided between the shipped and the stocked goods. In the finished goods main warehouse and Haraj warehouse the pallets that are used are majorly handled by electrical forklifts (Savola Group Annual Report 2009). Basically these electrified forklifts are purposely used for loading and off-loading of the racking system while the diesel forklifts are basically used for loading and off-loading of the trucks. The trucks that do operate in the Afia warehouses are usually contracted for fifteen years together with the truck drivers and they are assigned to carry twenty two pallets for one single trip but they are supposed to go for a minimum of three trips per day (Savola Group Annual Report 2009).

            This is however an overview, more elaboration on the supply chain in these warehouses will be done on the following pages as well as description of a better way to automate the warehouses will be explained in problem solving and recommendation part.

 

 

CHAPTER 2

            METHODOLOGY

            In this project I had to utilize both the primary as well as the secondary sources. The primary source was mainly to provide me with first hand information where I had to carry out data collection method such as interviewing and questionnaire method. Secondary sources provided me with information from the internet and some of the books with information on the Afia international company.

• Questionnaire method

 I formulated a list of questions that would allow me to gather information on the performance of the Afia international warehouses. After the formulation of these questionnaires, I supplied the questionnaires to some of the staff members who in giving their answers they provided me with data on the performance of the warehouse. These questions were brief and only needed good or bad, yes or no answers for easier analysis. These questions included;

1. What is the state of the racks in the warehouse? Good/bad
2. Are there adequate forklifts in the warehouse? Yes/no
3. What is the state of forklifts in the warehouse? Good/bad
4. Are racks fully utilized in the warehouse? Yes/no
5. Are shifting trucks completely utilized? Yes/no

 

• Interviewing method

In order to acquire data that would assist me in understanding the whole supply chain in Afia international company. This method enabled me to gather quite relevant information from the respective managers of those departments as I was able to personally carry out the interviewing method where I  interviewed several staff members in the warehouse with the help of different questions that included;

• What is the mean daily production?
• What is the receiving process of production in the warehouse?
• How are the goods produced stored in the warehouse?
• What are the types of machines used in loading of racks?
• What is the warehouse hourly batch size?
• How many SKU’s does the warehouse handle?

.while interviewing Mr.Mullazimon the supply chain process, firstly he explained to me the four stages that are involved in the process of production flow. He stated that the process starts with production receivers who are responsible for checking inbound refined goods, recording and reporting the received amount of the finished goods, sorting out to identify how many goods are damaged later they guide the forklifts machinist on loading the racks. The second step is on quality assurance where goods that are damaged are confirmed to be damaged and the rationale for their damage is established and reported back to the manufacturers. The third step involves forklifts operators where the operators follow instructions on loading the racks as instructed by the production receivers.

The last stage involves the activity of the production receiving supervisor who confirms the new inventory on goods received and reports back to the warehouse management.

            The packaging supervisor when I interviewed him he stated that there were over sixty SKU’s that are daily handled in the Afia international company but when it comes to the employees they handle them as per the litter size hence the existence of four or five different SKU’s. However, the goods are palletized in a similar way. There are two forms of packaging, that is the tin can and plastic packaging and they are differently categorized.

            While gathering information on the batch size, it was somehow difficult as there are usually no fixed numbers of batch sizes. However, on a 60 pallets per hour is the mean for the finished goods main warehouse and the Haraj warehouses (Savola Group Annual Report 2009).

            To find the standard daily production, I interviewed Mr. Ahmed Al Nahal who is the administration supervisor who assisted me with an excel document of the finished goods production flow in 2016 inclusive of all the inbound and outbound goods in and out of the warehouse (Frazelle 2002). Mean daily production is equals to monthly production divide by the number of pallets multiplied by 30. For example;

	Jan	Feb	Mar	Apr	May	June	Jul	Aug	Sep	Oct	Nov	Dec
Montly	38286	39665	42689	41656	40043	38286	40370	37681	32476	30899	29486	34609
Daily	1276	1322	1423	1389	1335	1276	1346	1256	1083	1030	983	1154

Values in table are in pallets

           

            Afia international company warehouses operates under the rule of first to come first to leave. This is applied by the production receiving supervisors and the forklifts operators who are involved in stocking and sales process (Savola Group Annual Report 2009). Racks at the exit are loaded first while those at the entrance are loaded last. This is clearly portrayed in the figure below;

 

            Machines that are used in loading racks are the average electrical forklifts. However according to the interview I carried out only one of this electrical forklifts was working as the others are not available. This has resulted in large pilling of pallets of loads as one electrical forklift carries only one pallet.

 

 

 

 

• Observation method

            I was able to visit the warehouse and observe the layouts of the warehouse and the maximum capacity to which the warehouses could hold so as to be better able to understand the storage of inbound goods. 

I was able to enquire from Mr. Tariq who explained of the losses that occur especially in the finished goods warehouse where the racks are too weak to hold more than two pallets higher hence causing the loss. For instance I observed through counting that out of a total number of 11949 pallets 876 pallets were destroyed.

            While loading the goods to the truck, the Afia warehouse management demands that the truck driver should have a pick slip where he uses it to hand over to the load checkers. In loading to the trucks the diesel forklifts are used and the dock levers. In case of inventory levels I was able to acquire sales and production forecast from Eng. Ahmed who is the planning manager.

 

 

 

 

 

 

 

CHAPTER 3

            DATA ANALYSIS AND FINDINGS

            From the data collected it was evident that the state of the racks was not totally good as all staff agreed on this point. To calculate the number of forklifts that were required in 2016 as per the objective I used the data on the one available forklift. To begin with, I measured the time motion sample where I measured the speed at which the electrical forklift is operating. So as to come up with the time motion sample mean I took the mean for the average rack sizes. Then in calculating the mean speed of the track drivers and the total working hours for an electrical forklift considering that it requires to be recharged I was able to calculate the electrical forklift performance (Savola Group Annual Report 2010).

That leads me to one Electrical Forklift Performance= = 40 x 8 x 1 = 320 Pallet/Day

NF = No. of forklifts

This formula would also be applied in the diesel forklift 2016 calculation. Since I needed the 2016 required number of machines I had to turn over the formula and be able to use the forecast data to get the forecasted number of machines. That is

If No. of pallets handled in a day, then NF =

Since the forecasted production from Mr Ahmed was in metric tons and since I needed them to be in cartons later to pallets.

Using the following formula I was able to acquire number of pallets in a day.

NP =    CF= Conversion factor.   MT= Metric tons.   CP= Carton/Pallet size

Since NF =, then this makes it easier to calculate the loading racks forklifts. I used the same step to calculate the offloading racks forklifts required. I applied this formula to all the months so as to come up with the required forklifts per month.

                                Calculating the shifting trucks that are required in the year 2016 I palletized metric tons and with the knowledge that the shifting trucks are 22 meters long in Afia Company and each truck is supposed to go for three trips then the formula will be NP divided by 66 that is 22 pallets multiplied by three trips.

The inventory levels of 2016 were to be formulated from the earlier production and sales forecast as well as creating an error margin analysis from 2013 sales and production.

Therefore; Inventory level = Starting stock + AVG Daily forecasted production – AVG. Daily forecasted sales.

 

 

 

 

 

CHAPTER 4

            CONCLUSION AND RECOMMENDATION

As clearly portrayed from the project, thorough examination of the warehouse situation, the problems and analysis of these problems and the coming up with formulas that have helped solve the problems has resulted to the following conclusions. Afia warehouses should be supplied with more of the electrical forklifts to the warehouse so as to be able to handle the future production.

I therefore recommend that the company should acquire the stated electric forklifts plus an additional of two more forklifts for recharging, sustenance and future errors. Diesel forklifts should be done with as the world market is also globalizing.

Table 1-1 (Forklifts requirements for 2016)

The shifting trucks strategy has so far been doing well but with the data collected it is evident that there are days when more than 36 and 40 trips are carried out. Hence I recommend that Afia Company should add an extra two trucks so as to make the extra trips when required to.

 

 

Table 1-2 (No. of required Trucks & Trips for 2016)

	Jan	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep	Oct	Nov	Dec	Max	Min	Avg
Shifting Trips	32	28	37	36	37	36	30	36	35	34	35	21	37	21	34
Shifting Trucks	11	10	13	12	13	12	10	12	12	12	12	7	13	7	12

 

           

            In the scenario about the inventory levels it is clearly stated that in cases where the worst scenario case was calculated where the highest production versus low demand that is sales, more warehouses are required by the company for storage. At a standard level, the rate of increase is reasonable up until the end of the year when the stock increases at the end of the year. I would therefore recommend that the Afia warehouses should start shifting a portion of the SKU’s at the last three months of the year so as to maintain a better stock level and hinder any risk of over capacity. The forecasted inventory levels should be followed and right precautions should be undertaken in cases of high inventory. For instance I would also recommend that some part of the SKU’s should be shifted to other external warehouses so as to acquire low inventory levels

 

 

 

REFERENCES

Beekun, R. I. (2006). Strategic planning and implementation for Islamic organizations. Washington [D.C.: International Institute of Islamic Thought.

Frazelle, E. (2002). World-class warehousing and material handling. New York [u.a.: McGraw-Hill.

Frazelle, E. (2002). Supply chain strategy: The logistics of supply chain management. New York: McGraw-Hill.

Savola Group Annual Report.(2009). Reportal Company Reports, 1.

Savola Group Annual Report. (2010). Reportal Company Reports, 1