Warehousing and Material Management

September 3, 2017 Management

LGT 3107 Warehousing and materials management Report Group Members| Student ID| Au Yeung Hoi Wai| 09282558D| Cheng Yin Ling| 09254965D| Kwan Pei Choong| 09704425D| Tang Yan Ting| 09170004D| Outline 1. Company Background – SC STORAGE 2. SWOT Analysis 3. 1. Strengths 3. 2. Weaknesses 3. 3. Opportunities 3. 4. Threats 3. Current Practices 4. 5. Customer order and service management 4. 6. 1. Problems and Recommendations Problem 1 – higher operating costs Recommendation 1 – Centralize the services provided Problem 2 – causes inconvenience to other tenants

Recommendation 2 –different durations of the contract Recommendation 3 –better control on the exchange of the size of the storage unit Problem 3 – messy accounting management Recommendation 4 – establish a better control and monitoring system 4. 6. Packaging 4. 7. 2. Problems and Recommendations Problem 1 – providing sole sized boxes Recommendation 1 – provide boxes with different sizes Problem 2 – lack of effective labeling Recommendation 2: introduce advanced labeling 4. 7. Transportation services and management . 8. 3. Problems and Recommendations Problem 1 – routing Recommendation 1 – adopting shortest-route method Problem 2 – lack of trucks and other modes of transportation Recommendation 2 – using strategic alliance 4. 8. Warehousing management 4. 9. 4. Improvements Improvement for bicycle storage Improvement for red wine storage Improvement for storage for exhibition Improvement for locker 4. Monitoring Methods 5. References 1. Company Background – SC STORAGE Hong Kong is a country that has a very high population density.

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This leads to problem of insufficient spaces especially for storage. Founded in the year of 2001, both SC Logistics and SC Storage are Hong Kong’s leading low cost mini storage operators. Over the years of operation, continue growth in the number of mini storage units and services can be seen. Reaching the 10th years in serving different customers needs, SC Storage now has over 6000 mini storage rooms in 22 convenient locations around Hong Kong. The main services provided are different sizes of storage spaces based on customers’ requirements.

The aim of SC Storage is to offer low prices of storage space and efficiently maximize the usage of limited given storage spaces. Recently, SC Storage widens their range of services by adding “Cold Storage” and “Bicycle Storage” into the list of services, serving more and more sectors of customers and tailored to their needs. Besides, SC storage is gradually expanding so as to provide a clean and low cost storage throughout Hong Kong and hopefully beyond. 2. SWOT Analysis The SWOT analysis aims to evaluate the Strengths, Weaknesses, Opportunities and Threats of organizations in doing their businesses.

It helps to identify the internal (S and W) and external (O and T) factors that will affect the organization performances, including favorable (S and O) and unfavorable (W and T) factors to achieve a particular project/strategy/objective. 3. 1. Strengths Since SC Storage has over 6000 mini storage rooms over 19 places in Hong Kong ,one in Lok Ma Chau and one in Macau, it becomes the biggest and the 2nd biggest self-storage provider in Hong Kong and Asia respectively. Due to that, the company can obtain high market share in the storage services industry.

Also, SC storage won numerous awards and certificates during 2006 to 2009, including “Caring Company Award”, “Self Storage Association of Australasia” and “Innovative Entrepreneur Award”. These awards and certificates will raise the company’s reputation and customers’ trust and confidence. Moreover, SC storage is located in different districts in Hong Kong (Figure 1) with more than 19 areas. It is very convenient for different customers to store and take their own belongings and goods. Furthermore, its high coverage in Hong Kong can catch more attentions from potential customers and attract them to start their own business.

SC Storage should maintain these strengthens and improve continuously to keep its favorable internal advantages. Figure 1: the map of SC storage. represents the location of its storage facilities. (Copy from http://www. scstorage. com/index. php? tn=map&lang=tw) 3. 2. Weaknesses One of the weaknesses of SC Storage is the decentralized information system which will lead to inconsistency of information. For customers, they can contact SC Storage by face-to-face, telephone and email. Since the company does not centralize the received information, customers will be replied in different versions by numerous managers.

Due to this, they will receive inconsistent answers and information. They may feel confused about the diversified replies. Thus, they will lose confidence to SC Storage. Besides, the company offers noncompliance services, it cannot provide serviced according to its promises. The company promises to call customers back within 24 hours as stated in “Call U Back” service. In fact, they fail to do so. As a result, customers will be dissatisfied with the noncompliance services. SC Storage should focus on it much more to change their current practices and try their best to provide promised service so that potential weaknesses can be eliminated.

Hence, the provision of customers’ service can be maintained at a high level. 3. 3. Opportunities Despite the internal factors, there are also some external factors that will potentially affect the business performance of SC Storage. There are several opportunities that SC Storage can extend their business. First, from Figure 2, it is known that the property price is sustainably high and keeps increasing in both Hong Kong and Mainland China, it becomes more difficult for citizens to acquire a larger flat to store all the things.

Because of that, there is inadequate space for the flat owners to store space-demanding items, for example, unused baby cars, toys, and seasonal clothes. It will become a great opportunity for the company to extend their business because the demand for storage spaces is increasing with the increasing property price. Also, people in Mainland pursues better living standard in the house, they will try to make their houses neatly by eliminating used items. As a result, it is an opportunity for SC Storage to provide storing services in Mainland.

Second, since the living quality improves in both Hong Kong and Mainland China, SC Storage can provide specialized storing services for the customers, such as wine and bicycle storage. To store wines, it is quite space-demanding to purchase a wine-storing cupboard and needs to care about the storing temperature, if SC Storage can provide a particular storage house for storing wines with controlled temperature and well-equipped facilities, it will be another business opportunity for the company. Lastly, the company should offer a packaged service to the customers with a discounted price to increase its competitiveness.

If the company can provide a package by combining the existing services like storage, moving, delivering and insurance at a discounted price, it can help the company to spread business so that the company can be more competitive. Figure 2: the increasing property price in Hong Kong (Copy from Centaline Property,) 3. 4. Threats On the other hand, there are several threats from the external environment that SC Storage has to be aware. The most important one is that the company has to face an increasing operating cost.

As the minimum wage law is launched for certain kinds of jobs (security guards and cleaner), the company will be under pressure that they have to pay higher wage for the employees. Also, the increasing land price may cause the company to pay a higher land rent. Under keen competition with other land users, the operating cost will be higher to the company. Another threat is that SC Storage has to face is that there are some close substitutes for the storage services, that is, there are other competitors that offering storing services in other industry.

For instance, the safety box services provided by the local banks as shown in Figure 3. Since banks will have a better security in protecting the stored goods, customers may shift to use the services provided by banks. Some may argue that the safety box in the banks is quite small, however, under keen competition; some banks have made some changes over the size of the boxes. Therefore, this will be another threat for SC Storage and other storage companies. Figure 3: Safety box service provided by local banks (Copy from: The Bank of China) 3. Current Practice 4. 5.

Customer order and Service management According to Jamier L. Scott. (2002), “Customer service is a series of activities designed to enhance the level of customer satisfaction – that is, the feeling that a product or service has met the customer expectation. ” Before considering the customer order and service management of SC Storage, it is better to know that we should consider different elements of customer services. As shown in the table below, the elements of customer service should be divided into three categories, they are the pre-transaction one, transaction one and post-transaction one.

The company has to integrate different elements into the services they provided so that they can have a better service level to attract new customers and retain the existing customers. For example, before customers have made the order of renting storage unit, SC Storage has to consider that their organizational policy and structure have been known to customers. Then, they should introduce the company policy to the customers: customers have to pay one month in advanced and two months deposit to the company in order to rent a storage unit. Also, customers need to make at least one month contract or pay HKD300 for reservation.

During the transaction, the company has also needed to ensure that they provide the storage services properly and reliably. For example, customers can access the storage house at anytime. After customers have rented the storage unit, the company also provides services to satisfy customers’ needs. For instance, 24 Hours CCTV and Monitor to ensure the security of the storage house. 4. 6. 1. Problems and Recommendations Problem 1 – higher operating costs In SC Storage, 24 hours accessible service has been provided so that customers can use the storage house at any time they needed by using their electricity cards and own keys.

However, this will put pressure on the company’s operating costs, including employing extra guards to monitor the storage house, higher electricity and maintenance costs due to non-stopped running of the equipment like air-conditioners and lights. Due to that, the company’s operating costs will get higher. Recommendation 1 – centralize the services provided The company has to monitor the usage rate of the storage houses at non-rush hours or during midnight, if the utilization rate is not so high, then it is possible for the company to concentrate the 24 hours accessible storage units in a particular storage house in each district.

For example, only the Shatin branch is 24 hours accessible in New Territories. It can help to reduce the operation costs of the company and save energy. It is also possible for the company to centralize the specialized services like wine storage in a particular storage house, it can enhance the efficiency in providing such services with well-equipped facilities and save the costs in purchasing one set of the equipment. Problem 2 – causes inconvenience to other tenants SC Storage provides flexible changes among different sizes of the storage unit to the customers, it will probably cause inconvenience to other tenants.

When the storage house is nearly fully utilized, when one customer wants to change the size of the storage unit, other tenants will be affected. Also, it will generate mess to the customers as well as the company when the exchange is not recorded well. Recommendation 2 –different durations of the contract It is suggested that the company can provide different durations of the contract to the customers in renting the storage unit. For instance, despite monthly basis, yearly and weekly basis can be offered to customers so that the company can have a higher flexibility in arranging the usage of the storage units.

It can help to avoid the problem of shortage in a particular size of the storage unit and minimize the impacts to customers. As a result, the problems generated from the freely refund mechanism can be minimized. Recommendation 3 –better control on the exchange of the size of the storage unit Apart from the above, the company should have a better control on the exchange of the size of the storage unit, more rules should be set to regulate this problem. It can help to minimize the inconvenience to other tenants and effects to the company’s reputation.

For instance, customers can only exchange the size of the storage unit with acceptable reasons. And the company can also provide recommendations on the best fitted size of the storage unit to the customers before they rent it. It can reduce the chances of exchanges among the sizes. Problem 3 – messy accounting management As SC Storage offers a freely refundable mechanism to the customers, the company’s accounting management will be impacted. The company allows customers to be refunded whenever they cease to rent the storage unit.

It will cause problems in the company’s accounting, that is, faults may occur in refunding customers if they do not pay according to the company’s policy. For example, customers at least need to pay a month rental with one month contract, but, the company may still refund them with the actual days they rented. It will deteriorate the financial performance of the company. Recommendation 4 – establish a better control and monitoring system The company should establish a better control and monitoring system to review the existing practices and operational performance.

It is vital for each company to have a well-rounded managing system to evaluate the performance of the operations. 4. 6. Packaging Packaging can be illustrated as a synchronized system of preparing goods for transport, warehousing, logistics, sale, and end use. First of all, packaged physical objects can provide protection from shocks, vibrations, compression, etc. Another function of packaging is information transmission. Labels on packages communicate how to use or dispose the products. Also, packaging serves the purpose of marketing, convenience, and even the security of the product.

Apart from storage service, SC Storage provides packaging services as well. The company mainly provides packaging supplies such as boxes, locks, tapes and dehumidifiers. Boxes and tapes (figure 4a and 4b) are furnished to package the stock to customers if it is required. Figure 4b Figure 4a Locks (Figure 4c) are used to enhance the security of inventory and the control of humidity is supported by dehumidifier (Figure 4d). Figure 4d Figure 4c Additionally, SC Storage also cooperates with recycling services providers for the purpose of environmental conservation since the company recently engages in corporate social responsibility.

The SC storage embraces responsibility for the impact of their stakeholders in order to contribute to the welfare of society in long term. As a result, the majority of packaging supplies, for example, discarded boxes and other packaging materials would be recycled by taken and delivered to the nearest recycling services providers. 4. 7. 2. Problems and Recommendations Problem 1 – providing one sized boxes only Currently, only single sized boxes (14’’X14’’X17’’) are given to choose for customers who want to package their stocks. Thus, substitutions of the box sizes are extremely limited.

But some customers may want to package large stocks for transportation while others may want to package small items only. Accordingly, customers’ expectations cannot be satisfied by the packaging service provided by the SC Storage. As a result, the level of customer services would be deteriorated sharply, resulting in a loss of customers. Recommendation 1 – provide boxes with different sizes The SC Storage should supply various sized boxes with the intention to satisfy customers’ anticipations. As a result, customers’ satisfaction would be improved by giving more product substitutions.

But the operation, administration and production costs would increase if product substitutions increase, which lead to an increase in customer service level. So, it is essential to determine an efficient and profitable service level with the aim of maximizing the net revenues of packaging business. Therefore, we recommend only three standard sizes will be provided. 1. Large: 20’’X20’’X27’’ 2. Middle: 14’’X14’’X17’’ 3. Small: 7’’X7’’X10’’ Other sizes will be also provided if customers require specific sizes. But additional charge is required in order cover the extra costs involved.

Consequently, it can encourage repeated consumption and business opportunities by offering a higher customers service level. Problem 2 – lack of effective labeling Some necessary information should be noticed on packaging containers in order to communicate with customers and employees. However, only fundamental information, for instance, clients’ name, simple descriptions, receive and arrival days, are put on the labels. There is insufficient information to instruct employees how to handle and transport the inventory. It may cause damages to inventory and hinder the transportation progress.

Recommendation 2 – introduce advanced labeling The information on the packaging containers should be more detailed and specific. For example, explicit instructions which notice how and when to store and deliver the stock should be placed outside the boxes so that employees can obtain unambiguous instructions and handle the stock efficiently. On the other hand, the nature of inventory should also be specified. It is crucial to mention whether the inventory is perishable, fragile or not. Also, the value of stock should be stated because inventory with higher value may require further protection.

Transport and delivery labels are important to ensure a smooth movement of inventory. 4. 7. Transportation services and management Transportation is the movement of goods and people between two points. SC Storage provides delivery service with reasonable price to customers. Its service can be divided into two parts, domestic and international transportation services. For the local services, the company has two types of cars to provide transportation services. One is for small-volume shipping and the other for less-than-truckload shipping.

The former one is used for regular delivery like documents, clothes and toys. While the latter one is used for houses moving. For the international transportation, more services will be provided, including the delivery of goods by air or water freight, help customers to fill in documentations and acquire overseas shipping insurances to reduce losses if accidents happen. 4. 8. 3. Problems and Recommendations Problem 1 – routing Routing is the process of selecting paths in a network. In selecting the routes of transportation, SC Storage uses the random strategy currently.

It means that they do not follow any principles or specific rules choosing their transporting routes. Because of that, the delivery time and cost varies and will greatly affect their customers. As a result, their service level cannot be ensured in terms of delivery time. Recommendation 1 – adopting shortest-route method To solve the first problem – random routing, SC Storage can adopt the shortest route method in selecting the transporting routes. It decides how vehicle can travel from one location to another while minimizing the total distance travelled. The following diagrams can be cited as an example (Figure 5).

If SC Storage uses the random routing method, they may choose the route from Start to B, C, E, G and Destination. The total distance of these combinations will be 150 kilometers. By using the shortest route (Start >A >C >F >H >Destination), the total distance will be decreased from 150 to 100 kilometers. It can help the company to control their delivery time within certain range and reduce the fuel costs. Hence, their customers can receive satisfactory services and the delivery time will not fluctuate greatly. (Figure 5)The number represents the distances in kilometers in delivery. The red arrows are the shortest route in transportation.

Problem 2 – lack of trucks and other modes of transportation SC Storage does not have trucks and other types of transportation tools like aircrafts and ships. What the company does is the role of Freight forwarders (FF). FF means a party buys the capacity from the owners of the trucks, ships and aircrafts, and sells it to other customers. SC Storage buys the capacity from the truck owners by using the truckload rate (the price is relatively low). Then they sell it to customers at higher price but lower than the rent if customers rent by themselves. Therefore, customers will use the services provide from FF, both parties can be beneficial.

But it has possible drawbacks. Since SC Storage cannot ensure that the bought capacity can be sold to customers, they may suffer loss if they cannot find customers. Recommendation 2 – using strategic alliance SC Storage may use strategic alliance to counteract the second problem (lack of vehicles). Since SC Storage is the biggest self-storage organization in Hong Kong, it has its own competitive advantages to ally with carriers such as providing customized service. By allying with other firms, it can change their role from FF to be the partners with some carriers in foreign market.

The company can enjoy the benefits from sharing the resources such as transportations. Both parties can access to target markets easily because they locate in different countries. After the alliance, the potential financial risk of SC Storage is shared with other parties. Moreover, when it allies with carriers, it can eliminate the political and economic obstacles set by the foreign countries due to the reasons of protecting the domestic industries. Since using strategic alliance can benefit both parties, it is feasible for SC Storage to solve the current problem. 4. 8. Warehousing management

The objectives of SC Storage in managing their warehouses are providing spaces for their customers’ inventory, utilize the limited spaces in order to achieve competitive advantage in low cost storage services industry. As a low cost mini storage services provider, SC Storage directs their effort to ensure that they provide storage rooms for customers with a safe, clean environment and at attractive prices. SC Storage has self-storage rooms ranging from 25sq ft to 300sq ft based on customers’ needs. Below is the list of storage rooms provided by SC Storage currently. 1. Bicycle storage 2. Red wine storage . Storage for exhibition 4. Document storage 5. Locker SC Storage discovered that bike riders often face problems in placing their bikes securely. This is due to most of the apartments are too small to store bicycles and most apartments do not allow the bicycles to be placed outside in the public area. So, SC Storage introduces the bicycle storage services. Specially designed to store bicycles and mountain bikes, and ideally located in Shatin in New Territories, an ideal place for bike rides. The “Bicycle Storage” room requires access card to enter, where the room is monitored by 24 hour CCTV camera.

The steel pipe used to lock bicycles is compatible with most of the bicycle locking system so that all the parts can be securely stored. There are additional spaces provided for users to assemble or fix bicycles which are equipped with electric pump and other bicycle fixing tools. Wine needs to be kept at constant temperature and humidity in order to stay at its best and prevent the corks drying out. If corks do dry out, they shrink, allowing air into the bottle and oxidizing the wine. By having a wine cellar with SC Storage, wines can be kept at its optimal conditions.

Constructed similarly to the normal storage room, yet the whole facility will be kept at a constant temperature of 15 degrees Celsius with humidity level of 40-65%. High level of security will be provided as wines are classified as high value items in SC Storage. Below are some components to preserve the integrity of the customers’ collection. 1. Private rooms of various sizes 2. State-of-the-art refrigeration equipment to maintain temperature 3. Professional humidification equipment 4. Back-up generator ensures critical equipment will always be running 5.

Fire and intrusion alarms monitored 24/7 6. Video surveillance and motion detectors 7. Key codes and layered security for client controlled room access 8. Low level of ultraviolet light 9. Insurance available upon request During an exhibition, the exhibitor requires to prepare some display stands, display signage and even some tables and chairs or some boxes. Exhibitors find it difficult to store these items when not in used. So SC Storage provides specialized storage services for them. Exhibitors may rent a storage space based on the items needed to be stored at a reasonable price.

Located in Tsing Yi, it is very near to the AsiaWorld-Expo, with the provided transportation from storing outlets to the destination of exhibition, SC Storage helps to save time and cost for exhibitors. SC Storage has document storage facilities that specifically designed and built for records management. The facilities are capable of housing all types of recording media. Besides, paper documents are stored in racks up to 10 cubic feet. The storage rooms are equipped with humidity-controlled system to protect computer tapes, microfilm and microfiche and offer the security a separate structure within the facility.

SC Storage knows that customers are highly concern about the security of their documents in SC Storage, so there are few arrangements made on this, 1. Employing only bonded personnel 2. 24-hour central alarm system 3. ESFR wet sprinkler system installed 4. Top-of-the-line climate controlled room Bar codes record management system is used in Document Storage. Each file or documents are attached with a bar code to ease the process of storing and retrieving. Pickup and delivery service is available upon request too.

For customers that have relatively few items to be stored, SC Storage provides storage locker for them. SC Storage offers 3 sizes of lockers, 1. 2m x 2m x 1m 2. 5m x 2m x 3/4m 3. 5m x 2. 5m x 1m Pricing from HKD220/month to HKD350/month. Lockers are CCTV controlled and 24 hours accessible. Improvements for bicycle storage Bicycle is an irregular shape item so it is hard to estimate the storage space required. In order for SC Storage to stay price competitive, it should maximize the bicycle storage spaces. Multi-storey bicycle racks can be used by providing a special sloped platform to let riders place their bikes.

In this way, the upper space of storage room can be utilized and reduce idle spaces. Although Shatin is an ideal place for bike rides, there are other places in Hong Kong that are hot spot for bike rides too, for example, Tuen Mun. So, SC Storage may consider expanding the “Bicycle Storage” to other SC Outlets to serve wider range of customers. Improvements for red wine storage A small wine tasting lounge should be provided to the customers. Currently, customers may only able to store and remove their wines in SC Storage but cannot taste them without removing them from SC Storage.

This may cause inconvenience to customers. Customers who store wines should have higher preference and taste on wines, such facilities should be considered to attract more wine lovers to store their collections in SC Storage. Improvements for storage for exhibition For customers having exhibition in Wanchai Convention Center, they only able to choose the normal storage spaces in SC Storage rather than the specialized Exhibition Storage that located in Tsing Yi. If they store their goods in Tsing Yi, they have to bear high transportation cost from Tsing Yi to Wanchai.

So, SC Storage is recommended to provide Exhibition Storage services in Wanchai in addition to the Tsing Yi facility as there are lots of exhibition held in Wanchai Convention Centre. Improvements for locker Currently the lockers are only located in Shatin, Kowloon Bay, Kwai Hing, and Chai Wan. SC Storage should expand this popular and well-perceived service to all of their locations to serve more customers. High population density locations should be the priority in expanding the business so more public to know more about these low-cost services. 4. Monitoring Methods 5. 9. Monitoring customer service

Regular meetings should be held every given period in order to monitor the customer service performance. During the meetings, participants should report the current situation and problems as well as progress of tasks so that the managers can tightly monitor the performance. The meetings should involve both high and low management level since they may have different point of views which are very constructive for decision making. Another suggestion is to distribute questionnaires to customers to receive the feedbacks from them. It is extremely helpful to response rapidly according to different customers’ needs. . 10. Monitoring packaging Testing of packaging materials can ensure the materials used in packaging are environmental friendly. Also, survey can be introduced to review whether the company needs to change the sizes of boxes because of the changing preference of customers. 5. 11. Monitoring transportation service Regular review of routing is necessary because there may be some better options with shorter distance. If it is the case, the company should change their routing decision which can minimize the transportation costs and increase the efficiency. 5. References Rego, G. & Nunes, R. 2010). Hospital Foundation: A SWOT Analysis. iBusiness, 2 , 210-217 Urban, Efraim (2002). Electronic Commerce: A Managerial Perspective. Prentice Hall. ISBN 0131854615. , http://en. wikipedia. org/wiki/Customer_service Wood, Donald F. , Wardlow, D. L. , Murphy, P. R. , Johnson, J. C. (the latest edition): Contemporary Logistics, Prentice Hall, Upper Saddle River, N. J. Wikipedia (2010). Routing. Retrieved November 27, 2010 from http://en. wikipedia. org/wiki/Routing Pollack, Maurice; Wiebenson, Walter (1959). SOLUTIONS OF THE SHORTEST-ROUTE PROBLEM–A REVIEW. Operations Research, , 8, 2 , p224-230


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