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Challenges of warehouse operations: A case study in retail supermarket

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Ferdoush Saleheen Mahadi Hasan Miraz

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Independent University, Bangladesh Universiti Utara Malaysia
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Int. J Sup. Chain. Mgt Vol. 3, No. 4, December 2014

Challenges of Warehouse Operations: A Case Study

in Retail Supermarket
Ferdoush Saleheen*, Mahadi Hasan Miraz**, Md. Mamun Habib#, Zurina Hanafi ##
* School of Quantitative Sciences, Universiti Utara Malaysia (UUM)
Head of SCM Meena Bazar/Gemcon Group, Bangladesh, Email: ferdoush_saleheen@yahoo.com

School of Quantitative Sciences, Universiti Utara Malaysia (UUM)

**mahadimiraz1@gmail.com; # mamunhabib@gmail.com, ## h.zurina@uum.edu.my

Abstract

The research represents a case study on Bangladesh price and at a right place, warehouse productivity
retail supermarket. The study demonstrates the and cost competency have no alternatives.
intricacies of warehouse management practice. It Warehouse operations have a fundamental set of
elaborates the dynamics of retail supply chain and activities in common which are (i) Product
the spiral affects how warehouse can play a receiving, (ii) Put away, (iii) Storage, (iv) Order
significant role. In addition to this, the study picking, (v) Packaging, (vi) Sortation &
identifies external factors, market trends, and Accumulation and (vii) Unitizing & Shipping [1].
possible barriers which influence the overall To execute more smaller transactions, handle and
performance of warehouse operation. The paper is store more items, provide more product and service
based on secondary data that encompassed three customization, offer more value added services,
major retail chains in Bangladesh. The paper also process more returns, receive and ship more
reveals opportunities to improve warehouse international orders, Less time to process an order,
performances in terms of planning, design and less margin for error, and finally warehouse
operation. The authors demonstrate some management system capabilities are the major roles
recommendations for industry practitioners to of warehouse management.
achieve a higher level of productivity in warehouse
management 2. Literature Review

When a consumer walks into a supermarket, it is

Key Words: Retail Supermarket, Stock Keeping Units taken almost granted that right products will be
(SKU), Enterprise Resource Planning (ERP), Warehouse available at a right place. Sometimes they expect
Management System, Responsive or Efficient Supply premium quality products at par to wet market
Chain, Purchasing Power Parity, FMCG price, adequate cold chain shall be maintained for
fish, chicken, vegetable, and dairy & cheese
1. Introduction products to ensure food safety. These days online
shopping gets much popularity among dual income
The concept of retail supermarket does not even household groups to avoid hassle, save time and
span a decade and the industry has uphill greater convenience. To support online customer
challenges. It causes due to many factors such as service, a robust logistics infrastructure with
political unrest, government legislations, import advanced IT platform is necessary which is
barriers, purchase power parity (PPP) and skilled connected with warehouse product availability and
resources etc. On top of that, implementation of quick replenishment. In retail operation,
modern IT infrastructure, Enterprise Resource performance measurement parameters are
Planning (ERP) and Warehouse Management considered in terms of time, cost, reliability,
System (WMS) etc. were major obstacles. In recent flexibility and speed. And the ultimate player in
trends with a rapid change of consumer buying this logistics game is warehouse efficiency in real
preferences, retail supermarket is growing very time environment. Integrated supply chain
fast. The sustainability of this industry depends on encompasses all the activities from suppliers,
the performance of its supply chain and a balance manufacturers, distributors and retailers [2]. And
between responsive and efficient warehouse the interdepartmental functional role involves
operation. To gain a competitive edge, such as fast sourcing of raw materials, conversion of raw
market penetration, product availability at a right materials into final output and distribution of
products to end consumers. Supply chain is the
______________________________________________________________ process of effectively managing the flow of
International Journal of Supply Chain Management materials and finished goods from retailers to
IJSCM, ISSN: 2050-7399 (Online), 2051-3771 (Print) customers using the manufacturing facilities and
Copyright © ExcelingTech Pub, UK (http://excelingtech.co.uk/)
warehouse as potential intermediate steps [3].
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Int. J Sup. Chain. Mgt Vol. 3, No. 4, December 2014

There are six drivers in SCM. These are (1) (Food and Non Food), (ii) House Hold, (iii)
Facility, (2) Inventory, (3) Transportation, (4) Apparel & Linen, (iv) General Merchandise
Information, (5) Sourcing and (6) Pricing [4]. (including Personal Care), (v) Dairy & Frozen, (vi)
Among these, facility consists of places where Produce (Fish, Meat, and Vegetable), (vii)
inventory is stored, assembled, or fabricated. World Stationary & Toys, (viii) Tobacco and others. A
class warehouse management should include huge quantity of imported products enters
performance, practice and objective for warehouse Bangladesh territory either through land boarder in
operation [5]. The efficiency level of warehouse illegal ways or through luggage parties. In the
operation can be measured through productivity, “produce” category fish, meat, vegetable, and fruit
shipping accuracy, inventory accuracy, dock-to- are included. In the sub-categories of “meat”
stock time, warehouse order cycle time and storage includes beef, chicken and mutton. All these
density. products require a different set of warehousing,
processing centers, grading and sorting facilities
3. Methodology which are also part of warehouse operation. A cold
chain facility in different temperature is a pre-
The research represents based on the secondary requisite for these products. In the “grocery”
data, includes interview with retail industry category there are two sub-categories, one is food
experts, online database, books, journals, and the other is nonfood. In the food category
conference papers etc. Widespread research papers “Bulk Commodity” is also a sub-sub-category
and conference papers have been appraised from which includes pulse, rice, salt, bulk oil, spices etc.
International Journals such as PROQUEST, In the “Dairy & Frozen” category includes cheese,
EMERALD, EBSCO, IEEE, ACM, JSTOR etc. butter, frozen food, chocolate, liquid milk in poly
pack and tetra pack etc.

4. Discussions
4.1.1 Warehouse design
4.1 Supermarket Warehousing
Warehouse Structure [7]: To ensure the highest
In a fast paced competitive environment warehouse level of operational efficiency, conceptual design
requires continuous improvement in design; and facility layout planning are crucial. Facility
particularly facilities in layout planning and layout planning deals with functional issues such as
distribution network design to bring higher storage capacities in particular departments,
efficiency in performance [6]. To incorporate technological facilities which are required to
modern concepts such as Just-In-Time (JIT) or lean deliver an optimal level of service on how orders
management brings new challenges to industry shall be placed and executed. At this level,
experts to rethink on several issues such as reduce throughput requirement is one of the main concerns
inventory level, reduce lead time, minimize to serve storage facilities and future operating cost.
response time, and increase higher level of Size and Dimension: Considers the construction
productivity. In less than a decade, the global retail cost of a warehouse, inventory holding policy, auto
industry has witnessed a significant achievements replenishment process and overall material
such as bar coding, Radio Frequency Identification handling procedures. To be specific, idea
(RFID), Enterprise Resource Planning (ERP) and formulation is required on storage capacity of a
Warehouse Management System (WMS) etc. warehouse under two circumstances (i) to
Implementation of all these technologies determine inventory levels externally as the
contributes a real time environment of warehouse warehouse has no direct control of inbound
operation and faster communication with other shipments and (ii) under the circumstances when a
supply chain partners. Many resources are involved warehouse can directly control the inventory
in planning and operating of such warehouse like policy. The objective of planning and process is to
space, labor, and equipment in order to achieve ensure the best system performance by allocating
capacity, throughput and service at a minimum the appropriate space and achieve an optimum level
cost. Grocery supermarket warehouse operation is of efficiency.
complex. And it operates in an extreme uncertain
environment. In terms of stock keeping unit (SKU), 4.2 External Factors in Warehouse Operations
on an average a supermarket warehouse carries
(8,000-10,000) products. However, for a 4.2.1 Handle multiple batch of production,
hypermarket the numbers can be two to three times
suppliers and origin
higher. Currently there are three major supermarket
players in Bangladesh (i) Agora, (ii) MeenaBazar Approximately 40% SKU’s sold in the grocery
and (iii) Shwapno. In general supermarkets carry category are imported. Same products imported by
(8-10) categories of products such as (i) Grocery multiple suppliers with different pack size cause
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Int. J Sup. Chain. Mgt Vol. 3, No. 4, December 2014

different purchasing cost and selling price. wholesalers don’t have proper documents while
Renowned companies such as Unilever, Nestle or delivering goods. This causes severe hiccups as
Reckitt Benckiser etc. operate all across the world well as shortage of product availability in the
and certainly they don’t market all products in one outlet.
particular territory. Due to that, there is a gray
market. Products sold in Unilever, India or in 4.2.4 Tractability of suppliers cold chain
Unilever, Dubai are not always available in
Unilever, Bangladesh. However, those products are Products like dairy & cheese, frozen food, liquid
widely available in Bangladesh imported through milk, juice and beverage require absolute zero
wholesalers or other intermediaries. As such tolerance in cold chain maintenance. The whole
product tractability is very crucial and individual process requires from the point of origin to the
barcode ensures tractability in terms of multiple point of delivery. Any deviation of temperature
batches, product origin or even pack size. These control within the process gets rejected while
products require careful monitoring while receiving. Warehouse receiving team needs
receiving, storage and shelving. compliance of written standard operating
procedures. Apart from this, fish, chicken,
vegetable and liquid milk receiving and distribution
4.2.2 Fake and tampered products also requires cold chain preparations. Frozen items
are kept from (-4 degree C to -20 degree C)
One of the biggest challenges in retail warehouse temperature. For Chocolate, juice, tetra pack milk
operation is to handle fake and tampered products. and other dairy products require (18 degree C to 20
As previously mentioned, many products are degree C).
imported through gray channel and due to customer
demand retailers need to carry those products. Once 4.2.5 Crosscheck approved sample vs. actual
a product is imported through Chittagong port, it receiving
travels through a lot of itineraries inside the
customs authority at Chittagong port terminal. Due Supply relationships between supermarket chains
to bureaucracy and unethical practice by some of and suppliers in the developing world have an
the custom officials, the process of releasing an integral chain and a level of economic theory [8].
imported container sometimes gets delayed. In And products must match all specifications every
many cases it can take up to two to three months. time with approved sample while receiving the
This delay also affects the shelf lifetime of the actual products at warehouse. As such different
goods and once a supplier fails to sell goods in parameters are used for receiving different
time, sometimes they do unethical practice and categories such as (FMCG grocery, imported item,
tamper the expiry dates and put a fake long expiry bulk commodity, perishable, cattle etc.) For
date. From outside, the product looks good but companies like Unilever, Proctor & Gamble,
once consumed it can cause serious health issues. Nestle, Reckitt Benckiser etc. requires to check
Identification of a genuine product is most difficult. body TP (Trade Price) and MRP (Maximum Retail
Therefore, whenever any product is bought from Price) where the PO (Purchase Order) and actual
wholesaler, each and every piece is checked with GRN (Goods Receipt Number) copy shows the
utmost attention and skilled hands. same. Simultaneously, date of expiry embossed in
the body, size and quantity which have previously
agreed, while negotiating products with price
4.2.3 Comply with government rules and policies should match at receiving time. These massive
operations require robust automated tracking and
Though retail supermarket is one of the fastest visibility. Enterprise Resource Planning (ERP) is
growing industries, but there is a dual practice in widely used for retail operations. Therefore there
the government policies between retail are many transaction codes (T-code) which are
supermarkets vs. street shops. Retail supermarket universally practiced either the retail is running
owners need to comply so many rules and through a platform in SAP or JDE etc. On the other
procedures. However the same product when it is side, for vegetables and cattle’s, while receiving
sold in street shops does not require to comply every lot must match with the parameters
many things. At supermarket the warehouse benchmarked. In an ideal environment a cattle has
receiving personnel needs to go through all the three varieties (Local Ox, Indian Origin or Hybrid).
papers such as BSTI (Bangladesh Standard Testing When it arrives in the Central Processing Unit
Institute) approval papers, BSTI dates, Importers (CPU) which is inside the warehouse are inspected
sticker, proper address, body MRP and TP etc. through veterinary doctors and QC (Quality
Failure to comply any of these can have severe Control) personnel. The size of the cattle should be
penalty by the law enforcing authorities to the from (80 kg to 100 kg), preferably with (2 to 4)
supermarket owners. In most cases, importers and teeth, and a minimum 48 hours of health diagnosis
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Int. J Sup. Chain. Mgt Vol. 3, No. 4, December 2014

is mandatory. The Fat level of the cattle depends on 6. Administrative and Other Factors
the originality (Local Ox, Indian Origin or Hybrid)
is also considered. There are many administrative factors which
should be handled with high level of efficiency and
4.2.6 Grading & Sorting
management skills. These also require extensive
knowledge in Industrial Relations such as labor
Vegetable, cattle and fish are processed in a Central
unrest, grievance, working at late hour,
Processing Unit (CPU), a part of central warehouse
productivity of an employee, salary and wages,
operations. Potato and onion requires extensive
multitasking ability, theft and pilferage, collective
level of sorting and grading before products are
bargaining, ability to meet emergency support with
sent to outlet. Grading and sorting of potato and
limited resource; a pre-requisite for smooth
onion are done based on the size; shape, free from
warehouse operation
any scratch, and spot on their skin.
7. Conclusions
4.2.7 Formalin, Ethylene and Carbide test
Food safety is one of the major concerns among the In summary, this research represents a case study
Dhaka city dwellers at this moment. Different types which investigates the current major challenges the
of local and imported fruit, vegetable, and fish supermarket industry face. An extensive interview
contains chemicals such as Formalin, Ethylene or with industry experts, practitioners, consultants
even Carbide. These chemicals are put in wrong along with international journal review and online
proportions by the unscrupulous traders to avoid database revel warehouse operational complicacies
any wastage or shrinkage as well as to artificially that affect lower warehouse performance. The goal
increase the shelf life of the products. Therefore, in of warehouse management is to ensure operational
every stage of the receiving process, efficiency while focusing on cost reduction.
comprehensive tests are done with the compliances Performance measurement benchmark at
of the respective certified authorities. warehouse operation comprises of Quality, Speed,
Dependability, Flexibility, Reliability and Time
4.2.8 Performance evaluation & benchmark linked with few internal as well as external factors.
Warehouse design, facility layout and capacity
Performance evaluation provides a feedback of the assessment can synchronize the demand and supply
warehouse performance on several KPI’s (Key gaps and ensures the smooth flow of operation.
Performance Indicators) and GAP analysis [9]. Simultaneously government should provide a
This also talks about more on a proposed design or common platform to all retail players irrespective
operational policy and possibilities to improve it. of size and volume. In addition to this,
Different approaches are practiced for performance collaborative planning and supplier relationship
evaluations such as: benchmarking, analytic with retailers can help to fight against uncertainty
models, and simulations and risk mitigation. This can also increase chances
for supply chain surplus and overall value creation
5. Warehouse Health, Safety and to end consumers. To get the optimum consumer
Environment satisfaction, government has to ensure reliability
and visibility to all possible supply chain
One of the most important compliances in intermediaries and drivers. Last but not least,
warehouse operations is Health, Safety and ethical business practice is a prerequisite for a
Environment [10]. The United States Department country as well as a nation to sustain continuous
of Labor states, OSHA (Occupational Safety & positive growth. Though operational efficiency and
Health Administration) The Occupational Safety good warehouse management practice along with
and Health Act of 1970 (OSH Act) was created to government interventions on few legislative issues;
avert employees from serious injury at work or the industry can be greatly benefitted. Therefore,
even unnatural death. This law enforces, safe work the ultimate beneficiary will be the end consumers
environment and conducts training and helps on “food safety”; a journey for a convenient
employees to know about their rights and shopping experience and a healthy lifestyle.
responsibilities. In addition to these, employers
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 67
Int. J Sup. Chain. Mgt Vol. 3, No. 4, December 2014

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