A system study on the inventory management and warehousing operations of Oriental Merchants Inc.

Oriental Merchants Inc. (OMI) is an import distribution company in the Philippines that brings in products from various suppliers in Europe. These products include food items such as olive oil, pasta, canned tomatoes, boxed desserts, and the like, and personal care products, such as colognes, soaps, and body fresheners. The company aims to create and sustain a pro-active and dynamic partnership with its numerous clients (i.e. individual, retailers, consignees, and food service providers) by ensuring a steady supply of the best-quality products. OMI currently stores majority of its products in its third party warehouse Orient Freight International Inc. OFII is also responsible for transporting and delivering OMIs products to its clients. Based on the present system, OMIs sales and operations Department and OFIIs warehouse team are assessed in order to analyze the inventory ordering, customer order fulfillment, and returns handling processes. Upon conducting a WOT-SURG analysis, it was seen that the most pressing problem is currently the sales amount of returns that deviates from the target of 3% by 3.77%. this results to actual monthly losses of 100,671.92. in order to solve this, why-why analysis was first used to determine the root causes of the problem. Through interviews, work sampling and observations, and historical data methods, the initial diagram was validated to confirm that the lack of product maintenance at the OFII warehouse, intuitive ordering policy, and lack of monitoring procedures for processing errors and product expiry were the main causes of the problem. After assessing several possible solutions through a Kepner-Tregoe decision analysis, a combination of four alternatives was selected. These are 5S housekeeping, outsourced freezing of Divella pasta, periodic review with reorder level ordering policy, and job rotation and incentive scheme. This proposed system now has a systematic method of upkeep at the warehouse, new key performance indicators to sustain the system, a more accurate method of ordering, and added steps for double-checking and crosschecking customer purchase orders and product expiry. Weighing the costs and benefits of the system, a net present value of 2,522,44.73 is achieved. Moreover, with its implementation, 85.55% or 6,842,575,21 of the controllable sales amount of returns and 81.97% or 926,334.95 of the cost amount of returns will be resolved. Investment costs will be recovered in a payback period of 0.20 months or 6 days