Velky Potraviny Prague

Velky Potraviny is a retail store located in Czech Republic, with positioned as one stop, low cost grocery store and established in 1991 and opened its first store in Prague in 1992, 37 stores operating in Prague and in the northest region of the Czech Republic. Political changes in Czechoslovakia happened in 1968 when communism in Prague moved to put a human face on communism was born. This movement to allow for more individual freedoms and entrepreneur was crushed by the Soviet invasion. In mid 1990, a freely elected a government was formed, led by Vaclav Havel, and capitalistic structures began to create. With political stability established its centralized location in Europe, and its well-educated and relatively low wages work force, western companies found Czechoslovakia to be an attractive location for investment. It shown by growth rate of GDP, 2.6 in 1994 and jump to 4.8 in 1995 follow by 1996 with 5.5 also reducing number in inflation from 20.8 in 1993 to 8.5 in 1996. Each Velky store was a full service supermarket, offering an extensive variety of products, although Velky limited the number of brands available in an effort to keep its costs down. Although the expansion milestone done by Velky they still faced a lot of problems, include employee, management includes supply chain, in 1996 Velky at number 6 rank of the largest Prague area retail/food companies with total sales 2.1 billion CZKs and majority sales from food (90%). Jurai Zdenek as the warehouse manager for the Velky Potraviny found that some challenges must be solve by management, since he felt that the bonus system was not proper for all employee and the compesnsation was only part of the entire problem that faced in running Velky Potraviny. Velky had faced numerous challenges cause by the complete transformation of an economy from communism to capitalism. Some of these included of factors from external and internal such as : 1. External factors , extremely high inflation due to price liberalization, a non convertible currency, a poor to non existent distribution system illustrated by a lack of roads, let alone highways, an overburdened rail system 2. Internal factors, a lack of warehouse space, and an evolving business, regulatory, legal and taxation system. If all these challenges were not enough, there was the cultural hurdle faced by convincing potential customers to do one stop shopping two or three times a week. The customer habit in Czechs prefer to

shopping daily at neighborhood specialty stores such as a bakery, a butcher and a fruit merchant rather than buy groceries in large quantities. Facilities that we can found in Velkys store such as customers could select individual units out of cartons, six cashiers whose responsibilities included memorizing prices, checking out customers, collecting money, and counting inventory with a small hand-held device. Depending on the retail store, some sent their orders via modem to the warehouse every day; some ordered 2-3 times a week. The warehouse was responsible for holding non perishable goods, which represented approximately 70% of Velkys product mix. Perishable goods such as fruits, vegetables, bread and cheese, were sent to the retail stores directly from the supplier. At the first warehouse was originally arranged in a such a way to facilitate the unloading of goods from suppliers and the loading of goods to stores. The Warehouse manager, Juraj was concerned about whether the warehouse could handle the additional demand with the increased need to service more stores, given the planned expansion 67 stores within next two years. He also addressed some issues such as cost control, performance evaluation, bonuses, company, had to be quickly learned on the job. On the other hand, being low-cost grocer in an economic whose per capita GDP wa still only 20% that of the United States, and operating in a country whose lack of roads and telecommunication caused costs and inefficiency. Nowadays, corporate viewed that Warehouse as a cost centre, and the goals was to provide inventory to the retail stores in a timely manner, and deliver exactly the goods the retail store order and in the correct quantity requested. To maintain the inventory flow, we need to follow First In First Out (FIFO), which can describe as an inventory costing method which assume that the first items placed in inventory are the first sold. Thus the inventory at the end of a year consists of the goods most recently placed in inventory. FIFO is one method used to determine Cost of Good Sold in a business. Anther cost issue was breakage. The inventory had to be stored and moved with care. Any inventory loss due to breakage went directly to total cost line. The total error rate for the warehouse was around 3%. The other factors that also give major contribution was maximizing buyers management, means that all buyers have to deal with the suppliers with certain term and condition which need to align with warehouse capacity, customer demand and finance for inventory flow. Since in Velkys case, buyers have own determined bonus that drive from the lack of inventory stock outs in the warehouse, so they always motivated to buy more than they thought was needed. After all. buyers was saw no cost associated with having too much inventory.

In retail industry, a buyer is an individual who select what items will be stocked in a store based on his or her predictions what will be popular with retail shoppers. Sometimes in smaller independent stores, a buyer may participate in sales as well as promotion. Talking about prediction always related with forecast accuracy, which means that buyers must be able to anticipate on customer behavior changes and customer needs. He or she can calculated demand from 6 or 3 months last actual selling vs stock. From retail store perspective, since the stores lacked bar code, scanning technology, the buyers did not have to update information what items were selling well or poorly. In other perspective from warehouse, since the buyers not located in the warehouse, and since the warehouse not operate on a perpetual inventory system, the buyers did nt know how much inventory was on hand at any given time. As a result, it was often the case that excessive inventory was being held at the warehouse. After the buyers placed an order, the suppliers delivered goods to the warehouse, but it was nearly impossible for the warehouse to plan ahead for the receipt the inventory. First, the supplier didnt always deliver the quantities that were ordered. As a result, buyers often ordered more than was really necessary, in the event supplier could not deliver all that was would arrive. As per exhibit 4, shown that Velkys warehouse had faced a lot of functional problems. The long ramp on the north side and a good portion of the ramp on the west side were not being used, as the height of the ramps did not match with the height the vans that Velky owned. Even though the south ramp accommodates up to six vans for loading at any given time. Velky also has a problem with empty bottle (juice or beer) that return from customers to the retail outlets. Which the negotiation with the supplier need a tough time since outlets always return in mixed pallets, in terms of size, shape, color and shipped back to the warehouse. Suppliers would only take back their own standardized glass bottles. The warehouse had the following job functions : receiver, picker, stepper, output checker, and driver. Their job descriptions and responsibilities schematically shows the order in which activity occurs within the warehouse. Warehouse management always related with Supply Chain Management which can describe ss the systematic, strategic coordination of the tradition al business function and the tactics across these business function within a particular company and across businesses within the supply chain, for the purpose of improving the long term performance of the individual companies and the supply chain as a whole.

Some factors can influence it include process, layout decision and management involvement . Supply Chain Management must address the following problems : 1. Distribution Network Configuration : number, location, and network missions of suppliers, production facilities. Distribution centers, warehouses, cross docks and customers 2. Distribution Strategy : operating control (centralized, decentralized or shared) 3. Information : integration of processed through the supply chain to share valuable information, including demand signals, forecasting inventory, transportation, potential collaboration 4. Inventory management : quality and location of inventory, including raw materials, work in process (WIP) 5. Cash Flow : arranging the payment terms and methodologies for exchanging funds across entities within the supply chain. Strategic for Supply Chain Management which include warehouse management : 1. Strategic network optimization, including the number, location, and size of warehousing, distribution centers and facilities 2. Strategic partnership with suppliers, distributors, and customers, creating communication channels for critical information and operational improvements such as cross docking, direct shipping and third party logistics. 3. Product Life Cycle Management, so that new and existing products can be optimally integrated into the supply chain and capacity management activities 4. Segmentation of products and customers to guide alignment of corporate objectives with manufacturing and distribution strategy 5. Information technology chain operation 6. Where to make and make buy decision 7. Aligning overall organizational strategy with supply strategy Layout decisions entail determining the placement of departments, work groups within the apartments, workstations, machines and stock holding points within a production facility. The objective is to arrange these elements in a way that ensures a smooth work flow (in a factory) or a particular traffic pattern (in a service organization). In general, the inputs to the layout decision are as follows : 1. Specification of the objectives and corresponding criteria to be used to evaluate the design. 2. Estimate of product or service demand on the system

3. Processing requirements in terms of number of operations and amount if flow between element in the layout 4. Space requirements for the elements in the layout 5. Space availability within the facility itself or, if this is a new facility, possible building configuration