Assignment 1: Hong Seafood

Quarterly Revenue in Singapore Dollars (By Year)

2016 Q1 $15,583.15
2016 Q2 $19,360.40
2016 Q3 $19,980.40
2016 Q4 $17,410.60
2017 Q1 $19,894.10
2017 Q2 $18,542,20
2017 Q3 $18,983.20
2017 Q4 $19,892.74
Figure 5: Quarter Revenue (By Year)

Background Information

Types of Products 12
Number of Suppliers Malaysia (Main Supplier)

Indonesia (Alternate)
Average Annual Demand 8,656
Maximum pallets in warehouse 60
Inventory holding cost $0.50 per unit
Increase/decrease in Average Demand Q1: +30%

from Previous Year Q2: - 5%

Q3: - 5%

Q4: +15%
Figure 6: Background Information

Consideration:

- Forecasting for Q1 & Q4 demand would be 30% and 15% jump respectively from

previous year average demand due to Chinese New Year festivities, Christmas and

New Year’s Day.

- Forecasting for Q2 & Q3 demand would be 5% drop in demand as there is not much

festivities throughout the two quarters.

- Hong’s current suppliers (Malaysia) only able to supply extra 20% worth from usual

order.
 - Hong’s backup supplier (Indonesia) able to supply additional extra percentage in

order to meet the demand.

- Hong’s current warehouse unable to add more stock due to space constraint.

a. What is the sales projections and profit for the next 12 months?

Year Demand Holding

2018 2018 Cost Revenue Profit

24,455.8

Q1 2813 1,406.50 25,862.33 3

16,605.5

Q2 2019 1,009.50 17,615.09 9

17,024.5

Q3 2019 1,009.50 18,034.04 4

21,632.1

Q4 2489 1,244.50 22,876.65 5

b. What is the recommended inventory level for the next 12 months

Main products of Hong’s Seafood are sea produces which perishable in nature where

they unable to be store for long period to preserve the freshness of the products. If it

not sold in time then it will be spoiled and unsellable where revenue might be loss

due to spoiled products. Higher inventory means less cash that has been tied up in

slow moving products that are not being sold. Inventory turnover also an indicator on

how efficient the products is moving along the supply chain.

Inventory Turnover

Average inventory = Beginning Inventory + Ending Inventory

2
= 2,651.00

Inventory Turnover rate = Total Cost / Average Inventory

 = 1.76

Turnover to measure performance

Inventory Turnover Rate X Gross Margin

(%)
= 1.76 X 136.21%
= 239.73%

Average inventory level is more than 100% where the turnover performance is 239.73% it show that the

inventory level is too high.

c. What is the recommended warehouse capacity needed to support the sales for the

next 24 months?

i) Racking system shall be redesign to increase their warehouse capacity in

additional to current system that they have now. Current capacity only able to

store maximum of 60 pallets.

 To incorporate deep racks since there are 12 types of products sold by

Hong’s Seafood.

 Hong’s Seafood may install mezzanine above the floor level to maximize

the above storage to improve their vertical storage.

ii) Identify and source for public 3PL warehouse not far from Hong’s Seafood

warehouse area so that it still close and near to their clients, restaurants,

shop to meet any surge of demand especially during festive seasons.

iii) Direct sales done at cross docking at port to cater their loyal customers and

clients which may increase of revenue for Hong’s Seafood instead of rejecting

their orders when the products already arrive at the warehouse.

d. What kind of layout and racking do you recommend for the company?
i) Chill storage under compatible temperature with independent and adjustable

temperature setting.

ii) Vertical storage of the warehouse can be maximize by segmenting products

according to type of products and expiry date.

iii) Products shall be consider first-in, first out (FIFO) racking system which allow

for constant products movements and to ensure that there are no

inventory/products spoils or goes to waste.

iv) Drive-in racking system is ideal for cold/freezer type of products especially

seafood produces. Drive-in racking system is probably the best option when it

come to storage and it also suitable to store fragile loads which cannot be

stored in block stacks. By choosing this system, it enable Hong’s Seafood to

store as many products in as limited as possible. By using drive-in and two

deep rack will enable Hong’s Seafood to utilized their storage area as

compared to conventional rack storage.

Figure 1: Proposed racking layout (Drive-in and two deep) and Side/Front View