2022 8th International Engineering, Sciences and Technology Conference (IESTEC)
Increased inventory turnover through a Lean
Warehousing management model in SMEs suppliers
to the food industry
Sharon Cynthia Espino-Sanchez Andrea Ximena Vasquez -Ortiz
2022 8th International Engineering, Sciences and Technology Conference (IESTEC) | 978-1-6654-9843-2/22/$31.00 ©2022 IEEE | DOI: 10.1109/IESTEC54539.2022.00013
Facultad de Ingeniería y Facultad de Ingeniería y
Arquitectura Arquitectura
Universidad de Lima, Perú Universidad de Lima, Perú
20170517@aloe.ulima.edu.pe 20171639@aloe.ulima.edu.pe
Abstract- This research article is developed in an importing and
marketing company belonging to the food industry in Peru. It is
known that warehousing is one of the main costs incurred by a
company in this industry; therefore, in this study a set of
engineering tools were defined with the objective of reducing the
technical gap of warehouse indicators compared to the industry
through the optimization of processes in this area. The
improvement proposal arose from the implementation of a
warehouse management model, which included the
implementation of tools such as Kanban, 5S and supplier
homologation. The proposed model made it possible to
streamline processes in the warehouse, which resulted in a better
stock turnover rate and, therefore, in storage efficiency. The data
analysis for improvement was performed using Arena
Simulation software, through which the favorable results in each
of the evaluated indicators were revealed. Inventory turnover
increased 8 times with respect to the initial level, matching the
industry average turnover of 12 times per year. On the other
hand, the level of inventory count accuracy increased to 97.44%,
which had a positive impact on the performance of the sales area
due to the accuracy in the amount of inventory available for sale.
Finally, the choice of suppliers was improved, as evidenced by a
4.64% reduction in inventory loss.
Keywords– Warehouse management model, lean warehousing,
kanban, 5S, certified supplier, inventory turnover, storage
efficiency.
I. INTRODUCTION
Currently, the trade sector has a 10.2% share of the Gross
Domestic Product (GDP) of Peru, representing one of the
main engines of the Peruvian economy. In June 2021 alone,
the commerce sector expanded by 38.06% compared to the
same month of the previous year, mainly due to wholesale
and retail trade [1]. At this point, it is highlighted that one of
the factors of this growth was due to the food industry due to
the growing demand for basic necessities in the state of
emergency. Food spending growth is projected at 7.2% y-o-
y in 2022 from 3.0% y-o-y in 2021 [2]. However, as of June
2020, Indecopi reported 6,012 consumer complaints about
the delivery times of their purchases, which shows a lack of
response capacity on the part of the sector in its outbound
logistics and, therefore, in its distribution of orders [3]
The problem identified represents an increase in costs, in
addition to an inefficiency in its logistics chain [4]. This may
be due to low productivity in warehouse management, low
inventory turnover or the lack of existing procedures on how
to proceed with the issue of goods, or consequently poor
follow-up management. of orders [5] This type of The
978-1-6654-9843-2/22/$31.00 ©2022 IEEE
DOI 10.1109/IESTEC54539.2022.00013
Authorized licensed use limited to: Universidad Peruana de Ciencias Aplicadas (UPC). Downloaded on June 14,2024 at 03:02:57 UTC from IEEE Xplore. Restrictions apply.
Juan Carlos Quiroz-Flores
Facultad de Ingeniería y
Arquitectura
Universidad de Lima, Perú
jcquiroz@ulima.edu.pe
problem is common in medium-sized companies that do not
invest in outbound logistics, which involves cargo
consolidation and bag shipping. These risks in the supply
chain must be resolved based on methodologies and control
tools, especially in service companies [6].
In this sense, it is necessary for the trading company
under study to optimize those processes that have an impact
on its outbound logistics, such as warehouse deficiencies, so
that this does not have an impact on its profits [4]. Therefore,
research has been conducted on the applicability of tools
such as 5S, Kanban and supplier approval in the sector to
generate a storage management model of the company to
improve the existing processes in the warehouse area and
thus improve the company's performance. [7] [8]
In order to present the proposal, this academic article has
been divided into the following sections: State of the Art,
where background for the problem will be presented from
approaches of different authors; Contribution where the
theoretical foundation of the model is explained and the
proposed model is described with its respective indicators;
Validation where the results before the intervention, the
implementation of pilots and simulation, and the results after
the intervention and Conclusions are described.
II. LITERATURE REVIEW
A. Lean Warehousing in the trading and importing sector
One of the problems of importing and trading companies
is the low rotation of the product, because it represents
immobilized money in the warehouse and ends up increasing
costs, generating inefficiency in the management of the
logistics area [4]. Many times, even when the product or
input is not of high turnover, companies make it necessary to
purchase it for various reasons, either because a specific
customer has requested it, or the purchase is necessary
because it is part of the purchase package [9], which leads to
deducting the existence of logistics waste in warehouse
management [10].
Given this, the need arises to improve purchasing
management and demand forecasting, so that a company can
acquire what is necessary and according to the level of
rotation of each product [11]. For this reason, a management
model based on the Lean Warehousing methodology is the
most appropriate, since it brings together a set of tools and
manages a system organized according to the needs of the
companies. In this way, a model based on this methodology
25
 will emphasize the reduction of excesses to improve the
operation of a company's warehouse. [12] [13] [14]
B. Kanban in the trading and importing sector
A characteristic problem of inventories is the difference
between the physical units and those recorded in the system
used by a company [7], which is more critical in trading
companies [15]. In addition, the more items a warehouse
handles, the greater the risk and therefore the greater the
control [16]. This difference leads to a lack of real
information on inventory turnover, so companies must have
a reliable control system for better inventory management
and, therefore, of the logistics chain [17] [18] [19]
In this sense, a system is required that allows greater
control of the items entering and leaving the warehouse, one
of the most useful being Kanban cards [10]. The information
contained in the cards should match the quantities in the
physical warehouse with the record in the system [20]. This
way of working will be more efficient depending on the
training of the warehouse personnel and the commitment of
the management to control the inventory program [21] [22]
[23]
C. 5’S in the trading and importing sector
The lack of order is a common problem in companies to
a lesser or greater degree, generally given by the absence or
little strength that companies promote in improving the
organizational culture, because it is not seen as a priority or
important [8], however, there is a need to minimize process
times, minimize errors and avoid waste [21].
In this sense, the 5S is considered as a culture of order,
minimizing waste and better utilization of resources [18],
which even minimizes work stress, which is why the staff
often make omissions and errors when performing their work
[23], which is why this technique is widely used in
warehouses, where a large number of items are handled and
products, materials and supplies that must retain their initial
state as intact as possible and must have a defined space
where they are stored must be moved. [19] [17] [24]
D. Standardization of processes in the trading and
importing sector
Today's companies face constant personnel turnover due
to various factors, monotony of the work, disagreement of
remuneration, better opportunities, among others, which
causes a task to be assigned to different people at different
times, which would not be bad if companies sought to work
in a standardized way [25]. There is a common mistake that
companies make and that is that the simplest operations to
carry out have little importance of control and improvement,
being precisely in these operations or processes where
problems arise due to lack of technicality, even more so
when staff turnover is higher. [14]
In this way, the lack of standardization implies errors,
delays, oversights, duplication of work, which have
repercussions on management, in this case on inventory
management, an area that, except for the boss, the rest of the
staff is operational, with little or no technical preparation [7];
hence the importance of standardizing processes in the
warehouse, especially when in this area information and
items are handled that represent money for a company for the
same products and therefore the handling of these products
allows greater rotation and income, profits for a business.
[16] [8] [12]
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III. CONTRIBUTION
A. Model basis
The basis of the proposed model is the Lean
Warehousing methodology, which encompasses a set of
tools to reduce excesses, and thus achieve a better
functioning of the warehouse in a company that markets and
imports ingredients for the food industry. The proposed
model presents the tools that will be useful in the solution of
a low inventory turnover, such as Kanban and
standardization, 5S and supplier approval.
B. Proposed model
For the present model, articles based on Lean
Warehousing were considered, which explain the
aforementioned tools, but do not present an application of
them in companies supplying the food industry; that is, the
application is still scarce for this industry. Likewise,
although the articles chosen provide reliable and accurate
information on these tools, they do not have defined
warehouse management models for the sector to which they
are addressed. For these reasons, the contribution of this
study lies in the design of a structured warehouse
management model for companies in the sector, as well as in
the implementation of this model to demonstrate the
usefulness of the methodology and its tools, results that are
measured through indicators and compared with the sector
average.
Firstly, a diagnosis of the company was made through the
problem tree, the Pareto diagram, the process diagram and
indicators, which were used to identify the necessary tools.
Next, the 5'S tool was implemented to establish an adequate
flow of the storage process, mitigating disorder and
disorganization.
Secondly, the Kanban tool was implemented, through the
use of cards containing information on the quantities in the
physical warehouse, which coincided with the record in the
system. This is one of the most useful systems for the control
of incoming and outgoing goods, in addition to the 5S tool
whose implementation allows an organized treatment of both
products and their information [21].
Finally, through the process of supplier homologation, it
was sought to determine an adequate purchase of orders in
order to have an inventory volume according to the correct
projection of the demand. This homologation is necessary in
this type of company because it is the only way to evidence
compliance with quality standards and allows the company
to supply itself with standardized products, which positively
influences the efficiency of the product commercialization
process.
For the development of the proposed model, 3
components were considered, as shown in the figure. The
main input is the main problem of low inventory turnover.
This input is the basis of the diagnosis (component 1), which
aims to obtain a complete analysis of the reasons and root
causes of the problem, taking into account the current
situation of the company. Then, the ideal tools are chosen
according to the causes (component 2) to be implemented
(component 3) with a simulation or a pilot, as the case may
be. Finally, thanks to the applicability of the proposed model,
the output is the improvements made.
 Fig.1. Components of the chosen sources
C. Components of the model
The model is divided into 3 components as mentioned
below:
a) Component 1: Identification of the improvement
opportunity
This stage consists of analyzing the root causes of the
main problem. In this way, each of them can be solved with
the identification of tools to help in the next phase.
b) Component 2: Intervention
x 5'S
Step 1: Seiri - Classify
Products were sorted upon arrival at the
warehouse, eliminating damaged products that do
not meet the technical specifications given by the
company.
Step 2: Seiton - Sort
An appropriate position was assigned to each
product that has not been detected as defective.
Step 3: Seiso - Clean
Continuous cleaning of the warehouse was carried
out and controlled by means of check sheets.
Step 4: Seiketsu - Standardize
The processes described in the previous points
were standardized through instructions, guides and
manuals.
Step 5: Shitsuke – Discipline
To implement this tool, labor discipline was
needed at every step and also to achieve
sustainability of the improvements.
x Kanban and process standardization
Before implementing this tool, the process flow
was identified through the Value Stream Mapping
technique, which allowed analyzing all the process
components under the same indicators, so that the
decision taken to identify the critical process or
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processes was the correct one. In this sense, it is
necessary to identify the quantity of products
entering and leaving the warehouse in order to
calculate the quantity needed on the Kanban cards.
It is also essential to make a good demand forecast
in order to identify the quantities needed.
It was necessary to use this tool to store the critical
characteristics of each product. This tool allowed
the standardization of the incoming goods
identification process, since each card allowed
obtaining accurate information for each
salesperson. In the same way, this information was
used to fill the kardex implemented in the
company.
x Supplier certification and approval
In this homologation process, the supplier's
operational capacity, financial and legal
compliance, as well as the management systems
they employ, are evaluated.
A criteria and attribute matching methodology was
established to identify whether the suppliers will be
able to supply products in a standardized manner
according to the client's needs.
c) Component 3: Implementation
In this phase, the implementation will be evaluated and
the proposed indicators will be measured to validate
compliance with the objectives and ensure the development
of the improved model.
D. Flow of the proposed model
The first component collects historical information from
the company, which is then analyzed through a problem tree,
allowing a Pareto diagram to visualize the main sub-causes
in a quantified and prioritized manner. Next, the company's
process flow was diagrammed to map the causes and identify
methodologies and tools based on indicators.
 Thanks to the information gathered from the
‫݁݃ܽ݇݊݅ݎ݄ݏݕݎ݋ݐ݊݁ݒ݊ܫ‬ሺΨሻ ൌ 
company and the analyses made afterwards, 3 main
causes were identified.
x inadequate inventory control and record keeping
x disorder and disorganization in the warehousing
process
x lack of a supplier approval process.
Therefore, in the second component, the possible tools to
be implemented to solve each cause were identified, it was
proposed to use the Kanban methodology, 5S and to
implement the supplier approval process.
Finally, in order to implement these tools, two
simulations were carried out, which show the current
situation of the company and the improved situation when
implementing the tools.
௩௔௟௨௘௢௙ௗ௘௧௘௥௜௢௥௔௧௜௢௡
[3]
௧௢௧௔௟௩௔௟௨௘௢௙௔௟௟௜௡௩௘௡௧௢௥௬
x Days of finished goods inventory on hand: Measures
the number of days of finished goods inventory on
hand, i.e., the volume of finished goods inventory
needed to support the business.
‫݄݀݊ܽ݊݋ݕݎ݋ݐ݊݁ݒ݊ܫ‬ሺ݀ܽ‫ݏݕ‬ሻ ൌ
௔௩௘௥௔௚௘ௗ௔௜௟௬௕௔௟௔௡௖௘௢௙௜௡௩௘௡௧௢௥௬
௔௩௘௥௔௚௘௥௔௧௘௢௙௦௔௟௘௦ሺ௣௔௦௧ଷ௠௢௡௧௛௦ሻ
[4]
IV. VALIDATION
For the validation of this research, the Arena software
was used, which allows the implementation of the proposed
inventory management model. Therefore, the first step was
the diagnosis of the company to identify the possible
problems in the warehouse management, and the points to
improve. Likewise, the design of the validation is presented,
and how the simulation was developed, explaining the inputs
and outputs of the process, as well as the improvements
through indicators of the company, compared with the sector.

Fig. 2. Proposed Process
E. Indicators
x Inventory turnover: Expresses the number of times
inventory is renewed during a one-year period.
௦௔௟௘௦௖௢௦௧
‫ݎ݁ݒ݋݊ݎݑݐݕݎ݋ݐ݊݁ݒ݊ܫ‬ሺ‫ݏ݁݉݅ݐ‬ሻ ൌ 
௔௩௘௥௔௚௘௜௡௩௘௡௧௢௥௬
x Inventory count accuracy: Measures the accuracy of
physical inventory compared to the book inventory;
that is, how likely it is to find the book quantity in the
physical warehouse.
௧௛௘௢௥௘௧௜௖௔௟௨௡௜௧௦௦௧௢௥௘ௗ
‫ݕܿܽݎݑܿܿܣ‬ሺΨሻ ൌ  ‫ͲͲͳݔ‬Ψ [2]
௣௛௬௦௜௖௔௟௨௡௜௧௦௦௧௢௥௘ௗ
x Excess inventory as a percentage of total inventory:
This ratio measures the value of obsolete inventory in
relation to the value of total inventory.
A. Initial diagnosis
In the initial diagnosis, it was found that the main
problem in the company was the low inventory turnover,
which was 4 times a year, meaning that the inventory rotated
every 3 months. The economic impact of this was 638
thousand soles per year in inventory costs, which meant 13%
of the net profit.
Additionally, the physical volume of inventory was
disorderly and disorganized in the warehouse. This had a
direct impact on the amount of sales made by the sales
executives because the quantity did not match what was
entered in the system.
B. Validation design
The proposed model will be validated to quantify and
evidence the improvements using the Arena software, which
will imitate the behavior of the current situation of the
company, that is to say, it will simulate the warehouse
process, comparing the current process and the process after
having implemented the improvement through the proposed
tools. The simulation will show the optimal sample size with
the help of the entities and resources necessary for the
implementation of the process, scope of the system, as well
as variables and attributes.
C. Simulation
[1]
To represent the current situation of the company's
process flow and the proposed improvement, two process
simulations were performed with Arena Software.
The data used as part of this simulation were collected as
historical data of the company, such as number of orders,
number of products from suppliers, storage times, waiting
times and others included in the model. Likewise, by means
of statistical calculations, the sample was found to determine
the data distribution. In addition, to complete the model it
was necessary to establish the best distributions using the
Input Analyzer extension of the software used.

28

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 TABLE I. DISTRIBUTION OF TIMES BY PROCESS
Indicator To be As is Improved value
Inventory
Activity Distribution Units 12 4 +8
turnover
Supplier deliveries CONSTANT (90) Days Inventory count >=99.3% y 96.30
+ 1.14 %
accuracy 99.9% %
Incoming orders UNIF (1,2) Hours Inventory
Warehouse shrinkage as a >=0.43% y
UNIF (1,2) Hours 7.20% - 4.64%
reception percent of total <7.4%
inventory
Quality control UNIF (1,2) Minutes Days of finished
NORM (Mean:2, goods inventory >=14 y <30 90 - 60
Dispatch Hours on hand
StdDev:0.2)
Awaiting credit
UNIF (10,15) Days
approval
NORM (Mean:20, The rotation was 4 times, i.e. it rotated every 3 months in
Billing-credit Minutes
StdDev:10) the year, due to the improvement now the products rotate 12
times per year or every month, since an accurate simple
demand forecast was implemented. In addition, there has
The scope of the process starts from the arrival of the been an improvement of 1.14% in inventory counting
products delivered by the supplier. The company has a make accuracy, which means an accuracy of 96.30%, this was
to stock strategy, therefore, once the product is in the obtained by standardizing inventory counting through an
warehouse, customer orders are accepted, passing through ERP system, which avoids human error and allows a better
several activities, ending with the dispatch of the order. “Fig. count of available products and, therefore, their sale. Finally,
3”, shows the current process system and “Fig. 4”, shows the we were able to improve the inventory surplus by 4.64%,
improved system. since, with less turnover, there are fewer unsold products in
the warehouse.
TABLE II. ENTITIES IN THE SIMULATION

Entities Attributes Resources Activities

Reception
Product
Warehouse
arrvial Quality control
operator
(suppliers)
Storage

Order code Secretary Billing

Warehouse
Dispatch
Incoming operator
orders Specification
guide Awaiting credit
Salesman
approval

For the analysis of indicators, the model was run for 1

month, taking into account a working schedule of 6 hours per
day. The following improvements were obtained.

TABLE III. COMPARISON MATRIX

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 Fig. 3. Simulation in Arena current situation
Fig.4. Simulation in Arena improved situation

V. CONCLUSIONS

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 The implementation of the inventory management model
under the Lean Warehousing methodology approach and the
tools discussed obtained positive results that, for the most
part, met the expectations set forth. Inventory turnover
increased from 4 to 12 times per year, equaling that of the
Peruvian sector, which allowed the inventory to return to the
company more frequently and, in turn, to have sufficient
inventory available on a monthly basis. On the other hand,
the level of accuracy in the inventory count was increased to
97.44%, which positively impacted sales due to the accuracy
in the amount of inventory available in the system compared
to the physical inventory. Finally, the choice of suppliers was
improved, as evidenced by a 4.64% reduction in inventory
loss, which was possible thanks to a supplier homologation
that not only ensured the quality of the products, but also
made it easier for the company to purchase the exact quantity
needed in accordance with the demand forecast.
The tools that were simulated were Kanban and
standardization together with the demand forecast values in
the Arena Simulation program based on attributes, entities
and factors. However, as for the 5S tool, an implementation
was carried out with the area's collaborators, while the
standardization of suppliers was seen directly with those in
charge of negotiating with them, making an evaluation of
each one of them. It should be noted that the order in which
the tools were implemented was key to the success of the
indicators obtained, which are similar to the results of the
competition in the Peruvian sector, thus reducing the large
initial technical gap of the company. Therefore, it can be
concluded from the following case study that the results were
favorable and met expectations.
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