An investigation of rounding rules for Jula´s Supply Chain Management Systems

Abstract: Order picking is one of the warehouse operations that have the highest priority for improving warehouse efficiency. Without a systematic approach to assigning stock keeping units (SKUs) to appropriate storage locations, the efficiency of order picking causes additional material handling costs, as well as ineffective storage utilization in a warehouse. The rounding of orders to achieve a batch size is a common practice in warehouse operations to achieve efficiency. However, order batching has also been recognized as one of the causes of the bullwhip effect in the supply chain. Since there is limited academic study investigates the bullwhip effect connected with replenishment strategy, this thesis aims to find whether rounding rules can cause a consequence in the supply chain in terms of quantity distortion and changes in associated costs. The author chose Jula as a case company, used Excel VBA function simulated six rounding rules, made comparisons and reached the conclusion that, rounding rules cannot cause a significant change in quantity, however, rounding at a minimum rate and with more levels of packaging parameter registration have an effect of reducing the handling cost per order, ordering cost per piece and total cost per item per year. The author has also highlighted the areas for Jula to improve its supply chain performance.