Seven Trends in Logistics

1. Warehousing; In-House or Outsourced?

On one side, the 3PL providers are getting better and have all the credentials needed, which is tearing down a lot of the walls of resistance towards outsourcing. On the other side is the feeling of lost control and freedom that could be needed as logistics is getting even more important. There are a lot of other reasons, but everybody is talking about it.

2. Ocean Freight

At CSMCP this was the topic for of many discussions and it is changing the thinking in many companies. The intensive rate hikes the last year and the unreliable capacity are some of the problems to wrestle with. It is also a part of the background to the on-shoring, even though it is more anecdotal than substantial statistical facts this far. On-shoring will make the list soon.

 

3. White Glove Services

The term used to refer to companies carrying the furniture into the living room. Now it is often used to refer to the value added services in conjunction with the delivery of a physical product. This service is getting more integrated in the physical product and treated more as a source of revenue than a nuisance. The final yards of the delivery is getting more important as the only physical contact with the customer for many companies.

 

4. S-a-a-S

The Software-as-a-Service concept has enabled smaller companies to operate good and modern WMS and TMS, which facilitates a smaller revolution when it comes to efficiency.

 

5. Intermodal Traffic

It has been talked about for a while and now nobody wants to miss the train (!) The increase in domestic container shipments on rail increased by 7% in the third quarter of 2014 over the same quarter in 2013 according IANA.

 

6. Fuel Prices

The gas price has decreased by 78 cents per gallon from May 2014 to November 2014. What will this mean for the trucking industry? Will the carriers change the fuel surcharge formulas?

 

7. Distribution Structures

Partly connected to the number 1 on the list. With the economy taking off and volumes increasing, we see a lot of companies reevaluating their distribution networks. The managements have learned that there are big savings to be had by optimizing the distribution networks and don’t want to miss out.

Warehouse Design in the Real World

Hakan Andersson discusses warehouse design in the real world. The main takeaways for getting a very efficient and low investment warehouse design for high-volume goods with few SKUs:

1. Separate flows, inbound flows from outbound flows.

2. Automate where the flows are big enough.

3. Abundance of dock doors to enable live loading into drop trailers.

4. When you have high enough volumes, don’t be shy from using the floor stacking.

 

Project Background

Just a short background. This company is a food company; they produce consumer food for retail. It’s high-volume goods and, relatively speaking, few SKUs. We have one or two hundred SKUs we’re handling here.

 

The Challenge

The challenge in this project was they just acquired a new brand, so they wanted to host double the production volumes; the facility should host that. We would like to do this, and this is then the outcome as well, because we succeeded in having very low investments. It turned out that we could handle double the production volumes with just marginally expanded workforce when it comes to material handling.

Then, as is for most companies, there was an urge to have this be very flexible.

 

Lessons Learned

1. Separate inbound flows from outbound flows

The first major lesson here was when we did all the analysis and we tried out a lot of different scenarios.

What made a huge impact was to separate the flows, inbound from outbound. With the original layout, there was plenty of dock doors but they were all at the same place. In this instance we made a design where we opened up doors that were coming in directly to the production line.

The reason we did that is we wanted to minimize the crossing traffic. When you have that high volumes as we have in this case, when you have a production, you have all the packaging material, the driving distance quickly adds up to be very much.

2. Automate where the flows are big enough

The second takeaway here was that when the volumes are high enough, it makes sense to automate. In this case this is true for the inbound material, packaging material.

We have very high, repetitive flows. We put dock doors close to where you feed the production lines.

With packaging material, we put drop trailers and used them as storage. The ingredients would come in through pipelines, so we didn’t have to handle that at all; pipelines and conveyors. By having the drop trailers with the packaging material, we could then unload them directly from the trailers. One touch on to gravitating conveyor belts that were feeding the packaging machines.
This took away a lot of handling, and it also helped a lot with disconnecting the feeding of the production line from material handling. Then we had a robot that was emptying the totes in the production lot.

3. Abundance of dock doors to enable live loading into drop trailers

The third takeaway here was that it made a lot of sense to install an abundance of dock doors. This way we could enable live loading of the drop trailers—again, one touch—and we would also reduce the need for staging space, which is very space-consuming in normal warehouse design and a very critical part of it too.

And we then set up routines to direct the trailers to the doors that were nearest to where the majority of the products were stored. This made a huge difference when it came to the staffing requirements.

4. Use floor stacking when volumes are high enough

The fourth major takeaway here is regarding storage equipment. In this case, as always I would say, the 80/20 rule is very applicable, which meant that we had a lot of products with less than five pallets an average storage volume. For them, we set up pallet racking, but that would leave us, then, with very few SKUs.

We started out with, say, 150 to say that we had 25 to 30 SKUs that were produced in very high volumes.

For those, it made a lot of sense to floor stack them; we would floor stack them two high and nine deep. No investment at all and racking for them, very space-efficient; just so deep, you could stack them too high that without the aisles that you would have with a racking solution, it’s actually surprisingly space-efficient, and it’s a very flexible solution.

It also means that you have a built-in ability to expand in increments by putting in four deep, four high driving racks.

Summary

The main takeaways here that are making it very efficient and low investment for high-volume goods with few SKUs:

1. Separate flows, inbound flows from outbound flows.

2. Automate where the flows are big enough.

3. Abundance of dock doors to enable live loading into drop trailers.

4. When you have high enough volumes, don’t be shy from using the floor stacking.

Optimizing Linear Networks

Dustin Mattison from TheFutureOfSupplyChains.com interviewed Fernando Alvarez, who discussed ‘Optimizing Linear Networks’. 

Logistics Network Modeling can help you evaluate trade-offs between service level and cost in your logistics network. Optimizing your logistics network can be a complex problem to solve. You need qualified supply chain consultants who know how to devise proper algorithms to solve specific logistics network design problems. The end results will include cost savings and better service levels.

Key Takeaways

• Today the top 100 liner companies running fleets of about a dozen vessels or more are basically developing their schedules and rotations by hand, or using Excel.
• This creates tremendous sub-optimality in their system.
• Using optimization you can transport the same number of containers at very high levels of service, but with lower bunker consumption and fewer vessels.
• It would be very easy to design a network that is extremely cheap, but that would provide a very low level of service to the shipper. At the same time it would be very easy to design a network that provides an extremely high level of service to the shipper, but that would come at a very high cost.

The interview in its entirety can be seen here.

About the Author

Dustin Mattison | Blogger on TheFutureOfSupplyChains.com

About the Interviewee

Fernando Alvarez