The boss

Last week we were talking about Mercadona, a clear example of business success at many different levels: its close relationship with suppliers, the commitment to continuous improvement, the training of its workers and the commitment to the white label have been decisive in this race to triumph.

While it is true that one of the key factors of success is the figure of “The boss”. In the Mercadona philosophy the customer is the boss. The goal is to have the products with the highest quality and at the lowest price possible. But “The boss” exercises control not only in the mix of products and the layout of supermarkets, but also in the central axis of decision making related to the group’s logistics operations, as they do in other areas of the company.

Quality is now also the priority, within a scope of action that ranges from the provisioning of products to delivery to stores.

The key is, then, that the whole organization is aligned according to the consumer. “The solution to avoid problems lies in giving a correct sequential order to the objectives of logistics, and we have to start with quality, followed by the quantity, the time, the place, and finally the cost,” said Montanyà, Logistics General Manager of Mercadona.

As a positive example, Montanyà mentioned the change made in the automatic picking equipment of its platforms, which allows to stack and prepare several boxes at the same time, instead of one, as was done with the previous machinery. Although the investment in this last type of equipment had already been made, it was decided to substitute – beginning at the center of Guadix -, to gain in agility, which translates into less time in the presentation of the product to the consumer and in greater freshness and quality.

Besides putting the consumer in the center of the logistics operation Montanyà did not leave aside other important concepts in logistics, such as productivity. The design of logistics thought for the worker; collaboration with suppliers; respect for the environment – both that of the inhabitants close to stores and the environment – are other requirements of Mercadona’s supply chain.




Energy alternatives

Working for the HOF3M project we were researching on sustainable transport alternatives from a double perspective: economic and ecological.

  • Economical in the way you can reduce costs by using these systems.
  • Ecological because they are less polluting than other transport models.

Diving through the net I was surprised by a new, not because it was spectacular or overly novel, but because I simply did not know it: the use of natural gas as an alternative fuel to petroleum derivatives.

According to GASNAM, this fuel is the first alternative fuel in Spain and its use is being boosted in different sectors (The MOVEA 2017 Plan plans to allocate 2.08 million euros for natural gas vehicles, especially to increase the number of cargo stations).

This type of fuel is valid for all vehicles, the use of which is notable in public transport and freight transport, due to the high autonomy that these vehicles achieve and the environmental and economic advantages.

Specifically it is 50% cheaper than gasoline and 30% diesel (it would be possible to travel by car from Barcelona to Madrid for 20 euros) and represents a saving of 25% of CO2 compared to gasoline, and a reduction of 87% nitrogen oxide compared to a diesel vehicle.

The European Union has about two million vehicles powered by CNG: Italy is the main European market for this fuel.

The future increase in the network of gas refueling points could stimulate the sale of these types of vehicles in our country.


Milk Run Logistics

Milk-Run logistics is a generic name of a logistics procurement method that uses routing to consolidate goods by the buyer. It is a method of goods collection in which the user (i.e. car assembly manufacturer) dispatches one truck at a specified time period to visit various suppliers (i.e. parts supplier) following a predefined route to collect parts or products, and deliver them to the factory .  In general, the reasons why Milk-Run logistics has been widely employed are:

1. Reduction in transportation costs due to consolidated transportation offsetting even the use of small lot transport.

2. Improvement of the assembly manufacturer’s production line and greater accuracy of JIT goods delivery due to synchronization. Milk-Run logistics can provide consolidated collection of goods necessary to improve logistics procurement systems.

3. Improvement of the vehicle loading rate, shorten the total distance traveled.  It can achieve various suppliers and manufacturers of coordination, improve agility supplies and flexibility, but also improve the ability of the manufacturer’s response and system efficiency.

4. It reduces the risk of product quality if problems. Manufacturers can quickly discover and   inform the corresponding suppliers, to minimize the impact on sales.

5. It changes logistics strategies, using third-party logistics significantly reduce in-process inventory, increased capital flows, reduce investment risks.


Source: Milk Run Logistics: Literature Review and Directions (Gurinder Singh Brar and Gagan Saini )

Business model in logistic

Currently the most recognized concept indicates that a business model consists of a conceptual tool that contains a set of objects, concepts and their relationships with the objective of expressing the business logic of a particular firm. This definition has been the precursor of those expressed in the text entitled “Generation of Business Models”, which has taken center stage by proposing the model called CANVAS. This text begins by stating that “the business model describes the basis on which a company creates, provides and captures value,” thus simplifying the authors’ considerations, which have been thoroughly discussed in several previous academic articulations. The authors sought through this text to present in a simplified way the way to diagram a business model, in order that the establishment of the “business canvas” be a common language through which companies can expose the form through which to seek to generate value.

 The combination of the concept of integrated logistics with the concept of business model takes on value from the importance of logistics processes in recent years. This makes logistics no longer only appear as one more component of business strategies, but now emerges as the core business in many companies in various sectors and economic sectors. This has been observed for decades, perhaps recognizing for the first time in the value chain of Michael Porter, the importance of two relevant primary activities such as entry logistics, related to purchase orders, order management, and storage , etc; And outbound logistics, linked to the storage of finished products, and distribution to the consumer, among other functions.

In logistics can be contemplated all the business models, knowing:

– Market Segment.
– Value proposal
– Channels.
– Customer relations
– Sources of income.
– Key resources.
– Financial structure.

Logistics goes through each and every one of the modules that make up the business model based on Canvas or business canvas. And it is noteworthy that it is useful for any logistic business model, the use of a scheme such as the one mentioned, in order to structure the operations, check the interrelationships of each function, and clearly state how the company will generate and capture value .




Inventory Forecasts


Forecasting is the prediction of what happens to a given element within the framework of a given set of conditions.

The basic objective of a forecast is to reduce the range of uncertainty within which decisions are made that affect the future of the business and with it to all parties involved. Although the prognosis does not replace the administrative judgment in the decision making, it is simply an aid in that process.

The forecasts are used in the process of establishing goals both long and short term, thus forming bases for the development of plans, at a general level and in the different areas or units.

In the production area, forecasts are made of the cost and availability of the raw material, the cost, and availability of labor, when maintenance will be required for the equipment, what capacity will be necessary to meet the demand.

Depending on the timeframe they serve, they are classified as:

Short term. They are used to design immediate strategies, are employed between middle managers and front line managers.

In the medium term. Joint short and long term, useful for decisions at all levels.

Long-term forecasts. Required to set the general direction of the organization, are generally made for senior management to use them in strategic planning processes.

According to the intensity of data usage, they are classified as:

Qualitative forecasts. They are based on the judgment of individuals or groups of individuals, can be presented in numerical form but are generally not based on historical data sets.

Quantitative forecasts. They employ significant amounts of previous data as the basis of prediction. They may be:

  • Simple (non-formal): projecting past data into the future without explaining future trends.
  • Causals (explanatory): try to explain the functional relations between the variable to be estimated (dependent variable) and the variable or variables that explain the changes (independent variables).

Simplr: Warehouse management software

We have been designing different layouts, taking decissions about how stock flows, orders, deliveries, inventory management, etc.

But, how technology helps in this issue? There are some softwares dedicated to help on some of the tasks we have seen in class, and in fact nowadays are the base of companies warehouse management.


In the next video, we can see the presentation of a software called: Simplr warehouse.


As we have seen, this software replaces traditional way of managing warehouses in different phases of ware house management such as inventory, stock of godos, delivery and so on. It has been great to have an approach of basic logistics concepts, since gives us the idea of how logistics play a key role in business. Adding to this, the softwares companies have the chance in order to ease this task can be also interesting for the class, so I have tried to show an example. I hope it can be helpful for you.

The excessive fluctuation in the supply chain by the whip effect

The bullwhip effect in the supply chain can cause stock problems and additional costs as well as affect customer satisfaction. For instance, an excessive increase in production can lead to a lack of control in each of the logistical commitment processes in all the companies involved. This can be called bullwhip effect.

Resultado de imagen de efecto del latigo

How the whip effect is triggered

The bullwhip effect is the tendency to an excessive fluctuation of inventories and orders in the supply chains that does not correspond with the actual demand of the customers. It is then that the small variations in a certain point of the chain are increasing and moving to all the procedures as the chain progresses, producing inventory problems in its wake.

If there is no constant information and feedback on the inventories and the current demand of the consumer in the different links in the supply chain, the whip effect generates over stock and, as a consequence, the final product is radically made more expensive.Such whipping in supply chain fluctuations increases the costs associated with inventory, transportation, shipping and receiving, etc

¿what factor cause the bullwhip effect?

  • Lack of information between suppliers and intermediate buyers.
  • Management without order in production orders.
  • Lack of precision in the forecast of demand
  • Making panic-driven orders in situations of stock breach

How to Avoid the Whip Effect ¿what factor cause the bullwhip effect?

  • Get the supply chain to react to sales immediately.
  • Planning in the warehouse management with a good forecast of the demand
  • Understand the behavior of demand peaks and seasonality of products.
  • Ability to integrate Just In Time dynamics to strengthen integration and synchronization with customers and suppliers.

In this way we will be able to adapt the client’s demands with the fluctuations of our supply chain in a correct and farsighted way.