HP – improving logistics

Today everyone knows the HP brand, but not everyone has the opportunity to learn news about logistics company.

HP is a company trying to reduce each year the environmental impact of transporting its products around the world. Most of their software products and image are assembled in Asia.

However, most HP sales are in Europe and America. These products are normally transported by ship from Asia to distribution centers, and then to transport to their final destination, which is done by truck or rail.

The company usually use air transport for urgent deliveries and when the products are lighter, such as cameras.


Its logistics network uses fossil fuel for boats, trucks and airplanes. They know that these fuel emissions contribute to climate change and increase pollution, but can not measure these emissions because they use third parties to transport.

However, its logistics program design for HP improves transport efficiency and reduces energy consumption. They also have new packaging and transportation of the product, as they are the subject of pallets and truck loading.

In 2006 HP managed to reduce the environmental impact of transporting their products by the continuous transfer of air and maritime transport, and improving transportation planning and the use of pallets.

They have made great achievements improving logistics shipments, but among these achievements include the pallets program they have, which is to introduce plastic pallets weighing less than a quarter of the wood and require less energy for transport shipments.

Resultado de imagen de pallets de plástico vs pallets de madera   Vs    



Lean in Healthcare (II)

In my previous post I mentioned the differences between the application of Lean in manufacturing and healthcare. However, which are the similarities? Moreover and perhaps more importantly: how to succeed implementing lean in healthcare?

First, it is very important to achieve the management commitment, and we should start making them understand Lean in order to get their support because a manager’s most important task is to create an environment where interaction between team members leads to a high level of performance. In addition, it is important taking into consideration that lean is a learning method more than anything else, and learning cannot occur if basic stability has not been achieved.

Second, the tools used for eliminating waste are similar in every type of organization, including healthcare. For instance, tools such “5 Whys” (used to discover the root cause of the problems), “5S” (used to create order and cleanliness, and to ensure that are maintenance day to day), “Kanban” (used to avoid the run out of supplies and to ensure that the oldest items are used first, eliminating waste due to expiration), “visual controls” (used to create a workplace where everything needed is displayed and immediately available) and “standardization” (used to identify and eliminate waste on processes, making the changes standard) can help any organization to implement Lean transformation. Furthermore, there are other tools like “Value Stream Map” (used to distinguish value-adding versus non-value-adding steps) that can be easily adapted to both health care operations and manufacturing processes.

In order to succeed with Lean in the healthcare environment is important that people involved understand what Lean means first. The Key concept is value, which is defined as the capability to deliver exactly the product or service a customer wants with the minimal time. For that reason, people involvement and support for front-line staff to make improvements is very important. Some employees tend to resist imposed change, but most employees will be ready to make changes that will improve their own work and efficiency.

Having achieved people involvement, the first step of the process is direct observation to understand what is going on the clinical area, to see how patients flow through the system and what obstacles and barriers are. Doing that we will understand what is truly valuable to patients, as well as establish whether or not what we are delivering is valuable.

Keeping this in mind, a good way to start implementing Lean tools is using a Value Stream Map. VSMs are easily adapted to most healthcare operations and are designed to distinguish value-adding versus non-value adding steps. In healthcare, a value-adding step would be a nurse’s interview to obtain important information from the patient, whereas a non-value adding step would be a patient waiting for doctor to arrive at the examination room. Once discovered the wastes is time to eliminate them and improve the processes. As we said before, Lean proposes several tools for eliminating waste. However, it is very important to underline that continuous improvement is needed in Lean and continued adoption and application of the tools will lead Lean becoming a standard way of solving problems.

VSM - Odense Hospital

Source: Linköping University. Department of management & engineering

Implementing all explained above, we will reach the 5 Lean principles in healthcare which are the following: specify value from the standpoint of the patient, identify the value stream to diagnose and treat the patient, enable patient to flow smoothly through every step, match capacity with demand and manage towards perfection

Implementing lean is a difficult task. Perseverance, high quality leadership, patience and dedicated professionals are needed. Scepticism and resistance will be high and success not guaranteed. However, Lean can really work in a healthcare environment and its application can improve quality, productivity and team working environment.


Ballé, M. and Regnier, A. (2007), “Lean as a learning system in a hospital ward”, Leadership in Health Services, Vol. 20 No. 1, pp. 33-41.

Fillingham, D. (2007), “Can lean save lives?” Leadership in Health Services, Vol. 20 No. 4, pp. 231-241.

Jimmerson, C., Weber, D., and Sobek, D. (2005), “Reducing waste and errors: Piloting Lean Principles at IHC”, Journal on Quality and Safety, Vol. 31 No. 5, pp. 249-257.

Joosten, T., Bongers, I., and Janssen, R. (2009), “Application of lean thinking to health care: issues and observations”, International Journal for Quality in Health Care, Vol. 21 No. 5, pp. 341-347.

Poksinska, B. (2012). Lean Healthcare, Lecture slides . Linköping University

Zidel, T. G. (2006), “A Lean Toolbox: Using Lean Principles and Techniques in Healthcare”, Journal for Healthcare Quality Web Exclusive, Vol. 28 No. 1, pp. 1-7.

Lean in Healthcare (I)

Implement Lean in a healthcare environment is a difficult task. Its application often leads to resistance and the common arguments are (among others) that a manufacturing approach cannot work in a hospital setting, that the personnel are too busy to implement lean, or that business approaches neglect the sociotechnical aspects of health care. Many people are reluctant to view the work they have been performing for many years as wasteful and according to that, they become defensive and resist any effort to change the situation.

However, several experiences have demonstrated that techniques developed in manufacturing really work in hospitals and the potential gains of Lean application are enormous. Bolton Hospitals NHS is one of these experiences: before Lean implementation the hospital had a financial deficit and significant problems with long waits for diagnostics and treatments, after three years of Lean application, the financial balance was restored and the waiting times reduced.

lean in healthcare

Source http://www.leanhealthcareconnect.com/

Lean can improve safety, improve staff morale and reduce costs, but some differences between the application of Lean in manufacturing and healthcare have to be taken into consideration. First of all, healthcare professionals deal with a group of customers who are often weak, vulnerable and frightened and in addition, the degree of organizational complexity is high and many procedures have a significant level of risk. Due to that, the outcomes of mistakes (drug errors, infections or misdiagnoses, among others) are often more critical than in manufacturing companies. Moreover, the patients consider as truly valuable aspects such as pain relief, wish for information, cleanliness or hygiene which are completely different of the value consideration in manufacturing.

Second, the balance between achieving high quality and remaining financially viable is becoming a major issue for hospitals today. If hospitals were like most companies, they could compensate the rising costs increasing the selling price; nonetheless hospitals are not like most companies. According to that, the goal is to understand that good quality can cost less not more. In addition, setting delivering benefit in a healthcare environment is one of the most difficult tasks and it is important to define whether it is reduction of mortality, improvements in productivity or patient satisfaction increase. In health care, different actors have different views of value and for instance, the doctor’s clinical value oftentimes differs of the manager’s operational value.

Finally, how processes should ideally work is often described in manufacturing companies, but it is rarely described in health care operations. This creates inconsistency in care, unpredictable delivery systems, and constant caregiver interruptions which in turn create inefficiencies, higher operating costs, errors increasing and worker frustration. In addition, different hospitals units may require different approaches to implementation. Whereas laboratory, pharmacy and information staff are normally process-focused; nursing units and senior leaders experiment greater difficulty in that aspect.

Having examined the differences, in my next post I will consider the similitudes between the application of Lean in manufacturing and healthcare.


Fillingham, D. (2007), “Can lean save lives?” Leadership in Health Services, Vol. 20 No. 4, pp. 231-241.

Jimmerson, C., Weber, D., and Sobek, D. (2005), “Reducing waste and errors: Piloting Lean Principles at IHC”, Journal on Quality and Safety, Vol. 31 No. 5, pp. 249-257.

Joosten, T., Bongers, I., and Janssen, R. (2009), “Application of lean thinking to health care: issues and observations”, International Journal for Quality in Health Care, Vol. 21 No. 5, pp. 341-347.

Zidel, T. G. (2006), “A Lean Toolbox: Using Lean Principles and Techniques in Healthcare”, Journal for Healthcare Quality Web Exclusive, Vol. 28 No. 1, pp. 1-7.

Logistics in PortAventura

When I was younger I went to PortAventura, you had to prepare seeing the map and choosing a route to be followed, before arriving there and even you were at the park you couldn’t know in a certain way, with your map in your hands, if you were going in the choice direction.

Another important thing is that, you could lose your valuable time waiting to access to a ride. They don’t provide any method to get an idea how much time are you going to spend waiting in a crowd people ride or even the lack of indications to arrive at your preferred ride.

A few days before, I have been in PortAventura, I saw some improvements that allow customers improving the access to the rides. For example they put more information and directions indicating where you are or which are your nearest attractions. Also, they provide different tickets with their relative prices to have a fast access.

But, the most important thing that attracted my attention, even I have taken a photo to post here, it was the panels indicating how much time you are going to spend waiting to access to the main rides. In this image we could see what I am referring.


It is necessary to highlight that people are concerned about the time because they want the maximum benefit of the day. PortAventura provided another useful organizational tool to give an idea how much time is needed to enjoy each attraction.

Due to logistics of the whole amusement park you can enjoy a day, because they have thought to improve their process applying some continuous improvements in their installations, even if you don’t really realize on it.

The PortAventura managers will have been in the Gemba, applying the kaizen methodology to directly improve their flows people in their facility.

Fast Fashion Takes Logistics to Another Level!

The first time that  classmates in America heard the name Zara was not because they saw an advertisement on the newspaper or a store on the street, it was because our next case project was the Zara case. In a class of logistics, transportation and supply chain management is almost a must to study this case, maybe fashion is not as interesting for eveyone, usually they may think that Valentino or Vera Wang are the neighbor’s children, but perhaps we should become familiar with the supply chain management style in Fast Fashion.

Cloting retailers like Zara, H&M, Topshop and Forever 21 are giving a new perspective in the supply chaing and logistics world, maybe the improvements are in a business segment that sadly is not considered innteresting and important for everyone, because there is a lot to learn as the fast fashion industry is succesfully growing.

Before fast fashion, the designers of this industry aimed from the haute couture market to lines sold in stores like Kohl’s and Walmart, historically they have worked on a four season product calendar. New designs were created six months before their arrival in stores, this gave designers time to make late adjustments according to any unexpected trend, and gave supply chain managers time to negotiate supply, production and transportation contracts. At the end, garments were sent to stores in a variaty of sizes and ranges. Then stores push the new arrivals extremely before, which eventually caused the discount in the items to accomplish the end of the season at the time desired.

Fast Fashion has speed up the process, as the four season product calendar is almost ignored and there is a continuous design process, that of course is season conscious but more focused in real time trends, as they take into account more the demand signals received from store by the shoppers, or street style.

For example if in certain location the customers express their interest in buying plaid shirts or denim skirt the information is transmitted by the stores to the central management areas, whom at the same thime contact the designers to inmediately design something to meet the demands, they make different changes but with the same idea in order to reach more customers, insted of six months to desing, produce and deliver a garment to store, fast fashion does the cycle in six to eighr weeks.

To achieve this, retailers have a strong relationship with suppliers of materials and garment producers, whose at the same time prepare themselves with strategies, like buying materials in bulk and white, as white is easily dye into another color.

Fast fashion companies ship small numbers of each item to their stores, as the goal is to sell the products at a full price, they are not interested in leaving garments to be sold at discount. But also the full price in fast fashion usually is below 50$  for some garments, which is a big difference from a haute couture garment that can cost 1000$.

Fast fashion expects to succed based in the current trends and affordable prices, not exactly in quality, as they usually do not survive several years, in some cases months, but that is not a problem, as this mean an opportunity to sell in the future.

This tipe of supply chain management is not possible to do in all industries, as not every item can be easily disposed in a short-term, but some ideas can be taken as they meet demands in a short period at affordable price, as this style has the potential to increase revenues and sales, as it increase the ability to sell the merchandise at a full price.


Nowadays Lean is everywhere, Lean Management, Lean Construction, Lean Manufacturing, Lean Organization, but what is Lean?

The main idea of lean is to increase value for the customer, through reducing waste. It creates more value for customers with fewer resources. The word Lean was first used to describe Toyota’s way of manufacturing.

A Lean organization is one that understands the customer value and focuses key processes to increase this value. The main goal is to give a perfect value, through a perfect value process with zero waste.

To accomplish the main goal, lean thinking focus in optimizing the flow of product and services through entire value streams that flow horizontally across technologies, assets and departments to customers, contrary to the usual management focus of optimizing separate technologies, assets and vertical departments.

Eliminate the waste of entire value streams, instead of single points, create better processes that need less human intervention and effort, less space, capital and time to create products and services at less costs and fewer defects, compared with traditional systems. Also companies are able to respond faster to the customer changes, this with high quality and low cost and better times. Management’s information also flows simpler and accuratly.

Lean is applicable to every business and process, is not just a tactic to reduce costs, and is a way of thinking and acting in the companies. Lean is not a temporal program that causes short-term reductions, companies transform themselves in the process to become Lean.

In Womack and Jones book is given a guide for managers to be used in the lean transformation in their organizations, the three fundamental guidelines according to the book are:


  • Purpose: What customer problems will the enterprise solve to achieve its own purpose of prospering?
  • Process: How will the organization assess each major value stream to make sure each step is valuable, capable, available, adequate, flexible, and that all the steps are linked by flow, pull, and leveling?
  • People: How can the organization insure that every important process has someone responsible for continually evaluating that value stream in terms of business purpose and lean process? How can everyone touching the value stream be actively engaged in operating it correctly and continually improving it?

Lean is not just a trend, is here to stay as long as the companies are determined to give a perfect value with fewer resources.

Source: Lean Thinking. Banish Waste and Create Wealth in Your Corporation, Revised and Updated. By James P. Womack and Daniel T. Jones. http://books.simonandschuster.com/Lean-Thinking/James-P-Womack/9780743249270#sthash.WaG5qY98.dpuf

Total Productive Maintenance (TPM)

Total Productive Maintenance (TPM) is an extensive production system. Herby parallels can be seen to the terms Kaizen or Lean Production. In general TPM is a program to improve continuously all parts of a company. The focus is on avoiding losses and wasting mainly in the production. The objects are as follows:

  • Avoid breakdowns
  • Avoid interruptions and slow runnings
  • Avoid defects
  • Avoid accidents

The traditional approach to TPM was developed in the 1960s and consists of 5S as a foundation and eight supporting activities.In the following graph you can see the TPM model:


The foundation of TPM is 5S: Sort, Set, Shine, Standardize, Sustain, a workplace organization method used to build a strong cultural foundation, create stability and improve capability. Accordingly, TPM starts with 5S because problems cannot be clearly seen when the work place is unorganized. Cleaning and organizing the workplace helps the team to uncover problems. Making problems visible is the first step of improvement. 5S should be treated like a pillar of TPM:

  • Sort: Eliminating any unneeded parts in the work area
  • Set in Order: Organizing remaining items
  • Shine: Inspecting the work area
  • Standardize: Creating standards in order to perform the above activities
  • Sustain: Ensuring that the standards are regularly applied

In the following table you can see the responsibilities of the 8 pillars. Each of them has the goal to eliminate losses. They are focused on proactive and preventative techniques in order to improve equipment reliability:

Pillar What Is It? How Does It Help?
Autonomous Maintenance Places responsibility for routine maintenance, such as cleaning, lubricating, and inspection, in the hands of operators. Gives operators greater “ownership” of their equipment.
Increases operators’ knowledge of their equipment.
Ensures equipment is well-cleaned and lubricated.
Identifies emergent issues before they become failures.
Frees maintenance personnel for higher-level tasks
Planned Maintenance Schedules maintenance tasks based on predicted and/or measured failure rates. Significantly reduces instances of unplanned down time.
Enables most maintenance to be planned for times when equipment is not scheduled for production.
Reduces inventory through better control of wear-prone and failure-prone parts.
Quality Maintenance Design error detection and prevention into production processes. Apply root cause analysis to eliminate recurring sources of quality defects. Specifically targets quality issues with improvement projects focused on removing root sources of defects.
Reduces number of defects.
Reduces cost by catching defects early (it is expensive and unreliable to find defects through inspection).
Focused Improvement Have small groups of employees work together proactively to achieve regular, incremental improvements in equipment operation. Recurring problems are identified and resolved by cross-functional teams.
Combines the collective talents of a company to create an engine for continuous improvement.
Early Equipment Management Directs practical knowledge and understanding of manufacturing equipment gained through TPM towards improving the design of new equipment. New equipment reaches planned performance levels much faster due to fewer startup issues.
Maintenance is simpler and more robust due to practical review and employee involvement prior to installation.
Training and Education Fill in knowledge gaps necessary to achieve TPM goals. Applies to operators, maintenance personnel and managers. Operators develop skills to routinely maintain equipment and identify emerging problems.
Maintenance personnel learn techniques for proactive and preventative maintenance.
Managers are trained on TPM principles as well as on employee coaching and development.
Safety, Health, Environment Maintain a safe and healthy working environment. Eliminates potential health and safety risks, resulting in a safer workplace.
Specifically targets the goal of an accident-free workplace.
TPM in Administration Apply TPM techniques to administrative functions. Extends TPM benefits beyond the plant floor by addressing waste in administrative functions.
Supports production through improved administrative operations (e.g. order processing, procurement, and scheduling).

As it was described in this blog, TPM is a method to improve and enhance productivity. TPM permanently improves the overall effectiveness of equipment, with the active involvement of operators.

Interesting video regarding TPM:






Transport of animals

One of the main challenges of food industry is to offer quality products to its customers. Due to the high and growing demand of meat transport of alive animals is fundamental to achieve that, as bad conditions in transporting can affect negatively to their health, maybe even not being in condition to fulfill sanity regulations at the end.

The main complication while transporting living animals instead unanimated objects is that the first notice transport conditions, which can affect to their stress level. For example, an abrupt stop or direction change can make boxes of inanimate items be beaten, but if packaging is efficient nothing will happen. In the case of the animals, they will be hit against its jails, putting in danger their health conditions, and they will be upset for the rest of the travel.

For this, it is responsibility of the carrier keep a moderate speed and attention to the road. Besides, conditions of the container are important, as avoiding the presence of dangerous objects (for example with sharp extremes) which can hurt the animals in accident case.

Also, choosing the best rout, avoiding for example roads in bad conditions, turns more important than in other type of transports.

Also, the temperature control is a big problem. Not only because it alters the animals, but also because it can make them arrive dehydrates to the final destiny.

It is difficult to manage this factor, because due to the agglomeration of jails with animals inside a truck container is easy to arrive to high temperatures, but some measures can be taken, as for example giving water to the animals in long travels, as when exporting other countries. Other practice is charge animals in morning hours, when temperatures are lower, as explained in the following video:


Another possibility to consider is try not to charge too many animals in a shipment, even if it is more expensive (as unitary cost increases when the charge is smaller) it can help to guarantee the animals will arrive in good conditions.

These problems are even more complicated when transporting delicate animals, as bees: while an important temperature change while traveling can upset a pigs shipload, bees can even die.

Regulations are also more difficult than when transporting non living products, Europe laws establish limit period time to 8 hours in travels by road when transporting animals. If the vehicles are improved (with efficient ventilation systems and other characteristics) this period can be extended to the following:

-Pigs: 24 hours, as long as they have access to water during the whole travel.

-Horses: 24 hours, with condition of water supply every 8 hours

-Animals in lactation period: 9 hours + 1 hour of rest and water supply + 9 hours.

-Sheeps and goats: 14 + 1 hour for rest and water supply + 14 hours.

For the companies, it is important pay attention to these factors not only to be efficient (as the animals bad shapes due to travel conditions produces important losts of money) but also to keep a good image between the customers, as conscious against animal abuse is a growing tendency.

Sourcess and interesting links:






Toyota strategy Just in Time

JIT is a manufacturing philosophy  involving an integrated set of procedures/activities designed to achieve a volume of production using minimal inventories.

A highly coordinated processing system in which goods move through the system and service are performed, just as they need.

  • Evolved in Japan after World War II, as a result of their diminishing market share in the auto industry.
  • Founded by Taiichi Ohno, a vice President of Toyota


    Just in time – Philosophy of complete elimination of waste

“Just-in-Time” means making “only what is needed, when it is needed, and in the amount needed.” For example, to efficiently produce a large number of automobiles, which can consist of around 30,000 parts, it is necessary to create a detailed production plan that includes parts procurement. Supplying “what is needed, when it is needed, and in the amount needed” according to this production plan can eliminate waste, inconsistencies, and unreasonable requirements, resulting in improved productivity.

Kanban System

In the TPS (Toyota Production System), a unique production control method called the “kanban system” plays an integral role. The kanban system has also been called the “Supermarket method” because the idea behind it was borrowed from supermarkets. Such mass merchandizing stores use product control cards upon which product-related information, such as a product’s name, code and storage location, are entered. Because Toyota employed kanban signs for use in their production processes, the method came to be called the “kanban system.” At Toyota, when a process refers to a preceding process to retrieve parts, it uses a kanban to communicate which parts have been used.

Evolution of the kanban through daily improvements

Through continuous technological improvements, the kanban system has evolved into the “e-kanban,” which is managed using IT methodologies and has increased productivity even further.

Taiichi Ohno (a former Toyota vice president), who promoted the idea of Just-in-Time, applied this concept, equating the supermarket and the customer with the preceding process and the next process, respectively. By having the next process (the customer) go to the preceding process (the supermarket) to retrieve the necessary parts when they are needed and in the amount needed, it was possible to improve upon the existing inefficient production system. No longer were the preceding processes making excess parts and delivering them to the next process.


In relation with the logistics terms, i can said that Toyota use Just-in-time production in a good way because relies on finely tuned processes in the assembly sequence using only the quantities of items required, only when they are needed. Imagine a process designed to produce six different types of product, where the total weekly demand for the range of products varies up and down by 25%, and the daily mix of product types is continuously changing. A planning challenge, but also a typical scenario in many types of business in which the process (manufacturing or otherwise) has to continuously respond to demand. Toyota Production System has responded to this reality of life by developing an approach that can meet the challenge in an efficient, cost-effective way.

Just-in-time offers a smooth, continuous and optimised workflow, with carefully planned and measured work-cycle times and on-demand movement of goods, reduces the cost of wasted time, materials and capacity. Team members can concentrate on their tasks without interruption, which leads to better quality, timely delivery, and peace-of-mind for Toyota’s customers.







The primary component of reservations control is seat inventory control. Traditionally, airline seat inventory control has been the practice of allocating seats to different fare classes in an effort to maximize the expected revenue of future scheduled flights. This is done by protecting seats for higher fare passengers, while at the same time making empty seats available to lower fare passengers.

The need for seat inventory control stems from the basic problem that airline supply does not equal demand. In air transportation, supply and demand seldom match exactly. On the one hand, demand for future flights is probabilistic and cannot be forecasted precisely. However, the problem results, to a greater extent, from the actual scheduling of aircraft. Because of the route structure of an airline, the relatively fixed number and size of aircraft, scheduling constraints, and the lack of balance in passenger demands over a network, it is not always possible to schedule exactly the right aircraft for each departure. Therefore, when there is either excess demand or excess capacity, a closer match between supply and demand can be achieved through the use of seat inventory control techniques.

The greater the problem of matching the supply of aircraft seats to the demand of different routes, the greater the benefits of effective seat inventory control.

The seat inventory control problem can be approached from a variety of perspectives. Seat inventories can be controlled over individual flight legs, over the entire network of a carrier, or over separate subsets of the network.

More info:

Airline Network Seat Inventory Control: Methodologies and Revenue Impacts. Elisabeth L. Williamson

Urban Logistics

What is Urban Logistics?

Urban Logistics offer unique tailor-made solutions for the transport of goods in cities by consolidating & rationalizing the existing logistics platforms and creating innovaitve solutions for the future through the use of information and communication technologies. Over the past two decades delivering goods into cities has become a chellenge with cities getting overly congested and traffic jams resulting in expensive logistic bottlenecks. Studies show that the cost of congestion now in terms of time wasted in traffic and fuel consumotion is off the roof, almost 200% (http://inrix.com/economic-environment-cost-congestion/)  more than what it was in the 1980s. Pollution, lack of parking bays, and warehousing costs are all restraint that are contributing to the economic cost of urban logistics.


By 2025 (Numbers and facts)

To give an outlook how cities will need new Urban Logisitcs here are some facts:

By 2025…

  • There will be 35 Mega Cities worldwide, each one demanding a unique solution for their logistics
  • 3 out of 5 people will live in one of these cities
  • Today an average city inhabitants from a developed city generates about 0.1 deliveries per day. If you take this number for 2025 this will lead to 500 million deliveries per day to cities by 2025
  • People will be even more connected (up to five connected devices (http://www.businessinsider.com/75-billion-devices-will-be-connected-to-the-internet-by-2020-2013-10)) and so for 20 % of retail will happen through online channels

Challenges of infrastructure

Due to the fact that in 2012 we broke the record of 800 cities with greater than one million inhabitants we can talk about the fact of the worldwide urbanization. Within the country membery of the OECD, tha urban population was 50 % of the total population in 1950, was 77 % in 2000, and should reach the 85 % mark by 2020 (OECD, 2003). Combine this fact with the already mentioned 500 million deliveries per day to cities we have a very high demand in resources.

The investment required for Urban Logistics will more the double itself from 2011 ($ 2.55 trillion) to 2020 ($ 5.98 trillion). Though the distribution will change. In 2011 32 % of spendings were used for warehousing. In 2020 the expected number will be 23 % of the total spendings.

Challenges of transport

In most of the city centers, nowadays it is a norm to deliver by truck services. Because of the amount of deliveries per day, trucks make up 25-30 percent of all traffic durring the workday (http://www.copenhagenize.com/2013/10/the-massive-potential-of-shifting-trips.html). As a consequence, in many large cities, road speeds during daytime hours already have fallen by up to 65 % in the last 10 years.

The major negative impacts of those number are rather obvious


Pollution, noise and the use of fossil fuel do damage the environment and the people significantly. In Chin only 1 % of city inhabitants breathe air that can be called safe under european standards.



The time delays caused by congestion increase travel times, intentory carrying costs and transportation costs have significatn impact on the economy in cities.

But: A lively and accessible city center is vital to trade and culture growth, which leads to a necessity to use city logistics as a tool in optimizing the use of limited city space, reducing congestion and improving economic efficiency of cities.

Solution for Infrastructure

There are solutions to these callenges. Some of them more simple than others. One of them can be the investement into so called Urban Consolidation Centers (UCC). This basicaly means that many different companies move from many different single company platforms into one common. Those UCCs might be build close to the city but still good connected to any freight arteries. Compared to building just a new lane on the highway the costs of building one UCC are a sixth of the price of a lane. (http://wiki4city.ieis.tue.nl/index.php?title=Urban_consolidation_center)


Another solution for small package deliveries can be the so called Locker Boxes. You can see them in most of the big cities in or near the post offices. The goal is to avoid a “milk run” type of delivery. They can be open 24/7 and can also used for return. The already existing boxes are mainly used by the end user and can only be used limited by businesses and companies.


Solutions for Transport

To avoid more polution in the city center due to a lot of transport is still done by lorries, one of the more simple solution is the extended use of EV trucks. These electronic powered trucks have a smaller radius, but can be supported by the appearance of an UCC. The charging can be done during the loading / unloading and CO2 emissions can be drastically reduced.


A solution for next day or even same day deliveries by now is often delivery by air. To avoid this wastly expensive but fast type of delivery cities could use high speed trains. There are already working examples like in France with the TGV.

The most environmentaly friendly solution will still be the bicycle. They can be used for the last mile delivery and are very fast. Most of the can only cary small to medium sized packages so the capacity is very small compared to an EV truck.



Looking at all of these different challenges and solutions there is no solution that fits to every city. In this blog I focused only on a few solutions but in my opinion the UCC combined with EV cars is a very simple though efficient one.

ArcelorMittal’s Supply Chain

ArcelorMittal, with a presence in over 20 countries and a leader in key steel markets around the world, have a responsibility to promote sustainability in your company.

Their key to success is to provide good efficient and reliable service to its customers and, thanks to the large size of the supply chain, the company is able to contribute to raising social an environmental standards.

Their supply chain structure has three levels:

  • Global: includes all those industries where suppliers are active globally.
  • Regional: whose platforms ensure that its regional procurement activity is as efficient as possible, and
  • Local: where global and regional agreements, and local partners are used both.

The global activities are supported in their shared service centers offering a support system for the entire company. Each center has a wide range of service, among which is the shipping and logistics service, which is supports the steel and mining activities, and is an integral part of the supply chain. This service enables the delivery of its steel products to its customers.

They are committed to achieving added value at its plants and offer exceptional to maintain their competitive edge services.



How is working the McDonald´s Supply Chain?

The management of McDonald´s Supply Chain has to be able to fulfil needs of around 70 million daily customers of a company with 35.000 McDonald´s restaurants. It is necessary to calculate the daily orders well in order to avoid that products run out. Therefore a strict organization on the responsibilities for planning each task and to fulfil the plans are necessary. It has to be taken in mind that source products depend locally. Furthermore the supply chain needs to foresee future demands and possible changes in sales volume.



Every distribution centre supplies between 250 and 700 restaurants, where are handled with daily sales, warehousing, restaurant stocks, transportation, marketing promotions and logistics services. Communication within the suppliers is essentially. Currently McDonald´s has a cooperation with 16 major suppliers.

The majority of the restaurants are organized with maximum three deliveries per week. In most of the cases of McDonald´s with one delivery truck it is possible to stock the whole establishment. Regarding the hours of delivery the times are coordinated in order to avoid interruption of breakfast or lunch services. When the customer sees the truck in the parking, he would feel inconvenient. Once the driver is going to one restaurant, he calls the restaurant to ensure that there are workers available to receive the delivery. This aspect reduces the time that trucks are in the parking lot up to 30%. Furthermore the company changed from roller and stand to delivery carts in order to move from the truck to the restaurant.


Regarding the inventory, this is turned over each four day at a restaurant. Based on the relationship with the suppliers this is possible. There is a large number of direct such as indirect suppliers.

As you have read in this Blog, McDonald´s Supply Chain Management has to conquer several challenges and does this with a lot of success. In the 2013 Gartner Supply Chain Top 25 list, McDonald´s supply chain ranked on number 2.

In the following YouTube video there is talked about the sustainable supply of McDonald´s:






IKEA´s Secret II

What makes IKEA as successful as it is???

An enormous part of IKEA´s success is their inventory management strategy. Beginning with the order of raw materials, due to their in-house design department, IKEA controls the costs of the product and the needed material. By that, they can reduce the amount of different materials to a minimum and save costs due to order huge quantities on the one hand and on the other hand they cut transportation costs.

The next cost saving step is the packaging and in order that the stocking costs. Each IKEA has a warehouse, which the customer reaches directly after leaving the show-room area where all the items are displayed.

Show-room-area to select product

Those warehouses are another important factor for IKEA´s success. The customer takes a trolley and goes through the warehouse. Here he can purchase the items he has chosen before, those which are easy to lift and stored on floor pallets. For items which are stored in height or too heavy to move on its own, their are workers who can help. However there are less touches or movements per item than in a regular furniture delivery process. That kind of strategy is called “cost-per-touch”. That means the more people have to touch or move an items to reach its destination the more expensive it is.

Self-service in the warehouse


Reordering management – minimum / maximum setting.

The reordering is done by the in-house logistic managers. These managers are working directly in the warehouse, not sitting somewhere else in an office. The idea is to order when the minimum amount of products on stock is reached and through that the maximum amount of products ordered at one time can be undertaken. The challenge is for sure ordering too less or too much. However the products are directly sold from the warehouse and the refillment takes place only after opening hours. At that point the coordination with the demand management (customer) is really important. The data for decision making in that process are picked from PoS data system and the warehouse management system (WMS).

In the warehouse IKEA divides high and low flow areas. The low flow area products are not in a as high demand as the high flow products. Therefore the level of automatization is less high. For the high flow items the level of automatization in storage and retrieval is higher. This strategy reduces again the cost per touch in stock management.

The sum of those strategy are part of IKEA´s success. The low operating costs, the high demand for their products and the continuous progress in supply chain management makes IKEA competitive against other furniture retailer.




Colonizing the Space


It is well known that logistics, nowadays, is essential for the human life. Logistics involve everything, from the manner to produce a product until the moment it arrives to the shop.

Since the beginning of the logistic history (where that term was referred to the military movements) until now, several improvements in all areas were realised. Nowadays we could choose between several ways to transport our products: Land, air or sea. But, what about the space?


No space colonies have been built so far, so let’s do an exercise of imagination and, perhaps, design a logistic network between the space and the planet earth.

First of all, it is necessary to know the huge cost of sending anything from the surface of the Earth into orbit (roughly $20,000 USD per kilogram), due to this, a space colony would be a massively expensive project. Knowing that, the first step should be to create a more efficient and revolutionary way to transport materials, like the invention of the steam locomotive at the beginning of the XIX century.

It is well known that the humanity has always dreamed about colonizing the Moon, and more recently (with the discovery of water) the planet Mars. But, in the same way that happens in the planet Earth, warehouses or landing spaces are needed for long distance travels.

1280px-Mars_mission Mooncolony


Is possible to create a warehouse in the space? Well,  actually is really difficult (and expensive) to create any habitat in the space due to the cost attached of sending things. But there are some examples of space “houses”, the most important one is the ISS (International Space Station) which has more than 900 cubic meters of habitable space. So, theoretically it is possible to have warehouses in the space (even being really expensive).

In fact, some companies are interested in the logistics around the space. Shimitzo Corp. is interested in create a uninterrupted provision of energy from the Moon to the Earth, installing solar panels around the satellite and sending it through several stations via laser or microwaves.



Moreover, Deep Space Industries are planning to send this 2015 a spaceship to search for possible materials in the asteroids, and, in 2016 send another one with the capability to collect 150kg of material from the target asteroid.

Following with this line, scientists have found several asteroids where are able to start developing a space mining, due to their properties and materials. In fact, there is a existing asteroid, called 16 Psyche, which has enough iron and nickel to supply the humanity needs for several thousand years.

But, to start the creation of anything, the first step is to have aliment for the people who will run that futuristic plans, and due to that, there are several plans to creat food in other planets or stations, like NASA’s project of growing plants in a habitats. Or, in other direction, the NASA’s project to develop a food printing machine. ACTUALIDAD_5_inventos2_640 ACTUALIDAD_De_la_ciencia_ficción_a_la_realidad_5_inventos_para_colonizar_el_espacio_51213_640


In any case, for all of that logistic and technological improvements we will wait several years. But, why not to imagine a future with an operational space network?










How important is the layout of the company?

When you visit a friend‘s house, you can see what’s the difference between your home in many aspects (furniture, decoration, dimensions..) but it is clear that it is not distributed like yours. It could be that your distribution was very similar but it will never be exactly the same. When you buy a house you thought that room will be for clothes or for your children, but you never put your office next to children room or also you have been thinking about if next to this bedroom it has to place the kitchen or a bathroom.

When you buy a house it is a difficult decision to choose which one will be adapted for your conditions. So I am writing this post, because it happens something similar when you have a company and you have to connect all process between them to reduce the time, the cost, the bottlenecks and movements of materials in your warehouse. All these will positively affect increasing the effectiveness and security of the production of the whole system.

You should use your space in the best way for everything can be accessible putting in the right location to optimize your productivity. So it’s a difficult task when you don’t have a clear idea of your process. It is necessary think before placing a machine in whatever location, so you should ask about why should I put it here and no in other place.

The other day I was in a company and I realized how important the layout is for all things that we mentioned before, so I’m going to enumerate which methods can we use to develop an adequate layout.

We have to distinguish between quantitative method (6 steps and algorithms) and qualitative method (Systematic Layout Planning), also it could be included LEGO method that we saw in class. Moreover, these hand methods are useful in simple situation, but for complex distributions we can use specific software like CRAFT (Computerized Relative Allocation of Facilities Technique) also there are others like CORELAP, ALDEP or COFAD. If we need to implement a warehouse with several levels we can use SPACECRAFT, CRAFT 3-D or MULTIPLE. Finally we have FADES (Facilities Design Expert System) that use artificial intelligence.



You should open these pictures to see how to apply briefly the two hands methods. To develop these images, I have use some notes that I wrote down last year (Joaquin Cestero Ramos, 2013).

To sum up, the perfection of a perfect layout, it will only be achievable when it is seen from the experience, good theoretical framework and the required knowledge of the whole process, but it is important consider that the best solution is when you have already done it and you can see how it is handle in the situation of maximum stress on the warehouse.



Cestero, J. (2013). Gestión de la Producción,Universitat Politècnica de València. Departamento de Organización de Empresas(DOE).


Most of the things that we use every day passed through a freighter before arriving to our hands. The reason why this is possible it’s because of the standardized containers.


Biggest ship transport companies

  • MSC (Italy)
  • Maersk (Denmark)
  • CMA CGM (France)
  • Evergreen (Taiwan)
  • Cosco (China)

Interesting industry data

  • Increase of the global fleet tonnage in the latest years.
  • Ships, more and bigger than a few years ago.
  • The useful life of a ship is between 25 and 30 years.
  • The biggest port in Europe is in Rotterdam (Netherlands).

Recent mergers

  • December 2014. Hapag Lloyd (Germany) and CSAV (Chile)
  • March 2015. Hamburg-Süd (Germany) and CCNI (Chile)

More info:



Incoterms clauses are an international commerce rules accepted by governments, authorities and all parts involved in the international freight transport.

They are used for defining the seller and buyer responsibilities in international trade transactions. The international Chamber of Commerce (ICC) based in Paris is responsible for overseeing the updates every 10 years. The last update was done the January 1st, 2011 for the period between 2011 and 2020.

Its use is voluntary but its diffusion and its international acceptance has made them useful standards. They should be fixed before the freight delivery for being transported.

Incoterms define:

-The price scope.

-Moment and place in which the ware risks are transferred from seller to buyer.

-The delivery point of the ware.

-Who has to contract and pay the transport.

-Who has to contract and pay the insurance.

-Which documents must be processed and paid by the seller and by the buyer.

They have been categorized into two groups:

-Those used in “Any mode of transport”: EXW, FCA, CPT, CIT, DAT, DAP and DDP.

-Those only proper used in “See and Inland Waterway Transport Only”: FAS, FOB, CFR and CIF.

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Below is a short explanation of every one of them: when starts the seller and buyer responsibility over the bought or sold product, when is placed the delivery, the risks transmission, costs distribution and customs documents procedures, depending on the selected Incoterm:

 Group E: The buyer has all the responsibility

EXW (Ex-Works): The seller delivers the products in his factory or warehouse and the buyer has to pay all the cost and bears all the risks up to the destination.

Group F: Not requires the seller to pay the main transportation.

FCA (Free Carrier): The seller delivers the product to the carrier selected by the buyer, and the buyer bears the cost and risks ones the ware has been delivered to the carrier.

FAS (Free Along Ship): The seller leave the goods at the port next to the boat but without being loaded. From this, every cost and risk is paid by the buyer.

FOB (Free On Board): The seller should deliver the goods on board the boat and pay the stowage costs.

Group C: The main transportation is the seller obligation.

CFR (Cost and Freight): The seller delivers the goods on the port and pays the transportation to the destination. The buyer pays the insurance during the boat transportation and the costs and risk until the warehouse.

CIF (Cost, Insurance and Freight): The seller pays all the costs and also insurance until the port of destination but with a basic coverage.

CPT (Carriage Paid To): The seller pays the carrier until the specified destination city, but the insurance and other costs are paid by the buyer.

CIP (Carriage and Insurance Paid To): The seller pays the transportation and the insurance to the agreed destination.

Group D: This group includes the delivery conditions in the buyer’s country paid by the seller.

DAT (Delivered At Terminal): The seller delivers the merchandise in the agreed terminal, since that moment costs are paid by the buyer.

DAP (Delivered At Place): The seller delivers the goods in some named place of destination country, and the buyer bears all the cost and risks from that place.

DDP (Delivered Duty Paid): The seller’s responsibility is extended until the merchandise is delivered in the buyer’s warehouse.