All posts by daniloupv

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 )


The importance of information flow in Supply Chain Management

The definition  of supply chain management (SCM) includes information flow as one of the two major flow components of the supply chain .  The need to share information across the various entities along the supply chain is definitely of paramount importance. Information serves as the connection between the supply chain’s various stages, allowing them to coordinate their actions and bring about many of the benefits of maximizing total supply chain profitability.

    Wal-Mart Stores, Inc. has used point-of-sale bar-code readers feeding data into an information system that links stores, distribution centers, and vendors.  Wal-Mart has entered into retailer-supplier partnerships known as vendor managed inventory (VMI) systems with a large number of its major suppliers.  Under a VMI system, a Wal-Mart supplier (subject to bounds previously agreed upon with Wal-Mart) decides on the appropriate levels of inventory to carry at the retail stores, as well as the corresponding inventory policies to maintain such levels.  To make such a system work, Wal-Mart shares point-of-sale information from its retail outlets directly with the supplier.  Other retailers may fear that the willingness to share information would result in losing power within such partnerships.  It actually allows the suppliers, given the easy access to information on consumer transactions and buying patterns, to themselves take responsibility for the sales and marketing of their own products within Wal-Mart stores.  This saves Wal-Mart a significant amount of managerial and other resources.  At the same time, these VMI partnerships have improved the suppliers’ on-time deliveries while increasing their inventory turnovers , and demonstrate how information sharing leads to mutual advantage for both parties in such partnerships.

      In all the information sharing that takes place in SCM, however, there is a need to ensure that the information flow is accurate and reliable.  Procter & Gamble (P&G) started to explore, after experiencing erratic shifts in ordering along the supply chain for its popular brand of disposable diapers, a phenomenon referred to as the bullwhip effect.  This phenomenon results in the flow of distorted information from one entity to another along the supply chain.  In particular, it was found that distributors’ orders showed more variability than that of sales (customer demand) and, further along the supply chain, P&G’s orders to its supplier exhibited the greatest variability.  Managers at every link in the supply chain tend to magnify even slight demand uncertainties and variabilities, and will tend to make ordering and inventory decisions in their own entity’s interest.  The phenomenon can give rise to excessive inventories, poor customer service, and lost revenues, among others.  It is not unique to P&G or the consumer packaged goods industry, but has also been experienced in a computer company and a pharmaceutical company.

    It is worth noting that both the inter-functional and inter-organizational coordination dimensions of SCM have made significant strides forward as a result of developments in the field of information technology, particularly the growth of inter-organizational information systems.  Enterprise resource planning (ERP) systems have facilitated inter-functional coordination.  The wide use of electronic data interchange (EDI)—the direct computer-to-computer exchange between two business partners of standard business documents such as purchase orders and invoices—especially over the last ten years or so, has helped improve inter-organizational coordination in SCM.

Source: The importance of information flow in Supply Chain Management ( document by Adriano Solis)

7 principles of Warehouse and Distribution Centre Design

Few people really understand the discipline of warehouse design and as a result, there are literally thousands of facilities that are underperforming.

According to, these are the 7 principles for designing a warehouse or a distribution centre:

1Determine the objective of the facility

The first step is to define the objectives and goals of the facility. What is it there for, what market does it service, is it part of a network, what types of good will be stored, what is the anticipated life of the facility.

2- Define volumes and functional requirements

The facts needed are:

a) Quantities of products to be stored.

b) The throughput velocities, including incoming goods, customers orders, interfacility transfers, dispatches and returns.

c) The nature of orders and specific picking requirements, for example, is picking performed in pallets, containers, cartons, or single units.

This is one of the hardest and most time consuming part of a design project. This is because most of the time enterprises do not have this data available. In cases where there is not much data or this is non existent, the designer must draw from his/her own expereince to fix assumptions around volumetric estimates. This is best performed with collaboration and agreement from the stakeholders involved.

d) What functions need to be provided for?

It’s imperative that the designer understands all of the functions that are to be included on the site footprint, for example,  warehouse, offices, gantry cranes, loading docks, forklift charging areas, dangerous or hazardous goods, cool or cold rooms, clean rooms, manufacturing or packaging operations, staff facilities, etc. Equally important is that relative dependencies between functions are determined so that the designer can correctly frame functional proximities for best flow and operation by staff.

3- Match storage modes, it systems and mechanised technologies with volumes

Once the data has been analysed, the designer is ready for equipment selection. Be it static racking equipment, mezzanines and the like, or mechanical equipment such as conveyors, carousels, stacker cranes etc., all equipment and systems must be applied according to their purpose, limitations and fit with the volumes handled.

For instance, it is a waste if an automatic storage and retrieval system is installed, when a conventional racking system will be enough. On the other hand, if the facts point to justification of a high-velocity automated system, it is foolish to ignore them for the sake of a more conventional system. A critical aspect of equipment selection is that the designer has expert knowledge of available equipment and technologies, and how to apply them.

This is a complex area that deserves careful consideration and the novice designer is well advised to seek advice from materials handling equipment and software suppliers, builders, and industry specialists to ensure that their design is well founded, robust and practical.

4- Flow

a) One-way flow.
The best warehouse operations are those that apply this principle. Whether straight, clockwise, counter clockwise, up or down, make sure it flows in a one-way direction. But here’s a tip. Be cautious when dealing with international customers, where cultural and religious beliefs point to specific requirements.

b) Flow vs. Capacity
The second rule of flow is that free movement has priority over storage capacity. If you are pressed with a choice, the experts agree that it’s better to hold flow sacrosanct, compared with building more stock or storage equipment. Why? Long after the warehouse construction has been completed, a team has to operate efficiently and safely in the warehouse year after year. If the design compromises on the size and quantity of aisles, for sake of more stock holding, beware: this can cause suboptimal performance over the life of the facility.

5- Close to zero materials handling movement

Keep the product handling by people to a mínimum. Ideally from 3-5 touches of the product, while goods are the in the warehouse.

6- Evaluate your options

The developed concept design options must be evaluated to ensure that the objectives are achieved. The two common approaches to assessment are:

a) Quantitative analysis: return investment, payback, cost per order to supply, cost per order cubic metre to name just a few.

b) Qualitative analysis: reviewing the advantages and disadvantages of options considered. Ideally the evaluation is best performed both individually and in a team workshop environment. It’s amazing what can be revealed when a team collectively focuses its attention at a project. Despite the meticulous job the designer may have performed, a workshop can often reveal a late insight, idea, or missed detail that can significantly impact upon the end design.

7- Consult widely as the design process is multifaceted, and normalyy involves executives, managers, and operators as well as equipment suppliers, builders, architects and councils

As part of the development process all should be regularly consulted as to planning and legal requirements, operational needs, preferences, ideas and opinions.

The best implementations typically features a cohesive and dedicated team charged with managing the project from early design phases through to completion.



Advantages and disadvantages of excess inventory

Inventory control is a strategy companies use to keep an appropriate level of materials, supplies and finished products on hand. Weighing the pros and cons can help small business owners determine the appropriate levels of inventory to stock.

Inventory Cost

When a company holds a high level of inventory, it ties up business funds that the company could use in other areas such as research and development or marketing. New product development and marketing can bring additional business to the company, but holding high inventory levels does not. The cost of the inventory is not recouped by the organization until the company sells the inventory or uses it to build customer orders.


Warehousing is another cost of holding excess inventory in a business. The cost of warehousing can include the warehouse space, utilities and maintenance of the storage area. Some supplies may require additional maintenance, such as temperature control to preserve the quality of the material. Companies that reduce inventory levels can store materials in a smaller area in the business and use the extra space for new product development.


Storing excess inventory can lead to quality problems such as degradation and potential obsolescence. Companies may stock high levels of inventory in anticipation of demand or for an existing order, but customers may change specifications or require different materials for future products. In this situation, the company must purchase new materials and supplies to build according to the new customer specifications. Businesses can identify and isolate quality problems easily with a smaller inventory quantity, as well.


An excess inventory of finished goods can provide a buffer for increases in customer demand. The business is taking a risk by building and storing finished products in anticipation of customer demand, but it can reduce the lead time and improve customer satisfaction.

Bulk Purchase Savings

Small businesses can obtain a savings when purchasing some supplies in bulk quantities. Suppliers may give discounts to customers who order larger quantities. The business can also save on shipping costs for one large order instead of multiple shipments of smaller quantities.



DFMA, stands for Design For Manufacture and Assembly. It´s the combination of 2 methodologies: Design for Manufacture, which means the design for ease of manufacture of the parts that will form a product, and a design for assembly, which means the design of the product for ease of assembly.

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It provides guidance to the design team in simplifying the product structure, to reduce manufacturing and assembly cost, and to quantify improvements. The practice of applying DFMA is to identify, quantify and eliminate waste or inefficiency in a product design. DFMA in therefore a component of Lean Manufacturing.

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Also, DFMA is the name of the integrated set of software products from Boothroyd Dewhurst, Inc. that are used by companies to implement the DFMA methodology. DFMA is a registered trademark of Boothroyd Dewhurst, Inc.


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The surprising benefit of queues

The accepted wisdom is that long lines are bad for business. In fact, they can be very good for business, as long as they are not too long. Research shows that long lines help customers learn what’s worth waiting for, and help businesses attract uninformed customers.

Most consumers don’t realize, however, that they will sometimes seek out queues. The empty restaurant syndrome is one example. Perhaps you’ve looked through the glass window of a restaurant, seen mostly empty tables, and decided to move on to the next restaurant in your search for a meal. On the other hand, that restaurant over there with the people waiting seems popular. The underlying psychology of empty restaurant syndrome is simple: if so few people come to this restaurant, it must not be good. The dynamic is based on uninformed consumers (for example, you, first-time visitors to a city) taken their cues from informed consumers (the residents of the city who know which restaurants are good).

At the same time, there is no doubt that consumers also avoid long lines even in these situations: if there is a 45-minute wait for a table, diners may go elsewhere.

In short, waiting in a queue is a cost that is incurred by the consumer. However, because a queue also increases the perceived quality or value of a product, the value can be perceived as greater than the waiting cost (the quality of the restaurant is worth the wait). The result: a ‘herding effect’ where many consumers attract even more consumers.

Researchers Mirko Kremer and Laurens Debo investigated the impact of this herding effect through two controlled laboratory experiments. These experiments involving numerous rounds of simulated shopping expeditions in which the various factors , for instance, the value of the product, whether or not consumers were informed about price or value, the number of informed consumers, and the amount of wait times — where randomly manipulated. The experiments led to some interesting results:

  • The diagnostic value of a queue depends on the presence of informed consumers. In a tourist area, where the restaurants are patronized by tourists (in other words, uninformed consumers), the presence of a queue is not necessarily perceived as an indication of the quality of the restaurant.
  • A small number of informed consumers can have a great impact on uninformed consumers. One of the revelations of the experiments is that it does not always take large numbers of informed consumers to convince uninformed consumers of the value of the product.
  • Even high-quality products or services need a sufficient number of informed consumers. Not surprisingly, low-quality products or services do not benefit from more informed consumers. However, for the herding effect to take place, even high-quality products or services need a certain number of informed patrons or users to bring in uninformed consumers.



Queuing strategies to cut perceived wait times

The waiting line experience is a huge factor in determining  a business´s overall customer satisfaction rating.

The key is impacting the way customers feel about waiting in the line. How is it impacted? with distractions…

Below , we have three simple, yet powerful strategies to reduce the perceived wait time of customers in the queue.

Queuing Strategy #1: Provide estimated wait times

Known wait times feel shorter than unknown wait times. You are proactively managing their expectations by providing the customer with an estimated time of how long they will be waiting in line. For instance, theme parks have in line a sign of the time customers will need to wait from the point of the sign until they reach to the point of the ride.

Queuing Strategy #2: Arm your queue with merchandising

Distractions are key. When people´s mind are busy, they will not think that much about how long they will be waiting.

Adding an in-line merchandising system to your queue is perhaps the most effective way to keep waiting customers distracted.Merchandising in the queue is reported not only to reduce perceived wait times, but to increase sales, too.

Increase the usefulness of your in-line merchandising system with the likes of simple price tag signs, larger format signage, and video displays. The waiting line will become a place of information, education, and entertainment to your customers.

Queuing Strategy #3: Get your customers started

Once a transaction starts, the wait is over.

There are several ways to begin a transaction before the customer actually reaches the point of service.

For example, a service business can install an in-line table for people to begin any necessary paperwork before they reach the service agent. Not only will customers be distracted from the wait by their task at hand, but the waiting line itself will run more efficiently by eliminating long amounts of time spent at the service counters.


Queue managements is very, very important. Only small changes in the queue will start making huge difference regarding how customers feel about waiting in line. Again, key is distraction. If the mind is busy, time flies. It is as simple as that.