All posts by derekwalker88

Wal-Mart

Wal-Mart: The world’s largest company. If Wal-Mart were a country, it would have the 27th largest GDP in the world. A total of over 11,000 stores worldwide, each of which measures, on average, the size of about 8 of the largest versions of Consum. The distribution centers to supply such large stores can measure up to about 3 million square feet (or about 280,000 square meters). It then should be no surprise that Wal-Mart has undisputed recognition for being the most logistically sophisticated company in the world.

Wal-Mart has state-of-the-art warehousing systems, nearing full-automation, miniscule amounts of inventory, leading cross-docking practices (in which product is taken directly to the shipping dock, instead of receiving, to avoid stocking expense, in cases where orders for that item are received), route optimization, and many other practices that many companies are already struggling to replicate.

However, Wal-Mart continues pushing harder to decrease waste, and optimize value. One instance is through the Electronic On-Board Recorder units, which not only tracks routes and positioning, but is being adapted to monitor driver’s foot movement, gear selection, and other driving decisions, with plans to retrain drivers with more efficient driving practices. Wal-Mart’s load-optimization software is some of the most sophisticated, optimizing truck-space. But the company goes beyond organizing boxes, to managing their content’s “value density.” Studies and research is conducted to reduce packaging, and even alter the design and chemistry of products, such as detergent formulas that reduce the water content, to make the product more value-dense.

The inventory system not only tracks stocking units perfectly, sending requests not just to the warehouse, but to the supplier as well, giving the entire supply chain real-time information on the products that need to be restocked. However, this software is beginning to retrieve this information before the product has even been bought, using shopping apps which consumers use to organize their shopping lists, and which links up to the supply chain’s demand information.

A book could be written about Wal-Mart’s logistics. The supermarket giant is going beyond standard practices, and has even set even less realistic goals of being supplied by 100% renewable energy, creating 0 waste, and sell products that sustain the environment. Perhaps 10 years ago, Wal-Mart was doing was many retailers are now only beginning to do. Hopefully in the near future, these seemingly insurmountable goals will be shared world-wide.

Spreading the Euro Notes

January 1, 2002, the twelve EU countries, with their more than 300 million constituents, participated in the largest currency experiment of such a kind in history. The various local currencies, including the German Marks, French Francs, etc., were to be replaced overnight with the Euro currency. The swap made for one of the largest logistical problems Europe has ever faced together.

The swap began at least three years earlier as a book value currency, allowing for exchange stabilization. The new currency had to also be coined and printed, which required standardized printers that could match the exact specifications of the new bills down to the nanometer. Next was the distribution of the bills and coinage. This began three months earlier in the beginning of September, as the more than 2,300 armored vehicles, trucks and security personnel were deployed to spread the currency throughout banks, to be held in their vaults; Many of which had to be redesigned to house the new currency.

As deployment was finished, the transition would start as the money was distributed in “starter kits,” or small amounts purchasable at local banks. The period between the beginning of January, until February 28th was to be a transition period, in which both currencies could be legally used as consumers got used to the Euro. Bank restrictions on labor hours were relaxed to help with the transition.

Besides spreading the new currency, the old currencies also had to be collected. Predictions were made that half this old currency would be collected within the first two weeks. Citizens were called to empty their piggy banks, exchanging the currency for the Euro.

The switch to the Euro is a remarkable feat in logistics, done with relatively few problems.

Online Electric Vehicles

    Imagine a transportation more economically and environmentally friendly than typical electric vehicles, not connected to a recharging station, nor does it ever need to be, and which recharges itself as it goes. If you are not very imaginative, just look up OLEV Technologies, Inc., as they have already created and began commercializing it.

                OLEV stands for On-line electric vehicles, and South Korea has recently implemented a tram system which runs on this technology. The vehicles are not connected to wires, nor plugged in to anything in order to be charged. They are charged by a series of magnets inside of the road, the fields of which are caught by a receptor, and used to charge the tram’s battery. While a traditional electric tram is connected to a network of wires, of which the entire network is turned on, the magnetic generators in the OLEV system only turns on when the vehicle passes over it, reducing wasted energy, and avoiding the magnetic field from being constantly imposed against the pedestrians walking over it.

                This technology is currently in use for the tram system, and is seeing installation and testing in high-capacity vehicles, such as high-speed trains.

The Ports of LA

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LA is home to two large ports, which collectively would make the 8th largest port in the world. The story of the port industry in LA is an interesting one, full of corruption, swindling, and cut-throat competition.

In the late 1800’s, docking in Los Angeles was a detested necessity. The port in San Pedro was in a difficult area with heavy waves, shallow mud flats, rocky shores, and overall very difficult access. Access required careful attention, and even rowing the giant boats into shore to avoid damaging the propeller. Furthermore, getting to the main transit areas from San Pedro was difficult, which was why Collin P. Huntington called for the construction of a railroad to connect and save transportation costs.

However, Huntington’s purpose was not to spread these savings to the transport companies, but instead keep them for himself. As cargo was being transported across his rail line, he would go so far as to check the books, and see the value of the cargo to best squeeze every penny he could. Normally, the cargo would cost more to move the 25 miles from San Pedro to Los Angeles than the 7,000 miles from Hong Kong to San Pedro, but due to Huntington’s monopoly, few alternatives were available.

Eventually, competition emerged to challenge the railroad tyrant, which led to a vicious price war. Huntington’s deep pockets allowed him to charge low prices for long enough to bankrupt the competition, and buy them out. Huntington sought to further monopolize the California port industry with a new construction in Santa Monica. However, the citizens revolted, causing a grass-roots backlash that made its way to the California congressional floor. After bribing, swooning, and lobbying, Huntington won the first fight in the house, but eventually lost support in the senate, causing his port monopoly to come to an end.

With laxed importation standards, the popularity of the ports surged as with the commerce in Los Angeles. Santa Monica restored construction of piers, letting way for the famous Santa Monica Pier. Long Beach became a sprawling city with a giant port, and Los Angeles remains the number one choice for transporting into Western United States. If the story had unfolded any differently, the face of Los Angeles would look quite different.

Why Hollywood?

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People often ask me what my favorite state in the US is, and there is only one obvious response – California. Most Californians would agree, and be hard-pressed to think it’s because of any kind of pat “state-rioticness.” California is nothing short of every kind of awesome. It is the state that has changed the US and the world technologically as well as culturally. It reeks of natural beauty, from the granite sky-scrapers of Yosemite overlooking the bluest river, tallest waterfalls, and greenest forest I have ever seen, to the always-sunny San Diego, to a desert holding the record for hottest place in the world (and arguably the most beautiful desert as well). In the US, we have the tallest mountain, deepest valley, most beautiful beaches (and women), glorious forests…

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And then there’s Los Angeles. Attracting visitors from around the world, to be left welcomed by a dirty, crime-ridden shit-hole that’s as much big as it is ugly. However, this giant urban mass has somehow managed to birth one of the most well-known industries in the world, known for bright lights, glamour, beauty, fortune, and fame. The industry is named just as frequently by what it produces as much as by where it’s located – Hollywood. But why would such an ugly city attract an industry with practically the opposite image? The answer lies in Logistics.

Almost a century-and-a-half ago, the film industry (then silent films) in the US was dominated by the Thomas Edison’s Motion Picture Co. in New Jersey, who held various patents, and was not afraid to use them. To avoid litigation, filmgoers fled elsewhere, and a film company called Biograph fled west and found a home in Los Angeles, which at the time, like most of California, was filled with orchards and farms.

However, California offered the film industry an ideal combination of factors. Not only did it help film producers escape litigation from the other side of the country, but also offered excellent weather conditions. The lights were not strong at the time, so films often relied on a sunny climate for good lighting conditions. Furthermore, California’s scenic diversity is hard to match, offering mountains, beaches, deserts, valleys, cliffs, islands, urban areas, suburban areas, farms, jungles… and almost any setting a film producer might want; and all within just a few hours distance from Los Angeles. The icing on the cake was the low wages that made the costly process of making a film less so. Biograph spread the news of the location, and as the film industry exploded, so did the urban mass of Los Angeles.

The story of Los Angeles is a complicated one. But at least next time you are driving down the streets of Bel Air looking at the homes of some of the richest celebrities on this Earth, only to have your tire blown out by a gauntlet of pot-holes, it will all make a little more sense.

Roman Logistics in the Conquest of Hispania

Over 2000 years ago, a strong campaign had been under way by the Roman Empire to conquer Hispania, or what was in part present day Spain. A study of this conquest can show timeless lessons in logistics.

 

The conquest of Hispania did not come without difficulties, namely due to the character of supplying Roman warfare. Roman legionaries relied on impedimenta, or supplies which they carried with them to the vanguard and afore, as well as commeatus, or the restock of supplies coming from the imperial capital.

 

The amount of impedimenta which could be brought to battlegrounds was of course limited to the weight which could be carried. Use of pack animals, namely donkeys, helped carry additional supplies for the campaign. The further supplies, commeatus, came from the capital through the use of what were then sophisticated supply lines. These lines took various forms adapting to the difficulties of the location. The use of bridges and carrying ships were used, as well as the employment of third party suppliers, or publicani, hired as private contractors to ship the supplies.

 

Supplying campaigns could of course be costly due to the remuneration of the publicani, or the use of resources in the form of men and food, which caused problems if a campaign was neglected in the home front, as politicians limited the allocation of resources to the legions. The soldiers then needed to rely on the procurement of their own resources. Harvesting food and wood could be a dangerous task on enemy lines, due to the time required, and the need to spread thin, making them a target for ambush. Often, legions would purchase from local vendors, or in one case, created trade agreements with the Celtibereans to organize trade on the mountain tops.

 

The Romans 2000 years ago faced many of the same difficulties in logistics as present day organizations, and these timeless examples underline some of the questions to be asked in regards to logistics. Such questions include how many resources to dedicate to a campaign, how much a campaign should finance itself and how much by the rest of the organization, what third parties or agreements could be necessary, and much more. Although the answers today might be quite a bit more complex, the problems remain very much the same..

Outsourcing

Over 6000 years ago, a crude old farmer from the Ancient Chinese province of Quiansang and took a portion of his Spring’s harvest of rice, and met with a gentleman in the neighboring hills to exchange them for a dried bag of his finest tea leaves. Thus, the idea of outsourcing was born.

If you are wondering where Quiansang is. . .  I don’t know. I made it up, as well as the story. But the point is, the ideas behind outsourcing and the ancient act of trade are basically the same. If multiple producers focus on one or few products, they can create more due of expertise, standardization and so on. Then, by trading, a community of producers can create wealth. Currency was adopted to make this trade easier, and we eventually arrived to where we are now.

As ancient as the concept of outsourcing may be, it had not been formally recognized as a business strategy until the late 1980′s (see “Managing the Outsourced Enterprise” by Rick Mullin). The study of outsourcing is focused on answering the question of what a given company should do themselves, and what they should have someone else do. Like most questions in business, there is no one right answer.

To decide if one should outsource a business area, the first two questions should be if is it a strategically important area, and does it contribute to organizational success. If the answers are no and yes, respectively, outsourcing is likely necessary.

When choosing an organization to outsource to, much consideration needs to be done. Areas to consider include:
Price, congruence of the two companies, and hidden costs and risks.

Price is one of the first and last thing to consider in outsourcing decisions. An organization can quickly eliminate potential providers by deciding what they simply can’t afford. However, the broader area of cost must be firmly assessed before price is considered, or one may well find out they can’t afford not to pay a high price. For example, if a computer network stops working, costing $100 each hour its down, you should be willing to pay the technician who can fix it faster a little more.

When an organization confronts the idea of outsourcing, they need to understand just as well who they are, as well as who the outside organization/individual they are considering handing over responsibility to. To do this, an organization needs to take a look back at their mission and vision statement, and choose organizations that share the same goals, and fit specific business needs.  For instance, if you’re a lawyer, you probably have access to sensitive information, and would not want to outsource your IT to a company with a poor security reputation. Likewise, if you are a military with a mission of fighting terrorism, it is perhaps not the best idea to outsource retaliation to rebel groups with links to terrorist organizations. . . For instance.

Another area to look at includes hidden costs, which can come fairly obvious areas like fees or price fluctuations, as well as less obvious areas such as  delivery delays, market instability, trouble adjusting to capacity changes, and so on. An organization must do their due diligence in assessing an outsourcing company, and a risk premium should be included into the price of the good or service. For instance, a 10 euro product in Greece is not worth the same as a 10 euro product in Germany, regardless how similar those products might be in quality and all other areas.

Outsourcing is a relatively new study, and is growing extremely significant. While no definitive guide can be made with all the right answers as to how to outsource correctly, it can be said that it has certainly become a lot more complicated than bartering rice and tea leaves.