WEIBULL EFFECT: LEARNING BY DOING

One of the best practical sessions I took part in during my bachelor’s degree was a course called Logística de Distribución Directa e Inversa (Direct and Inverse Logistics). We had to download a software called Implexa (software developed by a professor at the UPV), with little knowledge of what was going on, the professor explained that it was a simulation programme and that each of us was a different company with different set ups and that during the 10 minute simulation we had to adapt production (number of units per batch produced, frequency, etc.) to demand, while trying to balance lead time, and total costs: storage costs, production costs and transport costs. In addition, there were other small constraints because you had to order your raw material to be able to produce, but sometimes the raw material would not arrive or would not cover your needs to be able to produce enough product to send to your customer.

Image of Implexa. Source: Implexa

In the first round we all tried our best and made decisions based on trial and error and the almost non-existent historical data. The simulation was fast and decisions had to be made as quickly as possible.

After the first simulation we did a second one and he gave us some additional information, we were all different companies but we were somehow connected, meaning we were connected as a network of customers and suppliers. Although this was a very powerful piece of information, the fact that the supply problems you were having were due to one of your colleagues, the fact that we didn’t know who our suppliers were and who our customers were, didn’t make things any easier. But it is true that the results of this second simulation were much better than the first, we already had 10 minutes of experience!

Suppliers and clients network. Source: Implexa.

The third simulation revealed another key piece of information. It showed us the network, how we were all connected, so we basically knew who our customer was and who our suppliers were. This third time we were able to communicate with each other and ask our suppliers for more material or tell our customers that we would be able to serve them in a few moments. As expected, the results improved significantly in this third round.

Finally, in the last round, he even told us what the end customer’s initial demand was, “X units/second”. Knowing the demand and who the customers and suppliers were improved the overall efficiency of the network, resulting in the best results for each company so far.

However, the last scenario is far from reality because we do not know what our demand will be. The aim of the lesson was to show us, in an interactive way, the importance of the Weibull effect.

Weibull effect in Supply Chain. Source: Lamzaouek, Drissi and El Haoud (2021).

What’s the Weibull effect?

Also known as the Bullwhip effect or the Whiplash effect, is a phenomenon observed in supply chain management that describes the amplification of demand fluctuations as they move upstream in the supply chain. It is named after the Weibull probability distribution, which represents the pattern of demand variability. The Weibull effect typically occurs due to a lack of coordination and information sharing among supply chain partners, resulting in distorted and exaggerated demand signals. Here’s how the Weibull effect manifests in the supply chain.

Some of the reasons why this phenome occurs: demand variability, order batching, forecast inaccuracies, inventory buffering or poor communication and information delays.

The basic idea of the Weibull effect is that a problem has a tendency to propagate upstream in the supply chain. The exaggeration of demand fluctuations at each stage can accumulate and amplify as they move toward the upstream suppliers. This can result in an increasing magnitude of demand distortion and variability as one moves further up the supply chain. And leads companies to have inaccurate forecast, supplier relationships strains, inefficiencies in both production and planning, increase costs or level inventories.

Addressing the Weibull effect through improved coordination, information sharing, and supply chain practices can help mitigate these effects. Collaborative planning, demand smoothing, real-time data sharing, and the implementation of lean principles can contribute to reducing the negative impacts of the Weibull effect and enhancing overall supply chain performance.

Here below a video explaining Implexa can be found:

Exploring the Ford Factory in Almussafes: the ASRS

Probably one of the most important factories in the region of Valencia, is the Ford Factory in Almussafes, which is one of the most profitable ones in Europe. While studying at the Polytechnic University of Valencia, many of our professors have worked for or have a very good knowledge of the plant, and you are constantly hearing stories about the plant.

Around the plant, many other companies have grown and rely almost completely on the American car manufacturer. I had the opportunity to start my professional career in one of the companies that worked mainly for Ford. To enter to the plant, you must get a card and follow some basic safety lessons.

After my first week at the company, one of my colleagues asked me if I wanted to go with him to the Factory. He had to check some things at the Battery Plant and after he could show me the basics of the PHEV Manufacturing line, where I was going to focus the majority of my work. I remember how happy I was to be able to see the Factory for the first time, it was my first time seeing a production line and robots in real life.

The Factory is around 2.700.000 square meters, and in order to move around effectively you should go by car, however, only fewer cars are allowed to enter. That day we were not the lucky ones to have one of those cars, and we had to leave the car at the parking and enter to the Factory walking. As we walked, he started to explain the different plants that we encountered, starting from Painting and Body, and ending up in the Battery Plant. On our return walk, we took a small detour and walked a bit around the Assembly plant, and then he showed me what was for him, one of the most fascinating things at the Factory, the ASRS building.

ASRS System. Source: Occsystems

I immediately realized that I had already heard about the world ASRS during one of the subjects of my bachelor, but didn’t fully remember the meaning. An ASRS is an Automated Storage and Retrieval Systems and it consist of a series of racks or shelves that hold the items, in this particular case the body of the cars after being painted. The racks are typically arranged in aisles, and each aisle is served by a crane that can move up and down the aisle to access the racks. All the movements are done automatically and there is a software behind that has been programed.

Below, let’s explain some of the potential benefits and challenges of implementing an ASRS system:

The benefits of using ASRS to store cars:

1. ASRS increase the storage capacity of a warehouse by utilizing vertical space, being particularly useful in urban areas where land is expensive and limited.
2. ASRS can reduce the amount of time and labour required to store and retrieve cars. Cranes can move cars much faster than a human operator.
3. ASRS can reduce the risk of damage to cars during storage and retrieval.

However, there are a few challenges such as:

1. Racks and shelves: they need to be strong enough to support the weight of the cars and be able to fit different car models.
2. Implementation process, it relies in a good programing of the system. The start-up period might be long and costly.
3. Cost: this type of warehouse might need a bigger investment than other alternatives.

Overall, ASRS is a powerful tool for storing and retrieving cars in a warehouse. It can increase the storage capacity of a warehouse while reducing the time and labour required to store and retrieve cars. With proper design and implementation, ASRS can provide a safe, efficient, and cost-effective solution for car storage in a warehouse.

Here below are some videos of ASRS systems.

ASRS used as a car parking.

ASRS system for underground bike parking in Tokyo.

FROM A FIREFIGHTER OPERATIONS MODE TO A PREVENTIVE WAY IN LOGISTICS

According to a study conducted by McKinsey in 2019, managers spend approximately 80% of their time on urgent problem-solving, many of which could be prevented through the implementation of preventive plans (McKinsey & Company, 2019).

During my internship in the Supply Chain department of a company, I was involved in the development of a forecast methodology to anticipate vessel allocation needs. As of 2022, the maritime transportation industry was still recovering from the effects of the COVID-19 pandemic, the Suez Canal blockage, and other crises such as the container shortage and China’s zero-COVID-19 policy. Major companies, such as MSC and BDP, were facing significant challenges, and the container booking process had almost doubled in time, from around two weeks to almost a month, due to limited capacity.

Until that moment, many issues related to logistics were often addressed in a firefighter operations mode with problems being addressed as they arose, rather than taking a proactive approach to prevent them from happening in the first place. In this post, we will discuss the importance of moving from a firefighter operations mode to a preventive way in logistics.

Firstly, the firefighter approach is reactive rather than proactive. This means that businesses wait for problems to occur before addressing them, leading in many cases to delays, increase of the costs or significant downtimes. By contrast, Taking a preventive approach, which involves identifying potential issues that may occur and implementing measures to prevent them from happening, such as avoiding some ports due to future strikes or conflictive areas due to regulations such as zero-COVID-19 in China; can help businesses to avoid costly and time-consuming problems and ensure a more efficient logistics process.

Secondly, the firefighter approach can lead to poor customer service. When logistics operations are constantly in firefighting mode, it can be challenging to maintain consistent delivery times and meet customer expectations, leading to customer dissatisfaction. A preventive approach can help businesses to ensure more accurate delivery dates while increasing customer satisfaction.

Thirdly, the firefighter approach can lead to increased costs. When businesses are constantly dealing with problems as they arise, they are more likely to incur additional costs, such as rush fees, overtime pay, and emergency shipments. These costs can quickly add up, leading to decreased profitability. By contrast, a preventive approach can help businesses avoid these additional costs by addressing potential issues before they become problems. (E.g. Negotiate rates with FFW and not use spot rates, that are usually more expensive).

In conclusion, adopting a more proactive approach to logistics can enhance the overall efficiency of a company, as business identify potential areas of improvement and problems and implement measures to prevent them to happen.

DELIVERING WARMTH: THE LOGISTICS OF PROVIDING LUNCH AND DINNER TO THOSE WHO NEED IT

Project Lunch4All. Source: Serve the city.

I started volunteering in a centre known as “Humanitarian Hub” in Brussels where different NGOs and associations such as Serve the city Brussels or Red Cross operate. The centre provides people shelter, access to showers, play or charge their phones during the day time, as well as, two warm meals per day. The beneficiaries include a wide range of people in different situations, from asylum seekers to people with low incomes.

After my first day as a volunteer, I was amazed at the efficiency of the centre’s operations. First, because they managed to provide each day a bag that contained at least a bottle of water, a piece of bread, a piece of fruit and a warm dish; and secondly, their ability to coordinate the transportation of the food from the location where the food was stored to the centre, since the food would arrive warm and ready to be served.

Example of a lunch/dinner bag.

Logistics is an essential aspect of the operations of non-profit organizations, such as food banks. They rely on the food collection from markets and individual or corporate donations. Having an efficient supply chain, ensures that they are able to get, store and distribute food by minimizing the waste, with the minimum cost associated as possible and maximizing the number of people they can reach. On regular days, the centre would distribute around 400 lunch bags and a slightly fewer during the dinner shift. However, on some days, they could provide food to almost 700 beneficiaries

When a volunteer goes, they primarily assign them tasks such as preparation of the bags (Curious fact: the preparation was organised as a linear production line, with different workstations.), distribution, trash sorting or cleaning the canteen; meaning that little was seen about all the operations behind. My curiosity lead me to start asking people about the logistics and operations involved, and it showed me how the coordination of operations and logistics, along with the work of volunteers and the managers (called team leaders) played a crucial role in running the services while spending as little as possible.

The food provided came mainly from two different sources, donations, and from another project that collected once a week the food that would have been thrown away in a market of the city. After, the food collected, it was stored and cooked in another association that would also place the meals into individual containers to help the distribution. The containers were stored until needed, taking into account their perishability. Daily distribution would start around 12:30 PM or 18:30 PM (depending if it was lunch or dinner shift), and thirty minutes before the scheduled time, a van would arrive at the centre with the individual containers that would be packed in larger thermal boxes, ensuring that the food was warm when distributed. The food was warmed before transport from the cooking association to the centre.

Food Portioning. Source: Serve the city.

Nowadays, I’m still amazed of how a volunteer-association network has been stablished to help others, and how it manages smooth shifts most of the time. Some key considerations for logistics and operations of these type of associations include:

1. Donation Management: Food banks rely on donations of food from individuals, businesses, and other organizations. Effective donation management includes developing relationships with donors, ensuring that donated food meets quality and safety standards, and tracking donations to ensure that food does not go to waste.

2. Inventory Management: Inventory management is essential in ensuring that food banks have the right types and quantities of food available. This includes tracking inventory levels, monitoring expiration dates, and rotating stock to ensure that the oldest food is distributed first.

3. Storage: Proper storage of food is critical in ensuring that it remains safe and fresh. Food banks should have appropriate storage facilities, including refrigeration and freezer space, to store perishable items.

4. Transport and Distribution: Food banks rely on a network of volunteers and partners to transport and distribute food to people in need. Effective transport and distribution logistics include optimizing routes, coordinating with partners, and ensuring that food is delivered safely and efficiently.

5. Data Management: Data management is essential in tracking and reporting on the impact of food bank operations. This includes tracking food distribution, analysing demographics of food bank users, and measuring the impact of food bank services on food insecurity and health outcomes.

Source: Serve the city.

In conclusion, we hardly consider the significance of logistics and operations in our daily lives, yet they play a very important role. The Humanitarian Hub and its network serve as an example of the importance of efficient coordination between logistics and operations. While there is always room for improvement, I believe that the Humanitarian Hub’s successful operations demonstrate the benefits of effective logistics and operations management.