The 4th Industrial Revolution arrives at Logistics

Since 1760, the time when the 1^st Industrial Revolution began in the United Kingdom, the technology has not stopped yet, creating a new world that we cannot imagine in another way. With the Industrial Revolution II, new and better materials and chemical products were introduced into the production process accompanied by a considerable increase in the supply of energy, which was diversified. Finally, in the Industrial Revolution III, in which we are now, microelectronics, the commitment to R&D and renewable energies have been a step further. However, it seems that Amazon is determined to lead the leap towards the 4th Industrial Revolution through logistics.

Amazon, the change maker of Logistics

If the Industrial Revolution IV starts in a few years, Amazon will have a lot to do with it. This company, a pioneer in innovative logistics systems, has in recent times developed an intelligent machine capable of replacing a large number of workers when scanning and packaging products. Along with picking, these are the most important jobs within a logistics center, but … How does it work?

It consists of a huge machine that scans the products on a conveyor belt and, then, the machine wraps the products in carton, creating a carton box which fits perfectly the products. As we can imagine, this is completely revolutionary because the machine does almost everything.

Implications of the machine on Amazon warehouses and logistics centers

– The machine scans the products, packages them, seals the boxes and put the label for the delivery
– The machine packages between 600-700 boxes per hour
– Every machine replaces 24 workers, but it needs 3 workers to control the performance
– Reuters agency affirms that the installation of these machines in 55 American logistic centers would suppose 1.300 layoffs
– It improves the safety
– It improves delivery times
– More efficiency

One step forward … or one step back

With this advance, Amazon would be initiating a new industrial revolution that, as we can see, will be focused on the Internet of Things, the digitalization of the companies and the irruption of Artificial Intelligence in the machinery used every day. If we think as consumers this means a huge advance in logistics, when we thought that Amazon couldn’t improve much longer its service. However, it is a huge risk for thousands of workers who depend on the jobs that will be eliminated in the coming years.

From pickers to personal shoppers

Some jobs could disappear during the next years due to the technology, and some of these affected workers are the pickers. The automatization of picking and other logistic processes offers fewer errors, better inventory control, more fluid information and, of course, fewer labor costs. The automatization reduces the need for hiring workers and jobs like pickers could be in danger. However, time changes and, with it, jobs are evolving quickly, transforming the way we understand them.  Pickers can have a new life outside the warehouses becoming “personal shoppers”, a new kind of picker that has appeared a few years ago thanks to the e-grocery. Today we will discover how they have reinvented themselves.

E-Grocery, a job opportunity for pickers

Lola Market is one of the actors in this field who has changed totally how we understand the work of a picker, transferring them from the warehouses to the supermarkets and giving them another dimension.

How it works? Through an app or webpage, the customer can select different markets or supermarkets and the products that offer each supermarket, combining them in a single order if they wish. Later, the customer chooses the time when he wants to receive the order, and if he selects more than one supermarket, he will receive at the same time, more or less, the products from each supermarket by different personal shoppers, who go to every chosen supermarket and pick up the selected products.

Functions: personal shoppers more than pickers

This business model would mean nothing without the personal shoppers, who are the main actors and the crucial part of the service. Through them, the company performs a customer-centric strategy, where “pickers” carry out customer support:

• Clients can add products that don’t appear in the inventory of the e-grocery giving a note to the personal shopper, who personally will find these products.
• In case of replacement of a product, because there is no stock, the personal shopper can keep in touch with the client to offer other alternatives.
• Thanks to the personal shoppers, customers can buy fresh products and obtain them in one hour, service that doesn’t offer supermarkets within their deliveries.

In the video below (it is in Spanish) you can watch a sample of this kind of service and how a personal shopper works picking products from the supermarkets.

Supply Chain Management failures: the Bullwhip effect

The supply chain management has been achieving meaningful importance nowadays due to the increase of trade globally, a fact that complicates every stage of the supply chain in every company. A large number of operators through the supply chain, increasing and huge demands, more and more consumers… All these factors affect the way the companies manage their logistical operations, and today we are going to talk about a phenomenon that could appear in the upstream levels of the supply chains: the Bullwhip Effect.

What does it consist of?

The bullwhip effect is the trend that drives to an excessive inventory and order fluctuation at the upstream levels. The imbalance begins because each member of the supply chain makes a demand forecasting based on the order information of the previous member of the supply chain instead of the real demand of the market. This fact usually occurs when the orders flow from the retailer to the wholesaler and then, from wholesaler to the producer.

To be more clear, here you can watch more visually how the bullwhip effect is produced:

Causes

• Lack of information between suppliers and intermediate buyers.
• Operation without a predetermined order in the production orders, generating volatility in the shipments.
• Possible periods without the demand for the goods.
• Possibilities to take advantage of wholesale discounts, generating problems of time.
• Inflated or strategic orders, taking advantage of conditions or market opportunities.
• Uncertainty in the supply, which can generate unnecessary orders.

How can we combat against the Bullwhip Effect?

• Looking for constant demands through the elimination of offers and discounts for the customers.
• Improving the communication of the information in each level of the supply chain thanks to the centralization.
• Increasing the efficiency of the order management.
• Improving the technology of information that every actor uses along the supply chain.

Furthermore, as a way of expanding this interesting concept, there are more implications than the fluctuations of the orders along the supply chain, and this effect could be positive in other ways and situations. I am talking about the “Green Bullwhip Effect“, which is based on transferring environmental requirements along the supply chain. For more information, you can click on the link.

Offshoring & Outsourcing: Reasons and logistical implications

One of the biggest challenges for companies is finding a balance between the quality of their products and the cost of producing them, so in a globalized world like the current one, a vital question is launched: offshoring or outsourcing? The answer could be “it depends on the needs of the company” With the facilities for international trade that exist today and the specialization of the companies in particular activities many companies have decided to offshore and outsource as their most viable choice, so today we are going to analyze the reasons and logistical implications of this strategy.

Offshoring vs Outsourcing, what do they mean?

When we talk about offshoring maybe we can fall into confusion because outsourcing is sometimes related as a kind of offshoring, but there are many differences between both concepts. Whilst outsourcing means that an external supplier of services or intermediate products is working for a company in the same country, offshoring is understood within the international sector. When a company decides to carry out the offshoring it must decide in which way it wants to lead its operations. The company can choose between dealing with an external supplier in the foreign country for producing intermediate goods or services, or the establishment of a subsidiary in the foreign country in order to produce these intermediate goods or services.

Advantages and logistical implications

The choice of offshoring or outsourcing strategy involves different challenges, but especially, some crucial advantages for the right development of the company.

On the one hand, offshoring offers a lot of advantages for international companies:

• Human resources: the availability and the quality of the foreign workers is one of the main factors by which a company decides the offshoring.
• Costs: in developing countries, the companies can achieve low costs in telecommunications, rentals, transport… but the main cost reduction is produced by access to raw materials that are common in these countries and quite weird in the origin country and the low wages that most of the inhabitants of these countries have.
• Business environment: in some countries, there are clusters that can benefit the competitivity of the industry.
• Infrastructures: roads, airports, ports, telecommunications, and logistical facilities will lead a company to offshore its production to these countries.

On the other hand, other companies, usually medium companies, prefer to outsource some of their productive phases and operations which are quite important for the business, but they are not the core activities of the company, and the logistical outsourcing is one of their favorite options. Specialized enterprises are able to offer different services such as storage, inventory and stock control, receiving goods from foreign countries and labeling, packaging and shipping products. This provision of services offers the following advantages:

• Reduce direct costs: the company doesn’t need to spend money in huge warehouses, machinery, expensive software…
• Saving investments in R&D: they can save money from their investments in R&D and use it for investments in the core activities.
• Reduce staff costs: the company can reduce the amount of money that spend on wages for logistic workers.
• Improvement of the performance of the company: while the logistic company offers its specialized services, the company can be completely focused on their main activities and improve its performance.

However, it is not gold everything that shines and there are some critical voices which claim against the outsourcing, so I invite you to watch this interesting video and create your own opinion about this strategy:

Dropshipping: how to destroy the meaning of “Stock”

The stock is over, or, at least, this is what Dropshipping pretends to do in next times. The world of logistics is changing a lot during these years, and the introduction of E-Commerce into our life has changed the way the new businesses (and those which want to improve their performance) act and deal. Probably you have not heard yet about this concept, but it exists for several years.

What is exactly Dropshipping and how it works?

Imagine that you own an E-Commerce and it runs efficiently while you don’t care about keeping a stock of your products. Or imagine that you are the owner of a little fashion shop in the middle of the city center without a store inside the shop to hold a minimum stock of your products. It sounds quite weird, but this business model or logistic strategy is contributing to set up new businesses.

Through the dropshipping, a company doesn’t need to possess stock, dealing and achieving agreements whit manufacturers or wholesalers, which receive the order too and who are in charge of preparing, sending and delivering the products offered by the retailer, who is, in this case, the e-commerce or the fashion shop. In other words, the retailer acts as a kind of intermediary in these sales.

A Win-Win deal

There are some benefits to both parts:

• For the owner of the E-Commerce or shop, they can sell a huge variety of products without stock, saving inventory costs among others and earning a commission over the manufacturer’s price.
• For the dropshipper is profitable too because they broaden their customer portfolio without the costs of maintaining an online shop or positioning it.

Furthermore, a lot of new businesses decide to begin the dropshipping through marketplaces like Amazon or eBay. This strategy enables them not to create an E-Commerce, generating many advantages for them and taking advantage of the image and support of large and famous companies. This type of dropshipping assures online traffic to their products and takes advantage of the good reputation of Amazon or eBay and their works in promotion and retargeting. For further information about this, you can watch the following video:

All in all, the dropshipping is presented as a key element to set up new online businesses which need to reduce their logistics costs in their early stages and offering what the costumers demand. Definitely, it is a logistic model which will be the source of much talk in the future.