LOGISTIC STRATEGIES AND CROSS – DOCKING

In relation to our last class session and what it has to do particularly with logistic warehouses, cross – docking is an alternative that is configured and positioned within the logistic sector and the supply chain. Cross docking (also called dock crossing), refers to a logistic technique in which storage time is non-existent or limited. In short, it seeks the possibility of carrying out the entire logistics process in the shortest possible time and without having to incur higher storage costs.

Cross-docking can be adapted to any merchandise: it does not matter if it is raw materials, finished articles or components destined for factories, physical stores or final customers. Following the cross-docking strategy, the goods remain in the warehouse for a very short time after receipt. Furthermore, with this methodology, it is not placed on the shelves and therefore it is not necessary to carry out the picking process. This is the origin of the term in English, since the operation only requires crossing the docks of the warehouse.

¿ How do cross-docking operations work?

In a traditional supply chain, the warehouse represents a key link connecting suppliers (supply) to consumers (demand). This flow is discontinuous, since supply and demand are not synchronized and the link is based on the figure of the warehouse. The goods are stored there until the demand is activated.

However, the advance of information systems and software applied to logistics has led to increasingly agile and integrated supply chains. It is in this context that cross-docking becomes popular, since the key to the success of this working methodology is the perfect coordination of all those involved: suppliers, warehousemen, transporters and end users.

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Phases of cross-docking

In general we can conclude that the main phases of the cross-docking operation are:

1. Distribution scheduling by suppliers.
2. Reception of the goods in the warehouse.
3. Recording and reviewing of cargo received as part of the quality control procedure.
4. Repacking, consolidation of orders (if necessary) and dispatch of the goods

Types of cross-docking

The cross-docking activity can be carried out with different loading units (pallets, boxes, kits…). There are different ways to organize the types of cross-docking, but if we look at the steps required to perform it, we can highlight.

Pre-distributed cross-docking: The pre-distributed one represents the most basic cross-docking model. In it, the load units are already prepared and organized by the supplier taking into account the final demand. Therefore, the cross-docking operation is limited to receiving the goods and dispatching them without further intervention by the warehouse workers.

Consolidated cross-docking: In a consolidated cross-docking scheme, the goods do have to be handled to adapt them to the requirements of the end customer. Then, the load units received are transferred to a cross-docking zone or conditioning area where theya are examined and adjusted to the orders demanded.

This may involve organizing pallets from smaller loading units or vice versa: dividing the goods into individual packages or product kits.

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Hybrid Cross-Docking: This is a more complex type of cross-docking that involves preparing orders in the conditioning area by taking part of the
goods from the trucks received and part of those already stored in the facility. In these cases, the goods received can be moved to a temporary storage area instead of directly applying cross-docking.

https://www.youtube.com/watch?v=jt8qKSQLP0M

¿What are the challenges facing logistics on Black Friday?

Although Black Friday is a naturally American tradition (for Thanksgiving), either because of the influence of the United States or because of the very opportune date (end of November), it is true that in many places around the world this day has been taking on greater relevance and importance; for physical stores and e-commerce, it is an excellent opportunity because millions of entrepreneurs expect a great flow of people as well as a high volume of sales, which is a challenge to meet the demand generated by a day like Black Friday

But the key to properly managing the logistics of this day, focuses on how to manage all those customers who have a special interest to buy on this day, during the Black Friday is more than possible to achieve sales on a large scale, but it is also important to mention that selling too much and not knowing how to manage orders and customers in the physical stores, as well as shipments and deals with suppliers and transport companies, can trigger a number of problems.

Meeting such a concentrated demand in just a few days usually causes a lot of tension in the organizational structure of a supply chain and even in each of the intra-logistic units of the participants of the supply they are chain part of.

To do so, it is important to develop a great sales and service strategy during this stage, according to data taken from last year, that is, from Black Friday 2019, almost 14.5% of the annual shipments made by the various companies dedicated to this activity (Couriers and logistics operators in general) were made in a single day or, in the best of cases, in a few days before the peak day arrives.

In the following graphs we can see, according to 2018 statistics, which are the countries with the highest sales flow these days in relation to the United States:

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As well as we can appreciate what people are most interested in buying in this season of great discounts:

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Poor management of orders and shipments can lead to a negative user experience. In this sense, having a good or bad Black Friday will certainly affect the online reputation of e-commerce. Among the most relevant challenges that I can highlight with the logistics of this day, and which are commonly faced by companies:

•Problems of lack of coordination between departments:It is very possible that the planning of the marketing and commercial departments is very imprecise (not knowing how such a concentrated demand will evolve in time) and that this will inevitably change the planning of the logistics area.
• Problems of understaffing or overstaffing: Planning the appropriate number of employees to attend to the logistics area is usually complex,
but without a doubt, when the positions to be filled require a certain qualification or previous preparation that, for obvious reasons of lack of time, has not been provided to the worker, this may generate an increase in errors in certain logistics activities (picking, preparation of dispatch, lack of documentation accompanying the goods, etc.) that are difficult to foresee.
• Operational flexibility issues: It also adds to the fact that our fellow travelers in the supply chain where we operate will also not be able to predict how, when and where demand will increase or decrease in a timely manner, a scenario of relative paralysis could be encountered due to lack of control or information that the various operators receive at each step of the supply chain.
• Problems in transport and delivery companies: Again caused by the fact of an uncontrolled massification of demand and during a short period of time, we can find that the companies that usually work with us can find themselves orphaned by vehicles or drivers.

I share with you these two videos of successful cases of companies that manage very well, a lot of orders on this day and that have a lot of experience around Black Friday:

NIKE´S DISTRIBUTION nETWORK

Nike´s Distribution Network by Stephany Puerto
https://www.youtube.com/watch?v=eSw45bRbX2o

¿WHAT IS A BREAK IN STOCK OR UNAVAILABILITY AND HOW COULD IT AFFECT A COMPANY? – INVENTORY CONTROL

Throughout the supply chain, small mismatches and variations in demand forecasts with respect to actual demand create a snowball effect that starts out small but, if not attended to and regulated, as time goes on, the mismatch is transmitted from link to link throughout the chain, growing and eventually becoming a real inventory problem called: stock outs or overstocking.

When managing inventories, it is very important to foresee that this situation will arise one day in the company. For example, setting a minimum stock or safety stock for the items being sold. This planning is the responsibility of the manager or director of the supply chain.

Stock break is the situation that occurs when a customer wants to buy a certain product and the company does not have enough stock to serve it. In other words, it is the unsatisfied demand of the customer caused by the lack of stock of a certain product.

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The dissatisfaction of the customer for not receiving his order due to the lack of units (breakage of stock), is not a problem that affects only the customer: the production chain, the warehouse, the purchasing department, the commercial forecast and of course the external customer can be easily affected by this evil that in some companies is even accepted with resignation as an inevitable modus operandi. WIP’s (work-in-progress) out of stock, production halts, panic orders, process delays, wastage in the warehouse and throughout the supply chain, loss of confidence, are some of the most immediate and often unexpected effects of a break in stock.

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Among the risks to which companies would be exposed by not properly managing their inventory and produce breakage of stock are:

• No planning of suppliers: the lack of information and control of their lead time causes us to order goods without any planning, that is, without a calendar and without taking into account the times of our suppliers, their reliability, their delivery schedules, the articles they supply from stock or to order, etc. Without supply planning, the pace of our needs will be out of balance with the pace of acquisition, which will end up causing stock breaks at one or more points in the chain.

• Predicting variations in demand that are deficient or non-existent: a reactive warehouse is not preventive, therefore, it is doomed to assume the consequences of the lack of anticipation actions that prevent breakdowns.

• Unexpected increase in demand: a clear example of this is the case of an article that unexpectedly becomes fashionable and whose demand far exceeds its availability in stock and the manufacturer’s production capacity.

• Incorrect inventory data: stock is broken by bad information when you are confident that certain units are inventoried and there are actually fewer or no units left.

• Unforeseen supply delays: due to transport incidents, manufacturing or quality failures, etc. When they occur in the case of raw materials or components, they can stop production or force urgent replanning.

• Not knowing our own lead time, our stock levels, our production capacity, etc.: selling what we do not have available or compromising impossible deadlines due to not knowing our lead time causes identical effects as breaking stock.

• Not locating stock in the warehouse even when it is in stock and available: this is a mistake that causes countless breakages in warehouses where the technology is not used properly or does not exist.

To avoid breakage of stock unavailability of these we can:

Optimal lot: it is the adequate and necessary quantity for the cost of an order to be convenient. If the supplier charges a fixed amount of 100 euros to serve each order, it is logical to place orders with the largest possible volume of products. In addition, storage costs must be taken into account.
Optimal ordering point: This section refers to the time in which the order is placed with the supplier. Here we must take into account the time it takes to serve us and the daily units we sell of the product.
Safety stock: or also called . These minimum units that are established for a product serve to cover an unexpected demand. For example, an unexpected influx of people to our digital or physical store for a marketing campaign.
Better coordination between departments: the lack of communication between different areas of the company is key.
Control the current life cycle of each product: Knowing the point at which each of our references is, market introduction, growth, maturity or decline, will allow us to objectively evaluate the stock levels that we must maintain so that they do not fall to excessively low levels in times when demand for them is predictable based on the moment in their life cycle.
Forecast of the demand with adequate margins of error: If we are distributors it is very important for the correct management of purchases and sales and if we are manufacturers it will be determinant
for planning the production.
Supplier planning: In order to avoid stock-outs it is essential that we work in the right direction: improving our relationships with suppliers, thus enhancing their ability to supply our company. Company and supplier do not have to act as a tandem, they are inevitably in the same tandem and therefore must join forces to establish a productive relationship that benefits both directly and indirectly to the final customer.

“Stock Unavailability”

¿What happened to my luggage?

The airline industry claims that the technology implemented for the transportation of our luggage is increasingly better thanks to the tracking of objects, which is allowed with it. But millions of bags are still lost every year. So, is the technology implemented the right one or is enough being done to mitigate this problem? ¿Why do airlines still lose 25 million suitcases every year?

I find it a frustrating experience for millions of air passengers every year, but why does it happen? How can an industry that employs the latest technologies in its aircraft and air traffic control systems have such poor logistics when it comes to controlling our baggage?

In 2019, about 24.7 million bags were lost; about 4.65 billion bags are handled at airports each year. In 2018, 2.9% of them were lost due to bad handling, and although the rate has fallen by 70.5% in ten years, the accelerated growth of travellers around the world, in search of new experiences, maintains the problem. The SITA 2018 Baggage Report says this, estimating the cost of lost luggage in 2018 at $2.4 billion. That’s despite the fact that airports and airlines have been investing in technology to curb it for years. The International Air Transport Association (IATA) has taken action, imposing a standard on the industry to improve baggage tracking.

These figures tend to rise also in the busiest seasons of the year, during the summer holidays and at the end of the year. The trips that pose the greatest risk for incorrect luggage handling are those that involve the transfer of luggage from one plane to another or from one airline to another. In 2018, 10.67 million transfer cases were mishandled, representing 47% of all mishandled luggage. Of the cases of incorrectly
issued bags, 16 per cent were not loaded; mistakes due to ticketing, bag changes, security issues and other problems accounted for 15 per cent; and airport, customs, weather or space-weight restrictions accounted for 10 per cent. Late arrival bags accounted for 78 per cent of all incorrectly issued bags in 2018; 17 per cent had been damaged and 5 per cent had been lost or stolen.

A significant proportion of lost luggage is also due to passengers, or handlers, picking up the wrong piece of luggage.
But I think one of the most important factors may be the complexity of the system itself. In some airports, the airlines hire their own staff to move the luggage, but in others they are independent agencies hired by multiple airlines.
The International Air Transport Association (IATA) standard for coding baggage information dates back to 1989. The barcode label system exists from the 1950s. In some smaller airports, these labels are even scanned one by one on a routine basis, perhaps promoting the failure to properly check them and eventually losing them.

But finally the fact that many travellers go from place to place makes the bags end up in the wrong place. Those who travel to small airports within Europe might have some experience of this kind.

¿But what measures are being taken to combat the problem?

The implementation of RFID tags is one such industry-wide measure, a measure that could save the airline industry US$3 billion, although the system for implementing it could have significant costs for airlines, as new equipment and monitoring systems are much more expensive, but also more sophisticated as they include a chip or device in the tag that will allow the luggage of millions of passengers to be tracked in real time.

Because trying to locate lost bags and then return them to dissatisfied customers costs much
more time and money. Delta, for example, is experimenting with machine learning to detect
lost luggage patterns and identify weaknesses in the system, such as particular destinations or the types of bags that are more problematic than others.

Other innovations include airline applications, which offer the ability to update customers on where their bags are at any given time. While this does not necessarily affect the way travel
baggage is handled, passengers may have more information about it, should any anomaly arise, at the time of baggage collection.

On the other hand, last year, IATA introduced a new regulation, resolution 753, aimed at making airlines and airports take better care of our baggage. Suitcases must now be checked for correctness at several key points during the journey. These moments can be when they are loaded onto the plane and when they start their journey within the transfer system at airports.
But here it is not only a matter of having a clear and comprehensive regulation for the handling of our luggage, but also of finding a methodology or innovation from the logistic point of view that will allow the statistics on the loss of luggage to remain low, or ¿what do you think?

“Luggage routes within the airport”

THE LOGISTICS BEHIND A CAR RENTAL COMPANY

Nowadays it is very common to go to a car rental company to rent a car. ¿Who hasn’t rented a vehicle to make a trip or move around for work? Well, beyond getting a car, to move with your family to spend a vacation somewhere, or go for business somewhere and be able to mobilize without depending on others to do so, my personal opinion is that many times we do things, not to mention that most of the time without thinking about the logistics behind it all, but specifically for a company that rents vehicles is a whole logistics within the company, so they can meet your reservation, meet your needs, provide good service and a complete experience around it.

In the world there are hundreds of companies that rent vehicles; in South America one of the best known and recognized by its trajectory, for its coverage, for its good service and immediate availability of vehicles in the category that fits your needs is Localiza Rent a Car, a Brazilian company that has expanded throughout the South American continent, through franchises with a fleet of about 60.000 vehicles in different ranges.

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But how is it possible to manage and maintain a fleet of this size and provide an adequate service? Will there be many or few vehicles?

Well, from my experience I can tell you that the company must always oblige itself to keep certain things in order to guarantee and adequately comply with the service. This franchise is located in the different countries in South America by big automotive and Renting companies, which negotiate on a large scale with suppliers and vehicle dealers. The vehicles offered to the customers have not been working for more than 2 years, so they are constantly renewed. The main aspects that make up a whole logistics are:

1. Attention to reservations and requests: To have the appropriate and suitable personnel to understand and attend to your requests either by telephone, through sales representatives, and also to have a good system via Internet that can also attend to the demand digitally, so that customers can manage themselves and know in real time the availability in range, cost, place of collection and delivery, time.
2. Availability index: Maintain an availability according to the peaks and seasons of the year, with a greater flow of bookings to meet the type of customers handled (Corporate, normal, customers who book through exclusive portals for car rental and not on the company’s own page as, for example: Booking, Skyscanner, Despegar …)
3. Vehicle maintenance: Apart from having a certain amount of vehicles, the company has to maintain relationships and negotiations with high quality repair workshops, to send their vehicles for maintenance both for the safety of the customer, and for the company itself. This implies logistics, because they must have personnel to bring and pick up the maintenance vehicles, coordinate with the workshops such assistance, and also be prepared to have backup vehicles to meet reservations and so on.  
4. Agencies or physical offices: To have the appropriate offices, the number of staff and number of people who attend the counter (staff that performs the procedure with your credit card and other documents), those who make the delivery of the vehicle, those who wash and tank the vehicles.

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5. Coordinate passenger pick-ups: Localiza offices are not all located inside the airports, most of them near the airports or along the cities where they are located, which means that they must coordinate and maintain logistics with the staff that picks up the clients at the time, date and at the different points agreed upon and takes them afterwards to deliver the vehicles.

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And, last but not least important

6. Coordinate and maintain relationships with suppliers: With the vehicle insurance companies, with the repair workshops, with the companies that sell and market vehicles, with the gas stations, with the suppliers of car wash supplies; It is important to have excellent suppliers that meet your needs and requirements, so that you can deliver to the final customer in terms of Price, punctuality, quality, support, security, and coverage.