Logistics Legends: The Silk Road

You know what I’ve been geeking out over lately? No, it’s not the latest algorithm for optimizing delivery routes or a new AI-powered inventory system. It’s something way older and cooler: The Silk Road. After I saw the BBC documentary called, you guessed it, “The Silk Road”, my life would never be the same.

First off, let’s clear something up: The Silk Road, despite its name, isn’t a single road. Nope, it’s not a silk-lined, straight-shot highway from China to Europe. It’s more like a bunch of meandering paths going all over the place, a bit like your headphone cords after they’ve been in your pocket for five minutes​​. The Silk Road covered some 4,000 miles of formidable terrain, from the Gobi Desert to the Pamir Mountains. And here I thought my morning commute was tough. I can just imagine some poor trader, loaded down with silk, staring at his camel and saying, “You sure there’s not a shortcut?”​​.

The stuff the Chinese traded was pretty amazing: silk, jade, porcelain, tea, spices. On the other side, Europe sent horses, glassware, textiles, and manufactured goods. What really amazed me though, is that the Silk Road wasn’t just about moving products; it was the internet before the internet! Ideas, cultures, and technologies were traded along with those goods. It was a true information superhighway, only instead of Wi-Fi signals, they had camels​​.

The Silk Road wasn’t just a trade network, it was the beating heart of globalization, pulsating with life and exchange before the term even existed. Talk about being ahead of your time! Now, it’s on UNESCO’s World Heritage List, and I bet those traders never saw that coming. They were probably too busy negotiating camel prices or sand-proofing their silk bundles​​.

The Silk Road is an absolute legend of logistics. It makes my modern-day logistics look a bit less shiny, but it sure gives me a ton of inspiration. If they could sort out trade routes across continents with nothing more than camels and a sense of direction, I reckon I can manage my spreadsheets.

In conclusion, watching the BBC documentary I told you is mandatory! 😊

The Short Food Supply Chain Trend

With globalization and the increase in population, the distance between the producer and the consumer has increased, with many intermediaries being added in the supply chain that makes it difficult to follow the treatment of the product, causing problems such as extensive food waste, food security, environmental damage, unfair distribution of added value and profits among chain members and so forth, as well as provide reasons for an increasing interest in the quality of food, locally produced food and food producing practices.

This has led to a trend called Short Food Supply Chain that seeks to go back to the roots to pursue economic, environmental and social sustainability, revitalizing the rural population and strengthening the relationships between producers and between consumers and producers, while gaining control over the sale price by reducing the number of intermediaries.

The problem with SFSC is that, since there are few intermediaries, producers must cover the marketing and distribution of their products, something of which they lack specialized knowledge, with the main problem being the spoilage of the food during its distribution. Therefore, SFSCs require corresponding innovative logistics solutions, like smart packaging to ensure the state of the food and the hiring of LPS and freelancers to whom to delegate the distribution.

Another way to solve this problem has to do with the relationship between producers mentioned in the second paragraph. The relationship between the producers takes place through alliances (or clusters of producers), where producers share resources with each other, including those for marketing and distribution. This is the case of the organic farms in Berguedà, with Salt de Colom sharing its facilities with the other farms to prepare the orders and send them together to their customers, many of whom share among all of them.

References

Sociedad Española Agricultura Ecológica, S. E. A. E. (2020, November 25). Vídeo d´experiències: Cal Pauet – Ecoavícola – dpagès – salt del colom – 7é simposi pae. YouTube. Retrieved March 27, 2023, from https://www.youtube.com/watch?v=0wUpWbASO5U

Todorovic, V., Maslaric, M., Bojic, S., Jokic, M., Mircetic, D., & Nikolicic, S. (2018). Solutions for more sustainable distribution in the short food supply chains. Sustainability, 10(10), 3481. https://doi.org/10.3390/su10103481

The use and impact of Big Data in the Supply Chain industry.

The exponential impact of e-commerce on traditional, brick-and-mortar retailers, is one good example of how the data-driven revolution is sweeping many sectors of the economy and business operations nowadays.

Few organizations have been able to apply the “big analytics” methods that are revolutionizing the ways to define and organize the supply chain operations. Two major challenges might be limiting big data to fully impacting the supply chain. First, there is a lack of capabilities: even supply chain managers with advanced technical skills, fall way behind in the experience with data analysis techniques. This results in a lack of vision to see what big data might be capable of in the industry. The second challenge is that most businesses do not have structured processes for exploring, evaluating, and capturing big data opportunities in their supply chains.

Opportunities in supply chain areas with the use of Big Data.

For a more in-depth analysis about the opportunities in the supply chain industry driven by applying Big Data: https://www.mckinsey.com/business-functions/operations/our-insights/big-data-and-the-supply-chain-the-big-supply-chain-analytics-landscape-part-1

UPS success case

Companies can now optimize deliveries regardless of the obstacles they might find in the road thanks to GPS and location sensors, as well as real-time traffic reports, that allow them to change their path in real time.  UPS could be the most successful big data story in the logistics industry. The company has made significant progress in efficiency improvements and lowering costs through collecting and analysis of data, planning, and forecasting.

More than 200 onboard sensors in 80,000 vehicles measure variables such as speed, location, and idle time. Some of the sensors collect also data on the vehicle’s battery and tire pressure, creating opportunities for proactive maintenance, which is always more efficient than reactive. The goal is to keep a vehicle on the road as much as possible rather than in the shop. Big-data-driven predictive modeling serves as the catalyst for route optimization.

UPS used big data to cut fuel consumption by an estimated 1.5 million gallons in 2012, significantly reducing emissions while increasing operation margins through efficiency. Also, related to cutting costs, they managed to reduce  the wear and tear on vehicles through route optimization. This route optimization models also provide truck drivers with an innovative and unusual solution: they never turn left. When the optimal paths are traced, only right-turn directions are included, reducing the vehicles’ idle time at red lights.

While some firms are starting to invest in greener technology as well as big data initiatives, many supply chain companies are developing new techniques that imitate the outcomes of route optimization by trying to master inventory logistics management and optimizing shipments for efficiency.

Facilitating transportation systems: The world´s first beer pipeline

In the last lesson we were speaking about transportation and different transportation modes. One of these models is a pipeline that usually transport liquids (e.g. water, oil), gases (e.g. natural gas, carbon monoxide) or slurry (e.g. carbon with water). During the lessons, our professor mentioned a beer pipeline in Belgium. This sounded interesting and strange at the same time, so I did a deeper research on this.

And he was not kidding:
in 2017, the world´s first beer pipeline was opened in the Belgian city of Bruges.

The first thing you may think now is the following: Oh cool, can I get beer out of the tub in my home?
But as this is a logistics blog, of course the reason for building this pipeline is a logistical one. The pipeline does not connect private homes or restaurants.

What can we learn from a beer pipeline?

From this very special case, many things about pipelines in logistics can be learned. The main reason for using pipelines in general is the fact, that even besides the high construction cost, usually they are more economical than using tank ships or tank trucks and simplify complicated transport systems.

The problem

So what is the reason for the pipeline? The traditional brewery “De Halve Maan” had a logistical problem: The historic oldtown of Bruges had not enough space for an extension of the brewery´s facilities. As it was the oldest brewery in Bruges´ oldtown, they wanted to stay there. So, they build a bottling plant in a suburb, 3 kilometers away from the brewery. From then on, every day 4 or 5 road tankers, which carried 30.000 liters of beer, had to bring the beer from the brewery in the old town to the bottling plant. And here is the problem: The old town of Bruges which has very narrow little streets that are full of tourists. So, it was very difficult for the tankers to move forward and of course, this was not very economic neither.

The solution

As the owner was searching for a more practical solution, he came up with the idea of a pipeline. As mentioned before, it brings the freshly brewed beer from the brewery in the old town to the bottling plant in a suburb. I hour, about 5.000 liters of beer are flowing through the pipeline. This is enough to fill 12.000 bottles an hour. And besides the easier transport, the pipeline works as a big marketing tool for both the brewery and the city of Bruges.

The pipeline is 3.3 km long and at its deepest point 34 meters under the surface as it has to pass a parking garage. It was constructed using the latest technology and for that reason the road surface had to be opened only at two big spots as the digging was down from little holes automatically by special robots. The pipeline has also a cleaning and flushing system.

But not only the construction is similar to bigger water pipelines. Also, the rate of flow remembers of an oil pipeline which usually has a flow velocity of 3 to 5 km/h. The beer in the pipeline flows also pretty slow, it needs approximately 1 hour for the 3 km. This equals about 5000 liters per hour. For details, watch the video at minute 0:55:

Financing

The “De Halve Maan” brewery spend about 4 Million € for the project. A quite big part – 300.000 € – has been crowdfunded. By paying the top rate of 7.500 €, sponsor would get one beer per day for the rest of their lives for free and this way are getting close to the dream that was mentioned in the beginning: an inexhaustible flow of beer.

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.

Traffic light logistics: when you become the package.

While I was studying my industrial electronics and automatics engineer degree, I had to program a cross street traffic lights for a simulation. The task was not particularly difficult (I was just programming a couple of traffic lights for an intersection), but it made me realize how difficult must be to control not just one intersection, but all of them in a big city like Valencia (or worse, Madrid).

Just in the same way in a warehouse you have to take into account the holding costs, in a intersection of streets, if the red-green light periods of the traffic lights are too long,  retentions will be created, and if they are too short, only a few cars, the ones in first line, will cross, due to the delay in the reaction time of the drivers. So a proper lenght has to be found, and it depends on the traffic flux, which is also dependent on the area, hour and day, so a constant revision of the periods is needed.

By the way, we don’t have to forget the yellow light. Sometimes are not needed, if there is no “dilemma zone“, but when needed, if it is too short, some drivers will cross in red and it may cause accidents (although it also increases ticket revenue if you put a camera).

A propper traffic light system is not a joke, the Los Angeles synchronized whole-city-traffic light system “increases travel speeds by 16 percent and reduce travel time by 12 percent. And because of reduced idling time, the city says it will save 1 million metric tons of carbon from entering the atmosphere”.

In case you wanna know a bit more about how all this works, here there is a video of the Los Angeles Department of Transportation Automated Traffic Surveillance and Control Center.

Hope next time you see a traffic light, you look at it with different eyes.

Big Data: opportunities to improve Logistics and Transportation performance

One of the pillars of Logistics is data. Collecting data is not the basis of this business but according with the previous posts is very important in order to answer the questions:

1. How much do we store?
2. How many movements per hour do we need?

On the one hand, due to the significance of this topic I would mix the knowledge acquired in class with my own experience. In my everyday activities I’m work with a lot of data: number of datasets, classification, type of content, among others. At this moment is quite interesting mediate about these topics related with Logistics. For example: number of pallets or boxes, classification in conveyors, type of content (liquid, solid, others), among others.

According to the visit of Richard Stallman’s (http://bit.ly/1TCp62n)  at the Polytechnic University of Valencia the past 05/16/2016, let me introduce this TEDx video: Free software, free society at TEDxGeneva 2014. This video shown the implications of free software and proprietary software and suggested interesting reflexions related with the property of this systems. See Video 1 (minutes 1:55-5:38).

Video 1. Free software. <https://youtu.be/Ag1AKIl_2GM> [Accessed: 05/17/2016].

On the other hand; open data, public sector information and big data represents one of the most valuable assets of public and private organizations in order to try give an answer to this open questions introduced before. This information supported by management tools which support information flows through the entire organization like Customer Relationship Management (CRM) or Enterprise Resource Planning (ERP) could dynamize the interexchange relation between customer and supplier. See Video 2 (08:00-10:00): Using Open Door Logistics and Geographic Data to Plan Routes. In addition, I recommend visualize the Video 3: Big Data and Transport (2 minutes).

Video 2. Big Data: datasets. <https://youtu.be/kGoAHczxOsA> [Accessed: 05/17/2016].

Video 3. Big Data: Transport. <https://youtu.be/VXjDhzWfCF4> [Accessed: 05/17/2016].

Datasets related with Logistics:

• GSHHG – A Global Self-consistent, Hierarchical, High-resolution Geography Database: http://1.usa.gov/1XAl3Yo
• The Humanitarian Information Unit (HIU) World Country Polygon Datasets: http://1.usa.gov/1TZsUJ8

Finally, let me introduce the following topic: Is the Big Data the future of Logistics?

The big data could increase the velocity of communication, dynamize the volume of this communication and ensure their viability. Nowadays Big Data represents and strategic asset strategic asset to be considered by sustainable organizations. See Video 4 (2:21).

Video 4. Big Data: Logistics. <https://youtu.be/OCCIX1cnzbQ> [Accessed: 05/17/2016].

More and more parties getting involved – 3PL and 4PL

As we were talking about the trade-off between transportation and storage costs in the last lecture and shortly introduced the concept of Vendor Managed Inventory (VMI) I wanted to present other related concepts, the Third Party Logistic (3PL) and Fourth Party Logistic (4PL) providers. In the literature you might find slightly different definitions of these concepts. Therefore the author of the following article http://cerasis.com/2013/08/08/3pl-vs-4pl/ uses the definition of the Council of Supply Chain Management Professionals’ (CSCMP) glossary as it seems to be a generally accepted definition amongst practitioners. The CSCMP defines 3PL as the “Outsourcing all or much of a company’s logistics operations to a specialized company.” At the beginning the term “3PL” was used for intermodal marketing companies (IMCs) in transportation contracts. When these companies arouse contracts for transportation had to be extended from two parties (shipper and carrier) to three parties (shipper, intermediary and carrier). Nowadays the definition has broadened and pretty much every company that offers some kind of logistics service for hire calls itself a 3PL. The provided services are transportation, warehousing, cross-docking, inventory management, packaging and freight forwarding.

But let’s get to the important part. Why should companies work with 3PL providers? What advantages can they offer? I found another article (http://cerasis.com/2014/10/15/3pl-providers/) that gives 7 reasons why non-core transportation management functions should be outsourced:

1. Save time and money: This is kind of the most important reason and some of the following reasons might be necessary to explain why this is really the case. The company clearly saves time as they don’t have to handle transportation anymore. But on the first sight it might seem as it comes with a higher costs. This is where the following reasons kick in
2. Economies of scale: As 3PL companies have several customers the act on a larger scale which can bring several cost advantages. E.g. when merging loads to achieve FTL.
3. No need to buy an expensive transportation management system (TMS): Also 3PL providers have all the necessary computer software and again the costs are divided between all their customers.
4. Utilize more carriers: By using several carriers 3PL providers may be able to always get the best services and prices.
5. Liability: 3PL providers manage the legal part, carrier contracts and more. This does not only reduce the workload but also shifts the liability to the 3PL.
6. Visibility of loads: Many 3PL providers offer additional services like on-line tracking to give shippers visibility of their loads. This real-time information provides additional value and helps to improve planning.
7. Reduce back office duties: 3PL providers have the systems, manpower, and the know-how to process thousands of bills a day at a fraction of the costs.

To see how 3PL providers work you might want to watch this commercial video from a 3PL supplier called Total Logistic Control (TLC) (preferably minutes 0:25 to 0:48 and 2:00 to 7:14)

https://www.youtube.com/watch?v=hddWZ4Olfx0

Now that we know what a 3PL is let’s get to the next PL, the 4PL. 4PL was originally defined by Accenture as “A supply chain integrator that assembles and manages the resources, capabilities, and technology of its own organization with those of complementary service providers to deliver a comprehensive supply chain solution.” The CSCMP differentiates 4PL and 3PL the following ways:

• 4PL organizations are often a separate entity established as a joint venture or long-term contract between a primary client and one or more partners.
• 4PL organizations act as a single interface between the client and multiple logistics service providers.
• (Ideally) all aspects of the client’s supply chain are managed by the 4PL organization.
• It is possible for a major third-party logistics provider to form a 4PL organization within its existing structure.

Sometimes 4PLs are described as non-asset-owning service providers so their role is to provide broader scope managing of the entire supply chain.

Source: http://cerasis.com/2013/08/08/3pl-vs-4pl/

To make the difference more clear you find can find a link to a commercial video from a 4PL supplier called Ally (it’s a short video so from the beginning until minute 3:15)

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

As I said the problem can be like in many other fields that once a term is out in the world it is used in many different ways and may confuse you when you are trying to understand a new concept. So if you are still not really sure what’s the difference between 3PL and 4PL I invite you to watch the following video that has another explanation and also talks a little more about current developments in both fields. (I’m not writing which minutes to watch because it is relatively short and in my opinion worth watching all of it.)

https://www.youtube.com/watch?v=6pNXQEkgbCA

Have you watched it?

What do you think is Amazon a good example for a 4PL provider?