Tag Archives: Transportation

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.

how-drop-shipping-works

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.

amazon prime air

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:

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.

3pl-vs-4pl

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?