Archive for April, 2010

JIT blogging

April 29, 2010

Attending to the professor’s recommendation, from now on i am changing my blogging strategy towards a “Just in Time blogging”.

It means that i am going to reduce my post “warehouse”, reducing its length and having a set of posts (that are my Distribution Centers of ideas), instead of having a huge post with different topics and ideas.

This new strategy will reduce my “holding cost” and hopefully it will increase my final mark.


Second Lesson: Inventory Control and Transportation

April 14, 2010


First of all, i would like to start this post with an idea about the last lecture last the 12th of March: the fact that “Managing Inventory” is an “Inexact Science”….

…as was mentioned in the last lecture,  “Power is nothing without control” as the Pirelli TV comercial used to say:

…and for this reason companies need strategies to better manage inventory that are going to be shown next in this post:



a) Bullwhip Effect: 

The bullwhip effect is a well-known symptom of coordination problems in (traditional) supply chains.

It refers to the effect that the amount of periodical orders amplifies as one moves upstream in the supply chain towards the production end.

Even in the face of stable customer demand small variations in demand at the retail end tend to dramatically amplify upstream the supply chain with the effect that order amounts are very erratic, and can be very high in one week and almost zero in the next week.

The term was first coined around 1990 when Procter&Gamble perceived erratic and amplified order patters in its supply chain for baby diapers. The effect is also known by the names whiplash or whipsaw effect.

As a consequence of the bullwhip effect a range of inefficiencies occur throughout the supply chain:

  • high (safety) stock levels
  • poor customer service levels
  • poor capacity utilisation
  • aggravated problems with demand forecasting
  • ultimately high cost and low levels of inter-firm trust

While the effect is not new, it is still a timely and pressing problem in contemporary supply chains.


This game version is freely usable.

The link address is:


b) Multistage Inventory Control

Multistage inventory: when the parts stored in more than one stage in the production process sequential multistage inventory is generated, resulting in a difficult problem to establish balanced inventory levels at various stages and the overall system.



c) Vendor Managed Inventory

Vendor Managed Inventory or VMI is a process where the vendor creates orders for their customers based on demand information that they receive from the customer. The vendor and customer are bound by an agreement which determines inventory levels, fill rates and costs. This arrangement can improve supply chain performance but reducing inventories and eliminating stock-out situations.

Why Use VMI?

One of the benefits of VMI is that the vendor is responsible for supplying the customer when the items are needed. This removes the need for the customer to have significant safety stock. Lower inventories for the customer can lead to significant cost savings.

The customer also can benefit from reduced purchasing costs. Because the vendor receives data and not purchase orders, the purchasing department has to spend less time on calculating and producing purchase orders. In addition, the need for purchase order corrections and reconciliation is removed which further reduces purchasing costs. Cost saving can also be found in reduced warehouse costs. Lower inventories can reduce the need for warehouse space and warehouse resources.

  • References:

Interenting video where it is explained how HK Logistics provides turnkey vendor managed inventory services, integrated warehousing, logistics and order fulfillment solutions:

d) Just in Time

The just-in-time inventory system focus is having “the right material, at the right time, at the right place, and in the exact amount”, without the safety net of inventory.

The philosophy of JIT is simple: inventory is waste. JIT inventory systems expose hidden causes of inventory keeping, and are therefore not a simple solution for a company to adopt. The company must follow an array of new methods to manage the consequences of the change. The ideas in this way of working come from many different disciplines including statistics, industrial engineering, production management, and behavioral science. The JIT inventory philosophy defines how inventory is viewed and how it relates to management.

Inventory is seen as incurring costs, or waste, instead of adding and storing value, contrary to traditional accounting. This does not mean to say JIT is implemented without an awareness that removing inventory exposes pre-existing manufacturing issues. This way of working encourages businesses to eliminate inventory that does not compensate for manufacturing process issues, and to constantly improve those processes to require less inventory. Secondly, allowing any stock habituates management to stock keeping. Management may be tempted to keep stock to hide production problems. These problems include backups at work centers, machine reliability, process variability, lack of flexibility of employees and equipment, and inadequate capacity.


But not only automotive companies use JIT philosophy…



e) Stock Accuracy

A lot of tools are used to help stock accuracy such as the “Intermec Products” shown in this video about Tesco, the UKs leading supermarket retailer.

They wanted to improve many of their business processes, like stock and price control, customer services, and management information systems. Intermec devices were chosen for several different reasons.



Single Minute Exchange of Die (SMED) is one of the many lean production methods for reducing waste in a manufacturing process. It provides a rapid and efficient way of converting a manufacturing process from running the current product to running the next product. This rapid changeover is key to reducing production lot sizes and thereby improving flow .

The phrase “single minute” does not mean that all changeovers and startups should take only one minute, but that they should take less than 10 minutes (in other words, “single digit minute”).

There are seven basic steps to reducing changeover using the SMED system:

  1. OBSERVE the current methodology
  2. Separate the INTERNAL and EXTERNAL activities. Internal activities are those that can only be performed when the process is stopped, while External activities can be done while the last batch is being produced, or once the next batch has started. For example, go and get the required tools for the job BEFORE the machine stops.
  3. Convert (where possible) Internal activities into External ones  (pre-heating of tools is a good example of this).
  4. Streamline the remaining internal activities, by simplifying them. Focus on fixings – Shigeo Shingo rightly observed that it’s only the last turn of a bolt that tightens it – the rest is just movement.
  5. Streamline the External activities, so that they are of a similar scale to the Internal ones.
  6. Document the new procedure, and actions that are yet to be completed.
  7. Do it all again: For each iteration of the above process, a 45% improvement in set-up times should be expected, so it may take several iterations to cross the ten minute line.

This diagram shows four successive runs with learning from each run and improvements applied before the next.

  • Run 1 illustrates the original situation.
  • Run 2 shows what would happen if more changeovers were included.
  • Run 3 shows the impact of the improvements in changeover times that come from doing more of them and building learning into their execution.
  • Run 4 shows how these improvements can get you back to the same production time but now with more flexibility in production capacity.
  • Run N (not illustrated) would have changeovers that take 1.5 minutes (97% reduction) and whole shift time reduced from 420 minutes to 368 minutes a productivity improvement of 12%.

The SMED concept is credited to Shigeo Shingo, one of the main contributors to the consolidation of the Toyota Production System.

  • References: Study of TOYOTA Production System, Shigeo Shingo, 1981, p 70




a) Fleet Management

Fleet management is the management of a company’s vehicle fleet. Fleet management includes commercial motor vehicles such as cars, vans and trucks. Fleet (vehicle) management can include a range of functions, such as vehicle financing, vehicle maintenance, vehicle telematics (tracking and diagnostics), driver management, fuel management and health & safety management.

Fleet Management is a function which allows companies which rely on transportation in their business to remove or minimize the risks associated with vehicle investment, improving efficiency, productivity and reducing their overall transportation costs, providing 100% compliance with government legislation (duty of care) and many more. These functions can be dealt with by either an in-house fleet-management department or an outsourced fleet-management provider.

  • References:  Rfcafe. Fleet Management Systems, Services, & Tools


Interesting video about “Fleet Management Technology”: a solution that integrates People, Cost and Environment as one benefit that is optimize the fleet usage:

And there are also other “GPS Fleet Vehicle Tracking and Management” as the one presented now, which can increase productivity in a12%:


b) Hub & Spoke

The hub-and-spoke distribution paradigm (or model or network) is a system of connections arranged like a chariot wheel, in which all traffic moves along spokes connected to the hub at the center. The model is commonly used in industry, in particular in transport, telecommunications and freight, as well as in distributed computing.


The hub-and-spoke transport concept originated with Federal Express’s courier service operated out of Memphis and was then adopted by passenger airlines. Under a hub-and-spoke transport arrangement, parcels, freight, and/or persons are transported to a central “hub” facility, then onward to interacting nodes via a network of “spokes”. The shipping industry has also seen the emergence of massive hub ports at a variety of locales around the world, serving smaller regional “feeder” ports, particularly in the context of container shipping.

The hub-and-spoke transport concept is predicated on transhipment of commodities (from one marine vessel to another) and “feedering” of commodities via marine transport to other regional ports. Figure ES-1 provides an overview of the marine hub-and-spoke concept.

Maritime Hub-and-Spoke Transport:

 Maritime Hub-and-Spoke Transport

  • Source: Graphic developed by CPCS
  • References:  Study on Potential Hub-and-Spoke Container Transhipment Operations in Eastern Canada for Marine Movements of Freight (Short Sea Shipping).

c) Unit Load

A pallet is a flat transport structure that supports goods in a stable fashion while being lifted by a forklift, pallet jack, front loader or other jacking device. A pallet is the structural foundation of a unit load which allows handling and storage efficiencies. Goods or shipping containers are often placed on a pallet secured with strapping, stretch wrap or shrink wrap and shipped.

File:Plan palette-europe.gif


Interesting article about the dilemma with reference to tha fact that if the Shipping on EuroPallets could be a  good business decision or a bad mistake!:

Europallets: Good or Bad for Business???


d) Transportation Methods

Interesting Study Process in planning complex transportation projects in a “Environmental Assessment Study” context:

The Environmental Assessment is currently underway, and will involve a two-staged approach:

Stage 1:

•      Identify Transportation Problems and Opportunities
•      Screen Modal Alternatives and Assemble Combinations
•      Evaluate Transportation System Alternatives
•      Select a Preferred Transportation Strategy

The following schematic outlines how the potential transportation system alternatives will be developed.

Stage 2:

•      Refine the Study Area and Identify Significant Study Area Features
•      Generate and Assess Alternative Transportation Methods
•      Evaluate and Select the Preferred Transportation Method(s)
•      Develop Concept Designs and Proposed Mitigation
•      Submit Environment Assessment Report


e) Multimodality

Multimodality in Spain: interesting article from “Veintepies” logisitics magazine about the ZAL (Logistic Activities Area). September 2009.

 ZAL Barcelona grows and opportunities increase

ZAL Barcelona has consolidated itself after 16 years of experience as a multimodal centre per excellence, offering as differential advantages ,an unique strategic location, complete multimodality and professional activity of a “city” devoted to logistics

The Logistics Activity Area introduces itself under full expansion process, with a second stage of 143 hectares to develop in Prat de Llobregat and inside of the proper expansion of the Port de Barcelona, with the third container terminal. ZAL currently has 70% of the territory marketed and the rest is under negotiation. It is foreseen to be completed in the coming years.
Moreover, the maritime interior terminals in Zaragoza (tmZ), and tmC on the Madrid outskirts , as well as the dry port Madrid-Coslada, complete the offer of logistic corridors in Spain.

Moreover, the port of Barcelona is expanding its hinterland in France. It expans with the Zal-Toulouse, in Eurocentre, a place strategically located and Toulouse is the distribution centre for 19 million of consumers within a 300 Km radius. This platform is fully fitted out for intermodal traffic since it offers an excellent connection by road, sea and air. At the moment it is under full construction process with expected warehouse deliveries in 11 months. The plants of 20000 m2 are modulated with flexible modules of 6000 and 4500 m2. Next to ZAL-Toulouse , the Maritime Terminal of Toulouse (tmT) progresses, which is a new concept of inner port to facilitate the international maritime trade. It is too an strategic initiative of port de Barcelona to favour the permanent presence of the port in this market and differentiate its new services offer supported by quality standards with guarantees.

This inner maritime terminal is integrated with ZAL-Barcelona by road and railway and has the characteristics of a multimodal and multiservice terminal. The depot, containers, logistic handling, transport, delivery, distribution and customs services will be offered to this platform.

Europe and Africa expansion
Currently, Barcelona is the logistic hub of the Euromediterranean, since it is a very important distribution, concentration, and logistic cargo centre where ZAL offers services of high added value. For this reason ZAL and the port of Barcelona are creating a logistic platform network and inner maritime terminals to improve the import/export services. The whole network is perfectly linked by road, sea and air and therefore provides another great advantage, the expansion of the port towards these influence areas for customers aiming at establishing in our platforms.

An example is the growing project of the port TangerMed where the ZAL will develop its ZAL-TangerMed with 10 hectares.