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Archive for the ‘Logistics’ Category

One of the evolving stories of the operational impacts of the pandemic has been port congestion. We (collectively) have been ordering more stuff — shifting consumption from services to goods — and that has meant more work flowing through the nation’s port. This is particularly true for the ports of Los Angeles and Long Beach. That has meant that there is a long, floating queue of cargo ships waiting to unload — as this WSJ video explains.

An interesting side bit here is the impact of the ever-increasing size of container ships. Oversized boats played a role in the Ever Given saga in the Suez Canal. The relevance here is that bigger boats take longer to unload. That is, wicked big boats are efficient at schlepping containers across open water but make life hard when they hit a port.

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While discussing strategic capacity planning in class this morning there was a request to review the celebrated #Newsvendor model for #inventory and #capacity planning. So I figured: let’s make this 6min video for everybody who wants to review this simple, yet powerful decision model 🙂 What do you think?

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Happy new year to all! I have just published a 3min video that explains what digital operations is, how to implement it, and what the benefits are. This video then directly connects to my next video on digital Control Towers for your operational network and supply chain. Please add any suggestions or questions in the comment section on YouTube.

Thanks for watching & subscribing to help the channel get to Youtube Partner status (> 1000 subscribers and > 4000 hrs watched).

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Today’s post has nothing to do with the coronavirus. I can’t tell you how happy that makes me.

The story comes from the Guardian and concerns a coffee roastery in the UK trying to have carbon-neutral beans. The obvious hitch here is that coffee beans don’t exactly thrive in the British Isles so sourcing beans means having to transport them a long way and that has a big carbon footprint. Unless, of course, you use a sailboat (Carbon-neutral coffee comes to UK – via sail boat from Colombia to Cornwall, June 14).

Yallah’s special Colombian coffee grounds and beans are finding their way into coffee shops and restaurants across the country. Using a sailboat to import the beans into the UK made the first leg of their voyage almost entirely carbon neutral. …

By using a traditional sailboat, the 7,500-nautical mile trip has a carbon footprint close to zero. A traditional shipping container might have emitted two tonnes of carbon. A plane would expend 178 tonnes of CO2. …

“Whilst the shipping cost was higher than if it had gone on a big tanker, we worked with the right people and were able to produce a reasonably priced product. There are savings in the fact that we are cutting out the middle men and buying directly from our partners in Colombia. The price the farmers received for this coffee was way higher than the ‘fair trade’ price, by quite some margin,” Blake says.

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Much like Tom T. Hall, I like beer. And much like other industries, brewers have had to adjust as consumers habits and tastes have changed as bars and restaurants closed. As the Wall Street Journal reported a few weeks ago, this has largely meant a shift from smaller craft beers to the watery, American lagers your grandfather drank (Coronavirus Brings Beer Drinkers Back to Bud Light, May 18).

Beer drinkers have turned to box stores and grocery stores, and they are buying beer in 24- and 30-packs so they can make fewer trips. Shoppers are experimenting less, gravitating to brands they trust and looking for healthier, lower-calorie beers. Some people, out of work or watching their budgets, are trading down to cheaper options. And distributors and retailers, looking to simplify their supply chain, are trimming the number of products they carry.

All of those factors are hurting small craft brewers, which make most of their sales in their own tap rooms. Many craft beer brands aren’t distributed in retail stores. For most craft breweries, on-site sales were down by more than 70% in early April, and sales of craft beer to bars and restaurants had evaporated, according to a survey by the Brewers Association, an industry group.

So craft brewers are in many ways like lots of other firms during the pandemic. They had a business model built around sending kegs out to bars and when that demand dried up, they had limited ability to switch to other channels. Even if they could switch to bottling beer, they did not necessarily have the distributional muscle to get their beer into supermarkets and convenience stores.

But that also raises the question about what happens to the kegs. It turns out the breweries own the kegs. When a keg leaves your local craft brewer for a bar, it is supposed to go back to the brewery eventually. This video from Brewbound (a trade publication covering “the beer space“) gives a bit of background.

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The Financial Times has an interesting set of articles on how the ongoing pandemic impacts supply chains (Trade Secrets: Supply Chain Disruption). These hit on things like toilet paper, firms pivoting to new markets or switching from a business-to-business focus to serving retail customers. The one I want to highlight deals with how any fragility exposed by the pandemic will impact supply chain strategy going forward (Be wary of scapegoating ‘just-in-time’ supply chains, May 27) that links to a post that Gady wrote a few weeks ago.

Here is the gist of the article:

A lot of intellectual momentum is building behind the idea that the Covid-19 pandemic has revealed the foolishness of corporate executives in extending their supply chains without properly assessing the risks. Companies have been thinking of “just-in-time” when they need to be thinking about “just-in-case”. …

The reality is complex, and — a crucial point — differs with each industry. Some, like the car industry, have such sophisticated supply chains involving thousands of different components, some manufactured to extremely low tolerance, that diversifying into different suppliers is totally impractical through effort and cost. Sure, you will have a more resilient supply chain, but you’ll also go bust before the next pandemic arrives.

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We have had a number of posts over the years on retailers filling ecommerce from brick-and-mortar stores (see, for example, here and here). From the perspective of inventory management, treating what’s in the stores and whatever is in a fulfillment center as one giant pool of inventory makes a lot of sense. In theory, there is no reason to turn down a web order just because the fulfillment center is stocked out if the needed item is sitting at some mall. The reality, of course, is more complex since picking and packing at a store is going to be more costly than doing the same work at a dedicated facility. Additionally, there is the question of how taking items to fulfill online orders impacts in-store customer behavior.

Now add to those concerns how shipping items from random locations impacts the logistics provider who has to collect and schlepp those packages. Apparently, FedEx has had enough and is working to rein in retailers shipping from stores (FedEx, Strained by Coronavirus, Caps How Much Retailers Can Ship From Stores, Wall Street Journal, May 14). (more…)

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The ongoing pandemic has created a host of problems for a host of industries and supply chains. Logistics providers have had to scramble as demand for some goods has dried up while demand for other items has surged. On top of that, passenger airlines — which play a large role in international air freight — have been hard hit. How is all that playing out? Check out this video:

 

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Imagine you are service provider and you line up a bunch of extra capacity because your customers tell you that they are expecting they are really going to need you. What should you do when your customers turn out not to have that much business for you?

If you are UPS, you don’t have to imagine. This is a problem they face at the holidays. Retailers want to make sure that there will be space for their shipments on the truck, so they have an incentive to talk up their potential. Of course, no one can tell the future so sometimes their big talk will prove to be just hot air. UPS apparently is thinking of making the initial forecasts from retailer a little more binding (UPS Tries a New Twist on Surge Pricing, May 1, Wall Street Journal).

With the retail world in upheaval, UPS is asking retailers to help pay when the extra space and workers aren’t put to use—or even when the boxes don’t match the sizes that retailers promised earlier in the year.

“If there are variations to the plan, let’s see what we can do, but we should be compensated accordingly,” said UPS Chief Executive David Abney in an interview. He said the charge isn’t meant to be punitive but one element of a broader negotiation with retailers over pricing during peak times.

UPS is apparently also thinking of imposing charges at times beyond the holiday — say for flowers at Valentine’s or when a new product release causes volumes to spike.

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There have been a handful of interesting article over the last week or two about online fulfillment centers. The first is from Bloomberg (Amazon’s Robot War Is Spreading, Apr 5) and discusses how many firms have followed Amazon’s lead and have invested in robots to help run their fulfillment centers. (Recall that Amazon bought Kiva, which we have discussed before.)

One interesting point made in the article is that the automation may not be quite what you think. For example, these robots are not reaching and grabbing items from the shelves (form something like that, see here). Rather, they are working with human pickers who load them up and then let the robot carry items from storage shelves to the packing area. That is, the robots takeover time-consuming schlepping so that humans can focus on identifying the right item on the shelves. Check out this video.

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