Understanding the 7 Types of Logistics

In today’s fast-paced and interconnected world, logistics is the backbone of successful supply chain management. But logistics is far more than just trucks and warehouses, it’s a complex network of movements that support everything from manufacturing and retail to military operations and live events.

Let’s break down the 7 main types of logistics, each with its own purpose and value in the supply chain:

1. Inbound Logistics: This refers to the movement of raw materials and components from suppliers to a business. It plays a crucial role in manufacturing. For example, a car manufacturer receiving engines, tires, and electronics depends heavily on a well-organized inbound logistics system.

2. Outbound Logistics: Once products are finished, outbound logistics ensures they reach the customer. It includes warehousing, packaging, and transportation. Think of Amazon shipping products from its fulfillment centers to your doorstep.

3. Reverse Logistics: This process moves goods back from customers to the business. It includes returns, recycling, repairs, or disposal. E-commerce companies rely on reverse logistics to handle product returns efficiently.

4. Third-Party Logistics (3PL): Many companies outsource logistics operations like transportation, warehousing, and distribution to service providers. DHL or FedEx, for instance, manage end-to-end supply chains for other businesses, allowing them to focus on their core operations.

5. Fourth-Party Logistics (4PL): This is a step above 3PL. A 4PL provider acts as a strategic partner, overseeing and integrating multiple 3PL services for a manufacturer. It offers a big-picture approach to managing the entire logistics ecosystem.

6. Military Logistics: Beyond commercial use, logistics is critical in military operations. It involves planning, movement, and supply of troops, equipment, and ammunition. Effective military logistics can mean the difference between mission success and failure.

7. Event Logistics: Ever wondered how entire music festivals or sports events come together? Event logistics handles the planning and transportation of staging, lighting, and equipment. It ensures everything is in the right place at the right time, from concerts to exhibitions.

Logistics isn’t one-size-fits-all. Each type serves a unique function in supporting business, operations, or events. Understanding these logistics types helps supply chain professionals optimize efficiency, reduce costs, and improve customer satisfaction.

Understanding the 7 Main Types of Shipping Containers in Global Supply Chains

In today’s interconnected world, shipping containers are the unsung heroes of global trade.

From electronics to fresh produce, nearly every product we use has spent time inside one of these versatile metal boxes. But not all containers are created equal, each type is designed for a specific set of cargo requirements.

Here are the seven most commonly used shipment containers and how they serve the diverse needs of modern supply chains.

1. Standard Dry Container (20ft or 40ft):

This is the most widely used container in the world. It’s fully enclosed, weatherproof, and suitable for general cargo.

Think furniture, textiles, machinery, and consumer goods. Most dry containers come in 20-foot and 40-foot lengths and can be stacked and transported easily by ship, truck, or rail.

2. High Cube Container:

Similar to standard containers but with an extra foot of vertical space (usually 9'6" high instead of 8'6"), high cube containers are ideal for lightweight, high-volume goods. They're often used for bulkier cargo like automotive parts, paper products, or large electronics that benefit from the additional headroom.

3. Open Top Container:

Designed for cargo that can’t be loaded through standard doors—like large machinery, construction equipment, or oddly shaped materials, open top containers have a removable roof. They allow for crane loading from above, making them practical for oversized freight.

4. Flat Rack Container:

With collapsible sides and no roof, flat racks are engineered for heavy loads and oversized items such as steel coils, industrial pipes, or vehicles. These containers allow cargo to extend beyond the sides, making them a flexible choice for large or awkward shipments.

5. Refrigerated Container (Reefer):

When it comes to perishable goods like food, pharmaceuticals, or flowers, reefers are essential. These containers are equipped with active temperature control systems that keep cargo at a specific temperature throughout the journey, ensuring quality and compliance with safety standards.

6. Open Side Container:

These containers have side doors that open fully, offering greater accessibility for loading wide or irregularly shaped cargo. They’re often used in retail and manufacturing sectors where easy access to specific items within the container is essential.

7. Tank Container:

Built for transporting liquids, gases, and chemicals, tank containers are cylindrical tanks housed within a steel frame. They are heavily regulated and ideal for food-grade liquids like wine or milk, as well as hazardous materials, ensuring safe and efficient transit.

Choosing the right container isn't just about space, it’s about efficiency, compliance, and cost control. Understanding the functions of each container type can help make better decisions, reduce damage risk, and optimize the flow of goods across borders.

Whether you're moving basic goods or specialized cargo, the right container can be the difference between a smooth shipment and costly delays.

 

Active, passive, and hybrid thermal solutions in cold chain packaging

Choosing the best temperature-controlled packaging solution has grown more difficult and important as there are more packaging alternatives available.

Choosing the best packaging option is a crucial choice that can affect the effectiveness and safety of the items being carried in the field of life sciences logistics.

Cold chain packaging is an essential part of temperature-controlled shipping since it serves as the initial line of defense for perishable goods. 

Active, passive, and hybrid are the three primary categories of cold chain packaging technologies.

Active

These systems use mechanical or electric systems powered by an energy source to keep product temperatures consistent.

These systems are expensive to buy, operate, and maintain and due to their weight, potential need for repair while in route, and availability, they are also more expensive to ship.

Having said this, these are also simple to use and very precise and reliable devices, guaranteeing the temperature is maintained throughout the duration of the journey.

Passive

Insulating materials are used in passive cold chain packaging to shield items from ambient temperatures.

The lower level of accuracy can be an issue with this system, and the risk of product damage exists if a cargo is delayed and the transportation duration exceeds the packaging’s capacity to maintain temperature control, on the flip side this method is substantially simpler and more affordable than refrigerated units.

Hybrid

Hybrid methods use a combination of phase change materials (PCMs) or passive systems (such as water/ice or dry ice) and thermostatic controls or active systems.

It has all the pros of combining both methods, but it also has some of the cons, including the limited availability or the higher cost.

The Largest Courier Companies in the World

Interesting infographic showing by market capitalization the largest courier companies in the world.

It´s no surpirse that the “big three” global couriers, United Parcel Service (UPS), FedEx, and DHL continue to dominate transport services with closer to 70% of market cap.

Having said that, other carriers that operate more regionally have still attained a lot of value, including Japan Post Holdings and China’s S.F. Express and ZTO Express.

Logistionary: Kitting

 

Kitting is a technique where complementary items are ordered, packaged, or shipped together as a single "kit" with a unique SKU. 

Inventory kitting is a method of organizing inventory into kits.

From a production point of view, this would mean putting and storing together all the relevant ingredients for the manufacture of a given product.

This technique can also be used to pack together individual complimentary products to create one product that’s ready to ship to a single customer.

The goal of kitting is to assemble products ahead of time as a way to streamline the order fulfillment process. Companies can kit together products in anticipation of customer orders or as a marketing strategy to drive sales volume.

Before kitting, the traditional inventory model involved packaging separate SKUs on their own and sending them out as multiple different shipments, increasing both the cost and time involved for the company and the customer.

Product kitting has numerous benefits, including: 

• Minimize pick-and-pack time by preparing ahead ingredients or final products.
• Streamlining warehouse activities and lowering shipping costs
• Optimizing inventory management by reducing slow moving stock (items that don't sell well as individual can be included in a kit that customers are more likely to buy)
• Increasing customer satisfaction and convenience
• Increase sales by pairing together items that may have not been bought separatedly.

Lean 8 wastes

  

Before we dive into the eight types of wastes, it is important to understand what waste is.

Waste is any action or step in a process that does not add value to the customer.

Originally seven wastes (Muda) were identified, and a methodology was developed by Toyota, as part of the Toyota Production System (TPS).

The seven wastes were; Transportation, Inventory, Motion, Waiting, Overproduction, Overprocessing and Defects. They are often referred to by the acronym ‘TIMWOOD’.

The 8th waste of non-utilized talent or ‘Skills’ of workers was later introduced in the 1990s when the Toyota Production System was adopted in the Western world. As a result, the 8 wastes are commonly referred to as ‘TIMWOODS’.

We can now deep dive into each of these eight wastes and understand how we can reduce or eliminate them as part of a leaner and more efficient operations.

The Surprisingly Complex Logistics of Product Returns

Reverse logistics is the movement of goods “upstream” through a supply chain, to return them from the end customer back to a retailer or manufacturer.

Reverse logistics also covers the recycling, repurposing, repairing and resale of products.

There are several types of reverse logistics, for different reasons:

Returns management: This is the most common reverse logistics process: when a customer returns an item to a seller because it is damaged, not as expected, doesn’t fit etc.

Remanufacturing or refurbishment: This involves the repairing and rebuilding of products. Retailers and manufacturers may also recover some parts from a defective product to be used elsewhere.

Unsold goods: When a retailer returns unsold goods to the manufacturer.

Delivery failure: In the instance of a failed delivery (for example, the customer was not in to receive the package), products may be shipped back to the retailer.

Rental equipment: This is when rented or leased products are returned to the manufacturer at the end of a defined term.

Repairs and maintenance: The customer will send the product back to the business to be repaired. 

End of life: These are products that can no longer serve any purpose, so will need to be recycled or disposed of.

The next video shows how reverse logistics works in real life and how complex. When the customer returns the product, a new intricate adventure starts until it reaches its final destination and potentially a new life!

A deep dive into Cost to Serve

 
Cost to Serve or Cost to Deliver has been a concept that we have explored in the past, you can find the last post we published in this link: The importance of Cost to Serve in Supply Chain.

In this post, we are going to deep dive further on this concept and shed some light around the different components that can impact cost to serve.

First things first, a quick reminder of what is cost to serve; It is the total cost of providing a product or service to a customer including all direct and indirect costs.

Direct costs are those that can be directly traced to the production or delivery of the product or service, while indirect costs are those that are not easily traced to the specific product or service but are still incurred in the process of providing it.

Now onto why understanding your cost to serve is important.

By understanding how much it costs to serve each customer, companies can segment their customers and identify potential areas for cost savings. It can also be used to evaluate different pricing strategies and understand how changes in price may impact overall costs ultimately helping organizations to transform unprofitable customers into profitable ones.

But what is the best way to determine cost to serve, and what are the different elements that make up this metric?

There are several elements and categories that need to be captured to be able to analyse cost to serve and have some meaningful data to work with:

1- Customer: Customer services overheads, order management, customer specific services, presales costs etc

2- Sourcing and manufacturing: Sourcing and procurement, cost of goods, production costs, manufacturing costs etc.

3- Warehousing: Picking packing and storage cost.

4- Delivery/Transportation: Transport, last mile delivery, returns and reverse logistics etc.

Finally, how do we put everything together and calculate cost to serve?

This is the easiest part, providing you have managed to do the hardest part which is to identify all the different costs impacting your operations. Once this information is ready, it´s just a question of subtracting from the customer sale price all these different elements, leaving you with a data point that can be compared across all customers in your organization.

Logistionary: Decoupling inventory

 

Decoupling inventory is the process of setting aside extra parts or raw materials to ensure there aren’t any delays or disruption in the production of finished goods in the event of a supply shortage or machinery breakdown.

In simple terms, decoupling inventory is a type of safety stock, but what it hedges against is slow production and stoppage, not unseen fluctuations in demand, acting as a buffer that allows to continue fulfilling orders even as production issues are happening.

The main benefits of decoupling stock are:

Increased efficiency: Can increase efficiency across production lines and supply chains by allowing each stage of production to work autonomously even in the event of a disruption.

Increased flexibility: Helps mitigate the effects of unforeseen circumstances helping businesses become more agile and ready to respond to unexpected disruptions in the supply chain.

Perform spot maintenance on parts of your manufacturing equipment: Decoupling inventory is particularly advantageous in the event of a facility outage for repairs or machine maintenance.

Provides Protection During Periods of Uncertainty: When manufacturers are unable to obtain sufficient raw materials to finish producing a product, decoupled inventory offers protection to continue production without any delays.

Decoding The Supply Chain Crisis

 

It is no secret that these are unprecedented times and that the current situation is putting a strain on most Supply Chains regardless of how mature or advanced these are.

The next video ilustrates the ripple effect since the outbreat of the COVID 19 pandemic and the devastating consequences this has had for the millions of goods and containers that are transported like a clockwork on a daily basis.

We don´t know for how long this situation will last or more concerning, for how long supply might continue uninterrupted, but we know that we are navigating a perfect storm that has lead to increases in prices for the end consumer.

Gemba walk

Another term coined in Japan, Gemba means "the actual place", and in operations specifically Gemba usually refers to the shop floor or where the service provider interacts directly with the customer.

This concept was popularised thank to the lean manufacturing methodology, with the idea that problems are mostly visible when going to the “Gemba”, and the best improvement ideas will come from spending time where the actual issue is.

In practical terms it means that whenever there is a problem, senior management and they key decision makers must go to where the problem is to understand its full impact, gathering data from all sources.

Only when the problem has been studied “in situ” the team can go away and start working on a solution.

This concept that may seem trivial and common sense is most times undervalued and decisions to problems are being drafted and executed from the head office and regardless of the specific constraints affecting the shop floor.

You cannot expect different results by sitting in your corner office and only attending KPI meetings., instead, you need to see where the real work happens. You need to do Gemba walks.

The Gemba walk, denote the action of going to see the actual process, understand the work, ask questions, and learn, and is an activity that takes staff to the front lines to look for opportunities and practical shop floor improvement.

There are 3 important elements of this lean manufacturing tool:

1.  Go and see. Take regular walks around the shop floor and be involved in finding wasteful activities.

     2. Ask why. The main objective of a Gemba walk is to explore the value stream in detail and locate its problematic parts through active communication.

     3. Respect people. Keep in mind that a Gemba walk is not a “boss walk” or a pointing fingers exercise. You are not there to judge you are there to collaborate with the team and find problems together.

There are 7 suggested steps to follow when you go to a Gemba walk:

1. Pick a theme. This will help you focus all your efforts and be effective. There are different themes you may want to explore, such as productivity, cost efficiency, safety and etc. In order to be as precise as possible, you will also need to prepare a list of questions you are going to ask.

2. Prepare your team. The team that will be observed should be prepared for what is going to happen and have a clear understanding that the Gemba walk is a common process where the final destination is continuous improvement and not an opportunity to excrutinise their job competencies.

3. Linked to the above, focus on the process, not on people. You need to remember that the main purpose is to observe, understand, and improve the process not to evaluate your teams performance.

4. Be where the value stream is. Following the value chain will give you the best opportunities to identify areas with a high potential for waste activities.

5. Record your observations. Write down everything that grabs your attention. In some cases, you will probably be tempted to offer a solution immediately, but this would be wrong. Leave the analysis for later. You will be much more precise after you have all the facts available.

6. An extra pair of eyes. It may be a good idea to invite a colleague from another department. Someone with totally different daily tasks. People who are less familiar with the processes usually have a fresh perspective and ask different questions that you may never ask.

7. Follow-up. Even if you don’t find anything significant during your Gemba walk, you need to share with the team what you have learned or seen. Otherwise, the team will only have the feeling of being watched. If you are going to take action after the walk, inform the team about the upcoming changes and why they are necessary.

As important as the Gemba walk itself it the post-walk analysis to close the loop. Before you take any actions based on your observations, you will need some time to organize your thoughts and notes.

Conduct a meeting after each Gemba walk that may include participants from different departments. The main purpose is to have as many different points of view as possible to make the best decision.

 

 

Logistionary: Vendor Managed inventory (VMI)

 

Vendor Managed Inventory (VMI) is an inventory management practice in which a supplier of goods, usually the manufacturer, is responsible for optimising the inventory held by a distributor/retailer.

In traditional inventory management, a retailer makes its own decisions regarding the order size and frequency, while in VMI the retailer share their inventory data with the supplier such that the supplier is the decision-maker who determines the order size and frequency.

In VMI practice, inventory location depends on the arrangement between the vendor and the customer. The first option is for the inventory to be located both at the customer's and the supplier's premises. For the supplier, this serves as a safeguard against short delivery cycles or synchronised production cycles.

Another option can be for the supplier to deliver to the retailer’s central warehouse or alternatively, to a third party's warehouse. Managing the inventory at the central warehouse enables better optimisation of deliveries and lower costs.

Finally, a third option would be for the inventory to be located directly at the retailer’s premises such as the shop floor itself.

From an inventory ownership point of view, in vendor managed inventory, there are several solutions in terms of payment and transfer of ownership.

In the first alternative, the supplier is the owner of inventory at the premises of retailer. Invoice is issued when the items are sold from the stock.

In the second alternative, retailer assumes ownership of the inventory receiving an invoice upon delivery. However, the supplier is not paid until the retailer sells the items from.

In the third alternative, retailer owns the inventory upon delivery, while the supplier invoices the retailer once the shipment has been made.

In the majority of the cases, the products will be in the possession of the retailer but will not be owned by them until the sale takes place, meaning that the retailer simply houses the product. This is referred to as consignment stock.

There a many advantage for both supplier and retailer of using VMI:

Retailers benefit from reduced risk of going out of stock since the supplier can have information about how the products are selling. 

Retailers also benefit from reduced carrying costs since they shouldn’t need to carry as much excess stock.

Supplier benefit from more control and more customer contact.

Suppliers get to gather information as to the demand for the products, this should also help reduce the amount of safety stock that suppliers need in their warehouse.

This practice can prevent the bullwhip effect since the supplier will have control over the end to end inventory.

 

El concepto Uber se traslada al transporte logistico

 

Tras un tiempo en el que se hablo mucho del potencial de la “Uberizacion” del transporte logístico, el Gigante Asiático ha sido el primero en desarrollar una aplicación similar a Uber centrada en el transporte de mercancías. 

Gracias a las nuevas tecnologías y al big data, esta aplicación ha sido capaz de cubrir un nicho de mercado hasta ahora inexplorado, poniendo en contacto a empresas y transportistas y facilitando la interacción entre ellos.

Todavía es pronto para saber si este modelo tendrá éxito fuera de China, pero con su introducción en el mercado sudamericano parece que hay futuro para esta nueva aplicación y los posible competidores que sin duda surgirán en el futuro cercano.

El articulo al completo lo podéis encontrar en el siguiente enlace.

El Uber de los camioneros

Ocado: Shaping the future

It all starts with a concept and a vision, that turns into a mission, once you have that, the rest of the pieces will come together eventually.

Innovate, invest, empower, respect, change, lead...

From the very beginning:

Through the different stages:

Until the very end:

Pallets; when you thought that there was only one thing you can do we them

When you thought pallets were only meant to be used in warehouses and with the only purpose of storing merchandise, there is life for these awesome pieces of wood or plastic after they have served their time in the depot.

Don´t believe me? check the below video out and get started on recycling your old, or new, pallets! More than 200 hundred idead to take them back to life!

Bonus track: This is an awesome way to go across the city!

Christmas time!

Ohhh the joy of Christmas, it´s almost this time of the year again. It seems like it was yesterday when we were singing Christmas songs and cooking the turkey, and here we are, getting ready to wrap the presents and put them under the tree...but have you ever though about the journey of your present from you to your beloved folks?

Don´t miss the next video because it shows as we have never seen before how a superhub of a courier company work during Christmas!

Now, don´t you think it´s a miracle to get our parcels right during Christmas? I bet Santa uses a similar system to manage to get all the present delivered timely on the 24th!!

It´s still early to say it but....Merry Christmas!!

Slow moving inventory...your worst nightmare!

Mid-year review, and slow moving and obsolete stock start coming up in every single meeting…it´s pretty much inevitable; inaccurate forecasts, undersells, overstocks, there can be hundreds of reasons why a sku become a slow moving, and we might explore in deep some of them in future posts, but whatever the reason is, when inventory doesn’t move, the business will incur in associated carrying costs and lose of valuable resources that could be used to invest in your business.

Defining what is “slow moving” is not easy as the criteria will vary from company to company, and what is considered slow moving from some retailers might not be for others, but there is a general rule that can be applied to most companies to define if a reference is slow moving or not; Having stock worth 6 or more months of demand for any given item will indicate that this particular sku is a slow moving.

Now we know what slow moving is, we can focus on the impact that slow moving stock has in our business. From an outside perspective, you can think that slow moving stock shouldn´t be the focus of an organization as “it only has a negative effect on our inventory”, but if we dig a little bit further, we will realize that the impact of slow moving stock affects a business in ways that we never thought about before.

• Interest paid on borrowed money. When inventory doesn't sell, you are incurring more interest charges. 
• Insurance costs derived of inventory on hand. 
• Obsolescence provisions; financial reserve to cover losses, write-offs, etc 
• Storage space of course. 
• Costs incurred when your warehouse is full of slow moving inventory; outside storage costs, build of new facilities, movement of stock from one picking location to other etc.
• Cost of destruction of obsolete stock. 
• Depreciation of the inventory month after month. 
• Time and personnel, including managers, stock keepers, material handlers, cycle counters, planners and controllers.

These are only some of the aspects in which slow moving stock has an impact, therefore the sooner you tackle the “slow movers” the more profitable your business will be.

In future posts I will try to extend this topic and underline the causes and also possible solutions to slow moving inventory.

Push VS Pull flow

Terms like “Retail supply chain”, “Automotive supply chain” or “FMCG supply chain” have become widely popular, but there is not such a thing as a “specific” supply chain, there are basically two categories, and almost all supply chain processes fall into one of these two categories. All of the above industries fall under Pull or Push supply chain. In fairness, a hybrid new model called “Push-Pull” is being accepted as a third valid model but understanding the pull and the push models separately will make very intuitive the Push-Pull model.

What is Pull Supply Chain?

Under pull supply chain, products are manufactured based on specific customer requests, in fact, companies only make enough product to fulfill customer's orders. We also know it as “Make to Order” model (click here to learn more). We often see this model operating in High Tech Industries, where customization is the competitive advantage. Briefly, we have seen this model in automotive industry and it is being used in high end luxury market segment. The objective of this model is to minimize the Inventory and optimize supply. One advantage of the Pull system is that there will be no excess of inventory that needs to be stored, thus reducing inventory levels and the cost of carrying and storing goods. However, one major disadvantage is that it is highly possible to run out of product and not being able to supply the merchandise on time, leaving the company unable to fulfill the order which contributes to customer dissatisfaction.

What is Push Supply Chain?

Under Push model, products are manufactured based on anticipated customer orders. Companies must predict which products customers will purchase and determine what quantity of goods will be purchased. This model is also known as Make to Sock. The core assumption of push programs is that demand can be anticipated and that it is more efficient and reliable to mobilize resources in pre-specified ways to serve this demand. Some disadvantages of the Push model could include high inventory costs and huge warehousing and distribution costs, plus the fact that forecast are often inaccurate and sales can be unpredictable. An advantage of the push system is that the company is fairly assured it will have enough product on hand to fulfill customer’s orders.

Retailers heavily use push model but for some time now the big names in the retail industry are trying to adopt the hybrid Push-Pull model which is a combination of pull and push models.

The Push-Pull System

Some companies have come up with a strategy they call the push-pull control system, which combines the best of both the push and pull strategies. Push-pull is also known as lean inventory strategy. The goal is the reduction of product shortages which can cause customers to go elsewhere to make their purchases.