Editing Logistics (section)

== Business logistics ==
{{Business logistics}}
[[File:Allentown Project 042.jpg|thumb|A [[forklift]] operator stacking warehouse of goods on pallets in [[Allentown, Pennsylvania]], in April 2004]]
One definition of business logistics speaks of "having the right item in the right quantity at the right time at the right place for the right price in the right condition to the right customer".<ref>{{cite book|title=The Handbook of Technology Management: Supply Chain Management, Marketing and Advertising, and Global Management, vol 2|year=2010|publisher=[[John Wiley & Sons]]|location=Hoboken, New Jersey|isbn=978-0-470-24948-2|author= Mallik, Susan |edition=1|chapter=Customer Service in Supply Chain Management|editor=Hossein Bidgoil|page=104}}</ref> Business logistics incorporates all [[industry sector]]s and aims to manage the fruition of [[project life cycle]]s, [[supply chain]]s, and resultant efficiencies.

The term ''business logistics'' has evolved since the 1960s<ref>McGinnis M. A., Military Logistics: Insights for Business Logistics, International Journal of Physical Distribution & Logistics Management Vol 22, 1992</ref> due to the increasing complexity of supplying businesses with materials and shipping out products in an increasingly globalized supply chain, leading to a call for professionals called supply chain logisticians.

In business, logistics may have either an internal focus (inbound logistics) or an external focus (outbound logistics), covering the flow and storage of materials from point of origin to point of consumption, a key factor in [[supply-chain management]]. The main functions of a qualified logistician include [[Field inventory management|inventory management]], [[purchasing]], transportation, [[warehousing]], consultation, and the organizing and [[planning]] of these activities. Logisticians combine professional knowledge of each of these functions to coordinate resources in an organization.

There are two fundamentally different forms of logistics: one optimizes a steady flow of material through a network of transport links and storage nodes, while the other coordinates a [[sequence]] of resources to carry out some [[project]], such as restructuring a warehouse.

=== Nodes of a distribution network ===
A distribution network would require several intermediaries to bring consumer or industrial goods from manufacturers to a user. Intermediaries would markup the costs of the products during distribution, but benefit users by providing lower transportation costs than the manufacturers. The number of intermediaries required for the distribution network depends upon the types of goods being distributed. For example, consumer goods such as cosmetics and handicrafts may not require any intermediaries as they can be sold door-to-door or can be obtained from local flea markets. For industrial goods such as raw materials and equipment, intermediaries are not needed because manufacturers can sell a large number of goods to a user. Generally, there are three types of intermediaries, namely: agent/broker, wholesaler, and retailer.<ref name="Ghiani 2004"/>

The nodes of a distribution network include:
* Factories where products are manufactured or assembled
* A [[Warehouse|depot]] or deposit, a standard type of warehouse for storing merchandise (high level of inventory)
* [[Distribution centers]] for [[order processing]] and [[order fulfillment]] (lower level of inventory) and also for receiving returning items from clients. Typically, distribution centers are way stations for products to be disbursed further down the supply chain. They usually do not ship inventory directly to customers, whereas fulfillment centers do.{{cn|date=September 2020}}
* Transit points for [[cross-docking]] activities, which consist of reassembling cargo units based on deliveries scheduled (only moving merchandise)
* Traditional "[[mom-and-pop]]" retail stores, modern supermarkets, [[hypermarkets]], [[discount store]]s or also voluntary chains, [[consumers' co-operative]]s, groups of consumers with [[collective buying power]]. Note that [[subsidiaries]] will be mostly owned by another company and [[franchisers]], although using other company brands, actually own the point of sale.

=== Logistic families and metrics ===
A logistic family is a set of products that share a common characteristic: weight and volumetric characteristics, physical storing needs (temperature, radiation, etc.), handling needs, order frequency, package size, etc. The following metrics may be used by the company to organize its products in different families:<ref name="RuPe">{{cite book|first1=R.|last1= Ruggeri|first2= A. |last2=Perego|title= Esercitazioni e temi d'esame di Logistica Industriale |publisher= CUSL |date=2001|language = it|isbn = 8881320150}}</ref>
* Physical metrics used to evaluate inventory systems include stocking capacity, selectivity, superficial use, volumetric use, transport capacity, transport capacity use.
* Monetary metrics used include space holding costs, such as building, shelving, and services, and handling costs, such as people, handling machinery, energy, and maintenance.

Other metrics may present themselves in both physical or monetary form, such as the standard [[inventory turnover]].

=== Handling and order processing ===
[[File:Unit Load Device 003.JPG|thumb|[[Unit load]]s, which serve a protective function, for transportation of luggage at the airport]]
[[Unit loads]] are combinations of individual items which are moved by handling systems, usually employing a [[pallet]] of normed dimensions.<ref>{{cite ISO standard|csnumber=30524|title=ISO 6780:2003 – Flat pallets for intercontinental materials handling – Principal dimensions and tolerances}}</ref>

Handling systems include: trans-pallet handlers, counterweight handler, retractable mast handler, bilateral handlers, trilateral handlers, [[Automated Guided Vehicle|AGV]] and other handlers.

Storage systems include: pile stocking, cell [[Pallet racking|racks]] (either static or movable), cantilever racks and gravity racks.<ref name="ReferenceA">Lambert D., Stock J., Ellram L., Fundamentals of Logistics, McGraw-Hill 1998</ref>

[[Order processing]] is a sequential process involving: processing withdrawal list, picking (selective removal of items from loading units), sorting (assembling items based on the destination), package formation (weighting, labeling, and packing), order consolidation (gathering packages into loading units for transportation, control and [[bill of lading]]).<ref name="autogenerated1">D.F. Bozutti, M.A. Bueno-Da-Costa, R. Ruggeri, Logística: Visão Global e Picking, EdUFSCar 2010</ref>

[[Order picking|Picking]] can be both manual or automated. Manual picking can be both man-to-goods, i.e. operator using a cart or conveyor belt, or goods-to-man, i.e. the operator benefiting from the presence of a mini-load [[Automated storage and retrieval system|ASRS]], vertical or [[horizontal carousel]] or from an Automatic Vertical Storage System (AVSS). Automatic picking is done either with [[Order picking#Technologies|dispensers]] or depalletizing robots.

[[Sorting#Physical sorting processes|Sorting]] can be done manually through carts or conveyor belts, or automatically through [[Tilt Tray Sorter|sorters]].

=== Transportation ===
{{Main|Cargo}}
Consolidating small shipments into large shipments can help to save transportation costs. There are three methods to do this: facility consolidation, multi-stop consolidation, and temporal consolidation. Facility consolidation uses the [[economics of scale]] by transporting small shipments over short distances and large shipments over long distances. Multi-stop consolidation makes multiple stops to consolidate small shipments in the case of [[less-than-truckload shipping]]. Temporal consolidation adjusts the shipping schedules forwards or backward so as to make a single large shipment rather than several small shipments over time.<ref name="Ghiani 2004"/>

Cargo can be consolidated into pallets or containers. There are five basic modes of transport, namely, ship, rail, truck, air, and pipeline operated by different [[common carrier|carrier]]. These shipping methods can be combined in various ways such as [[intermodal freight transport|intermodal transport]] (no handling), [[multimodal transport]], and [[combined transport]] (minimal road transport). A shipper chooses a carrier by taking into account the total cost of shipment and transit time. Air is the most expensive type of transport, followed by truck, rail, pipeline, and ship.<ref name="Ghiani 2004"/>

Cargo can be organized in different [[shipment categories]]. [[Unit loads]] are usually assembled into higher standardized units such as: [[ISO containers]], [[swap bodies]] or [[semi-trailers]]. Especially for very long distances, product transportation will likely benefit from using different transportation means:  When moving cargo, typical constraints are maximum weight and [[volume]].

Operators involved in transportation include: all train, road vehicles, boats, airplanes companies, [[couriers]], [[freight forwarders]] and [[multi-modal transport operators]].

Merchandise being transported internationally is usually subject to the [[Incoterms]] standards issued by the [[International Chamber of Commerce]].

=== Configuration and management ===
[[File:Push-Back-Rack.jpg|thumb|A [[FIFO and LIFO accounting|LIFO]] rack system for storage of motorcycles]]
[[File:Airline hub-1995.svg|thumb|In this particular airline logistic network, [[Denver]] serves as a network [[hub and spoke|hub]] for the [[Midwestern United States|Midwestern U.S.]]]]
In the logistics business, a logistical system is designed at a minimum cost based on the expected customer service level. As the service improves, the number of sales also increased. As service is further improved, more sales are captured from competing providers. Further increase in customer service levels after these only increases sales marginally.<ref name="Ghiani 2004"/>

Similarly to production systems, logistic systems need to be properly configured and managed. Actually a number of methodologies have been directly borrowed from [[operations management]] such as using [[Economic Order Quantity]] models for managing inventory in the nodes of the network.<ref>Waters D., Logistics: An Introduction to Supply Chain Management, Palgrave Macmillan 2003</ref> [[Distribution resource planning]] (DRP) is similar to [[Material requirements planning|MRP]], except that it does not concern activities inside the nodes of the network but planning distribution when moving goods through the links of the network.

Traditionally in logistics, configuration may be at the level of the warehouse ([[node (graph theory)|node]]) or at level of the distribution system ([[Flow network|network]]).

Regarding a single warehouse, besides the issue of designing and building the warehouse, configuration means solving a number of interrelated technical-economic problems: dimensioning [[Pallet racking|rack]] cells, choosing a [[Palletizer|palletizing]] method (manual or through [[robots]]), rack dimensioning and design, number of racks, number and typology of retrieval systems (e.g. [[Crane (machine)#Stacker|stacker cranes]]). Some important constraints have to be satisfied: fork and load beams resistance to [[bending]] and proper placement of [[fire sprinkler|sprinklers]]. Although [[Order picking|picking]] is more of a tactical planning decision than a configuration problem, it is important to take it into account when deciding the layout of the racks inside the warehouse and buying tools such as handlers and motorized carts since once those decisions are taken they will work as constraints when managing the warehouse, the same reasoning for [[Sorting#Physical sorting processes|sorting]] when designing the conveyor system or installing automatic [[Order picking#Technologies|dispensers]].

Configuration at the level of the distribution system concerns primarily the problem of [[location (geography)|location]] of the nodes in geographic space and distribution of [[Productive capacity|capacity]] among the nodes. The first may be referred to as [[Optimal facility location|facility location]] (with the special case of [[site selection]]) while the latter to as capacity allocation. The problem of outsourcing typically arises at this level: the nodes of a [[supply chain]] are very rarely owned by a single enterprise. Distribution networks can be characterized by numbers of levels, namely the number of intermediary nodes between [[Vendor (supply chain)|supplier]] and consumer:
* [[Direct store delivery]], i.e. zero levels
* One level network: central warehouse
* Two level network: central and peripheral warehouses

This distinction is more useful for modeling purposes, but it relates also to a tactical decision regarding [[safety stocks]]: considering a two-level network, if safety inventory is kept only in peripheral warehouses then it is called a dependent system (from suppliers), if safety inventory is distributed among central and peripheral warehouses it is called an independent system (from suppliers).<ref name="RuPe" /> Transportation from producer to the second level is called primary transportation, from the second level to a consumer is called secondary transportation.

Although configuring a distribution network from zero is possible, logisticians usually have to deal with restructuring existing networks due to presence of an array of factors: changing demand, product or process innovation, opportunities for outsourcing, change of government policy toward [[trade barriers]], innovation in transportation means (both [[vehicles]] or [[thoroughfares]]), the introduction of [[regulations]] (notably those regarding pollution) and availability of ICT supporting systems, such as [[Enterprise resource planning|ERP]] or [[e-commerce]].

Once a logistic system is configured, management, meaning tactical decisions, takes place, once again, at the level of the warehouse and of the distribution network. Decisions have to be made under a set of [[constraint (mathematics)|constraints]]: internal, such as using the available infrastructure, or external, such as complying with the given product [[shelf life]]s and [[Shelf life|expiration dates]].

At the warehouse level, the logistician must decide how to distribute merchandise over the racks. Three basic situations are traditionally considered: shared storage, dedicated storage (rack space reserved for specific merchandise) and class-based storage (class meaning merchandise organized in different areas according to their access index).

[[Order picking|Picking]] efficiency varies greatly depending on the situation.<ref name="autogenerated1" /> For a man to goods situation, a distinction is carried out between high-level picking (vertical component significant) and low-level picking (vertical component insignificant). A number of tactical decisions regarding picking must be made:
* Routing path: standard alternatives include transversal routing, return routing, midpoint routing, and largest gap return routing
* Replenishment method: standard alternatives include equal space supply for each product class and equal time supply for each product class.
* Picking logic: order picking vs batch picking

At the level of the distribution network, tactical decisions involve mainly [[inventory control]] and [[delivery (commerce)|delivery]] path optimization. Note that the logistician may be required to manage the [[reverse logistics|reverse flow]] along with the forward flow.

=== Warehouse management system and control ===

[[Warehouse management system]]s (WMS) can differ significantly from [[warehouse control system]]s (WCS), although there is some overlap in functionality. A WMS plans a weekly activity forecast based on such factors as statistics and [[Trend estimation|trends]], whereas a WCS acts like a floor supervisor, working in real-time to get the job done by the most effective means. For example, a WMS can tell the system that it is going to need five of [[stock-keeping unit]] (SKU) A and five of SKU B hours in advance, but by the time it acts, other considerations may have come into play or there could be a logjam on a conveyor. A WCS can prevent that problem by working in real-time and adapting to the situation by making a last-minute decision based on current activity and operational status. Working [[synergistically]], WMS and WCS can resolve these issues and maximize [[Economic efficiency|efficiency]] for companies that rely on the effective operation of their warehouse or distribution center.<ref name="sdcexec">{{cite book
|author=John T. Phelan, Jr. P.E
|title=[[Supply & Demand Chain Executive]]
|publisher=Enom, Inc
}}</ref>

=== Logistics outsourcing ===
Logistics outsourcing involves a relationship between a company and an LSP (logistic service provider), which, compared with basic logistics services, has more customized offerings, encompasses a broad number of service activities, is characterized by a long-term orientation, and thus has a strategic nature.<ref>{{Cite journal | doi=10.1111/j.2158-1592.2011.01008.x|title = Commitment and Trust as Drivers of Loyalty in Logistics Outsourcing Relationships: Cultural Differences Between the United States and Germany| journal=Journal of Business Logistics| volume=32| pages=83–98|year = 2011|last1 = Wallenburg|first1 = Carl Marcus| last2=Cahill| first2=David L.| last3=Michael Knemeyer| first3=A.| last4=Goldsby| first4=Thomas J.}}</ref>

Outsourcing does not have to be complete externalization to an LSP, but can also be partial:
* A single contract for supplying a specific service on occasion
* Creation of a [[Corporate spin-off|spin-off]]
* Creation of a [[joint venture]]

[[Third-party logistics]] (3PL) involves using external organizations to execute logistics activities that have traditionally been performed within an organization itself.<ref name="Bazio.">{{cite thesis
|author=Baziotopoulos
|year=2008
|title=An Investigation of Logistics Outsourcing Practices in the Greek Manufacturing Sector
|degree=PhD}}</ref> According to this definition, third-party logistics includes any form of outsourcing of logistics activities previously performed in house. For example, if a company with its own [[Warehouse|warehousing facilities]] decides to employ external transportation, this would be an example of third-party logistics. Logistics is an emerging business area in many countries. External 3PL providers have evolved from merely providing logistics capabilities to becoming real orchestrators of supply chains that create and sustain a competitive advantage, thus bringing about new levels of logistics outsourcing.<ref>{{Cite journal|last1=Zacharia|first1=Zach G.|last2=Sanders|first2=Nada R.|last3=Nix|first3=Nancy W.|date=2011-04-01|title=The Emerging Role of the Third-Party Logistics Provider (3PL) as an Orchestrator|url=https://onlinelibrary.wiley.com/doi/10.1111/j.2158-1592.2011.01004.x|journal=Journal of Business Logistics|language=en|volume=32|issue=1|pages=40–54|doi=10.1111/j.2158-1592.2011.01004.x|url-access=subscription}}</ref>

The concept of a fourth-party logistics (4PL) provider was first defined by Andersen Consulting (now [[Accenture]]) as an integrator that assembles the resources, planning capabilities, and technology of its own organization and other organizations to design, build, and run comprehensive supply chain solutions. Whereas a third-party logistics (3PL) service provider targets a single function, a 4PL targets management of the entire process. Some have described a 4PL as a general contractor that manages other 3PLs, truckers, forwarders, custom house agents, and others, essentially taking responsibility of a complete process for the customer.

=== Horizontal alliances between logistics service providers ===

Horizontal [[business alliance]]s often occur between logistics service providers, i.e., the cooperation between two or more logistics companies that are potentially competing.<ref name="rauewieland">{{Cite journal|url=http://www.emeraldinsight.com/doi/pdfplus/10.1108/IJLM-08-2012-0083|doi = 10.1108/IJLM-08-2012-0083|title = The interplay of different types of governance in horizontal cooperations|year = 2015|last1 = Raue|first1 = Jan Simon|last2 = Wieland|first2 = Andreas|journal = The International Journal of Logistics Management|volume = 26|issue = 2|pages = 401–423| s2cid=166497725 |hdl = 10398/4de0953a-3920-409a-b63a-60342c976528|hdl-access = free}}</ref> In a horizontal alliance, these partners can benefit twofold. On one hand, they can "access tangible resources which are directly exploitable". In this example extending common transportation networks, their warehouse infrastructure and the ability to provide more complex service packages can be achieved by combining resources. On the other hand, partners can "access intangible resources, which are not directly exploitable". This typically includes know-how and information and, in turn, innovation.<ref name="rauewieland" />