What is meant by logistics and why is it so important for a company to be able to manage logistics in the best possible way? Up until not so long ago the logistics system was simply defined as the transport of goods, but now companies as well as the goods management system itself have changed. Handling logistics means managing the raw materials supply network, the transit of finished and/or semi-finished products, the distribution of goods and even possible returns. This glossary of logistics terms was created with the aim to support anyone involved in logistics by providing up-to-date and useful definitions in a field that is constantly evolving.
Automated Guided Vehicles (AGVs) move around by themselves in plants, following set paths or routes.
They feature control systems and devices capable of establishing and detecting their position and transmitting data.
These vehicles are guided by “markers” or “lines” on the floor, which normally come in the form of wired, optical, laser or magnetic systems. They often need to be supervised by an operator.
Automatic vertical storage systems are automatic systems used for the storage of goods in general, whether finished or semi-finished products, and tools. These machines, also called vertical cabinets, storage towers, or smart storage systems, are designed to take advantage of the vertical space and significantly reduce the footprint of traditional racking systems. Automation is used to take the goods to the operator: it is not necessary for operators to move among shelves to pick or place items. Thanks to an automatic system, the goods are taken directly to the operator. Usually, automatic vertical storage systems operate with software called WMS which can be integrated with the ERP and other company management systems.
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Autonomous Mobile Robots (AMRs) move around plants using a number of sensors, artificial intelligence, machine learning and computing to plan routes without human input.
Rather than wired systems, they rely on video cameras and sensors that detect obstacles and prevent collisions. They can slow down, stop and deviate from their routes to go around people and things.
BOM is an acronym for Bill of Materials, which is the list of all the SKUs and the number of parts necessary for manufacturing a finished or semi-finished product. BOMs can be multi-level, they are organized in a hierarchical way and are often represented as a tree, where the root is the finished product from which all the components branch off gradually.
First used in 2009, the term “dark store” refers to a distribution centre that is used exclusively for e-commerce purposes and is not open to the public.
Dark stores are designed and built to serve online shoppers, whose orders are prepared by picking staff inside the stores themselves.
They are widely used in the retail, e-grocery, and food & beverage sectors. Since they are not open to the public, they are devised and designed to optimize picking operations, with stock and space management approaches that are totally efficiency-oriented.
E-grocery is a term that covers all online sales of fast-moving consumer goods for people and the home.
It is a form of e-commerce for items that are normally sold in supermarkets, such as fresh or packaged foods, health & beauty products and household cleaning products.
Enterprise Resource Planning (ERP) is a management system that enables all business processes to be integrated, controlled and managed. ERP is a powerful planning tool for companies as well as a very efficient optimization tool. The structure of an ERP system consists of various modules for the management of specific business processes (purchases, warehousing, accounting, etc.). The individual modules then have different functions, through which users can carry out different activities in their respective departments.
First-In First-Out is the most common manner in which goods flow within warehouses. Specifically, the goods leave the warehouse in the same order in which they entered: that is, what entered first must leave first. This system prevents the deterioration of goods in the warehouse.
FEFO stands for First Expired, First Out and it is a system that is used in warehouses where perishable products or goods with expiry date are stored. The idea is that the products that expire first should be the first to leave the warehouse.
In other words, the products with the closest expiry date are the first to be removed from stock and used.
Inbound logistics relates to the goods entering a warehouse. It refers to the receiving of goods and the management of relevant information, as well as the evaluation of the timing and handling costs. After the reception phase, the goods are unloaded and the quantity and quality control, identification, and pre-storage labelling are then carried out. Inbound logistics provides the tools for managing the warehouse, which means checking the availability of stock, planning transport, and sorting the resources among the different departments where the goods will be transformed into finished products.
It is the function that manages and plans the flow of materials and information from the point of origin to the point of consumption in order to achieve maximum customer satisfaction. The activities related to reverse logistics involve the entire value chain from raw materials to the destruction of the product by the end user and waste treatment. In its classic meaning, this translates into having a product or service in the right place at the right time and at the lowest possible cost with the agreed-upon quality.
The term intralogistics defines the flows of information, goods, and materials within a company and the management of the warehouse and stock. Intralogistics, as the word itself indicates, focuses on what happens “inside” the warehouse or the company, while logistics in general refers to what “goes out”, towards its final destination. Intralogistics involves warehouse equipment, management systems, WMS and logistics software applications through which the internal handling of materials is managed (for example, between company warehouses). It also involves the management of stock and data flows through IT systems that record all movements, both inbound (acquisition) and outbound (invoicing), and warehouse management, that is, processes and operations related to orders, locations, reception and shipment of goods.
This stock management system is the opposite of the Just in Time method.
The idea is to make sure that enough goods are available at all times in order to avoid running out of stock.
The strategy works very well in the event of supply chain disruptions and increased demand or unexpected surges in demand.
It works in tandem with a push production rather than a pull production system.
This totally lean approach to stock management works in tandem with pull production techniques and the materials do not arrive until they are needed for production.
The aim of a Just in Time (JIT) inventory strategy is to align production volumes with stock levels and ensure that only the materials that are needed in the short term are being stored.
It is an effective way to reach high production levels with low supply and storage costs.
A Kaizen Manager is a person entrusted with the constant improvement of business processes.
The name comes from a Japanese term that combines KAI (change, improvement) and ZEN (good, better) and means “change for better”. It is associated with a business philosophy that emerged back in the 1980s and was already epitomized by Toyota.
Making production factors and processes more efficient, pursuing constant improvement, reducing waste and generally enhancing company performance are the cornerstones of the approach, which obviously also encompasses quality-related matters.
All of these activities fall under the remit of the Kaizen Manager, who proposes, supervises, corrects, analyses and recommends, developing new management systems whose goals include containing or cutting production costs.
In logistics, this term relates to the delivery time, that is, the time interval between when an order is received and the actual delivery of the goods. Lead time is measured in terms of response, is normally expressed in days, and is a critical competitiveness factor.
Last-In First-Out means that the last goods to be stocked are the first goods to leave the warehouse. This strategy is implemented in warehouses with homogenous products which do not lose value over time.
When the goods do not perish or deteriorate over time the storage system is organized so that what was received last is consumed first.
Also called picking bay, this is the access area to a vertical automatic storage system. It operates based on the “goods to person” method, according to which the goods are taken from the storage area and delivered to the operator in the picking bay.
There are different types of bays: internal, external, opposite each other, overhead, with single or double loading level.
Maintenance, Repair and Operations (MRO) covers all of the activities that ensure that equipment, machinery and technology in production systems are properly maintained, repaired and kept working.
They play a key role for the continuity of production and require shrewd management of indirect procurement, costs and quality.
MRO involves overseeing all company departments and making sure that all procedures always go smoothly.
There are two approaches: preventive maintenance and corrective maintenance. The former involves carrying out inspections to prevent downtime and standstills, while the latter involves taking action as and when problems emerge.
Material Requirements Planning (also known as MRP or MRP 1) is a method of calculating the amount of materials that need to be purchased to satisfy company requirements.
It plays a crucial part in business management and involves gauging market demand when organizing production and purchase orders.
The decisions made will be based on the bills of materials, especially when it comes to complex orders or materials with medium to long supply times.
A “push” approach is normally taken and the process affects the production side, the warehouse and stock.
The work is normally done on a weekly or monthly basis.
This is a mathematical model applicable to all sectors. In the case of logistics, it is estimated that 20% of the items in stock are involved in 80% of warehouse operations. There are relatively few high-demand products but they have a significant impact on the entire warehouse flow.
Picking is the term used to describe the process of collecting goods from storage areas or shelves for order fulfillment. In logistics, picking is thus any action that involves the picking of a specific good. Very often, picking means collecting goods from different packs or unit loads to add them to other goods and prepare an order, a shipment, or a parcel. The concept is to take something from one location and move it elsewhere.
In most cases, picking is based on a picking list that may correspond to a single order, a request for a customer, a shipment, or may be used to feed a production line, another warehouse, or a company department.
Picking can be performed in two ways: manually or automatically, depending on whether the physical picking is carried out by an operator or by a machine. To optimize picking operations, several technologies are available, including voice technology, radio frequency terminals, and various visual aids such as picking displays.
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ROI stands for Return on Investment and it is often described as the ratio between the average profit and the amount invested.
It is used in business economics to calculate how long it will take for the amount spent on an investment to be paid back by the benefits that it brings, i.e. how effectively the capital has been used in the period taken into account by the calculations.
Reverse logistics, also called return logistics, focuses on those products that have been returned by the final recipient and are sent back through the supply chain from the final recipient to the manufacturer or to a third party in charge of taking care of them. Reverse logistics activities include the planning, implementation and control of the entire flow related to the collection, transport, reception, and sorting of the returned goods. The management of returns in reverse logistics is very complex and sometimes also involves recouping value from the returned products that have completed their life cycle. In reverse logistics, it is necessary to minimize the number of returns or prevent them from the start, control the return flows, and possibly dispose of the returned products in landfills/disposal centers or redirect them to secondary markets.
Sourcing is the process by which a company ensures that the proper flow of products, goods or services is always available according to its needs. This flow must be planned and weighted considering the operations involved, objectives, and economic relevance, which allows the purchasing strategy to be defined with the consequent management of transport, storage and warehousing of materials, including inventory management. Depending on the sourcing strategy, the company can opt for in-house production, outsourcing, resale as a distributor, or a dropshopping model.
Stock, also called inventory stock, is the collection of all materials (raw materials, semi-finished or finished products) stored by a company so that they can be used to complete a transformation or distribution process. Stock may have different functions and/or seasonality: it is defined as in transit if it is used to improve the efficiency of a production process by facilitating the connection between facilities or between the company and suppliers, or as seasonal, if it depends on the fluctuation of demand.
Stock may be available to meet any need and ensure the performance of operations, and is then called safety stock. It can be cycle stock if, for example, it is bought in lots to take advantage of discounts or other benefits, or even speculative inventory if bought in larger quantities because an increase in price or demand or even uncertainty in production and shipping is expected.
A Stock Keeping Unit (SKU) is a code (often a sequence of alphanumeric characters) that is used to identify and track a product in a warehouse.
Each product has its own unique code, thus making it easy to locate and manage items.
The codes normally include significant information that identifies the products, their characteristics and details related to communication with customers and suppliers.
SKUs are generally used to subdivide products to obtain the minimum selling unit, which is a necessary piece of information in supply chain operations.
The same product may have different SKUs if it is stored in a number of different places in a warehouse.
Storage is the stage of the production or distribution process in which no value is added to the product. Storage refers to the condition in which a product is placed in a certain position in the warehouse and left there for a certain amount of time. This can be done for products at any point of the value chain: raw materials, semi-finished and finished products.
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All of the steps on the journey from the supplier to the end customer are part of the Supply Chain. It is a process that involves a number of different figures, who carry out numerous tasks in the business ecosystem: from the flow of raw materials used for production to the distribution system that gets the items to the customers.
The Unit Load or UL is the basic storage or transport unit for a given storage system. The UL is usually placed on a modular support or packaging (box, pallet, container, etc.) to handle it more efficiently.
The most important feature of ULs is their sizing, which must be carried out according to the dimensions and physical characteristics of the goods, also taking into account their volume, their use and the frequency of the picking operations involved.
ULs are usually divided into 3 levels:
– Single pack (first level).
– Pallet and similar supports (second level).
– Container, swap body, and semi-trailer (third level)
Inventory is the process that involves the analysis of all the goods and materials a company holds in the warehouse. When inventory is taken, the quantities of the items in stock are counted and their value is calculated. This can include raw materials, goods, parts and products for the ultimate goal of resale, production or utilization. Taking inventory involves the detailed accounting and mapping of all stock present at a given time as well as its valuation to establish the capital tied up in stock.
Design analysis of the space used for warehousing purposes, aimed at identifying structures, equipment, and means for handling and storing goods.
Warehouse management is based on software and processes that enable companies to control warehouse operations through a suitable combination of people, equipment, and methods to ensure maximum efficiency.
The WMS is an IT warehouse management system.
The main task of the WMS is to manage and log inbound and outbound flows, locations, as well as picking and placing operations within the sphere of the storage system. We can consider it the brain of the storage system, which communicates with the ERP (Enterprise Resource Planning) system to manage the more or less complex processes of the Supply Chain.
In fact, the main functions of the WMS are related to the management of inbound and outbound goods, stock control, allocations, product labelling, material loading and unloading, up to simple and immediate inventory management.