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November / December 2020

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Point2Point

November 11, 2020

Logistics

First in, first out

Definition: First-in, first-out (FIFO) inventory is self-explanatory, as the first items to arrive at a warehouse or distribution center (DC) are the first to leave. The method’s most obvious advantages come with products that are closest to obsolescence or expiry, but other benefits are accounting — FIFO is often used to calculate the value of inventory and cost of goods sold (COGS) — and safety.

Field guide: While the finance department must tap the accounting and tax benefits of FIFO, the warehouse/DC staff must ensure that it happens in practice. Many facilities have pallet flow racks, in which products are fed into one end, moved along by a track or roller system, and unloaded from the other end when needed for order fulfillment.

Factoid: Rest in Peace, a mattress w in Fresno, California, adopted a first-in, first-out method after the coronavirus (COVID-19) pandemic hit. “We always have about 1,500 to 2,000 mattresses in inventory waiting to be processed, and we make sure now to process mattresses first that have been in inventory the longest,” company president Matt Young told Bed Times magazine. “That gives us an extra couple of days, so that if a mattress did contain the virus, it would be gone over that time.

Research Spotlight

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Study: Collision-Avoidance Systems Live Up to Their Name in Trucks

Studies have determined that collision-avoidance systems in passenger vehicles have helped reduce accidents, particularly rear-end crashes. Such technologies as forward-collision warning and automatic emergency-braking (AEB) systems in large trucks would produce similar safety trends, according to a study from the Arlington, Virginia-based Insurance Institute for Highway Safety (IIHS).

According to IIHS research, trucks with forward-collision warning had 22 percent fewer crashes than those without the technology, and those with AEB had had a 12-percent reduction in accidents. Forward-collision warning and AEB reduced rear-end crashes by 44 and 41 percent, respectively. In 2018, crashes involving large trucks resulted in 4,136 fatalities in the U.S., an increase of nearly one-third since 2009.

“This study provides evidence that forward-collision warning and AEB greatly reduce crash risk for tractor-trailers and other large trucks,” Eric Teoh, IIHS director of statistical services, said in a press release. “That’s important information for trucking companies and drivers who are weighing the costs and benefits of these options on their next vehicles.”

While automakers are moving toward making AEB standard on all new models by September 2022, it is not required on trucks or passenger vehicles in the U.S. The  European Union has required the technology on most new heavy trucks since 2013.

Freight Scorecard

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Data Point

130.5

Increase in cost of shipping a 40-foot ocean-freight container from Shanghai to the U.S. West coast between May 22 (US$1,678) and September 18 ($3,637), according to the Shanghai Shipping Exchange. Analysts attribute the increase to (1) fears of more trade turmoil, as Chinese manufacturers try to speed production and shipments to beat new tariffs from the U.S., and (2) demand outpacing capacity as shippers reset operations and resume routes after coronavirus (COVID-19)- induced slowdowns.

(E)ven if shipping companies increase their capacities, they  will not be able to completely  ease the pressure from a shortage of (shipping) supply.

— Zhu Pengzhou Shanghai Shipping Exchange analyst, to the South China Morning Post

 

Passport: Belgium

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Logistics grade: Earlier this year, an online article referred to Belgium as potentially “Europe’s new logistics hot spot.” But the country has boasted solid infrastructure for years. A distribution-center capital and home to developed road, air, rail and port networks, Belgium ranked third in The World Bank’s Logistics Performance Index (LPI) for 2018.

Infrastructure: Location helps, and Belgium neighbors four of the LPI’s top performing countries: Germany (first), the Netherlands (sixth), the United Kingdom (ninth) and France (16th). Its road and rail networks link seamlessly with those nations. Belgian railways carry 62 million tons of freight annually, and the ports of Antwerp and Bruges-Zeebrugge are two of the busiest in Europe.

The customs house: Low real-estate costs and business-attractive tax conditions have helped make Belgium an attractive option for warehouse/distribution-center space. In recent years, Johnson & Johnson, H&M and Coca-Cola are among the companies that have established warehousing operations in the country.