Chapter 1: History and Basics of Logistics | Commerce, Logistics Facilities, WMS, Labor-saving

Section 1: Commercial Transactions (Commercial Flow) and the Role of Logistics

Commercial flow (the flow of commercial transactions) refers to all commerce activities that provide products from supply (producers or manufacturers) to demand (consumers or end-users), transfer their ownership, and collect payment. This includes the "movement of information and rights" such as contracts, ordering, and settlement. On the other hand, logistics (physical flow) is the essential operational force to complete commerce, referring to "all operations that actually physically handle products," such as product transportation, storage, sorting, distribution processing, packaging, and delivery.

When consumers choose a company among products with the same value and price, the final deciding factor for purchase is "how fast, accurately, and without damage the product is delivered while maintaining quality after ordering (logistics superiority)." Therefore, in modern business, logistics is not merely a cost center but is positioned as a critical corporate strategy (profit center) that drives sales. Furthermore, in response to severe labor shortages, correction of long working hours, and environmental issues such as CO2 emission reduction (ESG compliance), labor-saving and automation (introduction of robots, AI-based route optimization, use of AGVs, etc.) are progressing at an unprecedented speed today.

Section 2: Types of Logistics and Functions of Logistics Facilities

Logistics is broadly categorized into the following segments based on the flow direction of goods and the industry phase involved. The required lead times and quality standards for logistics facilities vary significantly across these areas.

Arterial Logistics (Classification centered on secondary industries)

This is the "forward-moving" logistics from raw materials becoming final products until they reach the consumer's hands.

Procurement Logistics: The movement of bringing raw materials and components from primary industries (agriculture, etc.) and suppliers to the factories of secondary industries (manufacturing, etc.). Requires strict delivery management and operational management that does not halt production lines, such as Just-In-Time (JIT).
Production Logistics: The movement of semi-finished products and work-in-progress within secondary industries (inside one's own factory or between processes). Also called in-plant logistics, it directly impacts production efficiency.
Sales Logistics: The movement of products from secondary industries (manufacturers) to tertiary industries (wholesalers, retailers, etc.), organizations, and consumers. Responding to frequent small-lot deliveries and optimal inventory placement at logistics facilities are key.

Venous Logistics (Reverse movement of cargo)

This is the logistics where products that have been consumed or remained unsold "flow backward," and is viewed as extremely important in a circular economy.

Return Logistics: The movement of defective or unsold products returning from delivery destinations (retail stores) or consumers to the manufacturer's or wholesaler's logistics facilities. Requires time for inspection and repackaging.
Collection Logistics: The movement of systematically collecting used containers and products (e.g., appliance recycling, empty bottles) for recycling and resource recovery.
Waste Logistics: The movement of safely and legally collecting and transporting items that cannot be reused completely as waste/garbage to processing facilities.

New Forms of Distribution (EC Logistics / Consumer Logistics)

With the explosive expansion of electronic commerce due to the widespread use of the internet and smartphones, EC logistics such as BtoB (business-to-business), BtoC (business-to-consumer), and even CtoC (consumer-to-consumer) via flea market apps are rapidly growing. Optimizing "last-mile delivery" to individual homes has become the biggest challenge, making advanced information systems like WMS indispensable. Furthermore, the enhancement of logistics outsourcing (3PL: Third-Party Logistics) services has enabled emerging businesses without their own logistics facility functions (like warehouses and trucks) to easily develop large-scale commerce.

Section 3: Packaging and the Development of Logistics

In the history of logistics, the development of larger and faster transportation equipment (trucks and ships) is in an inseparable, interdependent relationship with the advancement of transport containers supporting it (the evolution from hemp sacks, barrels, and wooden boxes to modern pallets, cardboard, and resin containers).

Palletization and Modularization:
The establishment of the "Unit Load System" can be called a revolution in the logistics industry. By optimizing (module calculation) the length, width, and height dimensions of cardboard to fit standard pallets (e.g., Type 11 in Japan) or truck bed dimensions without waste, dead space is eliminated, dramatically improving loading and cargo handling efficiency, thereby realizing massive labor-saving. This made bulk transport by forklifts possible.
Complementary Function of Resin Containers (Oricon):
Cardboard is cheap and lightweight, but it has the weakness of easily collapsing and becoming unstable in shape when the contents decrease during piece picking. Foldable resin containers (Oricon) or placons compensate for this. Being sturdy and retaining their shape, they enable extremely stable automated operational management on automated transport machines (conveyors, etc.) using sensors, barcodes, and RFID, as well as in automated warehouses. Furthermore, because they are reusable, they contribute to reducing environmental impact.

Section 4: System Structure of Logistics Facilities (WMS / Operational Management)

Modern advanced logistics facilities (distribution centers) function not merely as "places to put things," but as giant information processing factories. Mainly, the following three systems operate in close coordination.

1. Logistics Information Management System (WMS & Equipment Control)

Known as a Warehouse Management System (WMS). It receives scheduled receipt and shipping instruction data in real-time from the upper host (corporate core systems or ERP), and immediately feeds back confirmed data once the on-site operational management is completed. It performs strict centralized management by SKU (Stock Keeping Unit: per expiration date, manufacturing lot, color, size) to ensure inventory visibility and traceability.

2. Logistics Equipment System (Hardware and WCS)

This includes hardware such as storage racks, automated storage and retrieval systems (AS/RS), high-speed transport conveyors, direction-based sorting sorters, and picking systems using voice or lamps. Recently, WCS (Warehouse Control System) has been introduced to comprehensively control these, managing traffic so that each device coordinates smoothly without congestion, thereby promoting labor-saving.

3. Labor Management System (LMS)

No matter how excellent the hardware and WMS are, managing the humans operating them is indispensable. It is a human and organizational management method where administrators properly arrange workers (pickers and forklift operators), sequence tasks, and detect progress delays in real-time (KPI management) to eliminate bottlenecks and reliably secure the planned operational management (throughput).

Section 5: Labor-saving / Mechanization and Considerations

As labor shortages become severe, investments to reduce "reliance on people" in operating logistics facilities are unavoidable. However, blind implementation leads to overinvestment, so a precise study through the following steps is required.

1. What is Labor-saving: The first stage of initiatives to reduce human operational and physical burden (labor) and improve efficiency, such as lightening carts, reviewing traffic lines, and introducing digital assorting systems.
2. What is Mechanization (Automation): By introducing advanced equipment like transport robots, automated sorters, and automatic packing machines, tasks previously done by humans are replaced by machines, achieving fundamental labor-saving and unmanned operations.
3. Scale, Volume Fluctuation, Operating Hours: Equipment capacity must be calculated and selected to withstand the intense volume fluctuations of the "peak time zone" in a day, or the "busy season" throughout the year, rather than the "average value." Conversely, appropriate buffer setting is required to avoid over-specing.
4. Return on Investment (ROI): The total balance of how many years it takes to recover the investment is strictly evaluated by weighing the initial costs (CAPEX) and running costs (OPEX) of the introduced equipment against the reduced labor costs and loss costs from errors.
5. Investment Breakdown of Distribution Centers: It is necessary to appropriately allocate investment not only to the construction cost of the building itself, but also to material handling equipment, information systems like WMS, and internal infrastructure.

Distribution Center Investment Breakdown

Section 6: How to Proceed with Logistics Facility / Distribution Center Design

When launching a new logistics facility from scratch or executing a large-scale renewal, haphazard layout design invites fatal failure. Stepping through the following 10 phases systematically is a requisite for project success.

Decision on In-house Facilities vs. Outsourcing: Make a fundamental strategic decision (Make or Buy) on whether to own assets in-house or outsource to a 3PL company.
Formulating Location and Scale: Select a location by comprehensively evaluating the customer distribution center of gravity, access from expressway ICs, hazard maps for tsunamis and floods (BCP perspective), and ease of recruiting part-time employees (employment environment).
Planning Concept: Formulate a basic concept by ① clarifying current bottlenecks and problems to solve, ② calculating the upper limit of allowable investment budget, and ③ anticipating future expansion of commerce.
Project Management: Create a cross-functional organization spanning internal departments (logistics, sales, systems, finance, etc.) and clearly define decision-making roles.
Setting Basic and Planning Conditions: Analyze requirement specifications such as product characteristics handled, future handled SKU count, and required storage volume, and formulate conditions based on quantitative data.
Planning: Examine, compare, and evaluate multiple site layout models (single-story flat type, multi-story type, etc.) to finalize a master plan that incorporates safety and truck traffic lines.
Design and Construction Management: Perform close coordination and construction management so that the construction schedule of the building frame does not interfere with the delivery and installation schedule of large internal logistics equipment (racks and conveyors).
Manual Creation: Before the hardware is completed, create SOPs (Standard Operating Procedures) defining the traffic lines of operational management tailored to the new equipment and WMS, as well as exception handling.
Completion and Handover: Conduct comprehensive test runs before operation (system integration tests, stress tests assuming peak times) and strictly verify whether required capacities are met.
Maintenance and Preservation: To minimize downtime after operation, build a perfect support structure including the formulation of periodic preventive maintenance plans and a remote maintenance system by the manufacturer.

Practical Guide: Basic Flow, PCB Analysis, and System Design Methodology

We explain specific analysis methods and the thought process of operational management when designing layouts and systems inside logistics facilities in actual field operations.

Item 1: Basic Flow of a Distribution Center

Ideally, the movement of goods within the center should follow a continuous stroke without backtracking.

Receiving Berth (Truck docking/unloading) ➔ Receiving Inspection (Strict verification of quantity and exterior quality using handy terminals, etc.) ➔ Storage Area (Storage in AS/RS or fixed racks, management by free location, etc.) ➔ Retrieval/Replenishment (Bulk allocation in pallet/case units, or replenishment to flow racks for piece picking) ➔ Picking/Sorting (Digital picking, direction-based sorter, or assorting to roll box pallets) ➔ Shipping Inspection (Weight or image inspection) & Storage by Shipping Direction ➔ Shipping Berth (Loading/Dispatch)

Item 2: PCB Analysis and Selection of Logistics Equipment

Quantitatively analyze the form in which the handled cargo currently moves. This is a method to accurately discern the volumes and ratios of cargo in the states of P (Pallet: large-volume movement in pallet units), C (Case: medium-volume movement in case units), and B (Bara/Piece: small-lot movement in piece units), and assigning the most efficient material handling equipment and operational management to each (e.g., forklifts and automated warehouses for P, picking carts or shutter assorting for B). Tools like Tera Calculation 1 extract and aggregate C and B quantities from EIQ analysis data, logically leading to optimal storage equipment selection and area calculation.

💡 Item 3: Considerations on System Design (Trial & Error and Pursuit of Optimal Solutions)

In logistics system design, there is no "one and only correct answer common to all companies." Therefore, a process of repeating "trial and error" by creating multiple layout plans and comparing them through desktop simulations to brush them up is essential.

For example, it is crucial to compare a standard "fixed pallet rack + manual work with forklifts (Plan 1)" with a cheap initial investment, against labor-saving by "introducing electric mobile pallet racks / automated warehouse systems (Plan 2)" with a high initial investment but drastic labor cost reductions, to derive the layout that offers the most superior return on investment (labor reduction costs vs. equipment investment and maintenance costs) over a span of several years (the optimal solution for the company).

Furthermore, no matter how superior in efficiency and cost, "Safety First (compliance with laws like the Fire Service Act and Industrial Safety and Health Act, clearing internal safety standards)" and "Maintenance of the Work Environment (reducing physical burden on workers = ergonomics, maintaining hygiene and product quality through proper temperature/humidity control)" on-site must never be sacrificed. A sustainable logistics facility system design is only achieved when these are secured.

Logistics Facility Planning & Improvement | Related Knowledge Menu