Hello, in the MRO Process course,
I will be giving a lecture on Understanding Logistics
The content I prepared covers Hub Inbound and Outbound Management, Inventory Management,
and Transportation Management
We’ll start with hub inbound and outbound management,
looking at what logistics is and its role, and also SERVEONE’s logistics process
Next, under inventory management,
we’ll cover its definition and SERVEONE’s approach to inventory control
Finally, in transportation management, we’ll learn about logistics transportation,
SERVEONE’s delivery system, and the regional trunk-line structure
From 2015 to 2020,
I worked in e-commerce logistics planning at a Unilever affiliate
From 2020 to 2021, I managed overall logistics planning at a subsidiary of Yuhan Corporation
Since 2021, I have been with SERVEONE,
handling logistics contracts, planning, and cost management
In 2022, I was honored with the SERVEONE Pride Award as Best Employee of the Year
Let’s begin the first topic: Hub Inbound and Outbound Management
The word logistics in Chinese characters literally means “the flow of goods”
It refers to the efficient flow of goods and services
In simple terms, logistics covers all activities
that move a customer’s order from the producer to the consumer,
connecting production and consumption
These activities include storage, handling, transportation, packaging,
and information processing
Many people often confuse logistics and distribution
Distribution means the economic activity that connects production and manufacturing to the customer
Logistics, connects manufactured products to the customer
In a broader sense, distributions an economic activity that links production and manufacturing to the customer
In other words, a marketing activity
Logistics plays an important role within the distribution process
The goal of logistics is to deliver products safely, accurately, and quickly
to the right place at the right time,
providing the best logistics service
To achieve this,
companies invest in people, vehicles, facilities, and infrastructure
to improve logistics services
This is called a trade-off or the seesaw principle
If investment is low, service quality will also be low
If investment is high, service quality will rise as well
However, excessive investment can seriously affect a company’s cash flow
That is why companies must work to balance this trade-of
To resolve this trade-off, we must use both external and internal resources appropriately
External resources include logistics investments such as new equipment, system adoption, and building new centers
Internal resources involve improving operations,
such as revising inbound and outbound strategies, adjusting storage strategies,
router settings, and workflow paths
By making good use of both resources,
we can achieve the goals of logistics, improving service quality and reducing costs at the same time
This enhances the company’s distribution competitiveness
A logistics center is a facility for activities such as receiving goods,
storing and placing them, picking and packing, processing for distribution, loading, unloading, and shipping
To carry out logistics activities, a hub like the logistics center is essential
From this hub, logistics services are provided through various logistics operations
There are four main types of logistics centers
The first is the general logistics center
In this type, companies may add extra logistics activities or facilities
depending on their distribution and marketing concepts
A general logistics center handles a wide range of logistics operations,
including receiving, storage, QA, QC, picking and packing,
processing for distribution, loading, unloading, and shipping
A hub terminal is a logistics center that sorts goods by destination for delivery
It is the type of logistics center used by courier companies
A fulfillment logistics center is an e-commerce type logistics center
It handles both e-commerce deliveries and returns
The most common examples are Amazon and Coupang
A smart logistics center is a logistics center
equipped with advanced systems and technology
A well-known example is Shinsegae SSG
SERVEONE logistics centers combine the functions of a general center, a hub,
a fulfillment center, and a smart center
In particular, the Och﻿ang Mega Hub performs all four of these functions
As a note, SERVEONE logistics centers are often called OO Hub,
but the official name is OO Hub Center
Since they serve the role of a logistics center, the word center is included in the name
As for the current status of SERVEONE logistics centers,
in addition to customer logistics centers, there are nine coordination hub centers,
five company-owned hubs and four leased hubs
SERVEONE operates a total area of 122,100 m²
with 179 employees and 175 vehicles in service
The reason SERVEONE logistics centers are called hub centers
is because they perform multiple functions
They operate both standard products and dedicated products like a general logistics center,
while also handling cross-docking, which means moving non-stocked items
like a hub terminal
They also function as transfer hubs between centers,
receiving goods at a hub near the supplier,
then moving them to a sub-center near the customer
This enables nationwide delivery through the hub center system
Let’s look at the logistics process
At SERVEONE, products are handled based on inventory or non-inventory type and delivery method,
all managed through ERP and SLP systems
When goods arrive from suppliers,
tasks include unloading, inbound inspection, and inbound labeling
At the same time, delivery schedules are managed administratively
If the goods fail to meet SERVEONE’s inbound standards, they are returned to the supplier
After goods are received, inventory items are stored and managed depending on the delivery type
Storage and inventory management include placing goods in their location on the same day,
first-in first-out control, location management,
inventory monitoring, and stock-taking
For non-inventory items, they are not subject to storage or inventory control
After inbound processing, they go directly to outbound processing
Back to inventory, for outbound processing,
stored goods go through picking and packing, outbound labeling,
sorting, and outbound inspection
After inspection, inventory and non-inventory items together move to the loading stage
Depending on trunk-line use, goods may be delivered directly
or transferred through trunk-line shipping
Trunk-line shipping requires vehicle scheduling
and in/out management
For delivery, it depends on the method, direct vehicle delivery or courier delivery
Vehicle delivery requires route and regional management,
while courier delivery requires close monitoring to avoid issues with parcel collection
In addition, SERVEONE provides a separate collection service
After delivery, if a customer returns a product,
it goes back through the inbound process step by step
Logistics may be operated by in-house staff or outsourced
At SERVEONE, it is outsourced, and this is called 3PL
3PL means a logistics service where a specialized company handles the full logistics activities
for the client company
By contracting with such companies,
SERVEONE gains logistics expertise through professional staff and specialized solutions
SERVEONE also has current 3PL contracts
The main hub operators are LX Pantos and CJ Logistics
Other dedicated operators for clients include Lotte Global Logistics, Han Express, and Hanbat Logistics
For parcel delivery, separate contracts are in place with CJ Logistics and ILYANG Logis
After signing a 3PL contract,
a Service Level Agreement (SLA) is made between the client company and the logistics operator
An SLA aims to improve
the quality of logistics services for the client company
Based on the evaluation, incentives or penalties are applied
SLA evaluations are also used for vehicle contracts
Typical criteria include LT, claims, CBM, and safety evaluations
Logistics cost refers to the economic value
directly or indirectly consumed to carry out overall logistics activities,
from delivering finished products to clients, to shipping to customers, handling returns, and disposal
In other words, it is the cost incurred in logistics activities
It also serves as basic data to support
managers in making decisions to achieve
business goals related to logistics
Logistics cost is made up of five main parts: handling, packaging, storage and rental,
transportation, and logistics information management
Handling cost is the labor expense for logistics operations inside the center
Since workers are required inside the center,
handling cost is also considered labor cost
Packaging cost is the expense for consumables used in logistics activities
Storage and rental cost comes from leasing logistics centers,
covering product storage fees and warehouse rent
Transportation cost includes in-house transfers
between branches or hubs, as well as delivery to customers
It can be divided into vehicle cost, charter cost, and courier cost
Logistics information management cost refers to system usage fees
If a logistics system is not built in-house,
fees are paid for using external systems
At SERVEONE, handling, packaging, storage and rental, and transportation costs occur
Since SERVEONE has its own integrated logistics system,
there is no separate cost for logistics information management
Storage and rental costs depend on whether the facilities are currently leased
CST is a Costing Simulation Tool
It allocates costs based on logistics activities,
covering labor, vehicles, courier, and packaging consumables
used in sales and purchasing operations
For existing products and clients,
CST calculates expected logistics costs in real time across more than 100 delivery scenarios
This helps determine proper purchase prices and customer sales prices for operating products
For new business expansion, CST is also used to estimate logistics costs
to support sales and purchasing activities
Every month, actual logistics costs from inventory and non-inventory orders
are allocated by each operating unit
Hub handling standards are divided into seven categories
Items that cannot be handled at the hub cannot be processed,
so they must be reviewed in advance
Heavy cargo refers to irregular or asymmetric products
that are not packaged in boxes
If heavy cargo exceeds 30kg per sales unit,
it cannot be processed
Bulky items are those with a length over 3m,
a total of three sides exceeding 3m, or any single side at least 1m
Such bulky items cannot be handled at the hub
Logistics basically operates with pallet loading
If the size exceeds pallet standards, logistics operations are not possible
Installation and inspection items are not handled by SERVEONE
Such items belong to a separate system called installation logistics
Since SERVEONE does not operate installation logistics, these items cannot be handled
Intangible products refer to goods
that do not physically exist
Bundle products mean multiple items managed together as one product idea
Hazardous materials include gases,
flammable items, and toxic substances,
so they cannot be handled at the hub
Such items require
specialized managers and logistics centers that can store them safely
At SERVEONE, gases, flammables, and toxic materials
are not professionally handled
However, some hazardous items are allowed within certain limits
So hazardous materials must be shared with the logistics team in advance
for further review on whether handling is possible
Frozen and refrigerated goods, like hazardous materials,
require separate logistics centers and storage cases
However, some frozen and refrigerated items are allowed within certain limits
So these goods must also be shared with the logistics team in advance
for further review on whether handling is possible
Finally, fragile items cannot be handled at the hub
if packaging is insufficient
Even if accepted at the hub, items that break easily
are exempt from liability by the logistics company
Please keep this in mind when managing such products
Hub inbound standards include: inbound label attachment,
inbound packing list, packaging, and cushioning
Four types are defined: single packaging, combined packaging,
outer packaging, and cushioning packaging
If inbound labels are missing
or packing lists are not included in the box,
single packaging fails the standard and is returned
For combined packaging, if recipients are different,
boxes must be packed separately,
with one label per box
Irregular items must be packed in boxes
If unsuitable packing materials are used, the goods will be returned
If cushioning to prevent breakage is insufficient, the goods will also be returned
Even if accepted, if packaging or cushioning is poor,
the logistics company is not liable
for damage during operations
Please review the inbound standards in advance to avoid issues at inbound
Sometimes, even if standards are not met, items may still enter the hub
In such cases, they may be taken out for rework
and requested for re-inbound,
or if rework is done inside the hub, extra costs may occur
Keep this in mind when operating
Inventory management means keeping stock at the optimal level
to respond quickly and economically to customer demand
Inventory must be supplied in the right quantity,
at the right time, and to the right place
If inventory is too high,
excess purchasing and holding costs occur
If inventory is too low, stockouts cause lost sales opportunities
Therefore, inventory must be managed based on optimal stock and safety stock levels
Safety stock prevents stockouts by keeping extra inventory
and helps respond to rising demand to minimize lost sales
However, if only safety stock is managed,
as mentioned earlier, excess purchasing and holding costs occur
To avoid this, optimal inventory management is required
It prevents overstocking and keeps inventory at proper levels based on current market trends
Here, “optimal” means neither too much nor too little
The right level must be set by monitoring market trends
Optimal inventory management also considers the economic side of safety stock,
making it the best inventory policy
The purpose of inventory management is to satisfy customer service levels
while minimizing losses from stockouts, holding costs, and purchasing costs,
in other words, total inventory cost
By keeping optimal inventory,
companies reduce related costs, prevent overstocking, and keep working capital flowing efficiently
To achieve this, operations must align in practice
to ensure stable production and sales activities
There are two types of inventory: center stock and VMI
Center stock means products purchased directly by the company
and stored in its own logistics center
Here, the inventory is owned by SERVEONE
VMI means products purchased by a supplier
but stored in the company’s center
Here, the inventory is owned by the supplier
Inventory ownership means this: inventory is managed the same way,
but if stock is damaged or lost, center stock can simply be repurchased
For VMI, however, damaged or lost items must be reimbursed to the supplier
Inventory storage standards are divided into 3 categories based on turnover rate: high-frequency outbound products,
low-frequency outbound products, and items returned by clients or suppliers
Depending on the type of stock, goods are stored on pallet racks, shelf racks, or flat storage
High-frequency outbound products have fast turnover,
so they are stored close to the workspace after inbound
Depending on the layout, flat storage, pallet racks, or shelf racks,
stock may also be placed on flat storage
Low-frequency outbound products have little or slow turnover,
so they are stored farther from the workspace
They are usually placed on pallet racks
Returned items are stored near the inbound/outbound waiting area,
or depending on the type of stock,
they may also be stored like high-frequency items on pallet racks, shelf racks, or flat storage
High- and low-frequency items are managed using the ABC storage strategy
This may differ by company,
but on average, A-grade accounts for the top 20%,
B-grade for 60%, and C-grade for the bottom 20%
In this system, high-frequency items are usually set at 30–40%,
while low-frequency items are set at 60–70%
Inventory auditing means checking whether
the actual stock quantity matches the system records in the center
It is the process of reconciling physical counts with system counts,
which is an important factor in a company’s financial indicators
Since each stock item is a company asset,
inventory audits must confirm any inaccurate quantities,
and ensure alignment between the system, physical stock, and accounting indicators
Ultimately, inventory auditing means reconciling the actual stock value,
the system stock value, and the accounting stock value
At SERVEONE, inventory audits under 3PL
are carried out in two ways: ad-hoc audits and regular audits
Ad-hoc audits are done daily or at month-end, when SERVEONE requests checks
on certain products or outbound locations
There is no accounting reconciliation
Any discrepancies are managed separately
and recorded in the system as obsolete inventory
Regular audits are conducted twice a year, covering all locations
SERVEONE logistics staff perform sample audits
to minimize errors in 3PL inventory checks
The results of regular audits are used in accounting reports
and ultimately applied to the company’s financial indicators
Inventory valuation means determining how much a product is worth
when it is produced or purchased,
and how much it is worth when sold
There are several methods of inventory valuation
The main ones are the weighted average method, the FIFO method, and the moving average method
Please refer to the calculation formula shown at the bottom right
and follow the screen
The weighted average method calculates inventory value
by averaging the quantity and cost of beginning and ending inventory
Looking at the calculation reference:
if December 1 is the beginning date
and December 6 is the ending date,
the sum of beginning and ending costs is divided by the sum of beginning and ending quantities
to get the inventory valuation amount
The weighted average method is simple and easy to calculate, but it cannot reflect weights
and requires clear beginning and ending data
The moving average method is used as SERVEONE’s inventory valuation standard
It recalculates stock quantity and revalues inventory assets
at every inbound or outbound transaction
In simple terms, the inventory value does not stay fixed
but changes each time a transaction occurs
This method is used by many companies
and is considered the most accurate
However, if transaction records are missing, the valuation can be distorted,
so precise system input is essential
On December 1, the inventory valuation was 150 won
On December 3, there was no new purchase and only 15 sales occurred,
so the valuation remained 150 won
At this point, the remaining stock was 5 unit
On December 6, a new purchase was made
From the December 1 purchase, 5 units remained valued at 150 won
From the December 6 purchase, the inventory cost was 1,000 won
So, 750 plus 1,100 divided by 15 remaining units
equals 123.3 won
On December 7, since no sales occurred,
the inventory valuation remained at 123.3 won
The formula may look complicated, but it is simply: the total cost of remaining stock
plus the total cost of new stock,
divided by the remaining quantity plus the new quantity
Until a new purchase occurs, the inventory valuation amount
remains at 123.3 won based on this formula
The FIFO method bases valuation on the cost of the earliest purchase
When purchased stock is sold,
the next purchase cost becomes the new standard
FIFO means that inventory received first
must also be shipped out first
Looking at the formula: on December 1, the inventory valuation was 150 won
On December 3, there was no purchase, but 15 sales occurred
At 150 won each, sales revenue was 2,250 won
At that point, 5 units remained
On December 6, 10 new units were purchased
When calculating the average value of cost and quantity,
On December 3, 5 remaining units at 150 won equal 750 won
Adding the December 6 purchase of 1,100 won
Dividing by 15 units in total
results in a valuation of 123.3 won
Up to this point, it is the same as the moving average method
But on December 7, a sale occurred
The cost of goods sold was 150 won
Since 5 units were sold on December 7,
the valuation then shifted to the December 6 purchase price of 110 won
Since FIFO means first in, first out,
it is easy to apply in the system,
but in practice, it is quite difficult to manage
The formula may look complicated, but it can be calculated with a simple equation
Please keep this in mind as a reference for your work
At SERVEONE, slow-moving stock is managed in four categories
Normal, caution, inactive, and long-term unsold
Normal means products with continuous sales within three months
Caution means products with an average turnover exceeding 3 to 6 months
Inactive stock refers to products with turnover exceeding 180 days, or six months
Long-term unsold means products with no sales for more than six months
Here, slow-moving stock specifically refers to inactive stock and long-term unsold items
If we apply the ABC strategy
Normal stock can be seen as A-grade, Caution as B-grade,
and Inactive and Long-term unsold as C-grade
To prevent slow-moving and caution stock from piling up,
sales, purchasing, and logistics teams
must set inventory strategies
through Sales and Operations SCM meetings
Transportation means the act of shipping goods
There are three types: delivery, collection, and trunk-line
Delivery is an external method that transports products from the center to the client
Collection means receiving products from suppliers by vehicle
and moving them into the center or directly to the client
Trunk-line delivery is an external and internal method,
moving goods between centers before delivering them to the client
As learned earlier, trunk-line also refers to
internal transport between centers or between hubs
At SERVEONE, trunk-line transport is operated nationwide, with the Ochang Hub as the base
Currently, there are eight 11-ton trucks,
running across seven routes nationwide
There are pure trunk-line moves to the main hub,
and inventory balancing toward clients
The main hub refers to the storage site or the primary shipping point where goods must be kept
First, pure trunk-line moves to the main hub
are based on hub inventory distribution
The main purpose is to transfer stock to the main hub,
or to move stock from a hub that has exceeded its capacity
In such cases, logistics or purchasing staff may request stock transfers
In addition, there are cases of pure trunk-line moves done for strategic reasons
In Case 1, a supplier near the Gumi Hub
delivers products A, B, and C
The main hub for A and B is the Pyeongtaek Hub
while the main hub for C is the Ochang Hub,
A, B, and C received at Gumi Hub must be transferred to their respective main hubs
In another case, if the main hub for product B is already the Gumi Hub
the purchasing staff may still request a transfer through trunk-line movement
As a note, pure trunk-line moves are not based on customer orders,
so there is no separate order number
Next is inventory balancing toward clients
When a customer places an order,
stock is moved to the hub that covers the customer’s delivery region
This ensures the order can be fulfilled
Even products moved by pure trunk-line transfer can become subject
to inventory balancing if required by a customer order
In the second case, when orders are placed
for products A, B, and C stored at Gumi Hub,
they are transferred by trunk-line to hubs near each client
As I noted here, this process is based on customer orders
Accordingly, products move step by step through trunk-line transfer and are then delivered
As a note, because this trunk-line transfer is triggered by customer orders,
each order has its own order number
SERVEONE has direct vehicle delivery and courier delivery
Delivery regions are set based on postal codes plus operating units
For example, in region A with the same postal code,
if customers belong to operating unit A and operating unit B,
then according to sales requests,
the region can be classified as either direct delivery or courier delivery
Another example is, in region B, with the same postal code,
if operating units C and D belong to the same client,
then delivery is managed by either direct vehicle or courier, depending on the request
Most sales requests for regions can be accepted,
but in some cases, existing regional settings
may require either direct delivery or courier delivery
In the middle chart of regions,
you can see the division between direct delivery areas and courier areas
If a region overlaps both direct delivery and courier delivery,
then the requested method can be accepted 100%
In the delivery process by type,
both direct vehicle and courier regions follow the same picking and packing
After packing, direct vehicle regions go through loading inspection,
while courier regions proceed with invoice issuing
A special case is when capacity in a direct vehicle region is exceeded, then an extra chartered vehicle is arranged
For courier regions, if they refuse collection, a chartered vehicle is also arranged to complete delivery
Courier companies may refuse collection
for hazardous materials, flammables, aerosols,
unpackaged items, or bulky goods
Finally, all deliveries must be completed by D+1
Direct vehicle delivery is based on on-desk delivery
Thank you for listening to this lecture on delivery
If you have any questions after the lecture,
please feel free to contact me anytime
Thank you