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Lean warehousing for optimal customer value

Lean warehousing for optimal customer value

Once the latches on the trailer doors are closed and your load pulls away from the dispatch assembly area, it’s finished. You’ve done your best to ship the right product in the right quantity and at the right time to your customers. But this is also where it can all go wrong, which is why operations executives need to pay as much attention to creating a lean material flow in their picking, packing and distribution areas as they do in the factory.

The original concept of Lean was designed for mass production of identical or similar items, so a straight conversion to warehousing, where volumes aren’t massive or standardised, isn’t really a given. But even if you can’t apply the science of Lean in exactly the same way, you can definitely still apply it. Many of the tasks performed in a warehouse don’t add customer value, and are therefore good contenders for elimination. Sometimes the activities may, in the end, be necessary, but a value-stream mapping exercise can often identify work done in the warehouse that is both non-value-added and not necessary (i.e. waste).

The seven wastes

 The seven wastes that Lean manufacturing seeks to eliminate are all present in warehouse and distribution centres. These wastes (with examples) include the following:

  1. Transportation (driving a forklift without a load)
  2. Defects or rework (time spent fixing work done incorrectly, such as mispicks or shipping off a poor quality product to a customer)
  3. Inventories (piling staged product in locations that create congestion)
  4. Motion (temporarily placing inbound pallets on the floor instead of directly into storage)
  5. Wait time (waiting to load or unload trucks)
  6. Overproduction (making or ordering more product than is needed or before there is demand for it)
  7. Overprocessing (performing unnecessary steps in a process like packing and shipping)

Other wastes can be added to this list too. Eliminating waste along the entire value stream creates processes that need less human effort, less space, less capital, and far less cost and fewer defects.

The ultimate goal of Lean warehousing, therefore, is to cut waste for more effective use of the limited resources of time and space to provide optimal value to your internal and external customers.

Lean thinking

Achieving Lean warehousing requires a certain mindset. A can-do attitude is the starting point. If your warehouse personnel don’t believe that ‘the perfect order’ is attainable, normal error rates will persist. Lean thinking will require a conversion from top-down leadership to bottom-up initiatives. In a lean operation, every worker is an inspector, and everyone is expected to help the organisation achieve continuous improvement. Lean thinking will not occur in a hierarchical environment, so managers must become coaches rather than dictators.shutterstock_129633440

A lean warehouse or distribution operation is an integral part of a pull-based value stream that begins with the customer order. Such operations apply Lean tools and techniques to simplify packaging, streamline material flow, reduce errors, eliminate extra handling, reduce floor-space requirements and improve inventory management. In the ideal state — admittedly still a far-off vision for many companies — warehouse employees do not have to rush through a large batch of shipments at the end of the month or quarter.

 With traditional manufacturing, factories produce in economical quantities and then push the product through the market to the retailer. When products are not purchased as expected, unsold product is pushed out in a ‘clearance’ or ‘basement’ sale. Improved logistics capabilities, however, have enabled manufacturers to replace the ‘push’ system with ‘pull’. The best example is in automotive replacement parts. Traditionally, car dealers carried a three-month supply of replacement parts. The repair technician went to the parts window, requested the needed part, and waited for the counter person to find the item in a maze of storage bins. Today, rather than stocking all parts, the car dealer is likely to contact a nearby distributor who will have the needed part delivered within two or three hours.

In other words, it is the end user who initiates the build process by placing an order. That order initiates a chain of events that in effect ‘pulls’ the raw materials through the manufacturing processes so that the demand can be satisfied. One of the subtle differences in this approach is that rather than a downstream process pushing WIP into an upstream process, it is the upstream process that tells the downstream process that it needs some more work to do.

Ultimately, Lean management aims to create a culture of continuous improvement that engages employees at all levels — especially those who perform the work processes — in identifying waste and developing and implementing remedies. The end game of a lean warehouse is not a ‘point of arrival’ but a consistency of focus.  Only when the warehouse is consistently focused on waste elimination, lead time reduction and continuous improvement, can it truly become part of your broader ‘Lean journey’.

Integrative improvement is the sustainable approach to continuous improvement. It seeks to achieve best-in-class operational capability across the entire end-to-end supply chain. It does this by integrating continuous improvement tools such as Lean, Six Sigma, WCO, TPM, TQM and SCO into a single, codified integrative improvement system to ensure CI efforts are holistic, ongoing and sustainable.

About TRACC
The TRACC framework helps organisations build standardised and integrated good practice and performance capacity across their Plan, Source, Make and Deliver functions. Simultaneously it accelerates their collaboration and alignment capacity to build world class end-to-end value chains, enabling the organisation itself to become the ultimate source of sustainable competitive advantage.