Lean logistics and warehousing final

Lean Logistics & Warehousing
Lean your Warehouse & Fulfillment
Operations

Lean Manufacturing
• Focus:
– Waste - Non Value Added Activities
– Speed & Cycle Time
– Standardization
– Inventory Performance
– Logistics Cost Reduction
– Variance Reduction

Lean Manufacturing
(Continued)
• Tools:
– “One Piece Flow”
– Visual Controls
– “Pull” Systems - Versus “Push”
– Takt Time
– Supermarkets
– Value Stream Mapping
– Kanban
– Spaghetti Diagrams

Which activities add only cost and
which add value?
Source: Adapted from Martin Christopher (2002)
VALUE-
ADDED
(Form,
Place,
& Time
Utility)
COST-ADDED
(Production, Storage & Transport costs and the Time Cost of Money)
Store
Store
Store

What is Lean?
• A set of tools to reduce waste.
• A philosophy based on lead-time reduction from
customer order to delivery.
• A method based on customer demand (pull) and one-
piece flow.
• A state of mind.
• An operational model that ignores economies-of-scale.
• An organizational methodology designed to create a
learning organization.
• An operational model based on continuous
improvement.
What is Lean Thinking?

Principles of Lean Fulfillment Streams
Eliminate All Waste
• All partners need to be in-sync.• All partners need to be in-sync.
Make Customer Consumption
Visible
• As lead time is full of waste.• As lead time is full of waste.Reduce lead time
Create level flow
• Ship to the cadence (pulse) of customer
demand.
• Ship to the cadence (pulse) of customer
demand.
Use pull systems
• Create a problem-solving culture (the
“Learning Organization”).
• Create a problem-solving culture (the
“Learning Organization”).
Increase velocity and reduce
variation • Move smaller lots more frequently.• Move smaller lots more frequently.
Collaborate and use process
discipline
• Achieve optimal results!• Achieve optimal results!Focus on Total Cost of Fulfillment
• Eliminating waste reduces cost and ensures
value.
• Let customer pull drive consistent & smooth
flow.

What happens when we forget about
the system?
8

Waste
Being lean and reducing cost is
about reducing waste:
Muda – Waste, or any activity for which
the customer is not willing to pay. If
you stopped doing this, there would
be no adverse effect on the product.
Mura – Unevenness or fluctuation in
work, usually caused by fluctuating
production plans. Reduced through
heijunka.
Muri – The “hard to do”. Caused by
variation in production, poor job
design/ergonomics, poor part fit,
inadequate tools, unclear
specifications, etc.

• Defects
• Overproduction
• Waiting
• Non-utilization of talent
• Transportation
• Inventory
• Motion
• Excess Processing
The Eight Deadly Wastes

Symptoms
– Inventory Accuracy
– Fill Rate
– Receiving Overages/ Shortages
– PO/ Invoice reconciliation
Root Causes
– Processes
– Training
– Visual
Defects

– Picking Schedule
• How far ahead are you picking orders?
– 1 day
– 2 days
– 1 week
Overproduction

– Receiving/ Shipping Schedules
– Order Processing
Waiting

– Hourly Staff
– Mobile Equipment
– Storage Equipment
– Warehouse Management System
Non-Utilization of Talent

Plan for Every Part (PFEP)
• A detailed plan for every part in the process, showing
everything relevant to managing those parts with no waste
(muda).
• A similar concept, Plan for Every Person, also exists.
16

Plan for Every Person(PFEP)
17

– Transportation is a necessary activity but it doesn't add value.
(Non-Value Added but Necessary)
– Spaghetti Diagrams
• Visual display of ACTUAL transportation paths
• Identify Travel Distances for Processes
• Identify Process Breakdowns and Defects
– Velocity Diagrams
• Visual display of the FREQUENCY of transportation paths
• Identify bottlenecks based on opportunity and impact
• Identify Process Breakdowns and Defects
Transportation

– Spaghetti Diagram Example:
Transportation
• Issues with pick
– Part was not in proper location
– When part was found not
enough in location to fill order,
needed to go to second location
– Second location also did not
have enough parts to fill order
– Third location did not have part
– Needed to search for part.
• Did pick 2 other parts while
searching
– Part was found on other side of
aisle of location 2, mixed with
other boxes of another part
number
– Total travel 1,590 ft

S2S3
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Transportation
Current Aisle Travel 32,655
Proposed Aisle Travel 13,985
Unique Aisle Travel Reduction 18,670
% Aisle Travel Reduction 57%
Total Aisle Travel Roundtrip
Distance 200 Feet (Aisle
Length 200 feet) 3,734,000
Total Minutes Traveled at 250 FPM
Equipment Speed 14,936
Total Hours of additional travel 249
Average Total Monthly Hours 1,800
Savings 14%

Transportation
Lost Sales
Obsolescence Complaints Lead Time
Conveyance
Motion Rework
Lack of Training Waiting
Overproduction
Poor Process
Inventory=WaterLevel
River of Waste: Exposing the Rocks
Source: Martichenko & VonGrabe (2010), BLFS, Lean Institute.
Inventory

Cross-Docking
• For cross-docking to work:
– Great discipline and standardized work is required.
– The entire fulfillment stream needs to be visible to all
parties.
– Ongoing PDCA is needed.

Supermarket
• Location where predetermined standard inventory is kept
to supply downstream processes.
• Located near supplying process.
• Help us to see usage and demand.
• We withdraw from supermarkets based on signals from
pull systems, like Kanban.
23

– Different than Transportation
– Movement that does not ADD value
Motion

Excess Processing
Non-Value-Added
Any activity that does not add market form,
fit or function or is not necessary.
(These activities should be eliminated,
simplified, reduced, or integrated.)
“Would a customer pay for this?”

Session Exercise #1
Identify your Wastes
26

Standardized Work
Batch Reduction/
Wave Picking
Teams
Quality at Source
5S System
Visual Tools and
Display Boards
Layout
Point of
Use Storage
Flow / KanbanTPM
Continuous Improvement
Lean Building Blocks
Process
Redesign
Mapping
Metrics

– Proactive v. reactive approach
– Develop or sustain a competitive advantage
• Reduce the order fulfillment cycle from 180 to less than 28
days
• Reduce engineering time from 18 to 9 weeks
• Do the same amount of work in 1/3 to 1/2 the time without
increasing head count
– “Band-aids” applied to business processes with
changing business conditions
Why Process Redesign?

– In order to improve we must understand and
document the present through:
• Current Documentation
• Gemba (“at the site”)
…..and
– Evaluate if an improved process is possible
• Kaizen events
– Standardization
– Goals
– Ideas
Process Redesign Mapping

– The physical location of components supporting a
process is critical to:
• Providing continuous flow
• Reducing non-value added time/ process (Travel Time)
Layout

– Develop simple visual references for workers
• Quality
• Material
• Layout position
• Speed/ Quality
– Examples
Visual Tools and Display Boards

– Sort
– Set in Order
– Shine
– Standardize
– Sustain
5S
– Storage Strategy
– Slotting
– Set in Order
– Standardize
– Sustain

Case Study – Warehouse
2,150 Surgery SKUs
36 Pick Aisles
2 Floors

Case Study – Warehouse
2,150 Surgery SKUs
10 Pick Aisles
Ground Floor

– Example
• Strategy 1 – Pick all orders at once
– Considerations
» Manufacturing Schedule
» Outbound Logistics (UPS, Fed Ex, LTL, TL)
» Manpower
» Productivity
» Staging
• Strategy 2 – Smaller releases of orders to the floor
– Considerations
» “Right Size” workload
» Timing
» Scheduling
Batch Reduction/ Wave Picking

– Documented Standard Operating Procedures
All done right………..
– Training, Training, Training
– Continuous Improvement
– Communication
Standardized Work

– What if inventory ONLY existed at the place where it
was needed?
• Receiving Staging
• Putaway
• Inventory Storage
• Replenishment
Point of Use Storage (POUS)

– Sustain and Control
– You can’t improve what you don’t measure
– What are the “right” Metrics
• Industry benchmarks
• Customer feedback (Voice of Customer)
Quality, Financial, Performance, Inventory
Metrics

– Develop controls to eliminate defects at every step in
the process
– Visual
– Audits
» Inbound
» Self
» Random
• Identify and resolve root causes
– Example
• Shipping audit
Quality at Source

The Seven Tools of Quality
• Check sheets
• Control charts
• Flowcharts
• Histograms
• Ishikawa diagrams
• Pareto charts
• Scatter diagrams

Check Sheets
• A document used at the Gemba, to collect data in real
time.
• Data can be quantitative or qualitative.
• Often characterized by the inclusion of check marks or
tallies.

Pareto Charts
• Graphical representation of the frequency of defects in our system.
• Rank defects from highest to lowest.
• Support the 80/20 rule and identify our greatest opportunities.

FMEA & PFMEA
• List out defects (“failures”) in the process.
• Score them in terms of:
– Severity if they occur.
– Probability that they will occur.
– The likelihood that we would detect them if they
occur.
• Recommend a solution.
• Assign responsibility and due dates.
• Attack them from most urgent and important, to
least.

– Visual system supporting
• POUS
• JIT
• Speed (Faster)
Flow/ Kanban

Keys to Successful Kanban
• Customer processes ordered goods in the precise amounts.
• Supplier processes produced goods in the precise amounts.
• No items are made or moved without a Kanban.
• All parts and materials always have a Kanban attached.
• Defective parts and incorrect amounts are NEVER sent to the
next process.
• The number of Kanban is reduced carefully to lower
inventories and reveal problems.
48

Things To Consider in PDCA
• Do you have the right tools (systems, people,
identified metrics) to identify waste and track
activities?
• Is work standardized and easy to track and
improve?
• How frequently should you cycle through
PDCA?
• Is the organization committed to change and
follow-through?
50

– Mobile Equipment
– Conveyors
– Scanning Equipment
– Warehouse Management Systems
Total Productive Maintenance (TPM)

Session Exercise #2
What Building Blocks/ Tools
will you use?
52

Hold Kaizen Workshop
• Kaizen – “Improvement” or “change for the
better”.
• Kaizen Workshop – Multi-day team Kaizen event;
typically includes:
– Current state analysis
– Value stream mapping
– Cost analysis
– Future-state brainstorming
– Action plan development
– Focuses on making the
system better
54

Go To The Gemba!
• View as much of the process as possible.
• Talk to the people doing the job.
• Take photos & video, gather documentation.
• You are focusing on people, process, materials and
information.
• Don’t panic if you can’t gather everything.
55

Collaborate to Eliminate Waste
• Everyone has visibility to customer demand, and everyone
should have visibility to waste in the system that prevents us
from meeting that demand.
• Since everyone in the fulfillment stream is charged with
reducing the total cost of fulfillment, everyone owns
eliminating waste.

Gather Relevant Data
• Data needs to be gathered in a timely fashion, to
allow us to react.
• Performance is measured in terms of hours or days,
not weeks or months.
• It’s very difficult to work with all of our data in this
manner; we need to apply the Pareto principle.
• It can also be very difficult to gather the data we
need.

Data Collection Example
FLOW
• Trailer inbound (per day & shift)
• Trailers outbound (per day & shift)
RESOURCES
• People involved in shipping & receiving
• Physical resources involved in shipping & receiving
EFFORT
• Daily wait time for trailers in the yard.
• Unit of work or time to load & unload trailer.

Outbound Logistics
1. Collect outbound logistics network data.
2. Map the current outbound logistics network.
3. Develop an inventory strategy based on flow to
the customer.
4. Develop a packaging strategy based on flow to
the customer.
5. Create a daily logistics design and PDCA.
Inventory strategy drives transportation strategy.
Why?
59

Measure Current Operational Metrics
• Minimum Order Quantity (MOQ) – Smallest amount
that can be ordered, either from suppliers or by
customers.
• Lot Size – Packaging size increment of orders. Should
equal MOQ, with efforts to continuously shrink lot size.
• Cadence – Quantity & frequency with which materials
move through fulfillment stream. Should match…
• Takt Time – The precise customer demand rate,
measured by dividing available production time by
customer demand. The goal is to sync production with
customer demand, the heartbeat of Lean.
60

Determine Current Performance
• We strive for “perfect order execution” (POE, also known as “first time
quality” (FTQ)).
• The eight “rights” of logistics are used to assess:
Tactical (To The Next Step)
– Right quantity
– Right product
– Right place
– Right time
– Right quality (product and information)
Strategic
– Right source – Did the materials come from the right supplier?
– Right price – Was the planned price/cost paid?
– Right service – Did the customer receive the expected service?
63

1. Pick A Product
• Focus on a common, high-volume product, and its
components, to study.
• Enlist the partnership of the suppliers involved.
• Remember, not all products and customers are
created equal!
64

Coefficient of Variation
• Measurement of stability of demand
• Calculated by dividing standard deviation by the
mean (average) for demand:
COV = STDDEV / MEAN
COV < 0.2 Stable SKU & Candidate for LFS
COV > 0.2 AND Trending To Stable or Unstable
COV < 1.0
COV > 1.0 Unstable SKU & Candidate for
Rationalization or Make-To-Order
65

2. Measure Current Lead Time
• Calculate Current Lead Time
– Inbound (Supplier) Lead Time +
– Manufacturing Lead Time +
– Outbound (Customer) Lead Time* +
– Raw Material Inventory (ADOH)** +
– Finished Goods Inventory (ADOH)**
* Tells us how long it’s taking us to respond to
customer demand
** How long could we sustain activity before
replenishing?
67

3. Calculate the Current Total Cost of
Fulfillment
• Identify the key areas in your fulfillment stream,
and what they’re costing you to operate.
– Supplier collaboration (portals, EDI)
– Supplier parts and material ordering (parts ordering and planning)
– Inbound logistics (transportation; internal and external)
– Shipping, receiving & trailer-yard management (material-handling and yard
equipment)
– Outbound logistics (transportation & distribution; internal and external)
– Customer collaboration (customer service & demand planning)
• Add the cost of carrying inventory
• Make this cost known to all partners; reducing it
as a % of sales will be everyone’s goal!
68

4. Determine Cost of Inventory
• Excess inventory is waste! It ties up cash and
hides process problems.
• Knowing your costs is key to eliminating them.
• Typical carrying costs include:
– The cost of capital (borrowing money)
– Damages
– Insurance
– Obsolescence, donations, write-downs and write-offs
– Shrinkage
69

Your Future State
• Lean improvements occur over time, and build
on one another.
• Improvements must be pursued
simultaneously.
• The focus is on reducing cost.
• Lean is NOT about eliminating jobs.
• Lean IS about eliminating waste.
70

PDCA The Process
• Critical in avoiding the waste of inventory build-ups.
• Changes along the fulfillment stream can quickly
impact the ordering process.
• These PDCA events evaluate components like:
– Do we have new parts we need to plan for?
– Have we addressed gathering any data we’re missing on
existing parts?
– Have lot sizes & MOQs been optimized?
– Have we removed all unnecessary parts from inventory
(5S)?
– Are we using the appropriate method to order each part?
– How can we continue to improve the process?

Change Acceptance
• Why is it so hard to get people to buy into
change?
72

Resistance to Change
• Fear
• Comfort
• No Perceived Need (If It Ain’t Broke, Don’t Fix It!)
• No Faith In Process
• Lack of Knowledge
• Lack of Trust
• Perceived Lack of Choice
• Their Own Personality
73

Session Exercise #3
When will you start?
74

Next Steps for Lean Logistics and
Warehousing
• Questions?
• If interested in a complimentary 2 hour Warehouse
Diagnostic, let MAGNET know as you exit at the
session, and we’ll follow-up to
– Qualify your problem and schedule your session
• Thank you for Attending

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