lean management in logistics

1. Application of Lean management with Green in Logistics
Mr. Reji Ismail
(BSc, MBA)
ABSTRACT
According to Council of logistics management “Logistics is the process of planning,
implementing and controlling the efficient, effective flow and storage of goods, services and
related information from point of origin to point of consumption for the purpose of conforming the
customer requirement”.
In real terms it is all the business activities involved from the point of origin of a product to the
consumption of the product. Take for example potato chips; the origin starts with the raw
materials used is potato, chili, oil etc. The activities include procurement, documentation,
loading, transportation, unloading, storing, packaging, labeling, packing, restoring, reloading,
distribution, and ultimately to the consumer.
Lean management is nothing but reducing the wastage like time, energy, movement, etc.
thereby reducing the cost. The application of Lean Principle can be done on following areas of
logistics to minimize cost and maximize profit.
This presentation highlights different methods, by which this can be achieved,
1. Strategic alliance in Transportation.
2. Strategic alliance in Warehousing.
3. Strategic alliance in Procurement.
4. Product On transit.
5. Documentation & Customs.
6. Routes.
7. RFID usage to arrive at actual demand
8. Training drivers & cross-docking.
INTRODUCTION
Logistics Management
It is necessary to understand the difference between Logistics management and Supply Chain
Management. Supply Chain management is the total integration of all business functions like
Purchase, Production, Finance, Marketing, and HR from the point of origin of a product till its
consumption by the ultimate consumer.

2. Logistics management is a part of supply chain management which involves all the activities
from the point of origin of a product till its consumption by the ultimate consumer.
Take for example potato chips say lays. In this case the point of origin is Farmer from whom the
raw material potato is purchased. Here the integration of Purchase, Finance & HR functions is
integrated so that constitutes a supply chain. Whereas procurement, documentation. Loading,
transportation, warehouse, unloading etc. constitutes the activities which can be termed as
Logistics management.
Lean Management
To explain it in a simplistic form it is reducing any type of waste that is time, money, energy etc.
Lean manufacturing or lean production, often simply, "Lean," is a production practice that
considers the expenditure of resources for any goal other than the creation of value for the end
customer to be wasteful, and thus a target for elimination. This was devised by Ford and the
real usage was done by Toyota.
It has been proven that Lean is applicable in any sphere of human activity, and a variety of
industries – small and large from Retail, Office and Service industries have begun to appreciate
the benefits of Lean Management and are transforming themselves. Many companies from
Banking & Financial Services, Healthcare, Retail, Hospitality, BPOs, Call Centre & ITES and
Software Industries have already embarked on a Lean Program or are evaluating and seriously
considering one.
The figure below shows how the brick laying was done during nineteenth century. The brick
weighs about five pounds (2.3 kg). How much is the worker actually raising and lowering every
time he bends over for another brick?
Now, if we take a look at the figure below which shows how we can reduce the time and energy
of the worker above we will be able to get the real picture.

3. Green management
Environmental issues and global warming, is creating awareness among consumers and they
will be looking for products which will be environment friendly. Companies will have to expect
questions about how green their manufacturing processes and supply chain are, their carbon
footprint and how they recycle.
General Motors reduced disposal costs by $12 million by establishing a reusable container
program with their suppliers. Perhaps General Motors may have been less interested in green
issues if they were making record profits, but in an attempt to reduce costs in their supply chain,
GM found that the cost reductions they identified complemented the company’s commitment to
the environment.
Application
This paper identifies different methodologies by which one can use the lean management and
green concepts in Logistics. The reasons for strategic alliances become apparent when one
takes a look at the benefits. This applies to businesses and organizations of all sizes.
Creation of new ideas in developing strategic alliances and innovative methods is what the real
need of today’s global world. There are few areas from which the firms can profit from having
strategic alliances in logistics. They are as follows:
9. Strategic alliance in Transportation.
10. Strategic alliance in Warehousing.
11. Strategic alliance in Procurement.
12. Product On transit.
13. Documentation & Customs.
14. Routes.
15. RFID usage to arrive at actual demand
16. Training drivers & cross-docking.

4. Strategic alliance in Transportation.
Take for example a company manufacturing moulded water tanks are transporting in a truck ten
numbers. Assuming it cost Rs.20,000/- per load from point A to Z. If the company enters into a
strategic alliance with another firm which also transports goods to the same point say washing
powder the empty space inside the tank can be used to store washing powder and the cost can
be exactly reduced by half.
Similarly this can be applied in transportation of cars where the storage space in the car can be
used to transport FMCG products.
Strategic alliance in Warehousing.
In Michigan, USA the cost to construct a warehouse could $40 per Square Foot of building. Now
if two different firms come together and decide to have a strategic alliance to share the cost of
construction and operation of the warehouse by sharing the resources like forklift which costs
around Rs.12 lakhs and the cost of personnel’s in the warehouse. Well again it will lead to 50%
of what it is costing the company at present. Better training for employees is an important
benefit in entering a strategic alliance in warehouse.
Paperless warehousing will be attained by using scanners and bar-coding readers which will
reduce the usage of paper and thereby cutting down of trees which will ultimately contribute to
the green.
Strategic alliance in Procurement.
The computer and electronics industries have profited greatly from alliance relationships.
Innovation has become commonplace for firms that have chosen to work together. Just-in-time
inventory can be practically done as we can see in the case of Wal-Mart and Procter & Gamble.
Home Depot and Dell Computers have also built powerful alliances with their suppliers for cost
saving just-in-time inventory.
Timely product delivery
Greater consistency in parts, supplies, semi-assembled, and completed products
Detailed agreement as to handling of product problems and customer complaints
Specific (quarterly, yearly, etc.) volume commitments
Prompt response to quote requests and price problems

5. Product On transit.
One of the best examples would be the transportation of mushrooms in the vehicle and by the
time it reaches the store the product is ready to be harvested at the destination and can be
delivered fresh.
Not only in perishable goods but this can be seen in case of truck with concrete mixer is
another example. Similarly the partial production process for many products can be done in
transit thereby saving time and cost.
Documentation & Customs.
This is a major concern for all of the export and import firms around the globe. The solution for
this is use of technology for documentation that is online documentation and customs clearance
can be done by having custom personnel at the point of inspection of a consignment by that
particular countries. This depends upon the government agencies.
Routes
This is where we use transportation methods like North West corner, Vogel’s Method
.Here I would like to highlight a new methodology which is RIOM. (Reni Ismail’s
Outsourcing Method).This is based on the concept that in today’s global era it is
important to retain a existing customer rather than finding a new customer which all of
us agree.
In the event where the demand exceeds production capacity RIOM is the most realistic
approach for managers.
The figure below shows the example of a problem.
PLANT CUS1 CUS CU CUS4 SUPPLY=50
2 S3
1 10 10 2 5 20 11 15
2 12 7 10 9 20 25

6. 15
3 4 14 16 18 5 10
5
OP 0 0 0 20+/-X
DEMAND 10 15 20 25 DEMAND
=70
Figures in black are the unit transportation cost.
Figures in green are the units.
The above situation is the customer 4’s demand is 25 whereas based on the production
the firm is able to provide only 5 units remaining 20 has to be procured from other
sources that is outsourcing plant(OP). Here the firm has to decide how important is the
customer based on that the X value has to be decided. The highest unit cost is 20. So
even if the firm makes a loss in case of 4th customer it is a gain in the long run.
RFID usage to arrive at actual demand
If Radio frequency Identification Device is being installed to the tags of the products like FMCG
products actual sales can be analysed and it will give us a near to perfect actual demand on a
monthly basis and will help us in making a real sales forecast.
The figure shown below highlights the functioning of RFID.

7. The moment the customer rips apart the packaging the information can be obtained as
shown above.
Usage of green materials for packaging will also reduce cost if it can be used
strategically. Take for example the leaves of an Arac nut tree is used for packaging of
sandalwood soap in Kerala. Packaging is an area where we can bring about new
designs and material to reduce carbon foot prints.
Training drivers & cross-docking.
Fonterra of Auckland, New Zealand is presently implemented this by which the drivers
are provided with a customized hand held device by which they can easily able to meet
the changes in demand of the customer at the point of delivery itself. Here cross-
docking is used as a method by which the drivers does not have to come back to the
plant or warehouse to collect the goods if it is not available with the driver he can collect
from other vehicles near to his route and the usage of GPRS gives the correct location
to the base camp of the truck which also can be used for diverting the routes as and
when required.

8. About The Author:
Accredited Management Teacher by AIMA
“Darussalam”, Near CRPF Pallipuram P.O.,
Trivandrum-695 313
Email: reji.ismail786@gmail.com
MOB:9605410715