Lean Warehouse Management & Six Sigma Methodology

Lean practices are all too often associated with Lean manufacturing. In reality, Lean tools and training are ideal for any environment, including supply chain execution and warehousing. Lean tools and methodologies save millions of dollars in distribution center and warehouse operating costs by identifying and resolving issues that lead to inefficient processes. enVista’s consulting team is trained in the Lean Six Sigma method and works daily with manufacturers, distributors and retailers to optimize their operations.

What is Lean Six Sigma in Warehousing?

Lean is a set of principles used to remove waste and inefficiencies from various processes. Lean strategists commonly follow the 5S process to sort, set, shine, standardize and sustain. Another common strategy to invoke is the Six Sigma methodology.

Lean 5S Principles

Lean warehouse management helps your company optimize your warehouse for efficiency, which lowers costs and drives higher profits over time. The 5S principles are the most commonly followed when practicing Lean warehouse management:

• Sort: Audit all objects in a particular work area and determine what is necessary and what can be removed. In a warehouse environment, this can increase efficiency and improve customer satisfaction by reducing pick errors.
• Set in Order: Organize the remaining items in the work area among work groups, considering who uses what items, how frequently and for what purpose.
• Shine: Maintain the cleanliness of your work areas. Following best practices for cleaning and maintaining equipment and workspaces helps reduce safety incidents and prevent stock and equipment damage.
• Standardize: Standardize the systems, tasks and schedules you completed during the first three steps, turning them from one-time tasks to reliable routines, reducing errors during picking and packing.
• Sustain: Regularly review KPIs. Maintain and update your procedures as necessary.

Six Sigma Methodology

The Six Sigma methodology involves five key steps, referred to as DMAIC (define, measure, analyze, improve and control):

1. Define: This phase aims to collect the necessary data to break down the process, project or problem, such as high error rates or overstock issues.

2. Measure: The measure phase allows the organization to assess current business processes. With data-backed improvement plans, managers can set a baseline and move to the next phase. A warehouse manager might define KPIs relating to stock levels and turnover.

3. Analyze: In this phase, managers isolate the data to find the root cause of the problem, project or process. after identifying stockout issues in one warehouse, they might consider if the issue is as simple as ordering too few items or whether there’s stock sitting idle in a different warehouse, and the problem relates to how stock is routed.

4. Improve: The improve phase is where organizations directly address the problem. For example, a company might rearrange SKUs to speed up picking and packing or tweak order values based on new demand forecasting techniques.

5. Control: The final phase involves maintaining the implemented solution. Teams must continue to monitor KPIs and update the strategy to measure its success.

Lean Six Sigma Warehouse Management

In warehouse management, Lean Six Sigma combines Lean’s focus on eliminating waste and inefficiencies with Six Sigma’s emphasis on reducing defects and variability. Lean principles, such as the 5S methodology, streamline processes and enhance the organization, while Six Sigma’s data-driven DMAIC approach ensures continuous improvement and quality control. Together, they create a more efficient, productive and cost-effective warehouse environment.

Key Benefits of Lean Six Sigma Practices for Warehousing

Warehouses and distribution centers face a number of challenges every day. Lean solutions, such as distribution center automation, can minimize these challenges and improve efficiency. Managers must ensure effective management of inventory, product handling, space utilization, product diversity, labor costs, seasonal demands and more.

Lean Six Sigma can help with this in several ways:

• Reduced waste and improved efficiency: Lean warehouse management reduces waste, such as excess inventory, unnecessary movement and overproduction. These streamlined processes make for more efficient operations.
• Enhanced quality and accuracy: In the warehouse, less is more. Leveraging Lean warehousing principles will improve your processes and organize your spaces, leaving less room for error.
• Increased customer satisfaction: Lean warehouse management improves order fulfillment speed and accuracy, ensuring customers receive their correct order on time.
• Cost reduction: Eliminating waste with Lean warehousing principles will reduce costs across several areas of the warehouse, from inventory and labor to space utilization and more.
• Improved inventory management: Inventory management  is one of the challenges warehouses and distribution centers face daily. Leveraging a Lean inventory strategy mitigates these challenges by eliminating excess inventory, streamlining processes and fostering continuous improvement.

Using Lean Inventory Strategy in Warehousing

Lean Six Sigma thinking focuses on finding ways to streamline warehouse processes to improve productivity over the long run. The following tips will help get you started with Lean warehousing principles:

• Base your Lean warehouse management decisions on a long-term philosophy and develop exceptional people and teams who follow it.
• Leverage Just-In-Time (JIT) management to reduce inventory carrying costs.
• Create a continuous process flow to bring problems to the surface.
• Use “pull” systems to avoid overproduction.
• Level out the workload (work like the tortoise, not the hare).
• Fix problems as you notice them to get quality right the first time.
• Standardize tasks and processes to encourage continuous improvement and employee empowerment.
• Use and improve warehouse visual controls, so no problems are hidden.
• Use only reliable, thoroughly tested warehouse technology that serves your people and processes.
• Encourage improvement in your extended network of partners and suppliers.
• Make decisions slowly by consensus and implement them rapidly.

How to Implement Lean Six Sigma in Warehousing

When implementing Lean Six Sigma, it’s crucial to get all of your warehouse workers on board, as they’ll be using the processes in their daily tasks. For optimizing inventory processes, it can be helpful to implement a warehouse management system for more automation and standardization.

Several key performance indicators (KPIs) can be used to measure your success:

• Inventory turnover rate: This KPI measures how often inventory is sold and replaced over time. Successful Lean practices increase turnover rates, indicating efficient inventory management.
• Order accuracy: This measures the percentage of orders correctly picked, packed and shipped. Lean Six Sigma in the warehouse should increase order accuracy, indicating optimized processes.
• Cycle time: This KPI tracks the time from receiving an order to delivering it to the customer. Eliminating waste with Lean principles will reduce cycle times and improve customer satisfaction.
• Employee productivity: The output per employee in your warehouse should improve with successful Lean practices. Lean principles will optimize processes and reduce waste, allowing employees to do the same tasks more efficiently.

The Kaizen Event Process

To achieve Lean and Six Sigma, many companies use a Kaizen event. This exercise challenges your team to identify simple, high-impact ways to improve cost, quality, delivery and responsiveness to your customers’ needs.

The process is simple:

• Identify problems.
• Analyze the cause.
• Act on opportunities for improvement.
• Measure results.
• Repeat the process.

Lean Six Sigma Certification: Employee Readiness

Having Lean Six Sigma-certified employees can help you improve the efficiency of your warehouse. These workers can help others on your team adopt best practices, work more efficiently and produce fewer errors.

By embracing a culture of continuous improvement and encouraging your team to pursue higher levels of training and certification, you can reap the benefits of a skilled and motivated workforce.

Lean Six Sigma Tools

A warehouse operating on Lean principles can use these seven basic tools:

1. Pareto analysis: What are the big problems?
2. Cause and effect diagram: What’s causing the problems?
3. Stratification: How is the data made up?
4. Check sheet: How often does it occur?
5. Histograms: What is the overall variation?
6. Scatter charts: What are the relationships between the factors?
7. Process control chart: Which variations to control and how?

The Five Whys technique is useful for uncovering root causes of issues. This technique uses a cause-and-effect diagram to repeatedly ask “why” until you move from symptoms to root causes.

Value Stream Mapping (VSM) is another powerful tool that uses Lean language to visualize and improve inventory flow. Unlike isolated improvement events, which create localized improvements, VSM provides a comprehensive vision and plan, connecting all improvement activities to eliminate waste effectively.s which create localized improvements, VSM provides a comprehensive vision and plan, connecting all improvement activities to eliminate waste effectively.

Leverage enVista’s Lean Six Sigma Methodology

Using Lean Process improvement teams (6 to 10 team members) to support projects that are more complex than a Kaizen event is an efficient way to review your facility and identify areas for improvement. Lean Process Improvement teams will aggressively question all business practices, eliminate non-value-added activities and destroy any barriers that prohibit the pursuit of total customer satisfaction.

When applying Lean practices to your warehouse or distribution center, use the tools discussed effectively and efficiently. Implementing these Lean practices does not have to be more expensive or complex.

Let’s Have a Conversation®

For more information about applying lean warehouse management principles to your warehouse management systems and day-to-day supply chain operations, read enVista’s Lean Operational and Technical Value Assessments.

Our experienced supply chain consultants can assist with implementing Lean principles, optimizing your supply chains and improving your warehouse management practices.

Speak to a warehouse management consultant today.