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How to Apply Lean Principles to a Distribution Center

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A warehouse

Lean practices are all too often associated with manufacturing, when in reality the tools and training are ideal for any environment, including the supply chain execution market. Considering that logistics cost as a percent of company sales is on the rise and now more than nine percent, utilizing the fundamentals of Lean tools can save millions of dollars in operating costs, which will go right to your bottom line profitability.

What is Lean and Six Sigma?

Lean is a set of principles used to remove waste and inefficiencies from various processes. Six Sigma means a measure of quality that strives for near perfection. Six Sigma is a disciplined, data-driven approach and methodology for eliminating defects in any process. To achieve Six Sigma, a process must not produce more than 3.4 defects per million opportunities. A Six Sigma defect is defined as anything outside of customer specifications.

Lean principles that can be utilized in the warehouse include:

  • Base your management decisions on a long-term philosophy, even at the expense of short-term financial goals
  • 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)
  • Build a culture of stopping to fix problems, to get quality right the first time
  • Standardize tasks and processes; they are the foundation for continuous improvement and employee empowerment
  • Use visual controls, so no problems are hidden
  • Use only reliable, thoroughly tested technology that serves your people and process
  • Grow leaders who thoroughly understand the work, live the philosophy, and teach it to others
  • Develop exceptional people and teams who follow your company’s philosophy
  • Respect your extended network of partners and suppliers by challenging them and helping them improve
  • Go and see for yourself to thoroughly understand the situation
  • Make decisions slowly by consensus, thoroughly considering all options; implement rapidly
  • Become a learning organization through relentless reflection and continuous improvement

Lean Methodology

To achieve Lean and Six Sigma, many companies use a Kaizen event. A Kaizen is the organized use of common sense to improve cost, quality, delivery and responsiveness to your customers’ needs. Kaizen assembles small cross-functional teams aimed at improving a process or problem identified within a specific area in a very short period of time. Most Kaizen events will drive savings of 10 times or greater the cost of the Kaizen event in a very short period of time.

A Kaizen event should:

  • Focus on what adds value to the end customer
  • Consider problems and solutions end to end
  • Base all decisions on facts
  • Maintain a strong bias toward action
  • Use the three actuals (actual people, actual place and actual process)

Lean Team

Using Lean Process Improvement Teams (6-10 members) to support projects that are more complex than a Kaizen event is a very efficient way to review your facility and identify areas for improvement. Lean Process Improvement Teams will provide an aggressive questioning of all business practices, focus on the elimination of all non-value added activities, and destroy all barriers that prohibit the pursuit of total customer satisfaction.

Lean Tools

There are seven basic Lean tools that can be utilized in the warehouse. These include:

  1. Pareto analysis – what are the big problems?
  2. Cause and effect diagram – what’s causing the problem?
  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?

Questions to Ask and Tools to Use

The Five Whys is another tool to use, which is a questioning technique for getting beyond symptoms and uncovering root causes of problems. This technique works with a cause and effect diagram to identify a probable cause. Continue asking why five times for this process to be efficient and effective.

Value Stream Mapping (VSM) is a special type of flow chart that uses symbols known as the language of Lean to depict and improve the flow of inventory. Many organizations pursuing Lean have realized that improvement events alone are not enough. Improvement events create localized improvements; Value Stream Mapping and analysis strengthens the gains by providing vision and plans that connect all improvement activities. VSM and analysis is a tool that allows you to see waste and plan to eliminate it.

To conclude, applying Lean practices into your distribution center will work by using Lean tools discussed effectively and efficiently. Implementation does not have to be more expensive or complex using these Lean practices.

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