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How to Apply Lean Principles to Create a Lean Warehouse or Distribution Center

A warehouse uses lean manufacturing for better inventory management

Lean practices are all too often associated with lean manufacturing. In reality, lean 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 distribution center and warehouse operating costs. This money goes right to your bottom-line profitability.

What is Lean?

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.

What is Six Sigma?

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.

What is Lean Warehousing?

Lean warehousing is an approach to distribution center and warehouse management that simplifies processes and lowers resource use while still optimizing productivity and quality. Lean warehousing allows your company to optimize your warehouse for efficiency, which lowers costs and drives higher profits over time.

Why use Lean practices in a warehouse or distribution center?

Warehouses and distribution centers face a number of challenges every day. With the increasing logistic trends, these challenges continue to make inventory management even more difficult. Warehouse managers have to ensure that warehouses are effectively dealing with inventory, product handling, space utilization, product diversity, labor costs, seasonal demands and more. Lean management systems and lean solutions, such as distribution center automation, can minimize these challenges and improve efficiency.

5 steps of Six Sigma:

All employees must be trained to execute the steps of Six Sigma. As a methodology based on science, Six Sigma is only as effective as the data. If all employees are not on board with the strategy, analysts will find that the data is not accurately finding defects in the business process. Luckily the five steps, referred to as DMAIC (Define, Measure, Analyze, Improve, and Control), are straightforward:

1.   Define

The “Define” phase aims to collect all the data necessary to break down the process, project, or problem. This is a critical step to understand the focus and leadership of the company.

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.

3.   Analyze

In the “Analyze” phase, managers isolate the data to find the root cause of the problem, project, or process. Brainstorming root causes first and not the solutions, ensures the root problem will meet the corrective action.

4.   Improve

The “Improve” phase is where organizations directly address the root problem with a new improvement strategy. Thinking of potential issues and variables is important for the strategy to be effective.

5.   Control

The final phase, “Control”, involves maintaining the implemented solution. Teams must continue to monitor and update the strategy to measure its success.

How to use lean principles to create a lean warehouse or lean distribution center:

Lean thinking focuses on finding ways to streamline warehouse processes to improve productivity over the long run. Here are a few ideas to get started with using lean principles in your distribution center or warehouse:

  • Base your lean warehouse 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
  • Consider implementing warehouse management systems if needed
  • 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 (ex. warehouse picking and packing); they are the foundation for 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 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: How do you implement lean into a warehouse?

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 to improve a process or problem identified within a specific area in a very short amount of time. Most Kaizen events will drive savings of 10 times or greater than the cost of the Kaizen event in a very short period.

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

Seven basic Lean tools can be utilized when a warehouse operates on lean principles. 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 the 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 strengthen 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 to your distribution center will work by using the Lean tools discussed effectively and efficiently. Implementation does not have to be more expensive or complex using these Lean practices. For more information about how to apply lean warehouse management principles to your warehouse management systems and day-to-day supply chain operations, read about enVista’s Lean Operational and Technical Value Assessments.

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