Lean Six Sigma: 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 the supply chain execution market. Considering that logistics cost as a percentage of company sales is on the rise and now more than nine percent, using 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 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 warehousing principles are approaches to distribution center and warehouse management that simplify processes and lower resource use while still optimizing productivity and quality. Lean warehouse management allows your company to 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.
• 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. This includes traditional cleaning like sweeping, mopping and dusting, as well as regular maintenance on equipment and machinery.
• Standardize – standardize the systems, tasks and schedules you completed during the first three steps, turning them from one-time tasks to reliable routines.
• Sustain – maintain and update your procedures as necessary.

Six Sigma Methodology

Six Sigma is a disciplined, data-driven approach and methodology that strives for near perfection, 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.

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 for understanding 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 rather than 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.

Lean Warehouse Management

In warehouse management, Lean Six Sigma effectively 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 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. 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 Six Sigma can help with this in several ways:

• Reduced waste and improved efficiency – Lean warehouse management will reduce waste in various forms, such as excess inventory, unnecessary movement and overproduction. These streamlined processes will make for much 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 to labor, space utilization and more.
• Improved inventory management – Among the challenges that warehouses and distribution centers face daily is inventory management. 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. Here are a few ideas to get started with using 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 process.
• Encourage improvement in your extended network of partners and suppliers.
• Make decisions slowly by consensus; implement rapidly.

How to Implement Lean Six Sigma in Warehousing

When implementing Lean Six Sigma into the warehouse, it’s important to get all of your warehouse workers on board, as they will be the ones using the Lean processes in their daily tasks. For optimizing inventory processes throughout your warehouse, it can be helpful to implement a warehouse management system for more automation and standardization. When implementing Lean warehouse management, there are several key performance indicators (KPIs) that will measure your success.

• Inventory turnover rate – How often inventory is sold and replaced over a period of time. Successful Lean practices will increase turnover rates, indicating efficient inventory management.
• Order accuracy – The percentage of orders correctly picked, packed and shipped. Lean Six Sigma in the warehouse should increase order accuracy, indicating optimized processes.
• Cycle time – The time from receiving an order to delivering it to the customer. Eliminating waste with Lean principles will reduce cycle times, leading to better 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. 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 Six Sigma Certification: Employee Readiness

Having employees that are certified in Lean Six Sigma is of the utmost importance for creating a Lean culture in the warehouse. There are several levels of certification, which correspond to an employee’s level of skill, experience, knowledge and role in a project.

• White Belt – Focuses on the fundamentals of the Six Sigma approach and how different team members’ roles can improve a company’s efficiency.
• Yellow Belt – Builds on the basics of Six Sigma to understand how Six Sigma would work in a particular workplace.
• Green Belt – For professionals who create, identify and improve processes. This level is intended for mastering Six Sigma and DMAIC.
• Black Belt – Intended for leaders who could train teams of green, yellow or white belts. This level provides a thorough understanding of statistical analysis and process improvement.

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 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?

Additionally, 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, using the language of Lean 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.

Leverage enVista’s Lean Six Sigma Methodology

Using Lean Process Improvement Teams (6-10 team 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.

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

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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.