Creating the Lean Warehouse: Evolution Not Revolution

Creating a lean warehouse (or distribution center) is not something you accomplish overnight. It takes vision, planning, strategy, tools and tactics. Relative to people, you need to develop team members into problem solvers and then provide a leadership infrastructure to support their efforts. Identifying and solving problems may seem basic; however experience would suggest it can prove elusive in application. The results achieved through your lean efforts can be quantum in nature. Improved customer fill rates, decreased inventory levels, decreased inventory carrying costs, improved inventory accuracy, increased asset and team member utilization are all benefits of lean warehousing.

When Toyota Motor Manufacturing developed and shared its lean manufacturing strategy (known as the Toyota Production System), many realized it had implication as an overall business system and not just a manufacturing system. The principles of lean are now being applied universally, including inside the warehouse. Some of these principles include team member training and development, standardization, visibility, quality at the source, continuous improvement, waste elimination, visual management, and problem solving thorough the Plan, Do, Check, Act Cycle.

Starting with team member training and development, we understand that it is people who can identify problems and create sustainable solutions. One of the lean tools that we can give our warehousing people is value stream mapping. This allows us to map out current processes on the floor and identify waste and see where we can take non-value added activities out of the value stream. The value stream is simply defined as the flow of activities that add value to the customer. The premise is that we should only be doing those things that add value. All other activities are considered waste and should be eliminated.

The concept of standardization is also a key lean principle for the warehouse. Creating standardization of processes is to create tasks are easily repeatable with planned zero waste. The creation of standard work allows your team to understand processes from the point of view of inputs, procedures, timing and outputs. However, creating standard work is not about turning people into robots ! It is about creating a baseline from which we can improve. Many warehouse operations are a series of manual processes. The unfortunate aspect to this is that people will do the same process in different ways.

While this may lead to the same result, it is impossible to improve upon the process in the absence of a standard. Consequently, the lean thinker believes in standard work as it produces the baseline from which we will improve.

Visibility of material flow, inbound logistics, internal warehouse flow, and outbound logistics are critical to the lean warehouse. We need to understand the flow of material and be able to determine if we are supporting the “perfect order”; the right quantity, at the right place, at the right time in the right quality. The lean concept of “visual management” allows us to understand the score of the game (operation) so we can make decisions in real time that impact the overall flow of material to the customer. This is counterintuitive to many warehousing operations where the operation simply reacts to what trucks (or orders) show up at the facility on any given day.

Building on the fact that many warehouses have manual processes, we need understand the lean principle of “quality at the source”. To create quality at the source, we need to identify and isolate the key failure modes or areas of defects. Then we need to implement poke yokes (error proofing ideas) to eliminate the problems. Further, we need to create a quality dashboard to ensure that we can track our improvement in establishing quality at the source and be sure to continue to improve upon the past results. Focusing on quality at the source in a warehouse environment can be very enlightening. For example, one organization realized they needed to do something about serious errors in picking performance. Once the root cause analysis was completed in the picking area, the team was surprised at the actual root cause. While they initially believed in was a training issue, they learned the real issue to be that of picker interruptions. They learned that picking errors were being made because pickers were being interrupted by other members in the middle of their pick wave. This interruption made the picker lose track of where they were. The solution was that pickers would wear a green colored vest while picking and others were not allowed to interrupt them while they have the green vest on.

Material flow within our facility is often overlooked. Do we have waste of conveyance taking place because we have not correctly designed the floor layout? Experience has shown in lean warehousing that simply putting your perceived fast runners (A items) will not necessarily provide the optimal warehouse lay out. We need to consider material flow based on stability as opposed to gross volume. In other words, what items do we pick frequently even though they may not be in large volumes? How have we designed the warehouse to facilitate this flow of stable material?

The lean warehouse is about continuous improvement. Tools such as the PDCA cycle (Plan, Do, Check, Act) help us to identify and eliminate waste. What is the plan today? At the end of the day how do we measure our actual performance to plan? What do we need to adjust to be better tomorrow? Answering these questions is the essence of the lean warehouse. The goal is create a warehouse where problems are visible and where we fix problems at the root cause every day. Accomplishing this will in fact create the lean warehouse and drive quantum business results.

Written by Robert Martichenko, CEO of LeanCor Supply Chain Group