Warehousing gets lean

While lean is long a fact in manufacturing, innovative managers at warehouses and DCs are now asking what lean can do for them.

By Bob Trebilcock, Editor at Large -- Modern Materials Handling, 12/1/2004

Several years ago, OPW Fueling Components, a leading manufacturer of fueling products for gas stations and convenience stores, implemented lean manufacturing at its facilities in Cincinnati, Ohio.

With results like a 79% reduction in cycle time, OPW began to look at ways to apply lean concepts across the enterprise, including the finished goods warehouse.

'The lean concept has value, whether it's in the plant or the warehouse,' explains Tom Ciepichal, vice president of operations. 'We're going to identify and optimize those processes that add value for our customer. Then we'll reduce the processes that are non-value added or create unnecessary waste.'

Just as in the factory, OPW is mapping out the processes associated with storing, picking and shipping finished goods—defining the steps that workers currently take to execute those processes, and analyzing how things are stored. They are also turning to technology, such as bar codes and supply chain management software (Glovia International, 310-563-7000), to provide better visibility into processes.

'To implement lean in the warehouse you need to look at how you can improve the visualization of the facility, set the stage for standard work, and look at the simple movement of goods,' Ciepichal says. 'For instance, we recently looked at how the layout of the warehouse impacts the smooth flow from picking and packing to shipping to optimize travel time.'

Projects like the one at OPW beg the question: Is there such a thing as lean warehousing?

It's a good question. After nearly fifty years, lean manufacturing is a recognized discipline with well-defined best practices and many practitioners. Lean warehousing is nowhere near that stage.

'Lean warehousing is not yet a discipline,' says Bruce Strahan, a partner with The Progress Group (770-804-9920). 'But people are asking what lessons from lean manufacturing we can apply to the warehouse.'

For now, lean warehousing is a concept being embraced by manufacturers like OPW. These pioneers are exploring ways to translate their success on the shop floor into the other reaches of their businesses.

The state of lean warehousing might best be summed up by a recent logistics conference. There, an educational track was led by a plant manager who never once mentioned his warehouse.

'That tells me that people are interested in the lean warehousing conference, but they haven't made much progress yet,' says Jim Apple, another partner at The Progress Group.

There are some fundamental differences between the warehouse and factory that need to be taken into account. The most important of those, Apple believes, is variability and predictability. Even in a build-to-order environment, a plant manager knows what's going to run on the assembly lines for some period in advance. That allows for the synchronization of processes inside a facility, and ultimately across the supply chain in a lean operation.

'As we've concentrated on shipping product on the same or next day, our ability to control demand and predict the mix of products that's going to be filled in the warehouse is low,' says Apple. 'Variability is what causes waste, excess labor and excess materials.'

Still, Apple and others believe that while lean warehousing might still be in gestation, there are lessons to be learned from lean manufacturing that can be applied inside and outside the distribution center.

When it comes to warehousing, most talk about getting lean infers cutting back on personnel and inventory in order to do more with less.

But for lean manufacturing, as well as lean warehousing, that is only half the answer. The other half is getting agile.

'What is often missed is that leanness without agility is worthless,' argues Stephen Parsley, principal engineer, Daifuku America (614-863-1888). 'To be lean simply means you've reduced the fat. To be agile means that your processes are flexible, scaleable, and above all, understood by all who are working with them so you can react to a change in plans.'

Translation: lean is really about taking waste out of operations.

In fact, the original Toyota Production System identified 'seven deadly wastes' that interfere with operations. The seven are overproduction, waiting, downtime, unnecessary product movement, excess inventory, unnecessary motion and defective products. The best practices that have come to define lean manufacturing, like faster setups and error-proofing, are designed to reduce the amount of non-value-added activity.

One of the initiatives at OPW illustrates that point. 'In addition to the product we produce, we also purchase some finished product from other manufacturers,' says Ciepichal. 'We were storing, picking, and staging that product, combining it with our products, then shipping it to the customer. That was a lot of staging and sitting in queues.'

Through better layout, design and storage, OPW created a plan to locate purchased product closer to the shipping dock. That reduces the amount of handling it takes to combine and ship it with products the company manufactures.

Another approach is to optimize those areas in the warehouse where there is predictability.

'The variability in order mixes means we can't quite set up an assembly line for all of the warehouse,' says Apple. 'But we can identify those processes that have some stability.'

Apple and Strahan recently worked with a leather goods manufacturer. One of the company's biggest problems is gift-wrapping during the holiday season, when 97% of their orders have just one item.

'What we realized is that even though each order might have a different item, we have a common category that will have a common processing requirement—single-line orders that need to be gift-wrapped,' says Apple. 'That allowed us to develop an assembly line that will process those orders with half the labor of last season.'

Warehouses can also apply the 'touch-once' principle to their operations to reduce wasted motion. 'The idea is that any time you touch a product just to move it, you're increasing your costs,' says Ed Romaine, director of marketing for Remstar International (800-639-5805).

Creating buffer storage at the receiving dock to briefly hold inventory before it goes to a work area or is combined with other products to go out the door is one example of touch once, says Romaine. Another is to have vendors supply the product in finished shipping form with inner-packs, boxes and cartons that can be placed directly into the picking system. Picking to the shipping container to reduce the work at packing stations is another example.

Postponement is yet another best practice in the warehouse that enables lean principals.

'With postponement, you're not storing finished goods,' says John Pulling, COO, Provia Software (616-285-3311). 'You're warehousing raw inventory in a work-in-process state, and then finishing it according to a customer's order. That especially makes sense if you have a lot of product variability.'

Lean manufacturers are relying more and more on technology to synchronize the delivery of raw materials, parts, and components from suppliers with the product coming down the manufacturing line. That, in turn, is synchronized with the outbound transportation processes.

Manufacturers call this in-line sequencing, which means the parts that show up at the line are matched to specific product coming down the line. At the end of the process, they ideally go into the back of an outbound truck.

The emerging area of warehouse optimization software is one example of how in-line sequencing might translate to the warehouse.

'Lean is really about flow,' says Pulling. 'In a traditional warehouse, you pick orders and stage them on the dock until trailers show up. Optimization software allows you to schedule the arrival of trailers based on delivery dates, and then synchronize the release of orders to match the trailers arriving at the dock. By releasing orders in the proper sequence, you minimize intermediate storage and the labor associated with it.'

There are other strategies to optimize the flow of product. Just as OPW reconfigured its warehouse to better deploy product, some companies are reconfiguring their supply chains to provide better customer service.

'We're working with one 3PL that is managing 350 stocking locations around the world to forward deploy spare parts for their clients,' says Rob Sweeney, vice president of solutions engineering for Yantra (978-513-6000), a provider of WMS and other supply chain execution solutions. 'The other thing we're seeing is that end users are putting less emphasis on traditional WMS [warehouse management system] functionality like putaway and location control. They want functionality to manage flow-through centers, cross-docking, and merge-in-transit operations. They really want us to be able to synchronize their inbound and outbound activities.'

At the end of the day, the most important lean principal may have nothing to do with handling or configuration.

'The most important lean best practice is not a technique but an attitude,' says Parsley of Daifuku America. 'It's a total commitment to continuous improvement, with a never-wavering focus on the elimination of non-value adding activities.'

OPW Fueling learned that lesson during the implementation of lean manufacturing, and has carried it over to its lean warehousing initiative.

'Continuous improvement is the key to our success with lean,' says Ciepchal. 'Once you complete a successful initiative, you'll see areas of opportunity to start another. And if you fall short of your expected results, you go back to analyze what went wrong, and do it again.'

Click on the icon to read more about lean manufacturing.
(Modern readers get lean - web-exclusive - December 2004)

Click on the icon to read more about lean manufacturing.
(Lean and mean - March 2004)