It has been well reported that internet shopping is on the rise, and bricks and mortar retail is on the decline. Research states that the key contributor to this trend has been the consumer’s pursuit of the lowest cost, followed by convenience and increased variety. The role of logistics and distribution has been paramount in this rise as, with the increase of use of the internet, we have seen consumers virtually cutting through the supply chain to achieve their requirements of lower cost, convenience and increased variety of products. The prominence of e-commerce today is an example of the market identifying wastes (from a consumer perspective) in a long-established supply chain and eliminating them.
This example can also be applied to logistics and distribution in general. Wastes in your supply chain may be costing your consumers time, convenience and money, tying up capital in unnecessary inventory and consequently costing you potential business. This article is about looking at wastes in warehousing and logistics and how we can eliminate them and at the same time, improve our profitability, quality and customer service.
The Deadly Wastes of Lean originally identified by Taiichi Ohno as part of the Toyota Production System (TPS) are:
- Motion (usually means unnecessary motion of workers or machines during a process)
A final but important waste, “Loss of Human Intellect,” was added later.
The consumer (be that a retailer, wholesaler, manufacturer or end-consumer) sees the primary purpose of warehousing and logistics as the delivery of material and services to the right place at the right time in the right quantities and quality. Put more simply, a consumer sees the true value of warehousing and logistics as the satisfying of their goods and service needs at the lowest possible cost – anything that does not add to this value can be considered waste.
Applying the delivery criteria – right time, right place, right quantities and quality as demonstrated by the consumer – we can identify the wastes associated with each.
The consumer is more concerned about material arriving at the right place rather than the path it takes getting there. So any movement of material that takes place that does not get it to the customer’s “right place” adds no value. These unnecessary movements could include transport between factory and warehouse, distribution centre and final consumer. Unnecessary movement can also occur within the warehouse. The movement of material from receipt dock and reserve stock to pick face, packing and despatch adds no value to the consumer.
In terms of logistics, ensuring that material is delivered at the right time is just as important as getting it to the right place. How often have we experienced delays because material did not turn up in time? In manufacturing, it can stop entire production lines, and the costs can be enormous. In retail, it could result in a lost sale.
As a supplier, we often allow “buffer time” and deliver the material early. However, this is often just as bad as delivering late. At the destination, there may be no equipment or staff to unload the truck, nowhere to store the stock or even any space to park the truck. We now can see further waste – waiting for equipment and people, wasted movement in finding space to park or moving stock from place to place as space becomes available and even unnecessary stock holdings. To eliminate these deadly wastes, it is essential that delivery schedules are rigidly enforced and stock is delivered within the agreed-to time window.
Getting the wrong quantity of material to the customer can often be worse than sending material late. If material is under-supplied, extra transport and time will need to be spent sending additional material, and picks may need to be performed multiple times. If material is oversupplied, time and labour will be spent in recovering oversupplied material, and material that is over-supplied can be damaged in return movement or rendered unusable. This also adds to recovery or disposal costs.
Not moving the right quantity means you are looking at waste in material, transport and reprocessing plus possibly wasted movement inside the warehouse.
Quality, in terms of logistics and warehousing is not simply about the quality of the material that is delivered to the customer. The right quality in this case refers to delivery method, packing sequence, damages that may have occurred in transit as well as any defects in the material delivered to the customer.
Failure to deliver to the right quality can lead to associated waste in material, transport and movement. The delivery of the material itself is commonly seen as part of the quality of the goods and services you provide and will reflect on the perception of your organisation by the customer.
Loss of Human Intellect
The most important part of any attempt to reduce waste is maximising the use of our human assets. This is about training the people in the organisation to see waste and to be aware and supportive of the need to operate as a Lean, waste-free business. “If any organisation wants to achieve successful and sustainable change, then the most important factor is the commitment of leadership to lead the change process to develop a flexible and responsive supply chain. Getting everyone involved in your Lean initiative from the upper management to the truck driver, through a structured process of continuous improvement, is the only way to change behaviour and locking in a new culture of Lean,” explains Grant Forsdick, Director, Level 5 Lean.
The Wicked Warehouse Wastes
In parallel with Taiichi Ohno’s Deadly Wastes of Manufacturing, we can refer to the wicked warehouse wastes as follows:
Wicked Warehouse Wastes
Deadly Wastes of Lean
|Right Quantity||Overstocking and SLOB Stock||Inventory|
|Right Time||Waiting – Early & Late Delivery||Waiting|
|Right Time/Quantity||Movement within a Location||Motion|
|Right Time/Place||Unneeded Transport||Transportation|
|Right Time/Quantity||Material Waste||Over Production|
|All of the Above||Human Capital||Human Capital|
Principles, Techniques and Tools
“Lean Thinking provides many of the methodologies for waste elimination/minimisation through the supply chain. It is however important for leadership to first clearly understand the principles of Lean Thinking and how these can be included in the business strategy to achieve the desired returns. Thereafter, Lean best practices such as Value Stream Mapping, Standard Work, Change Over Reduction and even 5S can be applied to the supply chain to eliminate waste and make value flow in order to provide improved quality and customer services at the lowest total cost,” said Forsdick.
In addition, many logistics operations have adopted various technology tools and systems that can help organisations automate and adopt techniques to reduce wastes. Many are already using Warehouse Management Systems such as Cincom’s Warehouse Management System (WMS) to assist in optimising Picking and resource utilisation and also reduce defects and material waste. There are transportation and delivery tracking systems that can assist in load planning, route optimisation and delivery confirmation.
If you want to improve your logistics operations, the time to start was yesterday. In the highly competitive environment, getting the logistics side right can be the differentiator that leads to success or failure.