Lean Warehouse Operations

Background

Warehousing’s historical core responsibility has been the storage of goods. However, the scope and core responsibilities of warehouse operations have evolved to deliver high level inventory management, swift receiving & shipping dock management, accurate and flexible customized pick & pack services, and state of the art storing and safekeeping solutions for all the goods.

Best practice warehouse operations enable companies to meet the strategic delivery needs by improving materials flow, order pick & pack, replenishment, dock operations and maintenance of a swift information flow from source to delivery point, thus facilitating the coordination of the entire supply chain to get purchased materials in the right way, to the right place, and in the exact time they are expected by the next link in the supply chain up to and including the final consumer.

Because of the development of an increasingly integrated global economy market with production facilities scattered around the globe, warehouse operations are becoming the key factor to cope with demand variations, and inventory management is a critical component of a company’s financial performance, warehousing has become a vital cog within supply chains because it holds so much potential for improving lead time and cost reductions.

Challenges

The biggest challenge on today’s warehouse managers is to increase productivity and accuracy, reduce cost and inventory while improving customer satisfaction, which ultimately means, optimized goods rotation, less frozen capital and efficient use of all the resources assigned.

In an integrated supply chain environment, where often enough warehousing is considered as a non-value adding activity, applying Lean can ensure the company has the right visibility of the value-adding activities carried out at the warehouse in order to gain a competitive edge by:

  • Delivering low-cost and on-time service to distribution centers, productive facilities and/or points of consumption through improving efficiency and productivity while reducing costs, and improving quality and accuracy in preparation of orders.
  • Improving stock control to prevent production or service disruptions due to lack of material, picking disruptions due to lack of replenishment, loss of sales opportunities, and unnecessary purchases.
  • Improving the information flow, traceability and service rates between the warehouse and the rest of the cogs in the supply chain.
  • Managing the constantly increasing complexity of the market by improving flexibility and showing high change-adaptability to meet the customers' fluctuating demands due to seasonalities, rise of new sales channels, etc...

Focus Areas

Waste in warehousing processes represents tremendous savings potentials and thus it should and can, using the right Lean tools, be identified and minimized. While in most warehouse operations picking activities generate more than 55% of the costs, Lean principles, kaizen methods, and reengineering approaches can be applied in every step of warehouse operations. The right Lean Solutions can improve product quality, reduce lead-time and reduce working capital.

Areas of waste often identified in a warehouse environment:

  • Transportation / Conveyance: Unnecessary internal transport that results in added cost and lower productivity such as storing fast moving inventory in the back of the warehouse.
  • Inventory: Any activity that results in excess – or lack – of inventory or placed in a different location where required. Poor visibility or inaccurate information over the existing inventory in the warehouse management systems will impact the preparation of orders and ultimately result in stock being unavailable for sales or shipping, thus increasing the frozen assets in the company.
  • Movement: Unnecessary movement of people, such as walking, reaching or stretching, due to inefficient layouts, lack of ergonomic workstations, manual picking that involves more than just one 'touch' per item to prepare the order and make it ready to be shipped or picking trails not optimized.
  • Waiting: People, systems and material delays due to wasteful processes. Waiting for picking lanes replenishment, material or shipping approvals, waiting for data or waiting for correct materials and services to arrive due to poor replenishment planning.
  • Overproduction / Overprocessing: Stocking and delivering products before they are needed. Storing palletizing goods which shortly will be unpalletized.
  • Defects: Activities that cause rework, returns or adjustments, such as customer guidelines which require too many manual operations, or delayed customer instructions which are received after the order was prepared, billing mistakes, inventory discrepancies, or materials missing, damaged, defective, wrong or mislabeled.
  • Space: The use of space that is less than optimal, such as low or excessive fill-up rates of trailers, containers or cartons, inefficient use of warehouse space, racking systems not aligned to the kind of product and expected flow.

Lean Solutions

Designing and implementing Lean warehouse operations can have a great impact on the total supply chain output. By approaching the waste focus areas mentioned above with Lean solutions, some of the opportunities that come up to reduce lead times in warehousing include:

  • Handling time reduction in order picking, put away, palletizing and shipping.
  • Reliability of information to coordinate the rest of the supply chain.
  • Reduction in truck and containers loading and unloading times.
  • Reduction in time spent checking and looking for inventory.
  • Increased flexibility to adapt to changing market conditions and customer specifications.

We implement Lean Solutions to warehouse operations. The solutions must fit the challenges.

Tangible Improvements

Lead Time
Warehouse Lean project reduced the actual processing time of picking and packing by 50%, thereby shortening the total lead time by 25%
Optimizing the warehouse layout reduced storing times by more than 25% and picking times by 30%
Lean warehouse to dispatch workshop improved dock scheduling and loading plans which improved filling rates of transports and a reduction in truck loading hours needed, reducing the lead time between 10% to 30% varying on the different SKU categories
Quality
Lean picking workshop resulted in a decrease of picking mistakes by more than 90% due the to the standardization of the picking process and its interfaces with the order generation and invoicing processes
Optimized handling approaches and Lean ERP systems impacted a decrease of picking and shipping mistakes by ~40%
Costs
Optimizing cartons filling rate decreased the buying needs by 46% and lead to a reduction of 18% in transportation costs while reducing environmental impact
Inventory accuracy improvements due to optimization and linking of ordering, data entry and inventory management processes resulted in a reduction of 20% of inventory required to support a growth strategy 

To learn more about Lean warehouse operations solutions, contact Four Principles today.