Reduce the impact of labour shortages with Lean Warehousing
In today’s tight job market, some companies have seen their growth stunted by a lack of staff. Finding good people is also a challenge in the logistics industry,
prompting many companies to automate their warehouses, either partially or in full. These are exciting projects and the automation industry is booming: companies like Vanderlande, Dematic and Witron are growing rapidly. On the other hand, Peerless Research Group has found that 42% of all warehouses are still primarily manual and that 51% are home to a mix of automated and manual processes.
Before you start reaping the rewards of automation, there are other things you can do to relieve the pressure on your business. For a glimpse at what you can do, here is our structured framework for Lean Warehousing.
To find out more about Lean theory, we recommend reading ‘The machine that changed the world’ (James P. Womack, 1990), ‘The Toyota Way’ (Jeffrey Liker, 2004) and ‘Lean thinking’ (James P. Womack and Daniel T. Jones, 1996). These three books will give you a thorough understanding of what Lean means, what it does and why. Our ideas are based on these principles, but translated into a pragmatic approach.
5touch warehouse consulting
Our approach is based on the so-called 5touch warehouse process. It is a simplified operational model for a warehouse with a buffer stock and an order picking activity. In 5touch warehousing, goods are received (1), put away (2), replenished (3), picked (4) and finally shipped (5). Hence the five ‘touches’. Other warehouse systems may consist of more or fewer steps or have different definitions for certain steps, such as put-away and replenishment. Eventually, our framework can still be applied to these warehouses. You can adapt our framework to your storage methodology in any way you want.
Lean warehousing philosophy: remove the seven types of waste
The Lean philosophy tells us to remove waste (or Muda in Japanese). Waste is generally defined as activities that ‘do not add value for the customer’ and can occur in seven ways:
- Excess stock
- Waiting (too much time between process steps or stops within the process)
- Movement (of the operator) within a process
- Defects (errors, mistakes, repair work needed)
- Transportation (of goods between process steps)
- Overprocessing (too many operations/steps for the same result)
- Overproduction (too much work is being done)
The lean warehouse analysis framework
Looking for the seven wastes in the five touches leaves us with 35 areas to analyse. That is the relatively easy part of the project. Put the five processes under the microscope and check if you see too much inventory, waiting operators or goods, transfers that could be simplified, and so on. Start at the front desk and work your way through the warehouse.
Most obvious examples revealed by warehouse analysis: Picking
Order picking can account for 40-60% of the work, making it the most labour-intensive activity in the warehouse (Tompkins et al. 2003). The potential for improvement is most apparent when the team’s operators are waiting and standing by. The first thing you can do is check and improve the work forecast (total daily volume and daily fluctuations) and workforce planning. Second, the order picking process must take priority over the other processes. The replenishment process, for example, should be organised to ensure that order pickers never have to wait for stock at the picking location. This can be done by having the WMS prioritise replenishment orders and assigning enough resources to the team. If the goods needed for replenishment are not available in bulk storage, the order line(s) should be removed from the pick order (and re-run later when stock is made available). Third, avoid congestion between order pickers and other operators by scheduling workloads across processes.
Lean optimisation: Movement and transportation in picking
Secondly, lean optimisations should prioritise picking and transportation. Again, since picking is the most labour-intensive process, the picker’s routing before, during and after picking should be as short as possible. To make this happen, both the routing and length of the pick run must be carefully considered (there are many different routing strategies for different types of operations). This also affects the type of pick locations, the start and end points of the pick run, drop-off points, printers, and more. During the picking process, it should be made as easy and comfortable as possible for the picker to pick the goods from the pick location. After all, optimally arranging their route and letting them pick multiple orders in a route allows order pickers to work as efficiently as possible.
The third priority is excessive stock throughout the warehouse. To begin with, excessive stock in the receiving area (more incoming goods in a given period than the warehouse can properly absorb) will quickly call inefficiencies to snowball. It will become increasingly complicated to thoroughly check incoming goods and put them away properly. When it becomes more difficult to perform checks, more errors will be made (defects) and corrective action will be needed required (overprocessing). It will also be more difficult to manoeuvre the goods, making subsequent processes less productive.
Next, excessive stock in the storage area will limit your ability to store goods in the optimal location. They will have to be stored far from the reception, collection and shipping areas, giving rise to excessive transportation. It can also force the warehouse team to move goods from time to time because the space is needed for other goods, which constitutes a form of overprocessing.
Finally, excessive stock in the loading area is a signal that the integrated throughput planning in the warehouse is not functioning properly. Goods will arrive in the shipping zone too early, blocking the docks for longer than strictly necessary. In other words: the so-called just-in-time planning is not working properly. The indirect effect is that other goods are placed at docks that may be far away from the collection zone, creating excessive traffic (similar to what happens in the receiving zone). On top of that, orders can be changed or even cancelled during the wait, which means they will have to be re-stocked or partially re-picked. All this can be avoided by starting the picking process later on.
How to do better The challenging part
After analysing the 35 potential areas for improvement, the challenging part of the implementation and change process begins. The analysis can be performed in relative isolation from the operation, but the improvement process itself will require the cooperation of the entire team. This project to bring about organisational change can run into a wide range of difficulties common to such projects. And there are other challenges too: logistics is predominantly a low-margin business, which is still not always considered a strategic advantage (despite the ongoing efforts of the supply chain community to explain why it is and the long list of recent disruptions). Therefore, managers are reluctant to commit specialised resources and budget to drive the project. In the end, this means that the project will have to be done by the team itself, using limited or junior resources. Moreover, the industry has a strong tendency to settle for ‘good‘ rather than ‘great,’ even though Jim Collins has already taught us that ‘good is the worst enemy of great’. Finally, improvement projects must be implemented from top to bottom and bottom to top and may take several years (depending on maturity levels). In other words, for an improvement project to be successful, it needs strong, prolonged support from the top, confident that it will bear fruit.
Apart from the actual ideas for improvements, improvement programmes should start off by measuring current KPI scores. First, focus on service-level KPIs such as on-time-in-full (OTIF) and picking and inventory accuracy. These are the so-called quality KPIs, which indicate how well your business is running. Second, you need to measure productivity KPIs, which are usually explained as output (number of actions) divided by input (how many working hours do you need in order to receive, put away, replenish, pick and ship the goods). Start with the critical processes such as picking and replenishment and display the KPIs as openly and clearly as possible so that they cannot be missed. Discuss the KPIs with the entire team every day during short, intensive stand-up meetings (do not just communicate them to the management team, but involve all operators). If you do not measure KPIs from the very beginning, you will not be able to explain and/or understand the impact of your programme.
Once your as-is performance is clear, generating ideas is the first step of the continuous improvement process (Kaizen in Japanese). Each team member should be given the opportunity and be motivated to come up with ideas. It does not matter whether they are big or small. This is probably the most difficult part of implementation, but the more ideas the team comes up with, the easier the implementation is. A leader of an improvement programme should provide open feedback on all ideas: which will be implemented, which will not be implemented (yet), and what is the status? Bottom-up idea gathering is critical to engaging the entire team. Once ideas emerge in a more proactive way, put up an open idea board and encourage and recognize the best ideas, for example with small rewards. Make sure senior management is connected to the shop floor and proactively approaches all team members for suggestions. These workplace ‘walks’ (called Gemba walks) ensure that everyone understands that improvement programmes are a team effort.
There are several ways to select best areas for improvement. A first step may be to consider the impact and complexity of each optimisation idea and select those with high impact and low complexity. This will most likely lead you to the picking process. If you find that the other processes (especially replenishment) are important enablers for successful order picking, you might want to start there. Finally, you could also consider tracking goods, starting at receipt and ending at the shipping process.