With the growth of the global supply chain, warehouses are constantly under pressure for better, faster, more efficient performance. As this pressure grows, the role of lean warehouse management becomes increasingly relevant.
However, since lean is relatively new to the warehousing industry, not many of us may be acquainted with it yet. So, here's what it is and why your warehouse needs to be lean too.
What is Lean?
The lean way of thinking was developed by Toyota for automotive manufacturing. It aims to eliminate any activity or procedure that uses the resources but does not add value in return.
It is a systematic method to minimize wastage (“Muda”) without compromising productivity. It also aims at eliminating wastage created because of overburden (“Muri”) as well as because of inconsistency in workload (“Mura”).
Here is the basic principle that lean follows:
Though, originally the concept was created to be implemented only in manufacturing, it can be applied to other industries including warehousing because of its simple framework.
What is Lean Warehousing?
Modern-day warehouses are not restricted to storage. Since they include processes like receiving, put-away, picking & packing, and dispatch, etc., the lean methodology is also being applied to warehousing.
In the context of warehousing, the idea is to eliminate those processes and activities that are absorbing resources but are not creating any additional value. It applies the 5S principle of lean manufacturing to the processes and procedures of the warehouse.
Why Lean for Warehouse Management?
The need for the lean methodology in warehouses can be best understood in the context of the challenges that warehouse managers face every day. Here are a few of the major ones:
- Reducing operational costs
- Coping up with the pressure of shorter lead times
- Increasing the number of perfect orders
- Meeting the target of same-day/next-day deliveries
- High attrition rates and rising cost of labor
- Managing multiple delivery channels
- Managing an increasing number of SKUs
- Shortage of space
- Seasonal/fluctuating demands
And, these are only a few challenges that crop up in the face of the rising prospects of commerce. Here is where lean can help. While on a broad level, lean will lead to better efficiency, reduced errors, and maximum asset optimization, here are a few specific goals that lean can help you achieve.
- Standardizing workflow, resulting into shorter order processing time
- Optimizing asset utilization by finding the right place for the right inventory/equipment
- Eliminating inefficiency in material handling, thus reducing labor and transportation costs
- Stocking as per demand, thus enabling easy tackling of seasonal demand
- Cutting time wastage, thus helping you achieve more of perfect orders and same-day/next-day deliveries
- Standardized processes make it easy to manage and assess multiple SKUs
- Better human resource management leading to lower attrition rates
- Making way for new ideas and innovation, thus bringing constant improvement
A media release from McKinsey & Company projects that, depending upon the nature of business:
Applying lean warehousing management can save up to 20%-50% costs.
Here are a few examples, where lean management aims to remove wastages in the warehouse:
- Internal transportation – driving an empty forklift when it could be loaded
- Defects – adjustments, misspicks, rework
- Inventory – congested inbound and outbound areas, poor visibility of stock, storing obsolete stock
- Material storage and handling – areas not being fully utilized, storing the wrong stock at the wrong place; using inefficient and wasteful methods for material handling
- Movement (of people) – interruption in movement of warehouse staff because of staging stock before putaway
- Waiting time/delays – bottlenecks at pick locations, delay in shipping approvals
- Overproduction – holding more stock than required
- Overprocessing – performing unnecessary activities like labeling and checking when not needed
- Ignoring employee creativity – not welcoming ideas and innovation, thus relegating growth and lowering morale
- Overengineering – using a complicated process/equipment where a simpler one can prove to be efficient
Applying Lean in the Warehouse
Lean management in warehouses works on the 5S concept, which is originally a lean manufacturing tool. It is a comprehensive method that systematizes, cleans, organizes, as well as standardizes the warehouse.
Here are the 5S’s of lean.
1. The First S – Seiri – Sort
Sorting out the warehouse is the first step. You need to separate the things that you need from the ones that you don’t.
How to Sort:
- Removing unnecessary things like damaged/outdated stock, surplus stock, broken pallets, defective equipment, etc., is a good way to solve the problem of space shortage.
- You can also consider reducing or ending unnecessary movement, for e.g. creating a cross aisle within the picking area to effectively reduce the travel time of operators.
- Replacing manual paper picking with technology like scanners or voice picking, etc., can extensively remove wasteful activities.
- Mark the items that need to be disposed and keep them at a separate place till the approval for final disposal is obtained.
2. The Second S – Seiton – Straighten
Sorting should be followed by straightening out. Decide a way of organizing things so as to increase efficiency.
How to Straighten:
- Place more frequently used items at more easily accessible places.
- Adding inventory tags and labels to stock and bins to save time in locating items.
- Putting warehouse signs and instructions adds to the scheme of organization and keeps the warehouse clerks guided, thus reducing fetching time.
- Floor and aisle markers also help in improving pedestrian traffic, thus preventing confusion.
- Keep empty pallets and packaging at a point that can be accessed easily whenever needed.
- Equipment parking areas should have reminders for staff to charge the equipment as shifts end.
3. The Third S – Seiso – Shine
This S stands for shining or cleaning the workplace after the work is done. Also, a schedule must be maintained for the same.
How to Shine:
- Get all the work areas cleaned at the end of shifts. This allows any defects or damages to be reported almost immediately.
- Place garbage cans in front of each aisle to ensure that waste packaging paper, broken pallets, etc., are not littered around.
- Also, keep basic janitorial supplies and services at the ready. Keep spill kits handy in case of accidental spillage or littering on the aisles.
During the year 2015, according to a report from the US Bureau of Labor Statistics, slips and trips were the second biggest cause of fatal accidents at workplace.
4. The Fourth S – Seiketsu – Standardize
- Uniformity can only be brought through standardization. Creating standards for all work areas in the warehouse is essential. This is what the fourth S commands.
How to Standardize
- Walk through each process with the staff and document warehouse operation best practices and procedures.
- Make standardized processes and procedures accessible and visible for staff to follow.
- Make the display of these procedures easy to understand and photographic.
- Posters and charts are received rather well, with more to see and less to read.
- Raining manuals as well as videos are a great way to initiate new workers into following standards, while still saving time.
5. The Fifth S – Shitsuke – Sustain
There must be continuous improvement in the processes, procedures, and operations of the warehouse. Standardization is ineffective without sustenance.
How to Sustain:
- Encourage the staff to accept change, taking improvement to a new level, and not to go back to old standards.
- This will pave your way to Kaizen – the principle which says that change is good, and so things must always be improved.
- Conduct regular audits and checks to make sure that standards are followed.
- Incentivize high performances with a bonus and time off.
- Give consideration to creative and innovative ideas from employees.
- Be open to creating new standards if the present standards are not working out.
Companies have introduced a sixth S more recently – Safety, since it lies at the heart of warehouse operations
6. The Sixth S* - Safety
The idea is to make warehouses safer for the workers, which also lets you avert litigation by preventing accidents.
How to Ensure Safety:
- Conduct risk assessment at regular intervals.
- Review warehouse layout and design with a view to safety, including factors like walkways, ramps/stairs, racking, escape routes, etc., and make necessary changes.
- Have a fire and emergency plan that includes:
- Fire/emergency exits and evacuation procedures
- Location of fire extinguishers and emergency water hoses
- Track of all visitors and employees visiting the site any given time.
As warehouse digitalization becomes more promising and traditional warehouses are disrupted, lean warehouse management lends itself as a simple yet effective way to attain transformation and competitive advantage. It also means that you can tap technology to improve your lean warehouse since digitization is also all about simplifying and making processes more efficient.
As always, if there is anything else that you would like to know about this topic, or if you need some tips for improving your warehouse operations, do not hesitate to comment or contact us.