May 28, 2013
strategic insight | Cutting Logistics Costs

Lean your warehouse workforce

Lean management aims to eliminate waste, add value, and achieve the best quality. When applied properly, it can do all that and bring about huge labor-related improvements as well.

By Toby Gooley

Warehouse and distribution center managers spend a lot of time trying to figure out how to handle the greatest amount of product in as little time as possible, with the highest level of service, and at the lowest possible cost. Yet despite their best efforts, they may still overlook opportunities to achieve that goal.

That's because even in the most efficient facilities, there is waste to be found: wasted motion, wasted time, wasted inventory, and more. One way to root out waste—defined as anything that does not provide value—is through the kind of continuous improvement program associated with Lean, the process management discipline that grew out of the famed Toyota Production System.

Lean is a formal approach to process management that aims to eliminate waste, add value, and achieve the best quality by using dozens of standard techniques and tools. These fall into the broad categories of visual communication of information, process mapping, process control, and identification and elimination of defects. Some of the best-known lean tools and techniques include value-stream mapping (a diagram of the material and information flows required to bring a product from order to delivery); just-in-time production (making and delivering the exact amount needed, when and where it's needed); the "5 Ss" (five principles of an organized workplace); work leveling (ensuring consistent type and quantity of work over a period of time to avoid batching and backlogs); kaizen (continuous improvement); and Plan-Do-Check-Act (an improvement cycle that consists of proposing a process change, implementing the change, measuring the results, and taking appropriate action).

Lean is not just for manufacturing, however; its techniques and tools can be adapted to almost any type of operation. In warehouses and DCs, it can improve efficiency, inventory, safety, and costs, say experts in the discipline. And because Lean changes the way people think about processes and communication, it can be especially effective in helping facilities use warehouse labor more efficiently and cost-effectively. It's a complex subject that requires formal training to master, but the following will provide a general idea of how lean principles can have a huge impact on warehouse labor.

A GOOD FIT
What makes a concept originally developed in the auto industry a good fit for warehouses and DCs? For one thing, Lean's objectives are similar to those of warehouse and DC operators, says Timothy Sroka, senior manager-lean operations for third-party logistics service provider (3PL) Menlo Worldwide Logistics. "The goal of the Toyota Production System is lowest cost, highest quality, shortest leadtime. You want that in a warehouse, too," he says.

For another, the seven wastes that lean management seeks to eliminate are all present in warehouses and DCs. They include (with examples):

  • Transportation (driving a forklift without a load)
  • Defects (time spent fixing work done incorrectly, such as mispicks)
  • Inventories (piling staged product in locations that create congestion)
  • Motion (temporarily placing inbound pallets on the floor instead of directly into storage)
  • Wait time (waiting to load or unload trucks)
  • Overproduction (making or ordering more product than is needed or before there is demand for it)
  • Overprocessing (performing steps in a process like packing and shipping that are unnecessary)

Some companies have added other wastes to that list. Those interviewed for this story named unused employee creativity or knowledge and overengineering (applying a complex solution when a simple one would suffice) as warehousing-related wastes they try to avoid.

In addition, lean management is appropriate for any kind of process that includes a lot of steps—and warehousing and distribution certainly fits that profile, says Charlie Jacobs, director of global process management for APL Logistics (APLL). "When you apply Lean, you identify what adds value and what doesn't," he says. "In most cases, you're lucky if you can truly say that 15 to 20 percent of the steps add value."

Ultimately, lean management aims to create a culture of continuous improvement that engages employees at all levels—especially those who perform the work processes—in identifying waste and developing and implementing remedies. But it's also applicable to the warehouse at a tactical level, says Robert Martichenko, CEO of LeanCor, a 3PL that manages dedicated warehouses and consults on lean deployments for other companies. "One of the core elements of lean management is to establish a continuous flow from the time an order is received to the time it's fulfilled," he explains. "Lean is a strategy that can create velocity inside a warehouse."

THE LINK WITH LABOR
In a warehouse, every type of waste has an impact on labor in one way or another, says Mike Wilusz, director of warehouse operations for Menlo Worldwide Logistics. If everyone in a facility can develop "the eyes to see waste" and identify ways to eliminate it, it will have an immediate and direct impact on labor costs, he says.

Waiting is one of the biggest labor-related wastes inside a warehouse. "Typically, either people are waiting on orders or orders are waiting on people," Martichenko says. Both are costly: If people are waiting for orders, you have labor that's not being utilized or being productive, and if orders are waiting for people, those workers will have to work harder and faster, and thus become stressed and overburdened—or they will have to work overtime—in order to catch up, he explains. The lean principle that can address that kind of waste is work leveling; that is, controlling the flow and timing of activity to create level, unvarying demand during the available work time.

Here's an example of how work leveling can improve warehouse labor efficiency: At one LeanCor customer's facility, the 3PL works with suppliers and trucking companies to schedule inbound deliveries so that an approximately equal number of pallets are delivered each hour during the two shifts. Standardized work processes—another lean tool—ensure that everyone does a particular task in the most efficient way. "By doing that, we are leveling the flow, so people can work at a consistent pace and there's less need for overtime. They are not overburdened, but they're not waiting either," he explains. As a result, the facility is seeing labor savings of as much as 30 percent, Martichenko reports.

In another example, lean analysis tools helped an APLL customer cut labor and waiting time on a loading dock. The customer had two teams picking orders, placing them on pallets, and then loading them into trailers at adjacent doors after each pallet was audited for accuracy. On paper, dedicating teams to a dock door might look efficient, but both teams had a lot of downtime waiting for orders to be picked and for the auditor to complete the reviews, Jacobs recalls. Through line balancing (leveling the workload so that the timing and volume were consistent) and analyzing "takt time" (the rate at which work must be done in order to meet demand), APLL determined that the warehouse could handle the same amount of pallets in the same time with less labor. After changing the timing and flow, the facility now has one team for two dock doors; they load one trailer while the auditor checks the pallets for the other. While it isn't possible to completely eliminate waiting time, those changes did cut out the equivalent of some 60 hours of waiting time each week, and the two "excess" workers were reassigned to order picking, Jacobs says.

One of the most basic lean tools is the "spaghetti chart," which maps out the path a product takes during a particular process and visually shows the motion required. That can help warehouse operators identify overly complex processes, enabling them to reduce labor costs by addressing wastes like overprocessing and unnecessary transportation.

This type of analysis is especially helpful when there are numerous handoffs in a process. Menlo's Wilusz tells of one operation that shipped via parcel carrier. Order pickers would gather items and drop them off at a sorting station. Someone there would sort and consolidate the orders, and someone else would pack them. Another person would run the packages through the parcel shipping meter and stage them for shipping. As a result, inventory would build up between each handoff.

An analysis conducted by the warehouse associates showed that eliminating those handoffs and creating a continuous flow would save labor and time. Now, each worker follows the packages through every stage—picking, packing, running the packages across the meter, and staging them for shipping. That eliminated waiting time, and minor changes to the shipping area layout helped to prevent congestion. The end result, Wilusz says, was a reduction in labor of 25 percent and a per-order leadtime that's 50 percent shorter on average.

WHAT'S IN IT FOR ME?
Two questions are likely to come to mind for anyone who is considering bringing lean practices to a warehouse or DC: If lean analysis shows that less labor is required for specific tasks, how do you get employees to support those changes? And is it necessary to have a full-blown lean program already in place, or is it possible to apply selected aspects of it to cut warehouse labor costs?

All of the experts interviewed for this article agreed on three things in regard to employee buy-in. First, reducing headcount should never be the goal of a lean initiative, and no full-time employee should ever be laid off because of one. Instead, warehouses and DCs can adjust their use of temporary labor, wait for staffing levels to drop through normal attrition, or reassign associates to open positions.

Second, contributions from the people who actually do the work are an integral part of any lean initiative. They know what actually happens, and they are in the best position to identify waste and implement improvements. Their active participation in a multilevel team is a critical success factor and will also encourage them to accept change.

And third, honest communication about the expected benefits for them, their employer, and their customers is important. While the benefits for the employer may be obvious, associates need to know that lean warehouse initiatives have personal benefits for them: a cleaner, safer workplace; less physical stress and time pressure; recognition for their ideas and achievements; and often, more business and therefore, greater job security and opportunities for promotions. Says Jacobs: "The excellence of a project equals the quality of the solution times the acceptance of that solution."

As for whether lean projects can be done piecemeal or should only be implemented as part of a comprehensive companywide initiative, all agree that the latter is preferable by far. Lean is and should be a pervasive and permanent culture—not a limited-time project—that works for everybody at every level, Martichenko argues.

Menlo's Sroka agrees, and says that Menlo "treats Lean as part of our DNA." Lean is a systematic approach, and its principles are most effective when tied to an overall system, he says. "You could pick and choose and apply certain aspects, but there's the question of sustainability over the long term," he adds. Without the commitment to continuous improvement and all that it entails, things will eventually stall and revert to less efficient, more costly practices.

LABOR AS VALUE CREATOR
Lean is not easy to implement, but when done properly, it can transform a company's culture, not to mention the way a warehouse or DC operates. "Managers make decisions based on experience, but Lean takes you to places they hadn't thought of," Jacobs says.

But any warehouse or DC that tries to use lean principles solely to cut labor costs will fail to achieve the full benefits of the system. "Lean views labor not as a commodity but as something that has value," Wilusz says. "It allows you to do amazing things beyond just lowering costs; you can get more value from labor so that you can do more for your customers."

Ultimately, Sroka says, a systematic approach to Lean will reveal that there's no perfect warehouse and that every operation has room for continuous improvement. "The more experience you gain and the more you learn to see waste, the more you will see opportunities to make improvements," he says.

Editor's note: There are many excellent sources of information about Lean both in print and online, and many highly trained consultants who can help companies follow a lean path. A source we turned to frequently for this article was the Lean Enterprise Institute's website and its illustrated glossary, "Lean Lexicon."

More articles by Toby Gooley

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