Peter Bradley is an award-winning career journalist with more than three decades of experience in both newspapers and national business magazines. His credentials include seven years as the transportation and supply chain editor at Purchasing Magazine and six years as the chief editor of Logistics Management.
The concept of lean as a philosophical approach to business management began on the manufacturing floor. The idea, to oversimplify, is to get everyone in the organization to focus on getting at root causes for waste and then changing processes to eliminate them. Thus, every worker on a production line has authority to shut the line down when he notices something wrong.
In recent years, lean concepts have begun to spread from the plant to distribution, logistics and beyond. And the reason is clear enough: Getting good on the plant floor alone touches but one— albeit critical—part of the supply chain. All the activities on both sides of manufacturing offer potentially plenty of fat just begging for a lean diet.
Robert Martichenko makes that argument. "If you are calibrating how to eliminate waste and reduce lead time from order to delivery, it is easy to make the bridge to how lean applies to logistics and the supply chain," he says. Martichenko, the president of LeanCor, a company that both operates as a third-party logistics service provider and offers training programs, writes on and teaches lean concepts regularly. He is the co-author with Thomas Goldsby, Ph.D., an assistant professor of marketing and logistics at Ohio State University, of the 2004 text Lean Six Sigma Logistics.
"When you look at the house of lean, a whole pillar is built around flow and JIT inventory systems," he says. "If you are going to eliminate waste and focus on inventory and lead time reduction, you need to go into the logistics and supply chain network because a large percentage of lead time is actually spent outside the four walls."
Dr. Sridhar Tayur, CEO and founder of SmartOps, takes the argument a step further. "Unfortunately, many companies have thought about lean in too narrow a box," says Tayur, whose firm provides inventory optimization software for large companies. He cites some early efforts by Caterpillar's Building Construction Products Division, one of his firm's clients. "Caterpillar reduced inventory in the plants. Demands from dealers and the response time became longer and more unpredictable. So the dealers started to build inventory. They started gaming the system. Plant inventories were down, but supply chain inventories were up. The question is, What box are you drawing for lean? You have to think of a bigger box. In the end, it is not a question of whether you are good in one area, but if you are good from the start of the supply chain to the hands of the customers."
By focusing on total supply chain inventory, according to a case study prepared by SmartOps and approved by Caterpillar, the division was able to reduce component inventories by 22 percent overall. Plant and dealer inventories also fell, for a total inventory reduction of 16 percent, while product availability improved, and average order lead time fell by 20 percent.
"You start with inventory," says Tayur. "That's the most visible form of things that could be wasteful. Zealots say the optimal inventory is zero, but you have to be moderate in a supply chain. What is the 'just enough' amount of inventory? You start with how much has to be there."
Martichencko says, "What lean means from a high level in manufacturing or distribution and logistics is the recognition that time is made up of waste and value. "If you can focus on eliminating waste through continuous improvement, you will only be left with value."
Looking at lean in that way, says Martichencko, shows why translating lean principles to supply chain operations beyond the manufacturing floor makes enormous sense.
What it means to be lean
But the surge of interest in implementing lean practices has raised a series of questions—not least of which is how does "lean" differ from all the other quality initiatives that have come before it, including just-in-time and six sigma.
Karl Manrodt makes the point that the whole idea of supply chain management, without the "lean" modifier, is, in essence, about the elimination of waste. So just what is the difference between supply chain management and lean supply chain management?
"If you went to someone who did not know anything about supply chain management and said the goal is to reduce waste, they might ask if that is lean or regular supply chain management. It is both," says Manrodt, an assistant professor of logistics at Georgia Southern University who has written extensively on lean principles in the supply chain. "All supply chains endeavor to be lean. Don't I by default want high quality and to reduce waste?"
His answer is that bringing lean principles to bear on the supply chain is more a matter of emphasis than a major change in goals. He suggests that lean tools are essentially weapons in the arsenal of managers in supply chain operations to identify and eliminate waste. "It is a set of tools you can use," he says. "You can now talk the language with your manufacturing counterparts."
Learning to be lean
Martichenko puts it somewhat differently. "The difference between a lean culture and a non-lean culture is that lean cultures are learning organizations," he says. "They become that way through problem solving and continuous improvement. What I see is that a lot of companies want to improve, but they don't see the problems. They are too married to their internal culture."
Tayur, too, uses an education metaphor to get across a point about the amount of time needed to change a culture so that lean concepts are embedded in everyday operations. "We've started to move from the plants to the DCs, plus dealers, plus tier one suppliers," he says. "You cannot go from kindergarten to a Ph.D. [program] in one year, but you can get to middle school."
Taking a broad philosophical perspective is advocated by the founders of the Lean Learning Center, a lean consulting and curriculum provider. Jamie Flinchbaugh, one of the firm's founders, explains that perspective with reference to the "5S" list that is often used to summarize lean principles. The 5Ss are, in brief, Sort (organize work), Set in Order (put tools, etc., where they are needed), Shine (keep things spotless), Standardize (build consistent processes), and Sustain (keep up the good work and continuously improve).
"One of the most common questions we ask is, What is the purpose of 5S?" Flinchbaugh says. "You get answers about eliminating waste, improving productivity, standardization and building morale. But none of those are the real reason. The real reason is to be able to spot problems quickly," he says. "No matter how much technique you have, if you do not understand the reasons why, you won't succeed."
Lean at work
What are those problems in a distribution environment?
Flinchbaugh says that while every business operation has unique issues to solve, he does see some common areas of concern in distribution that the application of lean principles can help address.
"One is what we call the last mile," he says. "A great deal of effort in distribution goes into how to get from Shanghai to Canada or from Michigan to Boston. When something has to move five feet, that's where we lose all that sophistication and effort. When we look at errors, it is not the wrong truck going to the wrong city, but 'the wrong box on the wrong skid' incidents that are the real opportunity. We figured out how to get from Hong Kong to here, then someone prints a list. It is the last inch of information flow and material flow that offers lots of opportunity."
Manrodt argues that the number one issue in implementing lean principles in supply chain operations is demand management. "That has to be the starting point in the lean supply chain," he says. "One of the reasons lean will survive is the emphasis on demand signals. You need good information." Extended supply chains mean that businesses will never reach zero inventory or one-at-a-time production, holy grails in some lean theories. "But it goes back to the same principle, the reduction of waste," he says. And in logistics, he says, that requires a quicker demand signal flowing to all parties in the chain.
It is easier said than done. Manrodt cites the example of one company he has worked with that has about a 180-hour production cycle for its product. But logistics does not get the signal until 53 hours before the product has to be shipped. "It all goes back to demand management," he says. "If they had that signal earlier, how much could they improve transportation? If we work together, we need the same type of information. When you get a signal, I need it, too."
But, he says, a number of barriers can stand in the way of information sharing, including a lack of IT resources, resistance to change, and turf-related power struggles. The last, in particular, he sees as counterproductive. "You gain power by sharing data rather than keeping it to yourself," he contends.
Martichenko and Tayur focus more on the role of inventory as both a target for improvement and something that can disguise problems. Martichenko's thoughts echo some of the philosophical precepts behind the just-in-time movement. "What you have to recognize is that problems are hidden by inventory," he says. "The first reaction to problems is to throw inventory at it. Lean is about exposing problems and exposing waste and recognizing that what is hiding the problems is inventory. If you can reduce inventories, you can expose problems that exist in the organization."
Pace yourself
Martichenko emphasizes the importance of takt time, a term common among lean practitioners that essentially equates to the rate of customer demand. Takt is German for "cadence" or "pace." "You need to know what the customer wants, but also the rate of demand or the rhythm of the customer," he says.
Martichenko stresses that DCs and similar operations' success depends on reducing variability in operations and standardizing processes. That means making efforts to take out peaks and valleys in product flow, for instance, and to ensure that the processes for the first shift are the same as those for the second. Those are important so that employees have a clear understanding of what their jobs are and what their work is expected to produce. That echoes Manrodt's arguments about how crucial the flow of information is in order to manage the flow of product,with the focus on the customer rather than throughput on one part of the supply chain.
"A key aspect of lean is understanding that a business is a system," Martichenko says. You will suboptimize the whole by trying to optimize the parts. To understand system thinking requires a collaborative effort. One of the most powerful tools is level flow, so the DC manager has visibility of inbound and outbound and can do some work planning for level loading. That requires starting conversations around batch sizes and economies of scale. He argues that in the right environment, teamwork toward problem solving evolves naturally. But he also asserts that incentives, compensation and metrics programs must align with broad business goals, and not performance within a function alone.
"Particularly in warehousing, a lot of metrics can in fact encourage behaviors we don't want," he says. "If you are measured on how many cases are picked, everyone wants to work on the order with small cases. If you have measures driven by economies of scale or by volume, you drive behaviors you don't want. From a lean perspective, metrics are a little less objective—things like plan-to-actual and what was the gap. A lean culture is a planned culture. If you focus on having a plan and measuring actual against plan, you can find the root cause for gaps, focus on waste identification, and measure these things."
Jeremy Davidson makes a similar point. Davidson, who manages major accounts including automotive customers for Fortna, a consultant and systems integrator, sees the lean approach as a critical way of looking at business issues. Rather than focusing on, say, picking productivity, it forces managers to look downstream at customer needs, he says.
"Sometimes it is counterintuitive," he says. "You may shift metrics, and daily mean cycle time may be the most important thing. You may throw out cost per unit. To get to a system process implies certain things, like cross-functional teams have to look at and be measured by the same measurement."
Further, business management has to take what may be a counterintuitive response to problems.
Martichencko contends, "You have to celebrate—you do not have to be happy about it—but you have to celebrate when you uncover the rocks, or waste, and deal with it. That's a mental shift you have to make. Your job is to expose issues and get rid of things that are hiding them."
E-commerce activity remains robust, but a growing number of consumers are reintegrating physical stores into their shopping journeys in 2024, emphasizing the need for retailers to focus on omnichannel business strategies. That’s according to an e-commerce study from Ryder System, Inc., released this week.
Ryder surveyed more than 1,300 consumers for its 2024 E-Commerce Consumer Study and found that 61% of consumers shop in-store “because they enjoy the experience,” a 21% increase compared to results from Ryder’s 2023 survey on the same subject. The current survey also found that 35% shop in-store because they don’t want to wait for online orders in the mail (up 4% from last year), and 15% say they shop in-store to avoid package theft (up 8% from last year).
“Retail and e-commerce continue to evolve,” Jeff Wolpov, Ryder’s senior vice president of e-commerce, said in a statement announcing the survey’s findings. “The emergence of e-commerce and growth of omnichannel fulfillment, particularly over the past four years, has altered consumer expectations and behavior dramatically and will continue to do so as time and technology allow.
“This latest study demonstrates that, while consumers maintain a robust
appetite for e-commerce, they are simultaneously embracing in-person shopping, presenting an impetus for merchants to refine their omnichannel strategies.”
Other findings include:
• Apparel and cosmetics shoppers show growing attraction to buying in-store. When purchasing apparel and cosmetics, shoppers are more inclined to make purchases in a physical location than they were last year, according to Ryder. Forty-one percent of shoppers who buy cosmetics said they prefer to do so either in a brand’s physical retail location or a department/convenience store (+9%). As for apparel shoppers, 54% said they prefer to buy clothing in those same brick-and-mortar locations (+9%).
• More customers prefer returning online purchases in physical stores. Fifty-five percent of shoppers (+15%) now say they would rather return online purchases in-store–the first time since early 2020 the preference to Buy Online Return In-Store (BORIS) has outweighed returning via mail, according to the survey. Forty percent of shoppers said they often make additional purchases when picking up or returning online purchases in-store (+2%).
• Consumers are extremely reliant on mobile devices when shopping in-store. This year’s survey reveals that 77% of consumers search for items on their mobile devices while in a store, Ryder said. Sixty-nine percent said they compare prices with items in nearby stores, 58% check availability at other stores, 31% want to learn more about a product, and 17% want to see other items frequently purchased with a product they’re considering.
Ryder said the findings also underscore the importance of investing in technology solutions that allow companies to provide customers with flexible purchasing options.
“Omnichannel strength is not a fad; it is a strategic necessity for e-commerce and retail businesses to stay competitive and achieve sustainable success in 2024 and beyond,” Wolpov also said. “The findings from this year’s study underscore what we know our customers are experiencing, which is the positive impact of integrating supply chain technology solutions across their sales channels, enabling them to provide their customers with flexible, convenient options to personalize their experience and heighten customer satisfaction.”
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
National nonprofit Wreaths Across America (WAA) kicked off its 2024 season this week with a call for volunteers. The group, which honors U.S. military veterans through a range of civic outreach programs, is seeking trucking companies and professional drivers to help deliver wreaths to cemeteries across the country for its annual wreath-laying ceremony, December 14.
“Wreaths Across America relies on the transportation industry to move the mission. The Honor Fleet, composed of dedicated carriers, professional drivers, and other transportation partners, guarantees the delivery of millions of sponsored veterans’ wreaths to their destination each year,” Courtney George, WAA’s director of trucking and industry relations, said in a statement Tuesday. “Transportation partners benefit from driver retention and recruitment, employee engagement, positive brand exposure, and the opportunity to give back to their community’s veterans and military families.”
WAA delivers wreaths to more than 4,500 locations nationwide, and as of this week had added more than 20 loads to be delivered this season. The wreaths are donated by sponsors from across the country, delivered by truckers, and laid at the graves of veterans by WAA volunteers.
Wreaths Across America
Transportation companies interested in joining the Honor Fleet can visit the WAA website to find an open lane or contact the WAA transportation team at trucking@wreathsacrossamerica.org for more information.
Krish Nathan is the Americas CEO for SDI Element Logic, a provider of turnkey automation solutions and sortation systems. Nathan joined SDI Industries in 2000 and honed his project management and engineering expertise in developing and delivering complex material handling solutions. In 2014, he was appointed CEO, and in 2022, he led the search for a strategic partner that could expand SDI’s capabilities. This culminated in the acquisition of SDI by Element Logic, with SDI becoming the Americas branch of the company.
A native of the U.K., Nathan received his bachelor’s degree in manufacturing engineering from Coventry University and has studied executive leadership at Cranfield University.
Q: How would you describe the current state of the supply chain industry?
A: We see the supply chain industry as very dynamic and exciting, both from a growth perspective and from an innovation perspective. The pandemic hangover is still impacting decisions to nearshore, and that has resulted in a spike in business for us in both the USA and Mexico. Adding new technology to our portfolio has been a significant contributor to our continued expansion.
Q: Distributors were making huge tech investments during the pandemic simply to keep up with soaring consumer demand. How have things changed since then?
A: The consumer demand for e-commerce certainly appears to have cooled since the pandemic high, but our clients continue to see steady growth. Growth, combined with low unemployment and high labor costs, continues to make automation a good investment for many companies.
Q: Robotics are still in high demand for material handling applications. What are some of the benefits of these systems?
A: As an organization, we are investing heavily in software that will allow Element Logic to offer solutions for robotic picking that are hardware-agnostic. We have had success deploying unit picking for order fulfillment solutions and unit placing of items onto tray-based sorters.
From a benefit point of view, we’ve seen the consistency of a given operation improve. For example, the placement accuracy of a product onto a tray is far higher from a robotic arm than from a person. In order fulfillment applications, two of the biggest benefits are reliability and hours of operation. The robots don't call in sick, and they are happy to work 22 hours a day!
Q: SDI Element Logic offers a wide range of automated solutions, including automated storage and sortation equipment. What criteria should distributors use to determine what type of system is right for them?
A: There are a significant number of factors to consider when thinking about automation. In my experience, automation pays for itself in three key ways: It saves space, it increases the efficiency of labor, and it improves accuracy. So evaluating which of these will be [most] beneficial and quantifying the associated savings will lead to a “right sized” investment in technology.
Another important factor to consider is product mix. With a small SKU (stock-keeping unit) base, often automation doesn’t make sense. And with a huge SKU base, there will be products that don’t lend themselves to automation.
With any significant investment, you need to partner with an organization that has deep experience with the technologies that are being considered and … in-depth knowledge of the process that is being automated.
Q: How can a goods-to-person system reduce the amount of labor needed to fill orders?
A: In most order picking operations, there is a considerable amount of walking between pick faces to find the SKUs associated with a given order or set of orders. Goods-to-person eliminates the walking and allows the operator to just pick. I have seen studies that [show] that 75% of the time [required] to assemble an order in a manual picking environment is walking or “non-picking” time. So eliminating walking will reduce the amount of labor needed.
The goods-to-person approach also fits perfectly with robotic picking, so even the actual picking aspect of order assembly can be automated in some instances. For these reasons, [automation offers] a significant opportunity to reduce the labor needed to fulfill a customer order.
Q: If you could pick one thing a company should do to improve its distribution center operations, what would it be?
A: Evaluate. Evaluate the opportunities for improving by considering automation. In my experience, the challenge most companies have is recognizing that automation is an alternative. The barrier to entry is far lower than most people think!
Toyota Material Handling and its nationwide network of dealers showcased their commitment to improving their local communities during the company’s annual “Lift the Community Day.” Since 2021, Toyota associates have participated in an annual day-long philanthropic event held near Toyota’s Columbus, Indiana, headquarters. This year, the initiative expanded to include participation from Toyota’s dealers, increasing the impact on communities throughout the U.S. A total of 324 Toyota associates completed 2,300 hours of community service during this year’s event.
The PMMI Foundation, the charitable arm of PMMI, The Association for Packaging and Processing Technologies, awarded nearly $200,000 in scholarships to students pursuing careers in the packaging and processing industry. Each year, the PMMI Foundation provides academic scholarships to students studying packaging, food processing, and engineering to underscore its commitment to the future of the packaging and processing industry.
Truck leasing and fleet management services provider Fleet Advantage hosted its “Kids Around the Corner Foundation” back-to-school backpack drive in July. During the event, company associates assembled 200 backpacks filled with essential school supplies for high school-age students. The backpacks were then delivered to Henderson Behavioral Health’s Youth & Family Services location in Tamarac, Florida.
For the past seven years, third-party logistics service specialist ODW Logistics has provided logistics support for the Pelotonia Ride Weekend, a campaign to raise funds for cancer research at The Ohio State University’s Comprehensive Cancer Center–Arthur G. James Cancer Hospital and Richard J. Solove Research Institute. As in the past, ODW provided inventory management services and transportation for the riders’ bicycles at this year’s event. In all, some 7,000 riders and 3,000 volunteers participated in the ride weekend.