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.
Contributing Editor Toby Gooley is a writer and editor specializing in supply chain, logistics, and material handling, and a lecturer at MIT's Center for Transportation & Logistics. She previously was Senior Editor at DC VELOCITY and Editor of DCV's sister publication, CSCMP's Supply Chain Quarterly. Prior to joining AGiLE Business Media in 2007, she spent 20 years at Logistics Management magazine as Managing Editor and Senior Editor covering international trade and transportation. Prior to that she was an export traffic manager for 10 years. She holds a B.A. in Asian Studies from Cornell University.
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."
Robotic technology has been sweeping through warehouses nationwide as companies seek to automate repetitive tasks in a bid to speed operations and free up human labor for other activities. Many of those implementations have been focused on picking tasks, a trend driven largely by the need to fill accelerating e-commerce orders. But as the robotic-picking market matures and e-commerce growth levels off, the robotic revolution is shifting behind the picking lines, with many companies investing in pallet-handling robots as a way to keep efficiency gains coming.
“Earlier in this decade and the previous decade, we [saw] a lot of [material handling] transformation around e-commerce and the handling of goods to order,” explains Josh Kivenko, chief marketing officer and senior vice president at Vecna Robotics, which provides autonomous mobile robots (AMRs) for pallet handling and logistics operations. “Now we’re talking about pallets—moving material in bulk behind that line.”
Kivenko explains that whether items are being packaged and shipped directly to a customer’s home address or moved as finished goods to a shipping bay for store delivery, those items are first moved in bulk in some way, often by human hands and with human-operated equipment. He describes warehouses as chaotic environments in which humans move pallets and cartons in multiple ways—up and down, side to side, from receiving to storage, from storage to shipping, or via cross-docking. Automation can help bring order to that chaos.
“What we’re trying to do is relieve some of the pressure [on the] humans [doing] this work,” Kivenko says of companies that develop pallet-handling robotic technologies. “At the end of the day, we’re trying to automate some of those flows, relieve labor pressure, save costs, and keep the goods flowing.”
But automated pallet handling isn’t right for every situation, so it’s important to understand the warehouse conditions required and the protocols and best practices needed to make it a win. Here are some guidelines for applying pallet-handling robots and gaining the most from your investment.
FIRST, UNDERSTAND THE TECHNOLOGY
Pallet-handling robots fall into four general categories, explains Rich O’Connor, vice president of storage and automation for Raymond West Group, a business unit of lift truck manufacturer The Raymond Corp. They include:
Palletizing/depalletizing robots, which are used to load or unload items onto and off of pallets, usually with the use of a robotic arm for picking and placing. Today, these systems are being increasingly integrated with automated storage and retrieval systems (AS/RS) to further streamline pallet handling in the warehouse, O’Connor explains.
Autonomous guided vehicles (AGVs) and autonomous mobile robots (AMRs), which are used to transport pallets within the warehouse. Often outfitted with lift decks or conveyors, or designed to tug or tow items, these robots move pallets from point A to B within a facility. AGVs, which often follow a marked guide-path or wire in the floor, have been around for many years, but the advent of high-performance guidance and vision systems is allowing them more flexibility today, O’Connor says. AMRs are self-guided vehicles that use software and sensors to navigate their way through the warehouse.
Forklift AGVs and AMRs, which can move products both horizontally, from place to place, and vertically, into and out of storage racks. They come in various styles—including stackers, counterbalanced trucks, reach trucks, and even very narrow aisle (VNA) vehicles for use in densely packed warehouses. These vehicles are more complex than those used only for horizontal transport, O’Connor explains. They must be “highly integrated” into the facility’s warehouse management system (WMS) or warehouse execution system (WES) so that they know precisely where to retrieve and deliver pallets within the facility.
Robotic pallet shuttles, which move pallets into, out of, and within dense storage racking. The Raymond Corp. describes such a system as “a standalone, automated deep-lane pallet storage system that utilizes self-powered shuttle carriages to move pallets toward the back or front in a racking channel. Shuttles are motor driven and travel along rails within a storage lane.”
O’Connor and others say that no matter which of these technologies you’re investing in, it’s important to remember that they are all part of a larger system designed to optimize operations throughout the warehouse.
“The expanding role of all these different styles working together is what’s amazing today,” O’Connor says.
SECOND, ENSURE THE TECHNOLOGY IS A FIT
Kivenko, of Vecna, also emphasizes the importance of pallet-handling robots working in concert, particularly AMRs and AGVs.
“The magic isn’t just that the robots are autonomous and driving by themselves. The magic is multiple robots—when you have a [whole integrated] system [in place],” he says. “[It’s] how the fleet operates autonomously and optimizes itself for continuous improvement. That’s where the exponential gains are. [It’s] not just about automating what a worker does; it’s about automating a system.”
But you can’t install these systems in just any warehouse and expect magic. Kivenko and others point to certain conditions that enable the best robotic pallet-handling outcomes, especially when it comes to transportation-based and forklift-type AMRs and AGVs.
“The robots that I sell are large-load machines with very expensive technology,” Kivenko explains. “They move material, generally, in larger facilities. And in order for them to produce a return [on investment]—because that’s the name of the game here—they have to be higher-velocity facilities.”
He says pallet-handling robots work best in large facilities running multiple shifts, usually more than five days a week. Wider aisles allow the equipment to move more freely through the facility and at higher speeds, to optimize efficiency and productivity. Strong Wi-Fi networks and clean, dry environments also help keep equipment running at top performance.
O’Connor agrees that pallet-handling robots are best suited to facilities with multishift operations, where they can ease labor constraints and boost productivity. And he says many customers are willing to extend the typical two- to three-year ROI period to five years in order to achieve those gains. But there is even more to it than that. O’Connor’s colleague John Rosenberger says customers must first step back and analyze their processes to ensure that, even if they have the right facility for pallet-handling AMRs or AGVs, they are moving material in the most efficient way to begin with.
“Many times, we find that the processes in place [are inefficient],” says Rosenberger, who is director of iWarehouse Gateway and global telematics for The Raymond Corp. He emphasizes the importance of analyzing existing data—from an equipment telematics system or similar—to determine the best path toward automation.
“Do you have congestion zones now?” he asks. “They’ll still exist if you automate [those processes exactly].”
THIRD, MAKE SIMPLICITY A PRIORITY
Another basic rule of thumb when implementing pallet-handling robotics: Keep it simple.
Andy Lockhart, director of strategic engagement for global warehouse and logistics process automation company Vanderlande, says that when designing a pallet-handling robotics system, “you want to minimize the processes you [automate]. When you can create [an automated system] that focuses on one task—for example, AMRs delivering pallets from a high-bay [storage rack] directly to the palletizing cell—you can do that efficiently and effectively. When you ask the AMR to do this and this and this … you are adding risk of failure.”
Lockhart’s colleague Jake Heldenberg advises customers to first test their target processes via pilot programs within the warehouse or DC. Heldenberg is Vanderlande’s head of solution design, warehousing, North America.
“If AGVs or AMRs for pallet handling are interesting [to a customer], the best thing to do is pilot one or two in an existing DC,” he says, explaining that the process can help companies troubleshoot, understand integration timelines, and gauge ROI. But pilot programs can add expense to a project, making it unaffordable for some.
“If that’s the case, then the best advice is work with a vendor who has experience integrating [the technology],” Heldenberg says. “Use their experience to benefit your business. You won’t have the same hiccups and challenges you would with a less-experienced vendor.”
Jeremy Van Puffelen grew up in a family-owned contract warehousing business and is now president of that firm, Prism Logistics. As a third-party logistics service provider (3PL), Prism operates a network of more than 2 million square feet of warehouse space in Northern California, serving clients in the consumer packaged goods (CPG), food and beverage, retail, and manufacturing sectors.
During his 21 years working at the family firm, Van Puffelen has taken on many of the jobs that are part of running a warehousing business, including custodial functions, operations, facilities management, business development, customer service, executive leadership, and team building. Since 2021, he has also served on the board of directors of the International Warehouse Logistics Association (IWLA), a trade organization for contract warehousing and logistics service providers.
Q: How would you describe the current state of the contract warehouse industry?
A: I think the current state of the industry is strong. For those that have been focused on building good client relationships over the years, I think it’s a really exciting time. Coming out of all the challenges of the past few years, I think there’s a lot of opportunity for growth and deeper partnerships. It’s fun to see the automation and AI (artificial intelligence) integration starting to evolve [in a way that’s] similar to what we saw with WMS (warehouse management systems) in the early 2000s.
Q: You are now president of your family firm. Is it an advantage having grown up in the business as opposed to working elsewhere?
A: I definitely believe it was an advantage growing up in the business. Whether it’s working with family or someone else in the industry, there’s always an advantage when you have mentors[to guide] you. I’ve been blessed to have several mentors, some in the industry, others just in life, and I’m thankful that they were willing to mentor me and that I was willing to listen to them.
Q: What are the biggest challenges currently facing 3PLs, and how are you addressing them?
A: Labor and legislation are both tough right now. The two seem to have a lot to do with each other, and it can make it tough to find and retain people. So I think we’ll see more and more automation of processes industrywide.
Q: Third-party service providers often must handle a wide variety of products for a lot of different clients. Does this variety make it difficult to invest in automation and other new technologies?
A: It can make things more difficult when looking at certain automation, but it’s in the “difficult” that a lot of opportunities lie. It would be tough to find a single solution that fits every client’s needs, but there are always opportunities to improve in certain areas. It just takes a bit of vision and commitment, and a willingness to invest in your own long-term success.
Q: As a 3PL, what do you look for when selecting the clients you work with?
A: Quality relationships that will last a long time. When both parties are happy and working together in the same direction, everyone wins.
Q: You’ve been a board member of the International Warehouse Logistics Association since 2021. Why is your involvement with this organization important to you?
A: I think it’s important to understand what’s happening in the industry. IWLA is a great resource for staying up to date and getting a solid education when it comes to the latest logistics trends. I also think it’s important to give back and pass along what we’ve learned to those just getting started in the business. As important as it is to have a mentor, it’s just as important to mentor and help others.
“While there have been some signs of tightening in consumer spending, September’s numbers show consumers are willing to spend where they see value,” NRF Chief Economist Jack Kleinhenz said in a release. “September sales come amid the recent trend of payroll gains and other positive economic signs. Clearly, consumers continue to carry the economy, and conditions for the retail sector remain favorable as we move into the holiday season.”
The Census Bureau said overall retail sales in September were up 0.4% seasonally adjusted month over month and up 1.7% unadjusted year over year. That compared with increases of 0.1% month over month and 2.2% year over year in August.
Likewise, September’s core retail sales as defined by NRF — based on the Census data but excluding automobile dealers, gasoline stations and restaurants — were up 0.7% seasonally adjusted month over month and up 2.4% unadjusted year over year. NRF is now forecasting that 2024 holiday sales will increase between 2.5% and 3.5% over the same time last year.
Despite those upward trends, consumer resilience isn’t a free pass for retailers to underinvest in their stores by overlooking labor, customer experience tech, or digital transformation, several analysts warned.
"The 2024 holiday season offers more ‘normalcy’ for retailers with inflation cooling. Still, there is no doubt that consumers continue to seek value. Promotions in general will play a larger role in the 2024 holiday season. Retailers are dealing with shrinking shopper loyalties, a larger number of competitors across more channels – and, of course, a more dynamic landscape where prices are shifting more frequently to win over consumers who are looking for great deals,” Matt Pavich, senior director of strategy & innovation at pricing optimization solutions provider Revionics, said in an email.
Nikki Baird, VP of strategy & product at retail technology company Aptos, likewise said that retailers need to keep their focus on improving their value proposition and customer experience. “Retailers aren’t just competing with other retailers when it comes to consumers’ discretionary spending. If consumers feel like the shopping experience isn’t worth their time and effort, they are going to spend their money elsewhere. A trip to Italy, a dinner out, catching the latest Blake Lively and Ryan Reynolds films — there is no shortage of ways that consumers can spend their discretionary dollars,” she said.
Editor's note:This article was revised on October 18 to correct the attribution for a quote to Matt Pavich instead of Nikki Baird.
A real-time business is one that uses trusted, real-time data to enable people and systems to make real-time decisions, Peter Weill, the chairman of MIT’s Center for Information Systems Research (CISR), said at the “IFS Unleashed” show in Orlando.
By adopting that strategy, they gain three major capabilities, he said in a session titled “Becoming a Real-Time Business: Unlocking the Transformative Power of Digital, Data, and AI.” They are:
business model agility without needing a change management program to implement it
seamless digital customer journeys via self-service, automated, or assisted multi-product, multichannel experiences
thoughtful employee experiences enabled by technology empowered teams
And according to Weill, MIT’s studies show that adopting that real-time data stance is not restricted just to digital or tech-native businesses. Rather, it can produce successful results for companies in any sector that are able to apply the approach better than their immediate competitors.
“ExxonMobil is uniquely placed to understand the biggest opportunities in improving energy supply chains, from more accurate sales and operations planning, increased agility in field operations, effective management of enormous transportation networks and adapting quickly to complex regulatory environments,” John Sicard, Kinaxis CEO, said in a release.
Specifically, Kinaxis and ExxonMobil said they will focus on a supply and demand planning solution for the complicated fuel commodities market which has no industry-wide standard and which relies heavily on spreadsheets and other manual methods. The solution will enable integrated refinery-to-customer planning with timely data for the most accurate supply/demand planning, balancing and signaling.
The benefits of that approach could include automated data visibility, improved inventory management and terminal replenishment, and enhanced supply scenario planning that are expected to enable arbitrage opportunities and decrease supply costs.
And in the chemicals and lubricants space, the companies are developing an advanced planning solution that provides manufacturing and logistics constraints management coupled with scenario modelling and evaluation.
“Last year, we brought together all ExxonMobil supply chain activities and expertise into one centralized organization, creating one of the largest supply chain operations in the world, and through this identified critical solution gaps to enable our businesses to capture additional value,” said Staale Gjervik, supply chain president, ExxonMobil Global Services Company. “Collaborating with Kinaxis, a leading supply chain technology provider, is instrumental in providing solutions for a large and complex business like ours.”