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Operating and controlling warehouses in terms of processes, human resources, and inventory is known as warehouse management. This also includes the space and infrastructure of the facility. Warehouse management has become a major part of the supply chain. Efficient warehouse management helps businesses save huge amounts of money, and it also saves organizations from operating in constant panic. These days, a lot of technologies are being applied to help smoothen up the processes. In this article, we are going to learn about the most popular method known as lean warehouse management and how it can benefit your business.
Have a closer look at the topic below:
Understanding Lean Warehouse Management
When we talk about lean warehousing, our focus remains on eliminating all efforts and investments that do not yield positive results. Most people confuse lean philosophies with minimization, and that isn’t completely correct. In many cases, additional infrastructure/efforts are allocated to meet the desired results. The idea behind lean warehouse management is to add value without adding to the burden of managing inventory.
Market Stats: Only 63% of the retailers have a clear idea regarding their inventory. (Source)
Primarily, lean warehousing will focus on assessing cost centers within the storage facility to identify inefficiencies and curb them. This starts with the layout of the facility. It ensures that the fast-moving SKUs are kept near to the ground level. Next, the racks are arranged so as to minimize the wastage of space. Lean management considers inventory handling as one of the biggest areas where optimization can be done. From barcodes and RFID tags to robotics, a lot of technological tools aid this process. They are controlled centrally with the help of inventory management software.
The next phase of creating a lean ecosystem is to minimize the movement of goods and instances where it is touched by employees. This is because it will increase the risk of proliferation and misplacing the items. Also, saving time is one of the areas where the actual benefits of lean warehouse management lie. Meeting tight deadlines, ensuring smooth operations during peak demands, and ensuring timely delivery of items without mistakes is an asset in the market.
Hence, lean warehousing is a holistic approach to improvise the output. Here, I am laying down the basic principles with a brief description.:
- Muda: Muda means ‘waste.’ According to the Toyota Production System, there are seven types of waste, and they are represented by the acronym ‘DOWNTIME.’ They are:D-defects, O-overproduction, W-waiting, N-non-used talent, T-transport, I-inventories, M-motion, and E-excess processing.As you can see, the waste of talent i.e., skills, is also taken into consideration. These wastes not only reduce the productive output but also increase the risk of dysfunctional operations. Out of many methods available to eliminate Muda, we will have a look at the ‘5S’ method, which is highly recognized by the industry in the later portions of this article.
- Muri: Muri means ‘overburden.’ This is a bit of a contradictory scenario as it depicts over-utilization. When the human resources or the equipment are utilized beyond their capacity, it overburdens them. Let us say that a machine capable of running for 12 hours without stopping is run for 14 hours; breakdowns become more common. If an employee is made to work for 14 hours, their efficiency will decrease along with regularity. Hence it means eliminating Muda beyond required levels. To prevent Muri, standard approaches to running machines and maintenance plans are used. Also, employees are allocated to work within suitable workload limits, and SOPs are established to ensure optimal efficiency.
- Mura: Mura means ‘unevenness.’ It refers to the variations present within and outside the organization. Within the organization, unevenness in picking time, packing time, bundling, and shipping are some examples of internal fluctuations that derail operations. External factors can include variations in demand, changes in demand for specific items, and competitor activities. Thus, Mura tends to deviate from the smooth flow of activities. It is eliminated by standardizing design, processes, and responses. This allows the staff to work with a sense of predictability and reduces lapses caused out of variations. Having gauged responses also prevents lag in decision-making. While one cannot prevent the unevenness completely, minimizing its effect is possible through planning and standardization.
Challenges Before Businesses
A lot has changed in warehousing since the advent of consumerization with e-commerce amplifying its effects. Previously, companies used to stockpile products in warehouses and sell them in a far more predictable manner than today. The degree of variation was minimal, and hence, warehouse management was a simple activity. The recent changes have forced warehouses to redefine everything, including layouts, processes, technologies, and the basis of integration with the supply chain.
Here, I am listing down the challenges faced by most of the businesses:
- Inventory Control: Firms now need to maintain an inventory with a wider variety and also manage the fluctuations in demand. The customers may prefer specific products over others while some products don’t sell in high numbers but provide options. Such conditions make it imperative to keep enough inventory to meet all types of demands without shortages and bottlenecks.
- Space Utilization: One of the most common challenges faced is the improper utilization of space. Putting heavy items away from ground level or in barely accessible places increases picking time by many folds. Also, improper distribution of SKUs in the warehouse. Maintaining high accessibility of fast-moving SKUs is also difficult due to frequent changes in the demand.
- Improper Timing: It is necessary that the orders are reflected in the warehouse management system as soon as they are received by the firm. Also, allocating proper workforce, scheduling packing in case of multiple orders and bundled orders as well as meeting pre-scheduled deliveries make it a complex task. Managing all of these activities with proper timing is a big challenge unless a proper tool with extensive integration is employed.
- Mismanagement: As a matter of fact, mismanagement in warehouses arises from stagnant policies. The root cause of all challenges lies in the inability to respond to changes quickly. This, in turn, causes an atmosphere of constant panic to fulfill orders on time. Aligning human resources with operational requirements is one of the most difficult tasks.
- Inefficient Use Of Information: For a single order, right from receiving it to confirming proper shipping, the amount of information generated is very high. The inability to generate and process this information on a prompt basis digs grave problems for any firm. Therefore, most businesses either opt to use software that provides real-time data or outsource the operations to third party warehouses to keep costs under control.
Market Fact: In the US alone, private warehouses worth $33.8 B were constructed in 2019. (Statista)
Areas For Implementation
It is evident that the areas of implementation are directly related to the above-mentioned loopholes. However, I want my readers to understand that all of these areas overlap with each other. Implementing lean management will require a holistic approach since all components are interconnected with each other. I am listing down the key areas below for your ready reference:
- Warehouse Layout: This is a preliminary measure for the organizations before building a warehouse. Adequate doorways to facilitate free movement of vehicles is a must. Moreover, the racks should be placed in such a manner that the movement of workers while picking items should be a bare minimum. This will help them in working quickly without getting fatigued.
- Inventory Management: When considering ‘lean,’ what items to store, where to store, how to pick, how to pack, and how to ship are some of the basic yet crucial spots for the implementation. These areas of inventory management, when combined with warehouse layout, form a major part of implementing lean methodologies.
- In-house Material Handling: Selecting the right trolleys, carts, and pallet trucks for picking, scheduling pickups on a continuous basis, and assigning human resources are the key areas here. Remember that the variations will arise constantly, and hence, a dynamic approach is required here.
- Wastage Of Resources: Wastage, in most cases, goes unnoticed. A worker struggling to retrieve an item from the racks is deemed as wastage. Workers going in a single location at the warehouse with half loaded carts repetitively is a sheer waste of time and labor. Moreover, the layout design, inventory control, and material handling all contribute to wastage individually, but the result gets compounded with each function overlapping others. Hence eliminating wastage to optimal levels; working on all aspects is a must.
- Management Information System: A MIS forms the basis for implementing lean philosophies. Sourcing, processing, and utilizing resultant data to make decisions is instrumental in lean operations. While every firm has a provision for MIS in one form or the other, building a robust, integrated, and actionable system is at the core of implementing lean management.
5S In Lean Manufacturing Implementation
The 5S model is widely appreciated in the industry due to its simplicity and effectiveness. It has demonstrated consistent results with the help of minor changes to the overall approach. I would also bring to your attention that these basic steps can be implemented at your storage facility whenever you want to do so. It is because they help you achieve Kaizen- continuous improvement. Dive in deeper and see how to apply the 5S model in your warehouse:
Seiri means to sort. The first step is to identify useful things and separate them from the rest. The items that are unsold from too long are either cleared through discounts or through product bundling. They are also sold to the other buyers if available. The goods that are declared unfit for use or damaged are scrapped after retrieving useful parts. The companies shall also find out the equipment, which adds to the trouble while working. If these complications arise due to defects in design, care shall be taken while making fresh purchases.
The movements of the staff are also included in the sort out phase. A time tested method is to use videography for analyzing these activities. You can also identify the defects in layouts based either on the ease of work or frequent accidents/delays.
Seiton means to straighten. Here the focus is on revamping efficiency. Firstly, all the frequently required items are arranged in an accessible manner. They are kept near to the floor and near the gates. Next, mapping of the warehouse is done, and all areas are traced along with stored items. Naming the areas and labeling each rack will help you simplify planning. After every item is located concerning storage areas and respective racks, internal floor marking is done.
This will rev up the internal transportation with lower hazards. Also, this allows workers to move quickly within the premises. Next, instead of keeping all the trolleys and carts in one place, distribute them in smaller groups so that the employee does not need to carry them all the way. The racks are also arranged in such a way that the workers can access them without bending or leaning too much.
Seiso means to shine up. Dirty warehouses are very common. Most people think that since the clients are not going to walk in and buy, there is no need to maintain cleanliness. Especially in products requiring lubrication, the storage areas are very dirty. I would like to point out one fact that unclean surfaces hold higher chances of accidents and damages. One cannot identify any potential danger due to unclean surfaces and floor.
Hence, all the areas are cleaned properly. The next step is to allocate dustbins and disposal equipment wherever required. It is also advisable to build internal gutters in case of storing explosive or hazardous chemicals. This helps in lowering the response times and quick disposal of the stored materials in case of an accident. Clean warehouses also make it easy to spot irregularities and potential threats.
Seiketsu means to standardize. This is the most crucial phase of implementation. You have to list down all the areas where you observed the scope of improvements. Once the improvements become visible, you can take note of the entire process and roll out similar processes in other parts of the work. Standardization will also reduce the stress on the entire system as the staff members need not make any decisions on their own.
The most popular form of standardization of processes and decisions is the application of Kanban. Kanban is a visual pull technique in which an indicator is used as a signal to perform a certain action. Recording and reinforcing improvements along with Kanban will result in the successful implementation of Lean Management of warehouses.
Shitsuke means to sustain. This is an obvious yet tricky phase. After standardizing, the risk of falling back becomes prevalent due to several factors. For instance, HR turnover could cause new staff members to start working randomly. Also, if the documentation is not done properly, the employees will start to temper the revised practices knowingly or unknowingly.
In order to sustain the benefits successfully, you can use the documents and videos developed in the prior phases. They are used to provide training to both new and existing staff. Holding surprise checking and maintaining audit reports is a simple yet effective way to ensure successful sustenance of the acquired best practices.
Advantages Of Implementation
We learned a lot about this method, but what about the benefits? I am quickly summing down the broader benefits of implementation for your perusal.
- A considerable decrease in the operational costs without compromising utility.
- Optimal utilization of the floor space.
- Higher perfect order rate.
- Quicker deliveries.
- Lower overheads.
- Proper distribution of SKUs regardless of variations in the volume.
- Curbing pressure on the system in times of peak demands.
- It helps fight HR turnover.
- It helps in improving the financial health of the company.
- Lowers wastage of processing time.
- Enhances the scope of same day/next day deliveries.
- It makes room for improving working conditions.
“If you think of standardization as the best that you know today, but which is to be improved tomorrow; you get somewhere.” – Henry Ford
Kanban and Kaizen: The Bigger View Of The Picture
Any article on lean management is incomplete if Kanban and Kaizen aren’t discussed. Apparently, all the aspects of the 5S model are related to visual stimulus in varying degrees. Also, they all revolve around improving and dynamically adjusting with the arising situations. Kanban and Kaizen together not only raise the efficiency but also decrease the complexity of the model. This is a vital aspect for every business as scaling up with the help of complex infrastructure can do more harm than good.
Towards the end, I will draw your attention to the major learning outcomes of this article:
- Fast-paced markets have made it necessary to adopt lean warehousing to maintain feasibility and profitability.
- Lean management is fostering value addition and anti-redundancy.
- The major challenges faced by businesses in warehouse management are products of carryforward operational shortcomings.
- Major areas of implementation are at the ground level. Space, workforce, processes, and business intelligence.
- The 5S revolve around continuous improvement through very simple, visual indicators and standardization.
- Organizations will experience a surge in efficiency while strengthening their capability to meet business fluctuations.
- Kanban and Kaizen remain at the core of lean warehousing.
I hope that this article on lean warehouse management will be helpful to your business.
- Lean Transformations – T.Panneman (summary)
- Lean Supply Chain and Logistics Management
- Kanban System: How to Implement Easily
- What is Kanban?
- Warehouse Cleaning Checklist!