Applying Lean Concepts in a Warehouse Operation

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					               Applying Lean Concepts in a Warehouse Operation
                                         Frank C. Garcia, P.E.
                          Director, Business Solutions & Engineering Services
                                      Advent Design Corporation
                                           Bristol, PA, USA

1. Introduction
This presentation shows how a warehouse operation can be improved using lean concepts and techniques.
Warehouse improvement requires optimizing material flow, order picking, replenishment, and dock operations.
Although many traditional lean techniques maybe difficult to apply, the concepts of improving material flow and
eliminating waste can be used to make significant improvement in warehouse lead time.

Many lean practitioners consider the term warehouse and lean to be mutually exclusive. However, regardless of how
fast inventory is turned, warehouses will always exist to allow a company to deal with variations in customer
demand. The key is to reduce the non-value added steps in the warehouse as much as possible and to improve
velocity and flow. Implementing a lean warehouse starts with value stream mapping. After the current state value
stream map is created, improvements can be easily developed to eliminate extra material handling, excessive travel
time, and time spent looking for products. Various lean improvement techniques such as material flow analysis,
quality improvement, and application of the 5Ss can be used. A warehouse improvement example is presented to
show how warehouse lead time, order picking time, and material handling can be reduced by 50% using lean
concepts.

2. Evaluating the Warehouse

Over the past few years the production areas have been upgraded without a corresponding enhancement of the
warehousing activities. Companies are now experiencing problems with the warehouse and distribution areas
keeping pace with the product as it is received from the various processing areas. Space utilization, material
handling, and data collection are just some of the challenges that arise. There has been a trend of increased labor to
support the warehousing requirements.

Where do you start? In order to understand where to start the implementation of lean concepts in the warehouse, one
of the most useful tools is the value stream map. The value stream is the set of all specific actions, both value added
and non-value added, that are needed to take a product through the information and production flows of a
manufacturing operation (1). The value stream map follows the production path from beginning to end and shows a
visual representation of every process in the material and information flows The maps show the linkage between
information flow and material flow for a product family. Most times the warehouse shows up on a value stream map as
simply an inventory triangle and shipping. This makes it difficult to evaluate the waste that is occurring within the
warehouse. It is necessary to show the process within the warehouse including operations such as receiving, palletizing,
putaway, order picking, order staging and preparation, truck loading, and shipping. A concept warehouse value stream
map is shown in Figure 1.
                                      Simplified Warehouse Value Stream Map



                                               Orders                        Orders
                                                         Production and
                       Suppliers                        Inventory Control                Customers



                                   Schedules                                          Orders




                     Production                                                                      Shipping
                                                               Warehousing


                                                          Lead Time




                                                        Figure 1

3. Warehouse Value Stream Map
The current state value stream map shows how the warehouse currently operates and serves as the foundation for the
future state changes. The map starts with the shipping area and works back through the warehouse process to the
production area and to the suppliers. You need to start with one product family otherwise the map will be too
complicated. It is also useful to track a product family order through the warehouse operation.

The production control information flow is shown to determine how the warehouse processes are being scheduled
and controlled. At the bottom of the map, the total process time and lead time are calculated for a typical product
family unit or order. Figure 2 shows a completed warehouse current state map.

The current state value stream map serves as the starting point for developing the future state. The current state
value stream map shown in Figure 2 revealed a number of opportunities to reduce lead time and processing time in
the warehouse, including the following:

•   reduction in material handling time in order picking, putaway, and palletizing
•   reliability issues with the strapping and metal detection machines
•   reduction in truck loading time
•   reduction in time spent checking inventory location and aging

Using the current state map, the goal in developing the future state map is to make the flow continuous and to
eliminate as much waste as possible. Lead time is shortened as much as possible by implementing lean techniques.
The flow in the future state map is built around the takt time, or how frequently a unit must be completed to meet
customer demand. Takt time is simply the available working time per shift divided by the rate of customer demand
per shift.
                                                                                    Warehouse Current State
                                                                                                       Value Stream Map
                                                                                      Blanket Orders with Daily
                                                                                     Releases; Supplemented with
                                                                                       Open Market Purchases



                                                                                       Blanket Orders                        Production
                                 Spices and             Packaging                                                                                                                    Randomly Placed                                             Various
      Hogs                                                                             with Weekly or                   and Inventory Control
                                 Smokehouse             Materials                                                                                                                   Orders (Various Sizes)                                      Customers
                                                                                     Bi-Weekly Releases                  (Computer System)
                                  Materials



                                                                                                                                                                                                                                         Demand:
                                                                                            Daily
                                                                                                                                                                                                                                         131 to 242 orders per day
                                                                                          Production
                                                                                                                                                                                                                                         Avg: 167/day
                                                                                           Schedule
                                                                                                                                                                                                                                         1 to 2 pallets/order
        Daily                     Weekly or              Weekly or                                                                                                                                                                       15 to 17 orders per truck
                                  Bi-Weekly              Bi-Weekly                                                                                                                              Aging
      (about 400)                                                                                                                                           Daily Shipping Orders                                                        12 to 13 trucks per day
                                                                                                                                                                                                Report
                                                                                                                                                           & Freezer Release (5PM)                                                       1 route per truck



                                                                             Smokehouse Operations

                                                                          Smoke                 Wrap & Pack
                                                                                                                                           Off-Site Freezer Storage                                                                                   Daily
                                                                                                                                                                                                                                                  Shipments
                                                                                                Smoked                                                                                                                                          (12 to 13 routes)
                                                                                                Products
                                                                                                                        I                                 I
                                                                        Multiple                Multiple
                                                                                                                                                     1, 578K lbs
                                                                        Operators               Operators          Conveyor
                                                                                                                    Staging

                    Kill & Cut           Wrap & Pack                  Metal Detection            Strapping                         Palletizing                        Order Picking                          Order Checking                         Shipping
                                                                                                                                   & Storage                                                                  & Scanning
                                                                                                                                                                         1 to 2
                                                                                                                                                                                                                                                     1 to 2
                Cut Products             Cut Products                                                                                1 to 2                              pallets                                 1 to 2
                                                                                                                                                                                                                                                     pallets
                                                             I            1 to 2
                                                                          Pallets
                                                                                                  1 to 2               I             pallets              I             per order               I                pallets             I              per order
                Multiple                 Multiple                                                 Pallet                                                                 6 to 8
                Operators                Operators       Conveyor                                                  Conveyor                             Rack                                  Staging                             Staging
                                                                                                                                    3 People                             People                                 2 People                            2 People
                                                          Staging                                                   Staging                            Storage                              Palletizing                          for Trucks
                                                         10 cases                                                   10 to 15     C/T = 7 sec             775          C/T = 10 - 35           & Dock         C/T = 15 min         2 orders      C/T = 4 hours
                                                                        C/T =2 sec              C/T = 2 sec
                                                                                                                     cases       per case or 10       positions;             minutes          6 orders       C/O = 0 min         (4 pallets)    C/O = 0 min
                                                                        C/O =2 min              C/O = 1 min
                                                                                                                                 min per pallet       7 reefers;      C/O = 0 min           (12 pallets)     Rel. = 85%                         Rel. = 85%
                                                                        Rel. = 95%              Rel. = 80%
                                                                                                                                 C/O = 0 min          610K lbs        Rel. = 85%                             Avail. = 16.5 hrs                  Avail. = 16.5 hrs
                                                                                                                                 Rel. = 85%                           Avail. = 49.5 to
                                                                                                                                 Avail. = 24.8                        66 hrs (2 shifts)
        Order Lead Time 3.7 to 6.1 Days                                                                                          hrs (2 shifts)
        Order Processing Time: 6 Hrs                     30 seconds                     5 sec                  6 minutes                           2.9 to 5.3 days                           20 minutes                          15 minutes
        Takt Time: 3 to 4 minutes                                                                                                                 (Freezer storage:
                                                                        40 seconds              40 seconds                        20 minutes      6.7 to 14.5 days)    35 minutes                             10 minutes                          4 hours



                                                                                                              Figure 2

Figure 3 shows the future state map after improvements have been implemented in the warehouse shown in Figure
2. The process steps and information flows highlighted in red show the improvements from the current state map.
Some of the improvements are as follows:

•   new ergonomically designed palletizing station that reduces wasted motion and errors
•   accurate labeling and zoning of the warehouse racks to reduce time spent looking for products
•   use of barcode cases labels to track all cases and pallets in the warehouse
•   re-organization of the rack storage to place high moving products on lower rack levels and closer to the
    shipping dock
•   use of radio frequency bar code scanners and a warehouse management system (WMS) to obtain real time
    inventory data and pick sequences to reduce order picking time and errors. Figure 4 shows a process flow
    diagram of this improvement.
•   reduction in warehouse job categories and extensive cross training

The lean improvements, implemented in this warehouse, reduced order processing time by 50% and lead time by
25%.
                                                                                Warehouse Future State
                                                                                                  Value Stream Map
                                                                                 Blanket Orders with Daily
                                                                                Releases; Supplemented with
                                                                                  Open Market Purchases



                                                                                  Blanket Orders                         Production
                            Spices and             Packaging                                                                                                                        Randomly Placed                                        Various
Hogs                                                                              with Weekly or                    and Inventory Control
                           Smokehouse              Materials                                                                                                                       Orders (Various Sizes)                                 Customers
                                                                                Bi-Weekly Releases                   (Computer System)
                             Materials                                                                                                           • Aging Data

                                                                                                                                                                                                                                   Demand:
                                                                                       Daily                                                                                                                                       131 to 242 orders per day
                                                                                     Production                                                                                                                                    Avg: 167/day
                                                                                      Schedule                                                                                                                                     1 to 2 pallets/order
  Daily                      Weekly or              Weekly or                                                                                                                                                                      15 to 17 orders per truck
                             Bi-Weekly              Bi-Weekly                                                             Bar Code Scan                                                      Bar Code Scan                         12 to 13 trucks per day
(about 400)                                                                                                                                                Daily Shipping Orders
                                                                                                                          Warehouse Input                                                  Inventory Updates                       1 route per truck
                                                                                                                                                          & Freezer Release (5PM)



                                                                        Smokehouse Operations

                                                                     Smoke                 Wrap & Pack
                                                                                                                                         Off-Site Freezer Storage                                                                               Daily
                                                                                                                                                                                                                                            Shipments
                                                                                           Smoked                                                                                                                                         (12 to 13 routes)
                                                                                           Products
                                                                                                                    I                                    I
                                                                   Multiple                Multiple
                                                                                                                                                    1, 578K lbs
                                                                   Operators               Operators           Conveyor
                                                                                                                Staging

              Kill & Cut           Wrap & Pack                   Metal Detection            Strapping                            Palletizing                         Order Picking                             Order                          Shipping
                                                                                                                                 & Storage                                                                  Verification
                                                                                                                                                                        1 to 2
                                                                                                                                                                                                                                               1 to 2
          Cut Products              Cut Products                                                                                   1 to 2                               pallets                                 1 to 2
                                                                                                                                                                                                                                               pallets
                                                        I            1 to 2
                                                                     Pallets
                                                                                             1 to 2                I               pallets               I             per order                I               pallets
                                                                                                                                                                                                                                FIFO          per order
              Multiple              Multiple                                                 Pallet                                                                     6 to 8
                                                    Conveyor                                                                                            Rack
              Operators             Operators                                                              Conveyor               3 People                              People               Staging           2 People                       2 People
                                                     Staging                                                                                           Storage
                                                                                                            Staging                                                                            Dock
                                                    10 cases                                                                                       775 positions;
                                                                                                            30 to 50           C/T = 7 sec                           C/T = 10 to 15          2 orders       C/T = 10 min                  C/T = 2 hours
                                                   Gap cases       C/T =2 sec              C/T = 2 sec                                            Locator system,
                                                                                                             cases             per case or 6.8                              minutes         (4 pallets)     C/O = 0 min                   C/O = 0 min
                                                                   C/O =2 min              C/O = 1 min                                            A items on first
                                                                                                       3 separate Zones        min per pallet                        C/O = 0 min                            Rel. = 85%                    Rel. = 85%
                                                                   Rel. = 95%              Rel. = 90%                                             tier, additional
                                                                                                        Bar code scan          C/O = 0 min                           Rel. = 85%                             Avail. = 16.5 hrs             Avail. = 16.5 hrs
                                                                                                                                                    rack above
                                                                                                                               Rel. = 85%                            Avail. = 49.5 to
                                                                                                                                                     palletizing
                                                                                                                               Avail. = 24.8                         66 hrs (2 shifts)
                                                                                                                                                      610K lbs
  Order Lead Time: 3 to 4.9 Days                                                                                               hrs (2 shifts)                        Scan bar codes
  Order Processing Time: 3 Hrs                      30 seconds                     5 sec                      6 minutes                           2.6 to 4.5 days                           15 minutes
  Takt Time: 3 to 4 minutes                                                                                                                      (Freezer storage:
                                                                   40 seconds              40 seconds                           13 minutes       6.7 to 14.5 days)   20 minutes                              8 minutes                      2 hours




                                                                                                       Figure 3
                                                        FUTURE STATE ORDER PICKING FLOW




                                                FRESH              SMOKED                 FROZEN



                       Warehouse Management System (WMS)
                                                                   GET PICK                      GET LOAD
                                                                     LIST                        PATTERN
                                       Truck Route Wave Pick



                                                                 LOCATE PALLET
                                                                 IN WAREHOUSE                                   LOCATE PALLET
                                                                                                                IN DOCK RACKS
                                                                      • MOVE PALLET

                            Warehouse Management                   SCAN
                            System (WMS)                         LOCATION                    REPEAT
                                                                                              UNTIL
                                                                                             ORDER
                                                                                            COMPLETE
                                                                   PICK
                                                                                                            Warehouse
                                 • CASES 95% OF TIME            CASES OR
                                                                                                            Management
                                                                 PALLETS
                                                                                              Next location System (WMS)
                                                                      • MOVE PALLET

                            Warehouse Management                  SCAN
                                System (WMS)                      CASES



                                                                 STORE
                                                                 PALLET




                                                • PALLETIZING      STAGE
                                                  AREA             ORDER
                                                • DOCK
                                                                                 • MOVE TO INSPECTION

                                                                   CHECK
                                                                   ORDER

                                 Warehouse
                                 Management                      VERIFICATION
                                                                                     • TRUCK ROUTE
                                 System (WMS)                       SCAN
                                                Truck Route

                                                                                     • MOVE TO TRUCK
                                                                    LOAD
                                                                   TRAILER




                                                                      Figure 4

4. Implementation and Planning
When the warehouse future state value stream map is completed, an implementation plan must be developed to convert
the current state into the future state. Once the improvements are identified, a time-sequenced list of improvement
projects can be made. A brief goal and the expected improvement should be show for each project. The projects should
be given a relative priority so that the most important projects can be scheduled first. The plan should be established to
complete the majority of the projects within three to six months. A number of the improvements in the case study fell
into this category. Organizing the warehouse improvement projects in this manner can make it easier to include them in
the capital planning process if new process equipment is required. Some of the improvements in the case study require
warehouse expansion which will take a year or more to plan and to get final management approval. The financial
benefits of implementing the warehouse improvements shown on the future state value stream map can also be
calculated, including an estimated payback period.
5. Summary
Lean concepts can be successfully applied to a warehouse environment. Value stream mapping can be a valuable tool
for developing and implementing warehousing lean improvement projects. The process of creating the value stream
map helps to train the warehouse team on lean techniques and to reveal opportunities to reduce waste. Some of the
traditional lean techniques such as cellular manufacturing and setup time reduction may not be applicable to most
warehouse environments. However, once the value stream map has been developed, the waste in the warehouse process
can be easily identified and eliminated using
• improved order processing and tracking
• reduced material handling
• improved inventory organization
• cross training
• quality tracking

Using lean concepts can lead to significant reductions in warehouse order processing time and lead time while
improving inventory and order processing accuracy.


Biographical Sketch
Frank C. Garcia, PE
Advent Design Corporation, Bristol, PA
Partner and Director, Business Solutions & Engineering Services

Mr. Garcia, a registered professional engineer, served seven years in the U.S. Navy submarine force after graduation
from the U.S. Naval Academy. After completing his military service, he obtained his Master of Engineering in Industrial
Engineering from the Rochester Institute of Technology. In addition, he has 14 years of varied industrial experience in
engineering, quality assurance, and operations management. He has worked for Mobil Chemical Company, Burroughs
Corporation, Spectra Graphics, and the Department of Defense. His experience includes planning and implementing
plant expansions in manufacturing, warehousing and materials handling systems. He has been responsible for Quality
Assurance and Customer Service for multi-plant operations; engineered, justified and installed major manufacturing
equipment systems; and has successfully managed manufacturing operations with staffing into the hundreds.

As a manufacturing engineering consultant for the past 14 years, Mr. Garcia has worked and managed projects involving
material handling improvements, plant layouts and relocation, packaging line design and installation, and quality
improvement. He has been involved with many lean manufacturing implementations involving setup reduction, cellular
manufacturing, and value stream mapping. He has assisted in the development of manufacturing improvement strategies
for national and international companies. His projects have been in the chemical, food, pharmaceutical, electronics,
defense, and consumer products industries.

Mr. Garcia is a senior member of the Institute of Industrial Engineers (IIE) and American Society for Quality (ASQ). He
is also a certified Systems Integrator (IIE), Quality Engineer (ASQ), and Quality Manager (ASQ).

References
1.   Shook, J., Rother, M., 1999, Learning to See: Value Stream Mapping to Create Value and Eliminate Muda, The
     Lean Enterprise Institute, Brookline, MA.

				
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