New Trends for a Lean Logistics
The principles of lean thinking have become widely known and many companies are applying them to their production processes (“within their walls”) with excellent results.
However most companies are realizing that in order to get even more benefits it is necessary to extend lean principles and methods to warehouse management and transportation and to involve both suppliers and customers.
As we will show a company must be lean not only in production but in its whole supply chain.
This need becomes all the more evident if we think of the increasing tendency to transfer a significant part of the value creation process outside the company (suffice it to mention the outsourcing of sub assemblies) to a selected group of suppliers with a much more strategic role than in the past.
Competitive factors like service level, quality, flexibility depend on the capacity to synchronize all the actors involved in the supply chain.
As a consequence not only production but also technical design must take into account the needs of the supply chain and it is necessary to move from the concept of “Concurrent Engineering” to that of “Concurrent Logistics” : from the first stages of technical design it is necessary to define the standards and basic rules for stock management, procurement and transportation.
IMPACT OF LEAN THINKING ON SUPPLY CHAIN MANAGEMENT
A lean entreprise is one that tries to eliminate all kinds of waste and to apply flow production i.e. one or more production streams in which production flows from raw materials to finished goods to customer without any interruptions.
In order to implement this it is necessary to eliminate or at least minimize the traditional “buffers” made by stocks of components and semi finished goods.
This requires that each phase of the production process be synchronized with all other phases not only in terms of time (number of product units in a given time interval), but also in terms of mix.
In order to implement a lean supply chain suppliers’ behaviour, transportation and warehouse management should be submitted to the rule of synchronization.
In short this is what we mean by Lean Logistics: the supply chain works at the same rate as does production, in order to serve the market in a fast and flexible way without the need to maintain intermediate stocks.
Let us focus our attention in particular on two very important aspects: transportation and warehouse management.
TRANSPORTATION
One of the main problems is that quite often we have to take into account constraints deriving from causes out of the manufacturer’s control. Suffice it to remind that suppliers based in Asia or South America require large shipping lots or that nowadays a company has to serve customers located everywhere who order quantities that do not allow full-load shipment.
These constraints are the main obstacle to the improvement of lead time i.e. the time from the reception of raw materials to the delivery of finished products.
If much can be done within the four walls of a company to reduce the stock of semi finished products and to increase efficiency, the level of stock of raw materials and finished products is strongly influenced by the way the supply chain is managed.
What a company can do is to provide suppliers with medium term forecasts so that they can organize a continuous supply flow instead of a number of supplies based on individual purchase orders.
At the same time transportation should be organized on the basis of different concepts: instead of trying to optimize every single delivery it is necessary to organize deliveries in line with production rate.
In order to implement all this a company should take adveantage of systems based on logics like milk-run, of consolidation center, of electronic kanban, which make it possible to coordinate supply chain management with production flow so as to increase the frequency of deliveries without increasing freight costs.
These solutions can significantly reduce costs if correctly applied both to inbound and outbound deliveries.
WAREHOUSE MANAGEMENT
Usually material handling is an activity carried out inside the manufacturing company. However warehouse logistics function outsourcing is becoming more and more widely practiced. The purpose of outsourcing this function is to delegate it to specialized operators in order to free internal resources (real estate, space and labour) and use them in more value added activities. In other words to save time and money.
Very often the services are provided by freight companies who have evolved so as to be able to offer integrated logistic functions (freight + warehouse) thus achieving two results: optimize the use of their spaces and of their personnel while at the same time increase their revenues by offering new services.
From a lean perpective these solutions are to be judged favourably because they integrate warehouse management and transportation. They make it possible to apply a pull type logic to warehouse management. For instance: picking plans become a consequence of truck loading plans which in turn are a consequence of customers needs in term of delivery time ecc.
CONCLUSIONS
These are only a few examples of the opportunities that can be taken applying lean principles to logistics.
In conclusion it is worth pointing out that, in these matters as in everything else, the human factor is essential to get good results.
In other words it is essential to motivate people inside the company and to establish a good relationship with outsourcers and suppliers based on transparency and mutual trust.
This is the only way to optimize and continually improve the global performances of all the actors of the supply chain.
For more info on lean logistics contact our colleague Nicola Rigobello