Everything You Need to Adopt Lean Warehouse Management

Understanding Lean Warehouse Management

Lean warehousing is the process of maximizing resources and streamlining inventory and material handling processes to reduce warehouse operation costs. A lean warehouse uses continuous improvement methodologies like 5S, Kaizen and Just-in-Time (JIT) inventory management to improve efficiencies and eliminate waste. Adopting lean warehouse principles will provide your warehouse with material handling efficiencies by making all warehouse operation tasks easier, less time-consuming, and less costly.

Lean warehousing strategies are a fairly new concept when discussing warehouse operation. However, lean principles like 5S, Kaizen, and JIT have helped streamline manufacturing and production for decades, playing a critical role in the emergence of the Toyota Production System – a manufacturing and business operations approach emulated by millions of manufacturers and companies around the world.

Lean Warehousing Principles

Adopting methodical, proven continuous improvement methodologies is a must when looking to optimize your warehouse. It’s the adoption of these continuous improvement methods and lean warehouse principles that provides the impetus for increased efficiency.

The most common lean warehouse principles include 1) Value Stream Mapping, 2) Just-in-Time (JIT) Inventory Management 3) Kaizen and 4) 5S – which stands for Sort, Set in Order, Shine, Standardize, and Sustain.

Each of these lean warehousing principles is explained below and is following by a simple step-by-step process for the implementation of lean warehousing.

Value Stream Mapping is a lean solution where a flow diagram uses visual queues to outline the work tasks and material handling requirements that occur within a warehouse process – in this case, receiving an incoming shipment from a supplier, inspecting the shipment, unpacking, storing the finished goods on shelves, picking, repackaging for customer orders, preparing the shipment and then getting that shipment ready for delivery out to the customer.

Cycle times for each material handling activity are defined in terms of how many warehouse employees are needed for a given work task and how long that work task takes.

Just-in-time warehouse and inventory management approaches focus on eliminating the most common waste in managing inventory. While lean manufacturing is seen as a customer-centric philosophy that improves customer value by improving manufacturing processes, JIT is seen one of the more important lean warehousing principles that makes lean manufacturing possible.

The essence of JIT is to have exactly the inventory you need to manufacture or ship a product at the exact time you need it. It requires a seamless integration of a company’s supply chain so that suppliers provide the right quantities of parts, materials, or finished goods at the right time.

To understand why JIT works and why it’s needed within warehouse operation, it’s important to understand the most forms of waste and costs that come with retaining inventory.

In non-JIT inventories, a company typically has an inventory carrying cost of about 3 percent of the value of their inventory in any given month. This 3 percent carrying cost comprises multiple different inventory wastes and excesses – which JIT focuses on eliminating.

This 3 percent does not include warehouse employee wages, insurance, benefits, etc. It is solely focused on the direct costs attributable to the raw materials or finished goods on warehouse shelves.

In conventional inventory management, companies hold inventory in anticipation of customer orders. However, the longer they hold that inventory the more impactful the inventory waste becomes. The most obvious waste includes financing. Companies borrow money from lending institutions like banks to buy inventory and store it on their shelves. Borrowing costs in today’s economy are high, so the inventory waste (costs) of products sitting on shelves without being sold is also high.

While financing is most definitely a waste of inventory, it’s most certainly not the only waste. Inventory obsolescence is also a costly inventory waste. Having inventory that can’t be used or sold either because of poor sales forecasts, changing customer preferences, or upgrades in product designs most often means obsolete inventory can only be sold as scrap. This is another warehouse inventory waste.

Misplaced, lost, or damaged/ruined inventory is another warehouse inventory waste. This is a common occurrence in warehouses with poor material handling practices. However, in general, the longer a warehouse must keep inventory the more likely that inventory – whether it’s raw materials or finished goods – is likely to become damaged at some point. It’s not uncommon for some warehouses to have inventory on the shelves for months and even years.

Other warehouse operation waste relates to excess material handling movement. Inventory that is not properly forecasted or not available at the right time typically coincides with higher incoming and outgoing freight costs. Expedited incoming freight to cover low inventory counts and expedited freight out to customers to maintain delivery schedules are expensive costs. Not only are the freight costs high, but warehouses often must cover employee overtime.

The continuous improvement philosophy of “Kaizen” loosely translates from Japanese to English as “good change”. It emerged from the Toyota Production System – or TPS. However, other influences also played a role.

Borrowing aspects of statistical process control, process optimization, and analytical quality control, companies that effectively adopt Kaizen make it part of their culture. Kaizen is a belief system where warehouse managers, logistics coordinators, and continuous improvement managers are constantly focused on eliminating every form of process waste and material handling waste within the warehouse.

5S is an optimization process that improves workflow. Warehouse employees structure their workstations for improved efficiency to ensure that no time is wasted looking for tools, instructions, work orders, or materials.

Benefits of Lean Warehousing

For warehouse managers and logistics coordinators, a lean warehouse is the ultimate in efficiency. Tools like value stream mapping help warehouse managers present a big-picture view of the material handling processes within their warehouse. They can identify problem areas and proactively address them. Simple improvements that reduce material handling waste improve efficiencies and reduce costs.

JIT warehouse inventory management focuses on the excess waste that comes from having inventory for longer than necessary. By adopting JIT inventory management, warehouse managers and inventory professionals can lower multiple forms of waste while also improving a company’s cash flow and cash position.

With Kaizen Teian and 5S, warehouse managers, and continuous improvement managers ensure warehouse employees are always making the daily improvements that help improve efficiencies and reduce costs.

Finally, an efficient warehouse that adopts continuous improvement and lean methodologies experiences far fewer accidents and absenteeism. A single lost day due to an injury costs companies an estimated $1040 US each day. This is just a company’s cost of lost productivity and efficiency. It does not include the costs of medical expenses, insurance claims, extended injuries, or death.

• Reduced waste
• Increased efficiency
• Cost savings
• Improved safety
• Enhanced employee morale

Implementing Lean Warehousing Practices

When warehouse managers, logistics coordinators, and continuous improvement managers look to implement lean and continuous improvement within a warehouse, the adage “Rome was not built in a day” applies.

Lean warehouse management is never-ending. It should be seen as a continuous feedback process where incremental improvements are made until substantial savings and waste are eliminated. To help, here is a guideline for implementing lean and continuous improvement within your warehouse.

Step 1: Simplify the Value Mapping Process

Don’t make the all-too-common mistake of trying to capture every possible material handling process within your warehouse Value Map. Focus on the Pareto 80/20 rule where 80 percent of the material handling within your warehouse is driven by the top 20 percent of products or materials your employees handle.

For example, your warehouse is guaranteed to have high-selling products that your warehouse employees are constantly handling and moving – whether that’s receiving, unpackaging, re-packaging, storing, counting, or shipping. Then, there are the lower-selling products where these material handling responsibilities are less frequent.

Identify those high-selling, high-volume shipments your warehouse employees are constantly working with and base your value-stream map on those. There will be plenty of time to address the slower-moving or slower-selling shipments later.

Step 2: Define Your Warehouse Inventory Carrying Costs

A warehouse’s inventory carrying costs typically vary in terms of the types of products or shipments they handle and the industry or market they service. However, for the most part, it’s typically around 3 percent of the value you have on your shelves. However, it can be more.

Defining your specific warehouse inventory carrying costs allows you to zero in on your specific cost drivers. Perhaps obsolete inventory isn’t as much of a waste in your warehouse compared to inventory damage due to poor material handling. Maybe your financing costs aren’t as high as your cost of warehouse employee overtime.

By identifying your specific inventory costs, you’ll have a greater understanding of which costs to focus on.

Step 3: Gradually Adopt JIT Warehouse Inventory Management

Adopting JIT inventory management requires a considerable amount of discipline. It’s not an overnight pursuit and requires flawless synchronization with suppliers and a meticulous approach to inventory management.

Most warehouses run a combination of JIT and other inventory management approaches such as Min/Max. While the goal of JIT is to minimize inventory counts, the reality is that there will always be some materials or parts where maintaining a safety stock is critical.

Again, adopt the Pareto 80/20 rule. Focus on the inventory that has the highest turnover – the inventory that quickly arrives in your warehouse and must leave or be used just as quickly.

Step 4: Kaizen and 5S

Adopting the Kaizen and 5S continuous improvement solutions requires the commitment of all warehouse employees. All must play an active role in making the incremental improvements needed to help reduce costs, eliminate waste, and drive efficiencies.

Make it easy for employees by welcoming their input. This is especially needed during the 5S process where their insight into critical to optimizing a workstation’s layout and function. Encourage initiative by rewarding and acknowledging each improvement made by each employee. Use examples of initiatives that helped to reduce material handling waste and lower costs and always be sure to give credit to those employees who initiated change.

The Role of Material Handling in Lean Warehousing

Every time a warehouse employee receives a shipment, unpacks it, stores it on a shelf, removes it from the shelf, and packages a shipment for customer delivery, they are in essence performing material handling.

How your warehouse employees move inventory from one location to another determines your warehouse’s overall material handling costs. Whether it’s using a pushcart or trolley to move products to shelves or storing essential raw materials, tools, and consumables on flow racks, effective material handling practices go a long way to reducing costs.

The problem facing today’s warehouse managers and employees is the fixed-structure material handling solutions they’re forced to use. Welded carts and trolleys are perfect examples of fixed material handling structures. These structures have portable storage areas and physical dimensions that cannot be changed or adjusted without incurring substantial costs and extended downtime.

Most workstations are also welded or made of unstable materials like wood. Welded material handling structures are not suited to lean warehouse management practices, Kaizen, or 5S. The very essence of these continuous improvement methodologies is to continuously improve – which means making simple and effective changes.

Welded carts, trolleys, material flow racks, and welded workstations are not easily changed or adjusted which makes adopting lean warehouse practices extremely difficult. However, this is one material handling solution that is easily changed, incredibly durable and strong, is much less expensive than welded structures, and is more scalable, modular, and flexible.

How Flexpipe Can Help Material Handling

Flexpipe is a steel tube and joint material handling system whose origins can be traced back to TPS. Yes, the Toyota Automotive company was the originator of this modular and scalable material handling system.

The very same company where lean manufacturing and Kaizen originated from created the same material handling system Flexpipe is built upon. However, back then, Toyota relied on bamboo as opposed to the cold-drawn, high-strength steel used today by Flexpipe customers.

In essence, Flexpipe is a lean tool. It emerged from lean practices.

This simple material handling system empowers warehouse managers and warehouse employees to design, construct, assemble, and change or modify their material handling structures or individual workstations as they choose. Some changes take as little as a couple of minutes to a half hour – while others can take an afternoon. However, it is substantially cheaper and faster to make changes as opposed to trying to make changes to welded structures.

The steel tube and joint system addresses every possible lean warehouse requirement. It’s a customized solution that can be configured to whatever dimension, size, or configuration is needed. It’s scalable in that you can make simple adjustments to increase its functionality.

The Flexpipe solution is also modular, allowing you to create material handling structures of identical size. It is a reusable and renewable solution that you can use to optimize your warehouse. It is incredibly sturdy, robust, and exceptionally strong as structures are made from cold-drawn temperature-treated steel.

Examples of Flexpipe Structures for Warehouses

Top 12 most popular plans to download from the warehousing industry

Endless Material Handling Customization with Flexpipe

Flexpipe Inc. is an innovator, designer, and steel tube and joint material provider for companies needing low-cost, customized, modular, and scalable material handling solutions. Flexpipe is the ultimate lean solutions provider, serving multiple industrial and commercial industries worldwide.

Located in Montreal, Canada, Flexpipe combines its steel tube and joint materials with lean concepts and best business practices to ensure all customers have the necessary tools to implement lean and Kaizen concepts.

To improve your knowledge of lean concepts and approaches, please refer to our Learning section with its eBooks, web training, and lean maker academy.

You can start with Flexpipe’s steel tube and joint material handling system by filling out this sample request. If you have any questions about how to take advantage of our modular and scalable system, contact us now.