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Lean logistics may be founded on well-known principles of identifying and eliminating activities that don’t add value, but what’s in it for the client?

The brilliance of  the Lean concept is in doing more with less. Developed by Taiichi Ohno at Toyota, who initially applied it in the industrial production field as a method to continually improve operations and reduce waste.

Since the middle of the last century, this method, and its offshoots such as JIT (just-in-time manufacturing), has had a huge impact on the business of logistics and how goods flow from manufacturer to end-user.

What is Lean Logistics

In simplest terms, lean logistics refers to the system of identifying and eliminating wasteful activities from the organizational supply chain. The underlying motives being to increase the flow and speed of products, and reduce costs thereby gaining competitive advantage in the supply chain market.

Principles of Lean Logistics Methodology

The objective of lean logistics is to shorten the order cycle time. Ultimately, it’s a constant search for efficiency, which can be broken down into several phases or principles:

Pinpoint activities that add value for the customer

In the warehouse for example, picking operations are divided into various phases. Each of these can be broken down into subprocesses using tools such as value-stream mapping which focuses on highlighting all the tasks that make up a specific process.

Identify waste and opportunities for improvement

In logistics, lost time is often a major component of waste. To efficiently identify these opportunities, it’s essential to standardize tasks, maintain cleanliness and organization throughout an installation.

Create an optimized process flow

Design a new, more effective working method in terms of time spent and measure its impact on service quality. This means doing away with unnecessary tasks identified as wasteful.

Along with organizational changes, this phase can involve investments in new technology or systems that help to eliminate processes that take up extra time and fail to provide value.

Create pull strategies that minimize inventory

No one wants to continually manage static inventory. At any given time, stock held in the warehouse determines a large part of logistics costs.

Pull manufacturing methods, as opposed to push strategies which are based on producing according to sales forecasts, operate on attracting sales first, then swiftly supply the product.

Continue to standardize new processes and maintain change over time

To do this, the involvement and motivation of all workers is key. They have to be provided with the latest training, adopt new habits, and practice these much-needed skills in a fluid process. Once a mindset is set to expect regular change, acceptance of new processes is much easier.

The Fight Against Waste

Let’s look at its characteristics and how it can be minimized. Waste can be classified into four major groups:

1. Storing Excess Stock

The cause is usually linked to excess production, sometimes spurred by inaccurate demand forecasting.

In an attempt to maintain stock supply, “safety stock” inflates the problem and actually “covers up” poor supplier management and/or disorganized material flows.

This leads to increased storage costs due to squandered warehouse space and low-turnover stocks that are seldom replenished.

What’s the solution from a Lean logistics perspective?

Work on the factors you can control (as opposed less predictable factors such as demand forecasting). There are several strategies that can be implemented in the warehouse:

  • Take advantage of Cross-docking, which keeps stock stored to a strict minimum.
  • Use the just-in-time system (JIT), in supplier management and warehouse organization.
  • Shorten lead times – with respect to suppliers and intra-logistics processes. Shorter lead times tend to lessen the problem of being overstocked.

2. Bottlenecks and Wait Times

Lean logistics is based on reducing the difference between execution times (the working time you pay to your employees) and standard times (the time you charge to the customer).

There are various causes usually related to a poorly designed work methods, operator workload imbalances, or incidents left unresolved.

What’s the solution using Lean logistics?

  • Use a WMS – warehouse management system. This specialized software helps process huge volumes of information and organize it by prioritizing process optimization.
  • Measure and monitor each operator’s workload to balance and minimize excess idle time vs overloaded time.
  • Have a preventive maintenance plan for the handling equipment, automated systems, and inevitable equipment failure.

3. Unnecessary Movement

Picking and prep tasks take up the most time in the daily activity of the warehouse. Therefor poorly planned picking lines slow productivity such as wasted trips or extra movements.

What’s the solution using a Lean logistics methodology?

  • Automate load handling to reduce intra-logistics transportation times. Automation also improves safety and achieves excellent results in processes with repetitive movements. Similarly, stacker cranes can work in combined cycles leveraging all movements by carrying loads.
  • Improve order preparation using WMS picking routes feedback in the warehouse. Prioritize goods consolidation or groupage and adjusting times to dispatch schedules.

4. Errors in Processes

Product returns and processes that are unnecessarily repeated add significant waste to operations.

Luckily you don’t have to reinvent the wheel to reduce processing errors. Top firms in the logistics sector (of which many use Lean logistics) are known for combining excellent service with a reasonable price.

How? Mainly two reasons: they frequently get it right the first time allowing them to charge more, plus they’re backed by exceptionally efficient service.

How do you mitigate processing errors using Lean logistics?

  • Analyze the causes for returns. Again, a robust WMS system helps to drastically reduce returns stemming from mistakes in order prep and enhance the overall service quality.
  • Be diligent in identifying incidents that impact timing. This helps eliminate the need to do the work twice or repeat tasks.

The Importance of Lean Thinking

The aim of lean thinking is to instil a mindset of eliminating organizational waste from all processes along with any inventory that is not supporting operational and customer needs.

In practice, Lean Thinking is a continuous cycle of looking for perfection through maximizing product value and eliminating waste. This process ensures that clients do not have to pay for a lack of organizational waste and efficiency.

Alongside the processes in Lean Logistics, Lean Thinking involves four principles that ensure minimal waste:

  1. Value Specification – The value of the customer is specified and incorporated along the entire supply chain network.
  2. Value Stream Mapping – The value of processes along the entire supply chain network are measured. From the perspective of the client, processes are identified that do not add value to the product.
  3. Creation of Product Flow – The valuable processes are incorporated into the system. The factors are minimizing downtime, reducing interruptions and reduction of inventories.
  4. Establishing Customer Demand – Customer demands are given appropriate importance in the manufacture of a product. This demand information is processed and made available in all stages of the supply chain.

The Impact of Lean Thinking On Logistics

Any organization that incorporates the concept of lean thinking into its supply chain management benefits immensely from reduced environmental impact and improved customer service.

This ultimately increases the velocity and flow of the supply chain.

In terms of corporate culture, the lean thinking process emphasizes total ownership cost, rather than focusing on individual factors of cost such as transportation or warehousing.

Since inventory carrying costs usually make up for about 25-40 % of the entire logistics cost, a lean thinking approach relies on a total cost concept and keep the focus on individual cost drivers such as warehousing, transportation and inefficient sourcing practices.

Making important decisions depending on the total ownership cost has a significant impact on logistics as inventory carrying costs usually make up for about 25-40 % of the entire logistics cost. Without a lean thinking approach, organizations disregard this total cost concept and therefor continually deal with individual cost factors such as warehousing, transportation and inefficient sourcing practices.

The Bottom Line on Lean logistics Methodology

The underlying premise of the Lean logistics concept is that, when a customer buys a product, they’re not paying for the inefficiencies that don’t add value to the supply chain. At the same time, this methodology combined with Lean Thinking, aims to eliminate the waste that reduces a logistics company’s ability to be profitable.