Creating the Lean Warehouse: Evolution not Revolution By Robert Martichenko and Chris Luery

Creating a lean warehouse (or distribution center) is not something you accomplish overnight. It takes vision, planning, strategy, tools and tactics. Relative to people, you need to develop team members into problem-solvers and then provide a leadership infrastructure to support their efforts. Identifying and solving problems may seem basic, but experience suggests it can prove elusive in application. The results achieved through your lean efforts can be instrumental in your progress. Improved customer fill rates, decreased inventory levels, decreased inventory carrying costs, improved inventory accuracy, increased asset and team-member utilization are all benefits of lean warehousing.

When Toyota Motor Manufacturing shared its lean manufacturing strategy (known as the Toyota Production System), many realized it had implications as an overall business system and not just a manufacturing system. The principles of lean are now being widely applied, including inside the warehouse. Some of these principles include team-member training and development, standardization, visibility, quality at the source, continuous improvement, waste elimination, visual management, and problem-solving through the Plan, Do, Check, Act Cycle.
To start with team-member training and development, understand that it is people who can identify problems and create sustainable solutions. One of the lean tools that you can give your warehousing people is value-stream mapping. This allows the mapping out of current processes on the floor, to identify waste and see where you can take non-value-added activities out of the value stream. The value stream is simply defined as the flow of activities that add value to the customer. The premise is that you should be doing only those things that add value. All other activities are considered waste and should be eliminated.  
The concept of standardization is also a key lean principle for the warehouse. Standardizing processes creates tasks that are easily repeatable with planned zero waste. The creation of standard work allows your team to understand processes from the point of view of inputs, procedures, timing and outputs. However, creating standard work is not about turning people into robots! It is about creating a baseline from which you can improve. 
Many warehouse operations are a series of manual processes. The unfortunate aspect to this is that people will do the same process in different ways. While this may lead to the same result, it is impossible to improve upon the process in the absence of a standard. Consequently, the lean thinker believes in standard work, as it produces the baseline from which to improve.
Visibility of material flow, inbound logistics, internal warehouse flow, and outbound logistics are critical to the lean warehouse. You need to understand the flow of material and be able to determine if you are supporting the “perfect order”: the right quantity, at the right place, at the right time in the right quality. The lean concept of “visual management” allows you to understand the score of the game (operation) so you can make decisions in real time that impact the overall flow of material to the customer. In facilities where work flow is determined in response to what trucks (or orders) show up on any given day, this will require a change in approach.
Because they rely on manual processes, warehouses need to focus on “quality at the source.” To do so, you must identify and isolate key failure modes or areas of defects. Further, you need to create a quality dashboard to ensure that you can track your improvement in establishing quality at the source and continue to improve upon past results. Focusing on quality at the source in a warehouse environment can be very enlightening. For example, one organization realized they needed to do something about serious errors in picking performance. Once a root-cause analysis was completed in the picking area, the team was surprised at the actual root cause of its problems. While they initially believed it was a training issue, they learned that the real issue was picker interruptions. They learned that picking errors were being made because pickers were being interrupted by other members in the middle of their pick wave. These interruptions made pickers lose track of where they were. The solution was that pickers would wear green-colored vests while picking, and others were not allowed to interrupt them while they wore the vests.
Material flow within a facility is often overlooked. Do you have waste of conveyance taking place because you have not correctly designed the floor layout? Experience has shown in lean warehousing that simply putting your perceived fast runners (“A” items) closest to hand will not necessarily provide the optimal warehouse layout. You need to consider material flow based on stability, as opposed to gross volume. In other words, what items do you pick frequently even though they may not be in large volumes? How have you designed the warehouse to facilitate this flow of stable material?
The lean warehouse is about continuous improvement. Looking at Figure 1  will give you an idea of the key components of a lean warehouse. Tools such as the PDCA (Plan, Do, Check, Act) cycle help us to identify and eliminate waste. What is the plan today? At the end of the day, how do you measure your actual performance to plan? What do you need to adjust to be better tomorrow? Answering these questions is the essence of the lean warehouse. The goal is to create a warehouse where problems are visible and where you fix problems at the root cause every day. Accomplishing this will in fact create the lean warehouse and drive quantum business results.
 
Robert Martichenko is CEO of LeanCor LLC. Chris Luery is Executive, Lean Deployment at LeanCor Canada Inc.