There is an accepted hard-line distinction between manufacturing and distribution: Manufacturers build things; distributors ship things. They're like night and day. So how could a continuous improvement philosophy like Lean Manufacturing cross over to a distribution environment?
The first hurdle: Distributors need to think like manufacturers
In Lean Manufacturing, the best place to start process improvement is at the final deliverable. For a distributor, the final deliverables are the packaged goods they are shipping.
A warehouse's packing and shipping area is their production floor where "final assembly" of the deliverable takes place. This requires certain raw materials in order to "build" their deliverable. These materials can include shipping containers, packaging materials, packing tape, labels – and of course, the saleable goods that are going into the boxes for shipping.
To wit, distributors "manufacture" "boxes of stuff."
The second hurdle: Determine value added and non-value added services
A value added service is anything a manufacturer does to a product between the raw material stage and the final deliverable that adds value from a customer's perspective (i.e., painting, testing, machining).
A non-value added service is anything that adds cost – either in time or money – to a product (i.e., moving a product around a warehouse or shop floor, or any administrative tasks associated with a product).
For a distributor, most of these non-value added services can be listed under the following categories: defects, over-producing, wait time, non-utilized resources, transportation of goods, picker/puller movement, and excessive processing.
Where do we see these wastes in the final assembly area? Here are some examples:
- Defects: Sales orders entered incorrectly- no address or wrong quantities
- Over-producing: Working on more orders than are required to be shipped that day
- Wait time: Packers waiting for goods or shipping containers before assembly
- Non-utilized resources: Only using one packing station when there are two available
- Transportation of goods: Delays caused by ordering packing materials just once a month
- Picker/puller movement: High demand items are not located near appropriate stations
- Excessive processing: Multiple shipping forms or special labeling required for a package
The third hurdle: Optimize "final assembly" for flow
Of all the Lean principles, warehouses usually seem to have their material flow down pat.
The focus needs to be specifically on the packing area – and optimizing the flow of shipping materials AND saleable goods to "final assembly."
Shipping containers and materials need to be located nearby and preferably arranged in the way the container would be assembled.
For example, a high volume distributor might use a simple assembly line as illustrated below:
- The order picker delivers his pick bin to one of the packing stations. The order picker is now free to pick another order.
- The packager grabs the pick bin and a box which was pre built by the box builder. By having the box built ahead of time, the packager doesn't have to stop filling orders. Boxes are stored next to the packing station, eliminating movement.
- Once the box is filled, it moves down a roller conveyor where the package is affixed with appropriate shipping labeling. The roller conveyor helps transport the box without the need for human involvement.
- The shipping inspector includes the packing list and seals the box shut. By incorporating shipping inspection into the assembly line, we eliminate an additional step.
- The box is then placed on the shipping rack, ready to send off. Uh-oh, now we have to wait for our shipping carrier… Is there a better way?
The fourth hurdle: Continually improving your "assembly line"
As we can see from above, there are opportunities for improvement everywhere. Eliminating wait time between having a package ready to ship and when it is actually on the truck is one example. Obviously, having a UPS truck waiting outside, ready to go, would be the best solution. Or, would it?
Other examples of possible improvement involve Lean Manufacturing principles like eliminating batch processing and implementing one piece flow. What if, instead of an assembly line, each order picker was responsible for picking, packing, labeling, and inspecting his own order? Most warehouse don't do this -but, why? What would happen if you tried it?
Lean Manufacturing is a philosophy based on experimentation and continuous improvement. Don't let the name stop your distribution operation from thinking "outside the box."