The Fundamentals of Lean Warehouse Practices

Lean manufacturing is a common practice within manufacturing processes that systemically reduces waste and cost while increasing efficiency. While the primary focus of Lean is the production floor, many of the same principles extend beyond to the warehouse. For example, storage of raw materials, subcomponents and finished products is a necessary function for most businesses, however if those tasks are not properly managed they can quickly eat away at profits and compromise customer service.

Managing a warehouse is a complex undertaking with many moving parts, but it doesn’t have to be an uphill battle. This blog teaches you ways to implement lean principles within a warehouse to both enhance productivity and customer service while driving down costs and waste.

The “Plan – Do – Check – Act” (PDCA) model is the structure that drives lean and the framework used here to walk through the steps for designing and implementing lean practices in warehouse environments.

Step One: Plan

Whether the need is to design a brand new warehouse or upgrade an existing operation, the fundamentals of lean warehousing begin well before installing pallet racks, bins and shelving. A thorough plan includes defining the objective, collecting warehouse data and analyzing what story that data is telling you. As you start planning lean practices for your organization, identify which key stakeholders to involve early on. Your distribution partners can collaborate with your operations professionals to assist in the planning, design and implementation of your lean practice as many warehouse fundamentals are their core competency.

Defining an objective for your warehouse is critical. Think of broader objectives you might incorporate beyond materials storage. Some additional goals you could consider include:

• Reducing cost
• Increasing efficiency
• Maximizing space, or
• Enhancing flexibility in warehouse operations

In addition, think of any secondary goals that may be impacted by your primary goals such as establishing a subcomponent kitting/assembly area, wire rack area, cross docking, etc. Once you have your goals clearly defined you can begin collecting and analyzing data.

Within a warehouse, a variety of data points —both large and small— exist that managers can examine to help create a lean plan. Some basic data points you could collect might include average pick ticket time, “A” versus “B” material pick locations, average distance traveled to fulfill pick tickets, number of pick tickets completed daily and dock to stock times. In addition to focusing on pick rates and material positioning, you could also collect data around areas projected for growth or any dead/slow moving materials. In the age of “big” data and the connected enterprise, all of this data should be readily obtainable to help you make an informed decision – though if your organization has gains to make regarding data collection, you may have to spend some time gathering this information manually.

That data around your processes and operations is only one piece of the equation. You’ll also need to collect data about the physical space of your warehouse, including specifications from architectural drawings that might affect storage and material handling. The details should include a physical map of the warehouse showing columns, doors, height restrictions, docks and storage racks. Any external features that could affect the receiving, storage and shipment of materials should also be noted.

Once you have gathered the data you need, you can start to weigh it against the goals you have defined to see how it supports or prevents your overall success. For example, if you find that your average daily pick rate is lower than your target goal you have a clear path that helps your next steps and action items emerge.

After the data surrounding your operations and processes has been collected and analyzed, the next step is to focus on data related to the warehouse layout. Your analysis should be a collaborative effort with your warehouse manager(s), focused on determining if the present state of the warehouse creates any obstacles that might prevent the achievement of your identified lean goals.  If obstacles do exist, an action plan to mitigate them can be created. Be sure to take into consideration any operational downtime that might occur as a result.

On the other hand, if your warehouse audit shows that there are no immediate roadblocks a detailed implementation plan for your new lean processes can be created. Start by process mapping all major functions such as shipping, receiving and line delivery. This step will help provide a common understanding of how each function works across teams, enhancing communication and potentially surfacing any unneeded process steps (waste). In addition to process mapping, you might also consider conducting times studies to determine your pick, pack and ship rates. This can be supplemented with spaghetti diagrams to depict the amount of travel and the routes required to pick an order.

Step Two: Do (Implementation)

When thinking about your implementation plan, start at a high level by identifying major tasks first. Once those tasks have been organized, they can be broken down into a group of required sub-tasks unique to your operation. The implementation plan should indicate when each of these tasks are required to start and finish based on the availability of resources, noting whether the process owner is internal or an outside contractor. The plan should also capture if each task is independent, or if it is dependent on another task. Check the plan to make sure all tasks with dependencies have been correctly linked, including input from process stakeholders where appropriate. Once the implementation plan has been created it should be analyzed against a predetermined timeline to see if the original objectives are attainable with the existing resources. 

To ensure that your new strategy for warehouse layout is accomplished with minimal upset, begin your implementation so there is little to no movement of materials inside the warehouse. An ideal time for this would be during a plant shutdown or even on a weekend if your implementation is smaller in scale and your fulfillment schedule allows for it. However, in many modern warehouses that operate around the clock, implementation without any interruption might not be possible. In those instances, additional warehouse resources may be needed to maintain production and shipping schedules throughout implementation. If this is the case in your warehouse, be sure to factor additional personnel into your implementation plan in advance.

A simultaneous goal throughout implementation should be to ensure all changes being made in the warehouse are captured and replicated in your supporting warehouse management systems. A physical inventory of all products and materials in the warehouse should be carried out immediately following implementation to make sure your systems accurately reflect your stock.

Steps Three and Four: Check and Act (Post-Implementation)

After the new lean layout has been implemented, there should be a regular cadence of audits to ensure the layout is exactly as defined by the approved plan drawings. Every item should be stored according to the overall plan and this should be checked to ensure the layout is correct, particularly if there is an extended training or change management period for warehouse personnel to adopt these new lean processes.

If there are any errors, you’re at risk for picking errors or lost materials within the warehouse. Shipping could also be disrupted if warehouse systems have not been updated accurately with the correct layout information or if items are being stored in the wrong locations.

After the new layout has been implemented, regular checks should be made to ensure that the layout is working and that there aren’t any operational glitches that have occurred as a result. A period of time for the dust to settle is normal following such a major change in process, and making slight adjustments can be helpful in mitigating additional upsets.