There are two key points of survival in this economic climate: saving money and increasing profit. Our guide explains what Lean Logistics is, how Lean Logistics helps, and how to implement it in a distribution or last mile delivery setting to save money and increase profits.
We look at the principles behind Lean Logistics and how they will benefit your logistics infrastructure. We also explore how you can introduce lean initiatives to meet fast-changing consumer demand with a high-quality, low-cost model that delivers faster throughput with lower working capital.
Before there was Lean Logistics, there was Lean Thinking. Lean Thinking was the brainchild of the Japanese automotive industry and was developed in the 1980s. The industry set about eliminating waste from all car manufacturing processes while maximising customer value. It was essentially a mindset of providing value for money for customers while using fewer resources.
The basic structure and process of Lean Thinking were investigated and published in a Lean Thinking research paper created by James P. Womack and Daniel T. Jones and published in the Journal of the Operational Research Society in 1996. Today, you can read the entire Lean Thinking: Banish Waste and Create Wealth in Your Corporation for free on ResearchGate.
Womack and Jones set out the process of Lean Thinking and suggest that Lean can be achieved by following five steps:
- Identify customer value – and add this along the entire supply chain.
- Map out the value stream – including all supply chain processes, to eliminate any process that does not add value to the overall product. This step will help businesses identify where delays are and where there are gaps in processes, restraints, or excessive stock and inventory. Womack and Jones suggest that companies should turn the process on its head and view the process as a product and from the customer’s perspective.
- Create a product flow – leveraging what has been identified to create a lean sequence that delivers the product and minimises inventories, interruptions, and downtime.
- Introduce a just-in-time system – that delivers the product or service just when they are needed, based on customer demand, to minimise on-hand stock and inventory. Just-in-time principles are also known as customer pull systems.
- Pursue perfection – by continually running steps one to four until perfection is achieved. Once you have fixed something, you should fix it again.
The Lean Thinking concept was incredibly successful, and many other industries took note of this. In factories and manufacturing, Lean Thinking became Lean Manufacturing. Supply Chain Management transformed the concept for logistics and last mile delivery companies, who began to introduce the methodologies under the moniker of Lean Logistics.
Key Principles of Lean Logistics
Having digested the five principles of Lean Thinking, it is clear how similar the product or service is to that delivered in logistic and last-mile delivery. The alignment is parallel because logistics infrastructure is very much like a car production line, with one step leading to another.
In logistics and last mile delivery, you should aim to:
- Remove wasteful activity throughout the supply chain
- Achieve better material and inventory management by eliminating excess inventory and stock
- Minimise the transportation of air (transportation vehicles not full to capacity)
- Improve the flow of products so that you can deliver goods and services faster and more efficiently
How do I Implement Lean Processes?
To implement Lean Processes, you must apply the methodology to the whole company and not simply look at the performance of a particular department. You will need to master cross-functional operations, improve teamwork, and optimise product management.
Analyse Your Current Processes & Define The Goal
The first step in the Lean Logistics methodology is to analyse your current processes in the entire life cycle. The goal for logistics and last mile delivery is to eliminate any unnecessary steps in the life cycle that do not add value. You will want to bring different people from your teams together to identify the key roles and actions in each process. You can then begin working towards what the ideal approach would look like.
As you begin to identify waste, you will need to categorise it. The Japanese automotive industry focused on what they call Muda, which translates into uselessness. If we look at waste in terms of something that does not help achieve the goal, then there will be processes that do not add value but are nevertheless necessary. These processes cannot be eliminated and might include testing and quality assurance tasks.
The remaining waste is true Muda, and this uselessness needs to be eliminated. Taiichi Ohno, Chief Engineer at Toyota Production Systems, identified seven wastes which are referred to by the acronym TIMWOOD:
- Transportation – Excessive product movement
- Inventory – Too much stock or inventory
- Motion – Too much movement of people, equipment, or machines
- Waiting – Waiting for inventory, the customer, or for tasks to be completed by another station
- Overproduction – Producing products more than those being used
- Overprocessing – Actions taken by workers that are not required by the customer
- Defects – Defective shipping that results in returns or failure to deliver
These seven wastes include Mura and Muri. Mura means unevenness and occurs if tasks in the life cycle are not evenly distributed. Mura will inevitably put a roadblock in operations, leading to one team waiting on another. Muri means overburden or, in essence, having a workload that is unreasonable or above 100% of capacity.
You can discover the Muda, Mura, and Muri in your logistics or last mile delivery operation in a variety of ways. Gemba walks are one effective tactic and are the action of going to see the actual process so that you can understand how it works, ask questions, and learn about the problems. If you conduct Gemba walks, it is crucial to run these from the perspective of collaboration and finding waste in processes and not people.
It might be that you will time tasks and processes and adjust staff levels up or down to eliminate unevenness. You might be able to tackle unreasonable workloads in an operation by introducing warehouse vehicles that reduce manual handling or removing relentless expenses and time associated with the maintenance of diesel vehicles by introducing more reliable and fuel-efficient electric last mile delivery vehicles.
You can explore the topic in greater depth by reading Kanbanize’s Gemba Walks: Where the Real Work Happens.
Strategise For Savings
Many of the concepts of Lean Logistics and Lean Thinking are like those explored in the Lean Six Sigma Methodology. You can strategise to make savings by gaining a Six Sigma Certification in Logistics.
Six Sigma Methods were developed by Bill Smith at Motorola in the 1980s. The methodology looks at every process that takes products and services from the point of origin to the point of consumption. Following the Six Sigma Methodology, you will aim to reduce the number of defects. Defects are simply costs and the more costs you have in your supply chain, the smaller your company’s profit. By eliminating defects, you will eliminate waste, decrease lead times, improve supply chain flow, decrease inventory costs, and decrease shipping variations.
Returning to Lean Thinking, Womack suggests the following action plan:
- Find a change agent
- Gain knowledge and start with the big picture before addressing smaller steps
- Focus on small wins and obvious problems that don’t require money
- Map and analyse each step of the current state and assess if it adds value or is excessive, and envision the future state
- Begin as soon as possible
- Demand results that everyone will see to create momentum
- Move from a flow state to a pull state
- Reorganise your company buy product and value streams
- Create a Lean Team
- Deal with excess people early
- Create a growth strategy
- Remove draggers
- Create new ways of keeping score
- Create new ways to reward people
- Ensure transparency
- Teach Lean
- Ensure tools in your value stream are appropriately sized
- Pay a bonus and align this with the company’s profitability
- Complete the transformation by converting from top-down leaderships to bottom-up initiatives by perfecting processes instead of searching for brilliant managers
You should inform your decision-making and refine strategies using the Plan, Do, Check, Act (PDCA) methodology. PDCA is essentially a test that checks if taking an action (removing waste) has the desired outcome.
If you follow the principles of Lean Logistics, you will improve your EBITDA, improve your product and customer service, and reduce your environmental impact.