Guest Post: Lean Logistics: Going Lean is Going Green

Today’s guest post comes from Danielle M.  She has been a dedicated student of Lean Manufacturing methodologies since 2006. It was love at first sight when she read the motto, “Everything has a place; everything in its place” in her first copy of The Toyota Way.

Lean logistics offer a systematic way of managing logistics from when the order is placed until it arrives on a customer’s doorstep. They include a highly detailed organizational approach to managing logistics while cutting out the fat of inventory, fuel costs and middle-man handling. However, there are challenges to this approach to logistics of real world operations with factors, such as natural disasters, social chaos and unpredictable markets, that come into play. Yet companies and technologies have put lean logistics concepts into action with great results.

Challenges in a Lean Transportation System

The transportation industry is expected to see drastic changes in the near future, with the implementation of natural gas and EOBRs. However, according to the lean system of logistics, these changes are vital to the continual operation of the trucking industry. Robert Martichenko, the CEO of the LeanCor Supply Chain Group, notes that transportation is a necessary evil. He states that looking at transportation costs as a separate entity is a fruitless effort. Instead, consider the total logistics cost, which includes purchasing, transporting, warehousing and ordering costs. Martichenko continues by identifying five guiding principles associated with lean transportation including strategy, waste, performance, cost structure and daily event management. For example, by shipping according to customer’s demand, rather than storing products in warehouses until they are requested as does Amazon, lean logistics reduces the amount of work associated with inventory control and warehousing.

Lean Technology

While most in management consider lean logistics in conjunction with manufacturing, technology used for these companies also incorporate lean concepts. For example, the supply and demand giant Amazon has created Amazon Web Services that uses cloud computing to offer infrastructure investment (IT) services and application at a low cost. More importantly, cloud computing allows even the smallest of businesses to create customizable and full-service IT departments using cloud storage and capacity. This cuts out the extra cost associated with hiring and managing an entire IT department in-house. Businesses using cloud computing can purchase only what services they need, such as secure large-scale document housing, temporarily increased bandwidth and expansion of servers. Development and implementation of applications is also streamlined when using cloud services, which allows businesses to reduce the cost and time associated with customizing technology associated with logistics management.

Green and Lean Businesses

Going green for many in the logistics industry is an overwhelming process. Combined with the aspect of keeping with lean logistics, it can seem like an impossible task. However, green and lean are actually very similar, as lean logistics reduces the ecological footprint while streamlining the logistics process. One website focused on operations research with a green and lean foundation is GreenOR. This site offers suggestions for creating greener logistics, such as through energy efficiency, green supply chains, waste flow and renewable energy. For example, through the use a fleet management system such as those offered by Omnitracs, a trucking management team and its drivers are capable of cutting down on fuel costs by creating more efficient routes and by streamlining driving habits. The lean method is evident throughout the use of sustainable logistics methods, such as with the reduction of energy use and the establishment of green supply chains that reduce the amount of waste in the system.

LEGO Showing Lean Like Behaviors

A few weeks ago, Ultimate Factories on National Geographic premiered an episode about LEGO.  My son is a HUGE LEGO fan and seems to have almost the whole LEGO City setup.  So this episode really caught our attention.

My son loved watching the artist/builders design the new Police Station and seeing all the sets being made in the factory.  What caught my attention were the things that seemed lean like.

Here is the full episode.  It is 45 minutes long.  Below are some highlights I picked out with time markers as to where they are at in the video.

(1:15 – 4:10 in video) Right off the bat, the show describes how the artist/builders go about designing a product.  The product manager takes his team out to real life sites of what they want to build to study them.  They look at what the site has and needs to feel authentic.  It is truly direct observation of what the team wants to build.

(6:40 – 10:00 in video) LEGO takes full advantage of standardization as much as possible.  The Police Station turned out to be a 700+ piece set, but none of the pieces are new and require tooling to be made.  Because the designers were able to build the Police Station out of existing pieces they were able to use that budget to design a police dog that is brand new adding to the experience.  My lean lens sees this as cost management in order to reinvest in innovation.  The innovation leads to a better experience and more revenue.

(36:12 – 36:20 in vide0) The video does not talk about 5S but there is some evidence of it.  In this clip, you can see the tape outlines on the floor for the staging of finished product.

(36:20 – 38:10 in video) In the 1990s, LEGO went through a period when sales were declining.  LEGO decided to go and see why this was happening.  They discovered their products were not meeting the needs of the adult customer, which is 50% of their market.  People were hacking the Mindstorm systems and creating bigger sculptures with the robotics.  They didn’t try to shut the hackers down.  LEGO embraced them and created new products.  They still invite customers to come in and help with designs.  They are focusing on customers needs.  Everything starts with the customer.

These are some of the quick examples I picked out.  If you notice, nothing I saw focused on lean manufacturing although I believe I saw some lean like things in manufacturing and distribution too.

I would highly recommend watching the full video because it touches on every aspect of business.   From customer focus to product development to manufacturing to logistics.  It is very complete.  If you are a LEGO fan, this video is a must see.

In the comments below, tell me what you saw from a lean perspective.  What did I miss?

Walmart Changing Transportation Strategy

Walmart has decided to breakdown some of the orthodoxies that it has always had when it comes to shipping product (article here).  No longer will they wait for the supplier to deliver the product to their distribution warehouses.  Now Kelly Abney says,

“…it’s all about squeezing out costs by keeping Wal-Mart’s own trucks busy and by accepting delivery of merchandise at the supplier’s loading dock instead of at a Wal-Mart distribution center.”

This seems like the right thing to do.  Distribution centers are non-value added for the consumer which means they are nothing but a cost (or waste) for Walmart.  Does this mean they won’t have any distribution centers?  The article does not say what it means for the DCs.  My thoughts are there would still be DCs but maybe they need to be smaller because less is going through them saving on equipment, manpower, land, etc…  Also, what is mentioned but now focused on, is Walmart is trying to utilize its resources and not just source out everything and let their resources have waste in their processes.

Abney also says it allows suppliers to,

“focus on what they do best, manufacturing products for us.”

The main reason for this change is Walmart is having a big enough problem with receiving errors at the distribution centers.  Errors like:

“…missing pallets or delayed shipments.”

How does Walmart picking up the goods at the suppliers’ dock help?

“…when a Wal-Mart driver picks up a load at a supplier’s loading dock that same driver will have to scan each pallet’s RFID tag as it’s loaded. The driver will then transmit the data so it can be matched up in real-time with EDI documents that specify what’s in the shipment. Sending that data ahead doesn’t just give Wal-Mart the inventory information a few hours earlier. It gives the retailer the chance to have unpleasant inventory surprises corrected in minutes at the supplier’s loading dock, not days later.”

I like the concept.  Quicker feedback into the loop.  I still have a lot of questions though.  It is great that the problem is identified right away, but what if they don’t have the correct product or remaining amount available?  Is the data collected by the driver given to the supplier after every pickup so the supplier can track trends in types of errors in order to problem solve?

Once the pallets are on the truck, Wal-Mart also gains complete control over when that truck will arrive at the distribution center. Such knowledge creates much more predictability for arrival times, which in turn produces better scheduling options for the loading dock. It also means faster turnaround times. And, stores will know what they’re getting, and when.

Predictability is something that lean organizations strive for.  It creates less waste in resource availability.  Once this is accomplished, Walmart could take the next step in leveling the flow of trucks throughout the network.  I would bet by owning their own trucking and creating predictability they will create more savings then they even realize.