Warehousing and Distribution: Reducing Warehouse Costs - Essay Example

  Year: Warehousing and Distribution Warehouse and distribution professionals are today faced with a great challenge of reducing warehouse costs while maintaining the rising level of customer satisfaction and quality. Studies show that lean organizations are able to cut costs incurred from warehouse operations. Lean and quality management approaches are not a new concept. Manufacturing organizations have used this approach to eliminate waste and increase quality in their production. The service industry has also slowly embraced the concept so that to better their service to their customers. Continuous improvement, on the other hand, is based on the lean and quality management approach. It is essential to understand this three approaches and how their application in a warehouse can help improve its operations. This paper will discuss, in detail the differences among these three approaches. The paper will highlight several definitions of the three approaches and point out the differences. This essay will also review how the application of lean principles in a warehouse can improve its operations. Introduction This essay will start by defining what continuous improvement is. It will give an overview of continuous improvement and a brief history of the concept. It will further define quality management and lean approach and compare this approach to continuous improvement in a warehouse or a distribution centre. It will give a detailed comparison between the quality management and lean approach versus continuous improvement. The essay will then discuss how lean principles can be applied in a warehouse or distribution centre. It will seek to define what lean principles are and what causes waste in the warehouse. The essay will focus on how the application of these lean principles improves processes used in a warehouse. What is continuous improvement? Deming (2000) defines continuous improvement as a long-term approach to work aimed at achieving small, incremental changes in processes so as to improve efficiency and quality. Continuous improvement is also referred to as Kaizen. It is a constant, deliberate effort by an organization to better its information, products, services or processes. For an organization to attain the desired effect of continuous improvement, the changes have to be totally incorporated with a commitment to making them last. An organization should also hire the right personnel or train existing ones how to improve the process. Kaizen is a Japanese word that means change for the better but when translated to English, it means continuous improvement. Dr. W. Edwards Deming is highly credited for the philosophy behind Kaizen that was put into practice in Japan after the World War II. Define and compare a quality management and the Lean approach to continuous improvement Quality management as described by Lysons & Farrington (2006) is a concept of constantly improving the quality of delivered goods and services through participation of all levels and functions of an organization. It is an approach that regularly searches for ways of improving quality and performance that will not only meet but exceed customers’ expectations. According to Womack, Jones & Roos (2007) lean approach is about eliminating waste or any human activity that soaks up resources but creates no value. The goal of lean approach is to create more value with less work. In warehousing, Ackerman (2007) emphasizes that lean approach is about waste reduction, improving productivity, increasing space utilization and meet increasing customer demands. Lean distribution aims at increasing productivity of a warehouse or distribution centre. In quality management and lean approach, it is about doing more with fewer resources and less waste. Comparison between quality management and lean approach to continuous improvement Quality management and lean approach is a culture on which continuous improvement is based on. This culture aims at developing employees’ ability to work together in improving the quality. Top management has to instill this culture by helping workers to develop a mindset that embraces the approach. Continuous improvement, on the other hand, is a process with small, frequent improvements over a long period. Continuous improvement stresses on continuous steps as opposed to giant leaps. Imai (1986) Continuous improvement focuses on improving a process at a time whereas, quality management and lean approach takes a holistic look that considers the interaction of each process. Kaizen breaks down the bigger picture painted by the lean approach and help a distribution centre to attain it a process at a time. Continuous improvement mainly focuses on the operations of a distribution centre to ensure each process is done faster. Groups of individuals within an organization study a process to determine ways of eliminating waste and improve the flow of work. Regan (2000) Lean and quality management approach involve the whole organization where top management sets the pace and commitment to change. Author of Vision Magazine (2005) affirms that commitment must start with the top executives if a company is truly to adopt this approach. Top management should offer effective leadership which is essential when implementing lean techniques. Continuous improvement can start at any stage and involves individuals or small teams at a time. Continuous improvement occurs as the processes are repeated in line with the standard operating procedures set by top executives. Improvements should be repeatable such that everyone can follow and maintain them as they are continually improved. The risk involved in adopting the quality management and lean approach is higher than adopting the continuous improvement approach. The risk is brought by the fear of change. Change causes mixed reactions from employees who may resist it. According to the author of Vision Magazine (2005), adapting to lean warehousing entails considerable change in the warehouse operations, plus a commitment at each level of the organization to always be looking for ways to do things faster, better, with fewer errors and minimal waste. In quality management and lean thinking, results are recognized by the ability of a warehouse to deliver quality products or services on time with minimal waste. Speed increases customer satisfaction, and with such performance, an organization remains abreast in the market. George & Rowlands (2005). Internally, the approach saves time for employees’ that is otherwise wasted in locating stores in the warehouse. This is made possible by storing all stores in the “golden zone” or right address location. Continuous improvement is recognized by the efforts put into bettering the processes one at a time. These efforts look for small improvements over a period of time or larger ones and make the changes. This improves customer value and reduce non value adding activity thus reducing costs, increasing delivery velocity and remaining competitive or relative in a changing global environment. Imai (1986) Provide evidence as to how Lean principles may be applied to improve processes within a warehouse or distribution centre. Lean principles are methods or systems that warehouses initiate in order to improve standardization, reduce costs and increase productivity while improving quality and customer satisfaction. The principles are applied in a warehouse or distribution centre to improve system performance and reduce inventories. Any warehouse or distribution centre worldwide has processes that it follows in order to accomplish its work. Abilla (2010) describes a standard process as purchasing, order management or order fulfillment, receiving, inventory management, and shipping. Studies (2011) show that Toyota Japan had to identify the 7 wastes and their implication in their production line so as to develop and apply the lean principles in their manufacturing and warehouse. The 7 wastes include defects, inventory, processing, waiting, motion, transport and overproduction. In order to reduce the above wastes, the following lean principles can be applied by a warehouse or distribution centre. Through the pull system, a warehouse should only produce stock as per the customers demand and not for buffer stock. This reduces overproduction which ties up material resources and valuable labor that may be used to respond to customer demand. This principle encourages warehouses or distribution centers to only hold materials that they can manage through the use of just-in-time production. Work place organization or 5S as a tool has helped lean warehouses to organize and standardize the workplace. This tool can be applied to every function within the distribution centre. This principle helps warehouses organize people and operations in such a way that the flow of work would be smooth. A smooth flow of work eliminates waste in terms of time and space. Proper organization of people and operations improves communication and allows for better use of people. The principle of visual controls offers an understanding of a situation through the use of ordinary signals displayed within a warehouse. These controls are usually worker managed and self regulating enabling anyone walking through a warehouse know the inventory levels, quality and the workflow. Kanban is a method used to maintain an orderly flow of materials within a distribution centre. It uses cards to show material order points, how much is needed and where it ought to delivered. An orderly flow of materials enables a distribution centre manage its time effectively, handle more materials and remove barriers to productivity. Total quality management is another principle used in warehouses to improve the processes. The application of this system is used to constantly improve all function areas of a warehouse and recognizes every employee’s strength. As discussed earlier, this principle is a continuous process. Top management creates a conducive environment that ensures success, employees are trained on concepts of quality while the focus is maintained on attaining customer satisfaction. Point-of-use-storage principle is used to reduce transportation waste. This principle dictates that materials are to be delivered to the location where they are to be used. This helps to cut down on the transportation costs that may be incurred if the raw materials have to be taken to a warehouse house first. If materials cannot be transported directly to the location, those in the warehouse should be moved as efficiently as possible. Conclusion The business environment is constantly changing and for any business to remain relevant it has to embrace change. A warehouse with efficient operations is the key to making profits, sustaining and growing an enterprise. The service industry is currently experiencing the same challenges witnessed by manufacturers. They are challenged to improve response time and increase productivity all at lower costs, improve quality and customer satisfaction. If a warehouse or a distribution centre is unable to attain the above, it will soon be out of business. The three approaches, quality management, lean principles and continuous improvement have to go hand in hand for an organization to truly be effective in its operations. Application of these approaches is a never-ending task. A warehouse should be able to continuously link its value chain so as to reduce costs. A lean warehouse enjoys benefits such as operational improvements where lead time is reduced, and productivity is increased. Administrative benefits include streamlined customer service and reduced staff demands. Strategic improvement as a lean benefit helps a distribution centre to increase its market share if well handled. Lean warehouses are more responsive to market trends, deliver their services faster and offer their services less expensively compared to non-lean ones. References Deming, WE 2000, Out of crisis. Publisher: The MIT Press, Cambridge Womack, JP, Jones, TD & Roos, D 2007, Machines That Changed the World: The Story of Lean Production – Toyota’s Secret Weapon in the Global Car Wars That is revolutionizing World Industry. Publisher: Simon and Schuster, New York Regan, MD 2000, The Kaizen Revolution: how to use kaizen events to double your profits. Holden Press, North Carolina Imai, M 1986, Kaizen: The Key to Japan’s Competitive Success. Publisher McGraw Hill, New York Lysons, K & Farrington, B 2006, Purchasing and Supply Chain Management, Publisher: Pearson Education Limited, Essex George, M L & Rowlands, D 2004, The Lean Six Sigma Pocket Toolbook: A Quick Reference Guide to 100 Tools for Improving Quality and Speed. Publisher McGraw Hill, New York Ackerman, K 2007, Lean Warehousing. Ackerman Publishers, Columbus Abilla, P 2010, Warehouse Management Metrics. Retrieved from http://www.shmula.com/warehous-management-processes Kilpatrick, J 2003, Lean Principles: Utah Manufacturing Extension Partnership. Retrieved from http://mhc-net.com/whitepapers_presentations Blascovich, JD 2010, Taking A Lean Approach To Warehouse Management Logistics Vision Magazine, Volume 2-1, 2005 Read More