Lead and Mean
Anyone who has ever tried to lose weight knows that "going on a diet," which amounts to a temporary lifestyle change, doesn't work in the long run. Real weight loss requires a behavioral change, modifying how you do things, from the way you eat to how often you exercise.
The same holds true for companies attempting to establish lean logistics operations. To achieve true lean logistics, you have to make big changes and then maintain those changes.
"One difficulty with lean-based improvement programs is that lean is always assumed to be better," says Ed Frazelle, PhD, president and CEO of Logistics
Resources International in Atlanta . That's not necessarily true, he says. "In some cases, more inventory is required to optimize customer service levels. In some cases, goods should be moved less frequently in larger quantities to offset high transportation costs. In some cases, goods should be purchased in large, bulk quantities when a special opportunity to procure arises and obsolescence is not a high-risk or cost factor."
Lean logistics, then, isn't for everyone. Nor is a one-size fits all approach applicable. But if it is right for your organization and you can put it into practice correctly, you stand to make substantial improvements.
The basics
A couple of years ago, Solectron Corp., based in Milpitas , Calif. , was searching for a way to differentiate itself from its competitors. An electronics manufacturer whose customers include companies like Cisco Systems and Hewlett-Packard, Solectron was impressed with the lean approach that Toyota had adopted in the automotive industry. "We had a vision of becoming the Toyota of the electronics industry," says Ravi Ramanan, vice president of functional excellence. "Lean is a key competency around which we position everything."
Solectron's goal of becoming a lean operation meant that every facet of its supply chain would need to "slim down." "It's an evolutionary process and logistics and warehousing are a part of our approach to the overall supply chain," says Ramanan. "We treat manufacturing and logistics as a whole, making it seamless to our customers."
The general principles of lean, says Frazelle, include the following:
* Reduce setup/purchase order costs
* Reduce cycle times
* Increase operating flexibility
* Reduce/eliminate errors
* Use demand data to pull inventory
* Reduce/eliminate operating variability
* Move goods more frequently in smaller quantities
* Improve operating efficiency
* Reduce inventory
The goal, says Frazelle, "is to take time, cost, mistakes and variability out of an activity. Lean philosophy combines many of the concepts of JIT and cycle-time reduction," he explains. "Since it is based on a set of general principles-the same principles found in many pull-based supply chain improvement programs-lean principles can be applied in many industry settings."
Slimming down
Solectron began its lean approach with its manufacturing operations. "We optimized and improved manufacturing, and then we connected our other operations to the philosophy," says Ramanan. "We have eliminated waste and now mandate that every company activity adds value to our customers."
The company has laid out five key principles that guide its approach to lean:
Value: Understanding the value of the work the company performs by defining it as something that its customers want to pay for.
Value chain: Mapping the process steps that the company performs throughout the supply chain-identifying the steps that add value and striving to eliminate those that add waste.
Pull: Eliminating the primary source of waste-overproduction-by only producing what customers want, when they want it. This means starting production only when the customer "pulls."
Flow: Removing other major sources of waste-bloated inventory and waiting-by ensuring that goods flow continuously through the supply chain and never stop.
Kaizen/continuous improvement: Striving for the total elimination of waste through a succession of small, action-oriented (kaizen) events within the production process.
Ramanan says that the team determined that it wanted lots of product visibility in the DC, with "no cardboard boxes." The DC operates in a first-in, first-out (FIFO) environment and all of the products are arranged according to the frequency with which they are pulled. Because of this product visibility, the DC has been able to eliminate any dependence on software-with the exception of a database to order their materials. "Instead, we are hardware dependent," says Ramanan. "We keep our inventory so low that we don't need to stay on top of it."
Ramanan says that the approach has proven successful. "We've created a standard of work and have empowered our people to achieve it," he explains.
The results support Ramanan's claims. Before the company began its lean approach, it turned inventory 6.7 times annually. Now turns are over 8 and Ramanan hopes to improve that to 12. In addition, the company has been able to reduce its warehouse space by more than 100,000 sq. ft. It ships smaller shipments more frequently than in the past, changing the type of transportation Solectron uses to less-than-truckload.
Focusing on internal operations initially, Solectron has moved on to include its key suppliers in its lean approach. The company hopes that this step will lead to collaboration that will take customer service up another notch. "This is a journey, not a fly-by-night process," says Ramanan.
For other companies considering a move to lean logistics, Ramanan offers this advice: "Make sure you have proper leadership and support at the highest level," he says. "Leadership right up to the CEO level must be 100 percent committed to the process." Once that buy-in is there, build a small but dedicated team to help support the effort, says Ramanan. "Your kaizen team should be where the value is added," he explains. "Everyone should be working toward a fundamental goal."
When pulled off successfully, the sky is the limit, says Ramanan. "You can improve so much," he says. "But you have to build a vision and have the courage and tenacity to see it through."
The same holds true for companies attempting to establish lean logistics operations. To achieve true lean logistics, you have to make big changes and then maintain those changes.
"One difficulty with lean-based improvement programs is that lean is always assumed to be better," says Ed Frazelle, PhD, president and CEO of Logistics
Resources International in Atlanta . That's not necessarily true, he says. "In some cases, more inventory is required to optimize customer service levels. In some cases, goods should be moved less frequently in larger quantities to offset high transportation costs. In some cases, goods should be purchased in large, bulk quantities when a special opportunity to procure arises and obsolescence is not a high-risk or cost factor."
Lean logistics, then, isn't for everyone. Nor is a one-size fits all approach applicable. But if it is right for your organization and you can put it into practice correctly, you stand to make substantial improvements.
The basics
A couple of years ago, Solectron Corp., based in Milpitas , Calif. , was searching for a way to differentiate itself from its competitors. An electronics manufacturer whose customers include companies like Cisco Systems and Hewlett-Packard, Solectron was impressed with the lean approach that Toyota had adopted in the automotive industry. "We had a vision of becoming the Toyota of the electronics industry," says Ravi Ramanan, vice president of functional excellence. "Lean is a key competency around which we position everything."
Solectron's goal of becoming a lean operation meant that every facet of its supply chain would need to "slim down." "It's an evolutionary process and logistics and warehousing are a part of our approach to the overall supply chain," says Ramanan. "We treat manufacturing and logistics as a whole, making it seamless to our customers."
The general principles of lean, says Frazelle, include the following:
* Reduce setup/purchase order costs
* Reduce cycle times
* Increase operating flexibility
* Reduce/eliminate errors
* Use demand data to pull inventory
* Reduce/eliminate operating variability
* Move goods more frequently in smaller quantities
* Improve operating efficiency
* Reduce inventory
The goal, says Frazelle, "is to take time, cost, mistakes and variability out of an activity. Lean philosophy combines many of the concepts of JIT and cycle-time reduction," he explains. "Since it is based on a set of general principles-the same principles found in many pull-based supply chain improvement programs-lean principles can be applied in many industry settings."
Slimming down
Solectron began its lean approach with its manufacturing operations. "We optimized and improved manufacturing, and then we connected our other operations to the philosophy," says Ramanan. "We have eliminated waste and now mandate that every company activity adds value to our customers."
The company has laid out five key principles that guide its approach to lean:
Value: Understanding the value of the work the company performs by defining it as something that its customers want to pay for.
Value chain: Mapping the process steps that the company performs throughout the supply chain-identifying the steps that add value and striving to eliminate those that add waste.
Pull: Eliminating the primary source of waste-overproduction-by only producing what customers want, when they want it. This means starting production only when the customer "pulls."
Flow: Removing other major sources of waste-bloated inventory and waiting-by ensuring that goods flow continuously through the supply chain and never stop.
Kaizen/continuous improvement: Striving for the total elimination of waste through a succession of small, action-oriented (kaizen) events within the production process.
Ramanan says that the team determined that it wanted lots of product visibility in the DC, with "no cardboard boxes." The DC operates in a first-in, first-out (FIFO) environment and all of the products are arranged according to the frequency with which they are pulled. Because of this product visibility, the DC has been able to eliminate any dependence on software-with the exception of a database to order their materials. "Instead, we are hardware dependent," says Ramanan. "We keep our inventory so low that we don't need to stay on top of it."
Ramanan says that the approach has proven successful. "We've created a standard of work and have empowered our people to achieve it," he explains.
The results support Ramanan's claims. Before the company began its lean approach, it turned inventory 6.7 times annually. Now turns are over 8 and Ramanan hopes to improve that to 12. In addition, the company has been able to reduce its warehouse space by more than 100,000 sq. ft. It ships smaller shipments more frequently than in the past, changing the type of transportation Solectron uses to less-than-truckload.
Focusing on internal operations initially, Solectron has moved on to include its key suppliers in its lean approach. The company hopes that this step will lead to collaboration that will take customer service up another notch. "This is a journey, not a fly-by-night process," says Ramanan.
For other companies considering a move to lean logistics, Ramanan offers this advice: "Make sure you have proper leadership and support at the highest level," he says. "Leadership right up to the CEO level must be 100 percent committed to the process." Once that buy-in is there, build a small but dedicated team to help support the effort, says Ramanan. "Your kaizen team should be where the value is added," he explains. "Everyone should be working toward a fundamental goal."
When pulled off successfully, the sky is the limit, says Ramanan. "You can improve so much," he says. "But you have to build a vision and have the courage and tenacity to see it through."
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