Applying Lean Concepts in a Warehouse Operation

Frank C. Garcia, P.E.

Director, Business Solutions & Engineering Services
Advent Design Corporation
Bristol, PA, USA

1. Introduction
This presentation shows how a warehouse operation can be improved using lean concepts and techniques.
Warehouse improvement requires optimizing material flow, order picking, replenishment, and dock operations.
Although many traditional lean techniques maybe difficult to apply, the concepts of improving material flow and
eliminating waste can be used to make significant improvement in warehouse lead time.

Many lean practitioners consider the term warehouse and lean to be mutually exclusive. However, regardless of how
fast inventory is turned, warehouses will always exist to allow a company to deal with variations in customer
demand. The key is to reduce the non-value added steps in the warehouse as much as possible and to improve
velocity and flow. Implementing a lean warehouse starts with value stream mapping. After the current state value
stream map is created, improvements can be easily developed to eliminate extra material handling, excessive travel
time, and time spent looking for products. Various lean improvement techniques such as material flow analysis,
quality improvement, and application of the 5Ss can be used. A warehouse improvement example is presented to
show how warehouse lead time, order picking time, and material handling can be reduced by 50% using lean
concepts.

2. Evaluating the Warehouse

Over the past few years the production areas have been upgraded without a corresponding enhancement of the
warehousing activities. Companies are now experiencing problems with the warehouse and distribution areas
keeping pace with the product as it is received from the various processing areas. Space utilization, material
handling, and data collection are just some of the challenges that arise. There has been a trend of increased labor to
support the warehousing requirements.

Where do you start? In order to understand where to start the implementation of lean concepts in the warehouse, one
of the most useful tools is the value stream map. The value stream is the set of all specific actions, both value added
and non-value added, that are needed to take a product through the information and production flows of a
manufacturing operation (1). The value stream map follows the production path from beginning to end and shows a
visual representation of every process in the material and information flows The maps show the linkage between
information flow and material flow for a product family. Most times the warehouse shows up on a value stream map as
simply an inventory triangle and shipping. This makes it difficult to evaluate the waste that is occurring within the
warehouse. It is necessary to show the process within the warehouse including operations such as receiving, palletizing,
putaway, order picking, order staging and preparation, truck loading, and shipping. A concept warehouse value stream
map is shown in Figure 1.
 Simplified Warehouse Value Stream Map

Orders Orders
Production and
Suppliers Inventory Control Customers

Schedules Orders

Production Shipping
Warehousing

Lead Time

Figure 1

3. Warehouse Value Stream Map

The current state value stream map shows how the warehouse currently operates and serves as the foundation for the
future state changes. The map starts with the shipping area and works back through the warehouse process to the
production area and to the suppliers. You need to start with one product family otherwise the map will be too
complicated. It is also useful to track a product family order through the warehouse operation.

The production control information flow is shown to determine how the warehouse processes are being scheduled
and controlled. At the bottom of the map, the total process time and lead time are calculated for a typical product
family unit or order. Figure 2 shows a completed warehouse current state map.

The current state value stream map serves as the starting point for developing the future state. The current state
value stream map shown in Figure 2 revealed a number of opportunities to reduce lead time and processing time in
the warehouse, including the following:

• reduction in material handling time in order picking, putaway, and palletizing

• reliability issues with the strapping and metal detection machines
• reduction in truck loading time
• reduction in time spent checking inventory location and aging

Using the current state map, the goal in developing the future state map is to make the flow continuous and to
eliminate as much waste as possible. Lead time is shortened as much as possible by implementing lean techniques.
The flow in the future state map is built around the takt time, or how frequently a unit must be completed to meet
customer demand. Takt time is simply the available working time per shift divided by the rate of customer demand
per shift.
 Warehouse Current State
Value Stream Map
Blanket Orders with Daily
Releases; Supplemented with
Open Market Purchases

Blanket Orders Production

Spices and Packaging Randomly Placed Various
Hogs with Weekly or and Inventory Control
Smokehouse Materials Orders (Various Sizes) Customers
Bi-Weekly Releases (Computer System)
Materials

Demand:
Daily
131 to 242 orders per day
Production
Avg: 167/day
Schedule
1 to 2 pallets/order
Daily Weekly or Weekly or 15 to 17 orders per truck
Bi-Weekly Bi-Weekly Aging
(about 400) Daily Shipping Orders 12 to 13 trucks per day
Report
& Freezer Release (5PM) 1 route per truck

Smokehouse Operations

Smoke Wrap & Pack

Off-Site Freezer Storage Daily
Shipments
Smoked (12 to 13 routes)
Products
I I
Multiple Multiple
1, 578K lbs
Operators Operators Conveyor
Staging

Kill & Cut Wrap & Pack Metal Detection Strapping Palletizing Order Picking Order Checking Shipping
& Storage & Scanning
1 to 2
1 to 2
Cut Products Cut Products 1 to 2 pallets 1 to 2
pallets
I 1 to 2
Pallets
1 to 2 I pallets I per order I pallets I per order
Multiple Multiple Pallet 6 to 8
Operators Operators Conveyor Conveyor Rack Staging Staging
3 People People 2 People 2 People
Staging Staging Storage Palletizing for Trucks
10 cases 10 to 15 C/T = 7 sec 775 C/T = 10 - 35 & Dock C/T = 15 min 2 orders C/T = 4 hours
C/T =2 sec C/T = 2 sec
cases per case or 10 positions; minutes 6 orders C/O = 0 min (4 pallets) C/O = 0 min
C/O =2 min C/O = 1 min
min per pallet 7 reefers; C/O = 0 min (12 pallets) Rel. = 85% Rel. = 85%
Rel. = 95% Rel. = 80%
C/O = 0 min 610K lbs Rel. = 85% Avail. = 16.5 hrs Avail. = 16.5 hrs
Rel. = 85% Avail. = 49.5 to
Avail. = 24.8 66 hrs (2 shifts)
Order Lead Time 3.7 to 6.1 Days hrs (2 shifts)
Order Processing Time: 6 Hrs 30 seconds 5 sec 6 minutes 2.9 to 5.3 days 20 minutes 15 minutes
Takt Time: 3 to 4 minutes (Freezer storage:
40 seconds 40 seconds 20 minutes 6.7 to 14.5 days) 35 minutes 10 minutes 4 hours

Figure 2

Figure 3 shows the future state map after improvements have been implemented in the warehouse shown in Figure
2. The process steps and information flows highlighted in red show the improvements from the current state map.
Some of the improvements are as follows:

• new ergonomically designed palletizing station that reduces wasted motion and errors
• accurate labeling and zoning of the warehouse racks to reduce time spent looking for products
• use of barcode cases labels to track all cases and pallets in the warehouse
• re-organization of the rack storage to place high moving products on lower rack levels and closer to the
shipping dock
• use of radio frequency bar code scanners and a warehouse management system (WMS) to obtain real time
inventory data and pick sequences to reduce order picking time and errors. Figure 4 shows a process flow
diagram of this improvement.
• reduction in warehouse job categories and extensive cross training

The lean improvements, implemented in this warehouse, reduced order processing time by 50% and lead time by
25%.
 Warehouse Future State
Value Stream Map
Blanket Orders with Daily
Releases; Supplemented with
Open Market Purchases

Blanket Orders Production

Spices and Packaging Randomly Placed Various
Hogs with Weekly or and Inventory Control
Smokehouse Materials Orders (Various Sizes) Customers
Bi-Weekly Releases (Computer System)
Materials • Aging Data

Demand:
Daily 131 to 242 orders per day
Production Avg: 167/day
Schedule 1 to 2 pallets/order
Daily Weekly or Weekly or 15 to 17 orders per truck
Bi-Weekly Bi-Weekly Bar Code Scan Bar Code Scan 12 to 13 trucks per day
(about 400) Daily Shipping Orders
Warehouse Input Inventory Updates 1 route per truck
& Freezer Release (5PM)

Smokehouse Operations

Smoke Wrap & Pack

Off-Site Freezer Storage Daily
Shipments
Smoked (12 to 13 routes)
Products
I I
Multiple Multiple
1, 578K lbs
Operators Operators Conveyor
Staging

Kill & Cut Wrap & Pack Metal Detection Strapping Palletizing Order Picking Order Shipping
& Storage Verification
1 to 2
1 to 2
Cut Products Cut Products 1 to 2 pallets 1 to 2
pallets
I 1 to 2
Pallets
1 to 2 I pallets I per order I pallets
FIFO per order
Multiple Multiple Pallet 6 to 8
Conveyor Rack
Operators Operators Conveyor 3 People People Staging 2 People 2 People
Staging Storage
Staging Dock
10 cases 775 positions;
30 to 50 C/T = 7 sec C/T = 10 to 15 2 orders C/T = 10 min C/T = 2 hours
Gap cases C/T =2 sec C/T = 2 sec Locator system,
cases per case or 6.8 minutes (4 pallets) C/O = 0 min C/O = 0 min
C/O =2 min C/O = 1 min A items on first
3 separate Zones min per pallet C/O = 0 min Rel. = 85% Rel. = 85%
Rel. = 95% Rel. = 90% tier, additional
Bar code scan C/O = 0 min Rel. = 85% Avail. = 16.5 hrs Avail. = 16.5 hrs
rack above
Rel. = 85% Avail. = 49.5 to
palletizing
Avail. = 24.8 66 hrs (2 shifts)
610K lbs
Order Lead Time: 3 to 4.9 Days hrs (2 shifts) Scan bar codes
Order Processing Time: 3 Hrs 30 seconds 5 sec 6 minutes 2.6 to 4.5 days 15 minutes
Takt Time: 3 to 4 minutes (Freezer storage:
40 seconds 40 seconds 13 minutes 6.7 to 14.5 days) 20 minutes 8 minutes 2 hours

Figure 3
 FUTURE STATE ORDER PICKING FLOW

FRESH SMOKED FROZEN

Warehouse Management System (WMS)

GET PICK GET LOAD
LIST PATTERN
Truck Route Wave Pick

LOCATE PALLET
IN WAREHOUSE LOCATE PALLET
IN DOCK RACKS
• MOVE PALLET

Warehouse Management SCAN

System (WMS) LOCATION REPEAT
UNTIL
ORDER
COMPLETE
PICK
Warehouse
• CASES 95% OF TIME CASES OR
Management
PALLETS
Next location System (WMS)
• MOVE PALLET

Warehouse Management SCAN

System (WMS) CASES

STORE
PALLET

• PALLETIZING STAGE
AREA ORDER
• DOCK
• MOVE TO INSPECTION

CHECK
ORDER

Warehouse
Management VERIFICATION
• TRUCK ROUTE
System (WMS) SCAN
Truck Route

• MOVE TO TRUCK
LOAD
TRAILER

Figure 4

4. Implementation and Planning

When the warehouse future state value stream map is completed, an implementation plan must be developed to convert
the current state into the future state. Once the improvements are identified, a time-sequenced list of improvement
projects can be made. A brief goal and the expected improvement should be show for each project. The projects should
be given a relative priority so that the most important projects can be scheduled first. The plan should be established to
complete the majority of the projects within three to six months. A number of the improvements in the case study fell
into this category. Organizing the warehouse improvement projects in this manner can make it easier to include them in
the capital planning process if new process equipment is required. Some of the improvements in the case study require
warehouse expansion which will take a year or more to plan and to get final management approval. The financial
benefits of implementing the warehouse improvements shown on the future state value stream map can also be
calculated, including an estimated payback period.
5. Summary
Lean concepts can be successfully applied to a warehouse environment. Value stream mapping can be a valuable tool
for developing and implementing warehousing lean improvement projects. The process of creating the value stream
map helps to train the warehouse team on lean techniques and to reveal opportunities to reduce waste. Some of the
traditional lean techniques such as cellular manufacturing and setup time reduction may not be applicable to most
warehouse environments. However, once the value stream map has been developed, the waste in the warehouse process
can be easily identified and eliminated using
• improved order processing and tracking
• reduced material handling
• improved inventory organization
• cross training
• quality tracking

Using lean concepts can lead to significant reductions in warehouse order processing time and lead time while
improving inventory and order processing accuracy.

Biographical Sketch
Frank C. Garcia, PE
Advent Design Corporation, Bristol, PA
Partner and Director, Business Solutions & Engineering Services

Mr. Garcia, a registered professional engineer, served seven years in the U.S. Navy submarine force after graduation
from the U.S. Naval Academy. After completing his military service, he obtained his Master of Engineering in Industrial
Engineering from the Rochester Institute of Technology. In addition, he has 14 years of varied industrial experience in
engineering, quality assurance, and operations management. He has worked for Mobil Chemical Company, Burroughs
Corporation, Spectra Graphics, and the Department of Defense. His experience includes planning and implementing
plant expansions in manufacturing, warehousing and materials handling systems. He has been responsible for Quality
Assurance and Customer Service for multi-plant operations; engineered, justified and installed major manufacturing
equipment systems; and has successfully managed manufacturing operations with staffing into the hundreds.

As a manufacturing engineering consultant for the past 14 years, Mr. Garcia has worked and managed projects involving
material handling improvements, plant layouts and relocation, packaging line design and installation, and quality
improvement. He has been involved with many lean manufacturing implementations involving setup reduction, cellular
manufacturing, and value stream mapping. He has assisted in the development of manufacturing improvement strategies
for national and international companies. His projects have been in the chemical, food, pharmaceutical, electronics,
defense, and consumer products industries.

Mr. Garcia is a senior member of the Institute of Industrial Engineers (IIE) and American Society for Quality (ASQ). He
is also a certified Systems Integrator (IIE), Quality Engineer (ASQ), and Quality Manager (ASQ).

References
1. Shook, J., Rother, M., 1999, Learning to See: Value Stream Mapping to Create Value and Eliminate Muda, The
Lean Enterprise Institute, Brookline, MA.