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Lean Warehousing - Fact or Fiction?

Thursday, 8 August 2013

Lean Warehousing - Fact or Fiction?

Many companies are now talking about Lean Warehousing with their Third Partly Logistics (3PL) service providers. It has developed a reputation as somewhat of a panacea to the problems of the typical warehouse. But what is Lean Warehousing? And does it really live up to its promise? More importantly, how can you make it work in your Third Party Warehouse?

Perhaps the best way to is to examine these issues in the context of a real-life Lean Warehousing implementation.

The Clients Need

With only six weeks to go-live, the client commissioned the implementation of a new lean warehouse.

The clients warehouse was a pick and pack operation. It contained 1100+ items, and more than 80% of all orders were split case picking and packing. Orders were delivered from the clients ERP software via FTP into the Warehouse Management System (WMS). Order confirmation was to be returned from the warehouse via FTP to the client.


The client and the Third Party Logistics provider agreed on simple but effective Key Performance Indicators (KPI's) for the project:

Orders received by 12:00 were to be shipped by close of business next day
Inventory accuracy was set at 99%
Goods received within 24 hours
Costs of course had to be at budget or better


In order to satisfy these KPI's, the 3PL selected the Lean philosophy (5 S’s) for the implementation:

1) Sort (Seiri) - The first S focused on eliminating unnecessary items from the warehouse.

Paperwork in warehousing is common but typically ineffective. Radio Frequency (RF) technology was selected (terminals with large screens) to eliminate all paperwork from the warehouse. A single button automated stretch warp machine was installed at the end of the pick path to wrap pallets.

Warehouse Management Software was selected for the warehouse and configured with weights and measures (per item) to eliminate the need for scales and to allow auto calculation for transport.

Walk paths were set up with no loop back during order picking to complete an order.

Product was placed strategically so that heavy products could be picked first and smaller lighter items picked last, in order to eliminate the need to restack pallets.

All forklifts were able to operate anywhere in the warehouse. Man up order pickers were used to eliminate the need for ladders, and to assist with order picking from level 2 and 3.

2) Set In Order (Seiton) - The second S focuses on efficient and effective storage methods.

A place for everything and everything in its place.

Racking was purchased and erected in the warehouse. Given the shape and size of the warehouse, wide aisles were used to allow fast movement for picking and replenishment (and use all available space) and to support the ability to use all materials handling equipment in all areas of the warehouse.

The racking was set up with the first three levels being pick faces and the top two being for bulk or replenishment stock for the pick faces. The pick faces were fitted with chipboard to allow small cartons to be stored on levels two and three.

The bin location system was set up to allow X and Y coordinates and for a standardised gird of locations in the warehouse, to help casual employees understand the warehouse layout within minutes of arriving on site.

All locations were bar-coded and all aisles fitted with large visible signs, to enable quick and effective orientation on site.

Pick trolleys were purchased and fitted with a knife, calculator and a tape gun. A packing bench was set up to allow mixed cartons to be packed and cartons completed. The bench included cartons, tape and packaging material, all within arms reach.

A single high speed thermal printer was selected for all labels, and a standard single label used for all uses in the warehouse. Thus, when an order is completed and all cartons packed the store person can print all dispatch labels for the shipments. The picking confirmation process was set to create the consignment notes for the carriers and add a bar coded con note number to the dispatch label for easy tracking by the carriers.

3) Shine (Seiso) -The third S is to thoroughly clean the warehouse.

All racking and benches were fixed to the floor and each location was labeled.;

No product was allowed in the aisles, and no product was allowed into the pick face from bulk until all stretch wrap was removed. Pyramid picking was not allowed.

Outsourced cleaners were engaged to service the warehouse office and all amenities. Endless towels are installed in bathrooms to eliminate paper towels in the warehouse.

Warehouse staff clean floor with an electric sweeper and not a broom everyone takes turns as part of their duties. (Daily cleaning is part of the process. A clean and clutter-free work area encourages staff to take pride in their work and environment and to take ownership of the equipment and facility.)

A contract floor scrubber was also engaged to remove ground-in dirt from the concrete floor (every 8 weeks).

Working with staff to develop KPI's

4) Standardise (Seiketsu)- The fourth S is standardising best practice in your warehouse.

All RF units and PCs were standardised. PCs were selected based on ease of use and colour (black).

The following process was established:

When orders are received from the client, they update the Warehouse Management System (WMS) and are ready for picking.

Warehouse staff pick up their RF unit and log on. Pickers select order pick, and the system directs them to the first pick location in the pick path needed for that order.

Picker scans, picks, checks, scans and moves on to the next location. At the end of the order, the RF asks for the number of cartons or pallets and, when updated, allows the process to be completed and labels and consignment notes to print.

When the order is complete, it is automatically sent to the clients FTP mailbox, ready for invoice confirmation. When the confirmation is completed the invoice (or delivery note) prints in the warehouse and is attached to the order ready for dispatch.

Menus are specific for each function to assist staff with their functions. Pickers can see the pick menu, receiving the receipt menu and dispatch sees the information for dispatch. The warehouse manager and customer service were able to see all information based on their security and access level.

Receiving requires items to be booked in and a pallet ID attached to all inbound items. This was then used for put-a-way, replenishment and picking, as items move around the warehouse.

Stock takes, cycle counting and returns to the client are all managed via the RF units and the pallet ID labels.

5) Sustain (Shitsuke) - This is by far the most difficult S to implement and achieve.

Human nature is to resist change and more than a few organisations have found themselves with a dirty, cluttered warehouse just a few months after attempting to implement 5S. The tendency is to return to the status quo and the comfort zone of the old way of doing things. Sustain focuses on defining a new status quo and standard of warehouse organisation.

Being a new implementation with new staff there is no old way of doing things. With the removal of paperwork and the need to use RF units to perform tasks in the warehouse the status quo is the process.


Upon completion of the 5S process, warehouse staff were motivated by the lack of fuss and ease of performing their tasks. They were also enjoying the recognition they received for a job well done.

All KPI's were still being exceeded after 6 months of operation. The warehouse was performing like a production line, delivering predictable and reproducible results, using 40% less labour than the client’s original warehouse.

The implementation and setup were effective from day one. More detailed work was needed on master file information, however this was an anticipated part of continuous improvement in both the client and Third Party Warehouse systems.

Many of the results are built into the process and the most difficult of the 5S process, Sustain, is now the baseline default for the warehouse.


Obviously, the Lean philosophy alone, is not enough to resolve (or pre-empt) all warehousing problems. But when combined with traditional project management skills, it is amazingly effective at transforming a warehouse into a clean and organised system that performs like a production line, delivering predictable and reproducible results with significantly less labour.

So does lean work in an organic environment like warehousing?  Based on this lean warehousing implementation and the KPI's, the answer is a resounding Yes!

key performance indicators kpi

Lean Warehousing

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