Download White Paper: Streamlining Warehouse Operations with Lean Six Sigma

Abstract

Given the low margin nature of most distribution businesses, it is imperative to maintain the lowest possible labor costs.  This paper will show how to use Lean and Six Sigma tools to minimize the labor required to pick, pack and ship orders from a warehouse.

Background

This distribution company embraced Lean as part of their company’s strategy to constantly reduce costs and improve customer service.  They began their journey by applying Lean and Six Sigma tools to their primary operation, warehousing, picking, packing and shipping packaged goods to customers.

This project used 3 Lean Six Sigma Tools:

  • Spaghetti Maps
  • Pareto Analysis
  • 5S Visual Management

Visualizing the Problem with Spaghetti Maps

A Spaghetti Map is a simple Lean tool to help visualize extra movement of people within a process.  It establishes baseline performance, shows the need for improvement and provides insight into how to redesign the layout of a work-area.  They can sometimes be combined with time studies to break down each step and its duration.

The Lean Team at this Distributor began the project by creating a Spaghetti Map of the current state.  What you see on the page below (Overall Warehouse View) is 3 orders with a total of 7 items being pulled, packaged and shipped.  This Map shows how the warehouse attendant had to travel to get these 7 items.  For these 3 orders he travelled all over the warehouse, covering from one end to the other and almost all 4 corners.  This is a lot of movement for 7 items.

The Pack & Ship Area Spaghetti Map is of 8 orders being packaged and prepared for shipment (via UPS).  This Map is a close-up of the Pack & Ship Area.  It tells shows something different.  Here we see repetitive and un-necessary movement.  One table is for packaging, a different table has the UPS computer, a different table has the internal ERP system computer (that closes the order and moves it to the invoice queue) and yet another table has the ticket printer.  Finally, they stored boxes about 25 feet from the packaging area.  Each order required a separate trip to box storage.

Clearly the Spaghetti Diagram makes the case that this warehouse could be improved; reducing the labor required to pick, pack and ship orders.

Current State Spaghetti Map – Overall Warehouse View

Current State Spaghetti Map – Pack & Ship Area

Using Pareto Analysis to Make Improvements

We next moved to using a Six Sigma tool, Pareto Analysis, to analyze how to reduce the move-time required to pick, pack and ship an order.  Pareto Charts were developed in the late 1800’s by an Italian Economist, Vilfredo Pareto.  He used this analysis to determine that wealth was skewed to a small portion of the population.  In his time, 80% of the land in Italy was owned by 20% of the families in Italy.  From Vilfredo we derived the Pareto Principal or 80/20 rule.  This is commonly used in sales, with 80% of sales generated by only 20% of customers.

We created a Pareto Table for the number of times an item was on an order.  Quantity or Sales $ was not important for this project as we were concerned with reducing move-time.  Therefore, how many times a warehouse attendant had to go to that item to pick it, was the critical metric.

This table shows the items that make up the top 10% of “picks”.  There were about 6000 items kept in this warehouse.  Sixteen items accounted for 10% of all picks!  The concentration of the top items was much higher than 80/20.  It was actually 80/10, with 10% of the items accounting for 80% of the picks.

Top Item Location

The team then mapped the location of these top 500 items.  This was very manual work and they therefore started with the top 250.  As you can see, the top sellers in terms of “picks” were located all over the warehouse.

 

Spaghetti Map – After

The top 500 items were all moved as close as possible to the Pack & Ship Area.  Many of the smaller items were moved right into the Pack & Ship area on shelves next to the packing table.  As shown below, picking 11 items took much less movement and time than where this team started.

Incorporating 5S Visual Management to Re-Layout the Pack & Ship Area

We also used 5S Visual Management tools to re-layout the Pack & Ship Area.  The boxes were moved right next to the packing table.  The ERP and UPS computers were put on the same table.  Everything was as close as possible.

The result was minimal movement to pack and ship products to customers.

Control Plan

Every 6 months the Vice President of Operations reruns the pick-velocity report, and maps out the location of top 500 items.  As items fall off the list they are moved further back in the warehouse.  As items move onto the top 500 list they are moved as close as possible to the Pack & Ship Area.

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“Supply Velocity gave us the tools to analyze our business and processes based on the facts and numbers versus our perceptions. Our common quote was “Let the numbers lead us”. The key for our organization was how quickly we moved from classroom to actual project initiation. We were able to jump in, start using the tools and see a difference right away.

The get-into-action approach was good for our culture.”

Ned Lane, President, CeeKay Supply
“We used Supply Velocity to rethink our sales process. By analyzing the entire process we found wasted time in our Sales, Admin and Operations departments. Streamlining this process created extra time for each Sales Rep, allowing them to spend more time with Customers and increase the value we add. Gross profit margins are up 40%!

We are now using Supply Velocity to help us rethink our entire Strategic Plan.”

Jeff Reitz, Vice President, Central States Bus
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Haris Tokalic, President, Grand Rock, Inc.
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Jim Carroll, Executive Vice President Operations, Schaeffer Manufacturing
“Mitch Millstein and his team helped guide our shop fabrication division in the re-layout of our custom pipe and steel fabrication facility when we moved into a new building. It is not only the results but how he helped. We were involved in every step. I personally did time studies and was able to see the non-value added steps required to manufacture in our old layout. When we created our new layout, everyone was involved, from the executive team to our direct labor force. With Mitch’s help we increased our throughput by a 3x multiple, while providing more competitive prices to our clients as a result of the efficiency improvements.

This has enabled us to not only make more money but also to expand our commercial reach and serve more, and larger customers. I would recommend Supply Velocity to any company that wants to make improvement in supply chain and operations.”

Geoff Gross, President, Gross Mechanical

“Your process encourages this group to work together, better communicate and have fun doing it.”

George Edinger, President, C&R Mechanical
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Terry Etter, Vice President of Operations , Essex Medical Systems
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In the last six months, our Chapter has realized expense savings of over $380,000 annually, and significant improvement in intra-company service levels has been attained. Supply Velocity, Inc. will return to the Chapter periodically throughout the next 18 months to audit our newly implemented processes. We have been pleased with our results and Supply Velocity, Inc.’s professionalism.”

Joe White, CEO, American Red Cross – Saint Louis Chapter

“In a time of volatile supply chain disruption, Supply Velocity is helping us develop Demand and Supply Planning processes to proactively tackle these new challenges. They are genuine partners, working with our team, facilitating and teaching.”

Jane Thrasher, Vice President of Supply Chain, Horizon Hobby

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Fred Kostecki, Partner-In-Charge, Assurance Services, Rubin Brown
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Their math-based technology, solid down-to-earth facilitation skills, and positive, patient and enthusiastic attitude combined to make our implementation of Lean a very rewarding experience.

We increased our production by 50% in the first month of implementation and continue to see improvements. Improvements have not only been realized in productivity, but also in quality and morale. We have increased profitability by $2M on flat sales of $10M.

Based on Supply Velocity, Inc.’s integrity and our results, I will continue to refer them to others and utilize them in the future as we expand our company through acquisitions.”

Bill Gilbert, President, Fusion Coatings
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Participants included the Promotions, Market Research and Agency Licensing sections of the Marketing Department.

We learned valuable tools to help us to prioritize based on the voice of the customer.

I firmly believe these skills made a difference in how we work every day. We are moving new projects forward, eliminating or changing ineffective processes, and we are a much stronger department. We continue to use the tools to help us with our highly-complex and time-consuming projects. Supply Velocity helped us to accomplish our goals.”

Karen Rugare, Director of Marketing, Erie Insurance
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Tom Kuthe, V.P. Construction Operations, C&R Mechanical
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The project turned out to be very significant to the company and most importantly, our customers. We reduced our customer wait times by 40%, and cut in half the labor cost to fulfill customer orders.

Some results are not able to be measured. However, as a result of this project, we have started to build a Lean mindset and culture, which is part of our strategic mission to save our customers money. Supply Velocity has been a valued partner in this mission.”

Dionne Dumitru, COO, Weekends Only
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Lorenza Pasetti, CEO, Volpi Foods
“Our experience with Supply Velocity was one of the best values we have ever had from a consulting project. Cyril Narishkin brought a structured lean methodology, invaluable experience and engaging facilitation skills to help us streamline a very complex and disjointed sales order process. Just as importantly, our team now has the knowledge and process competencies to address other business improvement opportunities going forward.”
Mike Howard, CEO, Aspeq
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Rob Bowers, Vice President of Strategy, Total Hockey
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Rich Lavosky, General Manager, Anheuser-Busch Precision Printing
“Many thanks to all three Supply Velocity presenters. I think you guys took a very difficult time for learning and capitalized on everyone’s time and training needs. I truly hope this helps your business as this was a considerable undertaking on the part of Supply Velocity. Outstanding!!”
Mark Holdinghausen, VP of Operations, DEMA Engineering
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Jeff Lazaroff, Senior Vice President, Clean Uniform
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Put simply, we got everything we paid for and in addition to more in depth analysis, we got specific tasks that were immediately actionable. Our local management team found Ray to be engaging, highly credible and insightful based on his wide experience. In other words the cultural differences and lack of specific industry knowledge weren’t impediments to things we could implement immediately and on our own. In a nutshell it was money well spent and will pay itself back many times over.”

Lee Hartwell CPA, Plant Manager, Myerson Tooth

“I am thrilled to provide this testimonial for Supply Velocity and their outstanding work in implementing Lean Warehouses and processes at Crescent Parts & Equipment through the COVID pandemic. With their data-first focus and Mitch’s exceptional coaching and experience, they transformed our business into a more supply chain-oriented organization, enabling us to grow while prioritizing employee safety and creating a better work environment. Supply Velocity’s expertise in Lean methodologies and their comprehensive evaluation of our customers have been instrumental in optimizing our operations and increasing customer satisfaction. We highly recommend Supply Velocity to any company seeking to implement Lean processes and enhance their supply chain efficiency.”

Josh Cole, Director of Supply Chain, Crescent Parts & Equipment
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