Part I Introduction
4.1 Lean Logistics
4 Logistics Philosophies
Zahra Rouhollahi
Department of Industrial Engineering, Amirkabir University of Technology, Tehran, Iran
In contrast, in the conventionalpush system, production is done according to sched- ules and available resources such as people, material, and machines regardless of whether or not the next step needs them at the time. In the kanban system, the aim is to meet demands right at the time they are ordered and not before. In assembly lines, stages up the chain provide needed parts. By reducing the kanban quantity (i.e., the amount demanded from each workstation) bottlenecks gradually become apparent [3]. The kanban quantity is then reduced gradually until all of the bottlenecks are revealed and removed. The aim of kanban is to reduce inventory to its minimal amount at every stage to achieve a balanced supply chain.
4.1.2 Just-in-Time Philosophy
Just-in-time (JIT) systems are the extension of kanban and link purchasing, manufacturing, and logistics [4]. The primary goals of JIT are inventory reduction, product quality, and customer-service improvement and production-efficiency maxi- mization. In JIT systems, the main focus is on achieving continuous improvement of the process and the quality of the product and service. This is achieved by reducing inefficient and unproductive time in the production process.
JIT changes many of the principles in a firm. For example, instead of concen- trating on cost, quality is considered more. ‘Many suppliers’ thinking is replaced by ‘few suppliers with long-term open relationship’ thinking. In fact, in JIT think- ing, higher-quality customer service is more important than cost, which is the main issue in conventional systems.
In JIT systems, material control is based on the view that a process should oper- ate only on a demand signal from the customer, the pull system noted earlier.
Implementing JIT has several benefits that primarily fall into four general areas [5]: inventory turnover improvement, customer-service improvement, warehouse- space reduction, and response-time improvement.
Unreliable suppliers
Volatile demand Bottlenecks
Inaccurate forcasts
Quality problem
Figure 4.1 Hidden problems as a result of holding extra inventory [3].
Lean Manufacturing
As a term, lean manufacturingwas first used by Womack et al. in their bookThe Machine That Changed the World in 1990. The book is about the techniques and concepts developed by Taiichi Ohno at Toyota. The goal of lean manufacturing is reducing “waste” with the goal of total elimination. According to Russell and Taylor [6], waste is “anything other than the minimum amount of equipment, mate- rials, parts, space, and time that are essential to add value to the product.”
Lean methods target eight types of waste [7]:
1. Defects: money and time wasted for finding and fixing mistakes and defects 2. Over-production: making products faster, sooner, and more than needed 3. Waiting: time lost because of people, material, or machines waiting
4. not using the talent of our people: not using experiences and skills of those who know the processes very well
5. Transportation: movement of people, materials, products, and information
6. Inventory: raw materials, works in process (WIP), and finished goods more than the one piece required for production
7. Motion: Any people and machines movements that add no value to the product or service.
8. Over-processing: Tightening tolerances or using better materials than what are necessary.
These wastes can be seen in all logistics activities such as distribution and ware- housing. In other words, waste is anything that adds no value to a product or service.
Sometimes, more than 90% of a firm’s overall activities are non-value added [8].
In lean manufacturing, paradigms change from conventional “batch and queue” to
“one-piece flow” [9]. In fact, lean manufacturing combines best features of both mass production and craft production, which means it intends to reduce cost and improve quality while increasing diversity of production [1,10]. Lean manufacturing leads to improved product quality and production levels; reduced cycle time, WIP, inventories, and tool investment; improved on-time delivery and net income; better space, machine, and labor utilization; decreased costs; and quicker inventory investment [10].
Lean Manufacturing Tools
Various methods and tools are developed for lean implementation. We briefly describe the following five core lean methods: the kaizen rapid-improvement process, 5S, total productive maintenance (TPM), cellular manufacturing, and Six Sigma.
Kaizenmeans continuous improvement in Japanese. The kaizen rapid-improve- ment process is the foundation of lean manufacturing. It holds that by applying small but incremental changes routinely over a long period of time, a firm can real- ize considerable improvements. Kaizen involves workers from all levels of an orga- nization in addressing a specific process and identifying waste in this process.
After finding possible wastes, the team tries to find solutions to eliminate them and then quickly apply chosen solutions, often within 3 days. After implementing improvements, periodic events ensure that this improvement is sustained over time.
Standing forsort,set in order,shine, standardize, andsustain, 5S tries to reduce waste and optimize productivity by maintaining an orderly workplace [11]. Sort
means removing every nonessential item from the workplace.Set in orderimplies that everything should have a specific place and should always be in the place unless it is being used. Shine means cleaning the plant and equipments.
Standardizeis the process of making people accustomed to the first three S’s, and sustain means keeping 5S operating over time. The 5S philosophy encourages workers to maintain their workplace in good condition and ultimately leads reduced waste, downtime, and in-process inventory. The 5S implementation can also signif- icantly reduce the space required for operations [12].
TPM reaches effective equipment operation by involving all workers in all departments. The most important concept of TPM is autonomous maintenance, which trains workers to be in charge of and take care of their own equipment and machines. TPM tries to eliminate breakdowns, the time spent on equipment setup or adjustment, and lost time in equipment stoppages and to minimize defects, reworks, and yield losses [10].
Cellular manufacturingis the actual practice of the pull system. The ideal cell is basically a pull system in which one piece is pulled by each machine as it needs the piece for manufacturing [11]. All of the machines needed for a process are gathered as a group into one cell. Using cellular manufacturing offers different advantages such as reduced WIP between machinery, low lead time to customers, reduced waste, and more flexibility. In a cell, when a defect occurs, only one prod- uct is defective, and it can be immediately caught. As soon as a defective part is seen, the operator starts repairing it, which leads to reduced scrap. In addition, using cells can shorten lead times. For example, if a customer’s order is less than the usual company batch, the order can be delivered the moment it has been com- pleted. In conventional manufacturing, however, the customer must wait until the company batch is completed before the order is shipped.
Developed by Motorola in the 1990s, Six Sigmauses statistical quality-control techniques and data-analysis methods. Six Sigma uses a set of methods that analyze processes systematically and reduce their variations, ultimately leading to continu- ous improvement. At the Six Sigma quality level, there will be about 3.4 defects per million, which signifies high quality and low variability of process [13].
4.1.3 Lean Principles
Five principles are basic pillars in the lean philosophy [14,15]:
1. Identifying customer value 2. Managing the value stream 3. Developing a flow production 4. Using pull techniques 5. Striving to perfection
Identifying Customer Value
Valueis an important and meaningful term in the lean context, meaning something that is worth paying for in a customer’s point of view [14]. Therefore, the first step
in specifying this value is demonstrating a product’s capabilities and its offered price.
Managing the Value Stream
Once value is identified, all required steps that create this value must be specified.
Wherever possible, steps that do not add value must be eliminated.
Making Value-Adding Steps Flow
Making steps flow means specifying steps so that there is no waiting time, down- time, or other general waste within or between the steps.
Using Pull Techniques
Fulfilling customer needs means supplying a product or service only when the cus- tomer wants it. The following types of waste are eliminated by using pull techni- ques: Designs that are out of date before the product is completed, finished goods, inventories, and leftovers that no one wants.
Striving to Perfection
By repeatedly implementing these four steps, perfect value is ultimately created and there is no waste.
Using these principles is key in making an activity lean. These principles are also calledlean thinking. With this thinking, any tiny change may lead to waste. A good example is changing the placement of a waste bin in a plant. After awhile workers get used to the placement of the bin and blindly throw their wastes in it without searching for it. When the bin’s place is changed, however, workers have to find the bin first, which is time consuming, even if it is just a few seconds. In lean thinking, these seconds are waste. The ultimate goal is to eliminate them.
4.1.4 Lean Warehousing: Cross Docking
Warehousing has four major tasks: receiving, storage, order picking, and distribu- tion. Among these four tasks, storage and order picking are the most costly.
Storage requires inventory holding (one of the eight kinds of wastes), and order picking needs a lot of labor work hours (which is mentioned asmotionin different kinds of wastes). To eliminate these wastes and produce a lean warehouse, the cross-docking concept was developed. A cross dock is just like a warehouse in which only receiving and delivering freight is being done.
Shipments will be transferred directly from incoming trucks to outgoing ones without any long-term storage. These loads are delivered to receiving doors, sorted, consolidated with other products for each destination, and loaded onto outgoing trucks at shipping doors. The whole process is done in less than 24 hours in a typi- cal cross dock.
Companies such as American Freightways, Yellow Transport, and Old Dominion Freight Lines operate hundreds of cross docks in North America. Some retailers such as WalMart and Home Depot also operate cross docks.
Cross docks also function as a place to consolidate loads and thus reduce trans- portation costs. As illustrated in Figure 4.2, suppose two suppliers serve four custo- mers. Direct-shipment suppliers may undertake extra costs as a result of a less than truckload (LTL) for each customer. Using a cross dock as a consolidation center reduces the number of LTLs and sends more truckloads (TLs) to retailers, substan- tially reducing transportation costs.
Types of Cross Docking
Napolitano [16] classifies the different types of cross docks as follows.
G Amanufacturing cross dockis used to receive and consolidate supplies.
G Adistributor cross dockconsolidates products from different suppliers and delivers them to customers.
G Atransportation cross dock consolidating LTLs from different suppliers to reach eco- nomic shipments.
G Aretail cross dockreceives, sorts, and sends products to different retail stores.
Cross docks can also be divided based on assigned or unassigned information:
predistribution andpostdistribution[17]. In a predistribution cross dock, the desti- nations are already determined and their orders are prepared by vendors for direct shipment. In this kind of cross dock, shipments that are already price tagged or labeled are transferred directly into outgoing trucks. In postdistribution operations, the cross dock must assign freights to each destination to make them ready for shipping by price tagging, labeling, and so on, which means higher labor costs and more floor space for the distributor.
Cross docks can also be classified based on the method of freight staging.
According to Yang et al. [18], there are single-stage, two-stage, and free-stage
LTL LTL LTL
LTL
LTL
LTL LTL
LTL Customer
Customer
Customer
Customer
Supplier #2 Supplier #1
(A)
Customer
Cross dock
Customer Customer Customer
Supplier #2 Supplier #1 LTL
LTL TL
TL TL
TL
(B)
Figure 4.2 Direct shipment versus cross docking: (A) direct shipment and (B) cross dock as a consolidation center.
methods. In a single-stage method, one staging lane is devoted to each receiving or shipping door, and shipments are placed into these staging lanes. In a two-stage method, the shipments are unloaded in receiving doors and put directly in a receiv- ing door’s stage lines. In the center of the cross dock, shipments are resorted and repacked into the staging lines of the shipping doors. In a free-staging cross dock, there are no lanes or queues in which freights are placed and pulled to shipping doors. Instead, near the receiving or shipping doors, freights are resorted and repacked. Figure 4.3 depicts a two-stage cross dock [19].
Product Selection
Generally, products that can easily be handled with low variance and high volume are the most suitable for cross docking [17].
For supply and demand to be matched, demand for shipments must be certain or at least have low variance. If demand has high variance, then cross docking is not suitable.
As cross docking needs frequent shipments that force expenses to system, demand for shipments must be high enough to justify extra expenses.
Shipping
Sorting
Receiving
Figure 4.3 Two-stage cross-dock structure [19].
Cross-Dock Design
There are two important parameters in cross-dock design: size and shape. The first decision is the number of doors. Generally, doors are devoted to one of the two fol- lowing types of trailers [20]:
G Incoming (receiving), from which freight must be unloaded
G Outgoing (shipping), in which freight must be loaded
Typically, once the number of destinations of a cross dock is known, the number of outgoing doors needed is easily determined. The number of doors required for each destination depends on its freight flow. Destinations with a higher flow may need more than one door. The number of shipping doors thus equals the number of destinations the cross dock serves multiplied by their needed doors.
To determine the number of receiving doors needed, more issues must be addressed. In some retail cross docks, extra operations such as packaging, pricing, or labeling need the same number of doors in each side of the cross dock, with receiving doors devoted to one side and shipping doors to the other. For distribu- tors’ cross docks, which generally do no value-added processing and are just a place to consolidate freights, the number of receiving doors can be estimated by Little’s law: unloading mean time multiplied by trailer throughput [21]. Unloading is relatively easier than loading. “A good rule of thumb is that it takes twice as much work to load a trailer as it does to unload it” [20]. To achieve a smooth flow without bottlenecks, there could be either twice as many outgoing doors as incom- ing doors or more assigned workers to load each trailer.
The next important factor is cross-dock shape. According to Bartholdi and Gue [21], most cross docks are I shaped like a long rectangle, but there are also cross docks in other shapes such as an L (as in Yellow Transportation, Chicago Ridge, IL), a U (as in Consolidated Freightways, Portland, OR), a T (American Freightways, Atlanta, GA), an H (Central Freight, Dallas, TX), and an E. Bartholdi and Gue also showed that design has an important impact on cross-dock costs. I shapes were best for cross docks with fewer than 150 doors, T shapes for cross docks with 150250 doors, and H shapes for more than 250 doors.
The shape of a cross dock also depends on many issues such as the shape of the land on which the cross dock will be placed, the patterns of freight flows, and the material-handling systems within the facility [20].
In addition to the shape of cross dock, the location of cross dock and how it is related to its connections have a considerable effect on its success.