Lean for Distribution Logistics

The “5 Whys” exercise began with a question: “Why are we not keeping up with increased volumes?” The five answers were: not enough floor space, improper lighting levels, not enough product staging, resources not available to keep up with increased volumes and equipment not available to support increased volumes.

Based on this exercise, the team concluded increasing order volumes could not be supported by New Breed's current processes or equipment because the warehouse layout could not support additional equipment.

Through value-stream mapping, a Lean technique that analyzes the flow of materials and information required to bring a product or service to a consumer, Mahdi discovered the most significant bottlenecks were occurring in packaging because of the different packaging requirements involved. Other root causes uncovered by quality tools included resource allocation and packaging method times. Training and audits also were exposed as unforeseen root causes.

The team developed a PICK chart to categorize potential solutions into four quadrants: Possible, Implement, Challenge and Kill. The graphical tool helped the team brainstorm and ultimately select the solution with the biggest payoff.

Maximizing Flow

The improvement team came to a final conclusion: Additional space had to be created in the existing facility through a warehouse redesign that would maximize flow, improve lighting and help employees meet customer packaging requirements.

The project took four months and involved adding new floor space as well as moving racks and inventory and modifying electrical wiring. A variety of new equipment was added, including mobile security workstations and computers, packaging carts, scales, heat sealers, scanners and printers.

Behind the scenes, KPIs were modified to measure on-time packaging rather than on-time shipping. New ergonomic equipment, such as mobile workstations and anti-fatigue matting, reduced the risk of employee injuries, and efficiency increased dramatically.

New Breed lowered its overtime requirements by at least 30% while boosting employee morale. Employees felt more involved in the company's success since they had input into potential solutions. Overall, the project fostered better collaboration and communication and built a work environment based on honesty and trust.

The benefits of using Lean Six Sigma to eliminate waste and reduce process variation were numerous:

• Throughput increased from 167 to 240 orders per day;

• Ability to accommodate increasing customer volumes improved from 40% to 45%;

• Shipping accuracy steadily increased, reaching 100% after one year;

• Errors decreased from 9,903 parts per million (ppm) to 9.4 ppm after one month.

Pleased with the results, Boeing rewarded New Breed with more business.

New Breed's Lean Six Sigma-based warehouse redesign was so successful that the Swedesboro, N.J., improvement team was named a 2008 finalist in the International Team Excellence awards presented by the American Society for Quality (ASQ).

Looking back on the four-month project, Mahdi says he was impressed by how employees came together as a team to accomplish the end results.

Applying Lean Six Sigma methodology to distribution logistics was challenging, Mahdi admits. “It wasn't your traditional manufacturing environment,” he says. “We're in a transactional business. We had a toolbox of Lean Six Sigma tools, so we could select what would and wouldn't work for our business.”

Janet Jacobsen is associate editor of the American Society for Quality's Journal for Quality and Participation and a freelance writer specializing in quality and compliance topics.