What does "lean" really mean? [page 2]
-- Logistics Management, 5/1/2006
Page 2 of 3 -- According to LEI, by 1990 the Toyota Production System (TPS) required half the human effort and half the manufacturing space and investment for a given amount of capacity, as well as a fraction of the development and lead time, as did other mass production systems at that time.
Toyota tracked the information flow that defined both the process steps and the flow of the goods and products. But the company's breakthrough idea was to tie everything back to one trigger point: a demand signal that activated "replenishment loops" so that supplies were replenished as soon as they were consumed, with those "loops" ideally replicated all the way back to raw-material sources. The goal was to stay closely attuned to the demand signals and to respond to them by shipping flawless product frequently and in wide variety.
Lean logistics got its start as the inbound logistics function supporting lean production. It emphasizes frequent delivery, leveling flow (so that each day or hour produces roughly the same output), and cutting inventories. Lean production systems will typically involve carriers that operate milk runs—sometimes several times a day—to meet specified delivery times, thus reducing the need for inventory.
"We realize that the logistics system is hiding a lot of costs: inventory-carrying costs, the performance of our carrier base, the quality of the product, and so forth," says Robert Martichenko, president of consultancy LeanCor LLC. He points out that the best way to expose such costs is to gradually "lower the water level," as he puts it. In other words, to identify unnecessary costs, slowly reduce inventory, including work-in-progress inventory, until only what is crucial to a smooth production flow is left. Anything else is not necessary and is therefore a cost that can be eliminated.
A handful of companies already do lean very well. Convenience store retailer 7-Eleven Japan is widely applauded for managing demand-driven replenishment several times daily. The U.K.-based grocery chain Tesco refills its shelves with small but very frequent deliveries. And automotive supplier Delphi Corp. has made such enormous strides in lean operations that it has often been described as a Toyota clone. One key to Delphi's success has been its collaborating with suppliers on reducing their costs rather than simply asking them to cut their prices. That effort has had a measurable impact on logistics. "One thing [Delphi] had to do was get rid of acres of intermediate warehouses," notes Womack. "They now have a tremendous amount of integrated logistics."
Eastman Kodak Co. has made big gains with its lean cross-docking project. The company has cut order cycle times for inbound materials from seven to two weeks because it can now accurately schedule deliveries. Since materials are pulled for production only when needed, inbound inventory at Kodak's plants has dropped from one week's supply to one day's worth. One department was able to eliminate 130 pallets of raw-materials inventory in just the first week of the project.
And it's not just multinational giants that are getting into lean logistics. The Top-Flite Golf Company, for instance, is putting lean to work in its distribution center. Distribution Manager Jude Prych explains: "We've been using kaizen (continuous improvement) events with our associates in the DC to examine and revise processes, focusing on eliminating waste and moving toward visual systems." (LEI defines visual management as "the placement in plain view of all tools, parts, production activities, and indicators of production system performance, so the status of the system can be understood at a glance by everyone involved.") One of last year's events, Prych notes, focused on the shipping dock. Continued...
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