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Lean Warehousing and Distribution Operations Explained

Brands that adopt lean warehousing and distribution operations benefit from streamlined processes and reduced costs. Learn more below from WBX Commerce.

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Lean warehousing and distribution operations explained

Lean is a business management methodology for achieving greater efficiency without sacrificing productivity and quality. Many areas of business benefit from these practices—from marketing to warehousing and distribution. Lean principles originated in the car manufacturing industry and date back to Henry Ford and the Toyota Production System. These principles have since helped many of the world’s largest companies do more with less time and resources. Consider the following examples:

  • After adopting lean principles, the automotive manufacturing plant Mercedes Benz Brazil reported a 10–20% reduction in hours per unit (HPU) spent on manufacturing. In addition, employees worked together to introduce and implement 12,000 new ideas for improvement.
  • Zingerman’s Mail Order, a specialty foods brand in Michigan, uses lean principles to stay agile during seasonal fluctuations. Though the brand has doubled in size over the past decade, lean methodology helped Zingerman’s reduce its number of seasonal workers from 800 to 400.

Lean methodology has uses throughout the ecommerce supply chain. For instance, brands can apply lean principles of warehousing and distribution to optimize storage space, avoid overstocking, streamline packing, and much more.

What is lean warehousing?

Lean warehousing applies the lean system to warehouse operations with the goals of eliminating waste, reducing inefficiency, and improving quality. It has its own set of principles, known as the 5S system. Each S represents a Japanese term that corresponds to a way your supply chain or ecommerce business can optimize its warehousing practices: 

  1. Seiri (Sort)

Over time, warehouses accumulate a lot of equipment, supplies, and stock. That’s where sorting comes into play. This is the process of separating necessary items from broken, unused, or outdated items such as the following:

  • Broken pallets
  • Defective or underutilized equipment
  • Surplus or expired stock
  1. Seiton (Straighten)

Once you have eliminated unnecessary items in your warehouse and freed up physical space, it’s time to straighten up. The goal here is to rearrange your warehouse to make your processes more efficient. You could put this concept into practice in these ways:

  • Rearranging the remaining items in your warehouse
  • Making sure frequently used items are within easy reach
  • Revisiting your processes for picking, packing, and shipping
  • Putting up signs to help personnel navigate the new warehouse flow
  • Using floor and aisle markers to control traffic in the warehouse
  1. Seiso (Shine)

The third S focuses on keeping your warehouse clean and in good working order. This way, you can improve efficiency by making sure trash, spills, and breakages don’t disrupt workflows. A clean working environment also encourages employee pride and reduces the risk of on-the-job accidents.

Help clean up your fulfillment warehouse with these practices:

  • Creating a schedule for cleaning up after shifts
  • Asking personnel to report damages immediately so they can be fixed
  • Placing garbage and recycling receptacles in strategic places
  • Keeping basic cleaning supplies on hand
  1. Seiketsu (Standardize)

Once you have decluttered, rearranged, and cleaned your warehouse, it’s time to focus on how work gets done. Developing standard operating procedures (SOPs) will equip all personnel to perform at their best. In fact, every area of the warehouse should have SOPs in place to ensure everyone knows what to do and how best to do it. Here are a few ways to put the fourth S into practice:

  • Walking through and documenting each warehouse process
  • Making sure everyone understands best practices and procedures
  • Soliciting input from all levels of warehouse personnel before finalizing SOPs
  • Using charts, posters, and other visuals to make SOPs clear
  1. Shitsuke (Sustain)

Contrary to how it sounds, sustaining your improved efficiency is not about making sure everything stays the same. Rather, it’s about continuing to improve your processes, procedures, and standards. Do this through the following practices:

  • Using regular audits and checks to gauge operational quality
  • Seeking feedback on how current standards serve your goals
  • Staying open to employee ideas for improvement

What is a lean distribution operation?

A lean distribution operation is one that aims for continuous improvement. The goal is to receive orders, deliver products, and fulfill customer needs as efficiently as possible. How? By optimizing factors like cost, quality, and responsiveness to customers.

Methods for achieving a lean distribution operation

The 5S system, which we explored earlier, can help achieve a lean distribution operation. Additionally, many companies use a Kaizen event to jump-start the improvement process. Kaizen is a Japanese concept meaning “change for the better.” So Kaizen events bring team members together to discuss and solve problems in the distribution warehouse. Goals include eliminating waste and standardizing commonly executed activities and processes. Often, they result in increased efficiency and a leaner organization. 

Here are some signs of a lean distribution operation:

  • Level workflows, with few sharp peaks and valleys in your operations
  • SOPs that staff members at all levels develop and adopt 
  • Agile operations that stay highly responsive to customer demand
  • Optimization of human effort, inventory, product touchpoints, and use of space 

Why should your ecommerce business adopt lean warehousing or lean distribution?

Principles of lean warehousing and distribution offer a blueprint for continuous improvement. They provide a useful model for boosting responsiveness to customer needs, cost-effectiveness of operations, and safety in your fulfillment center. And the cost savings from going lean could be tremendous. McKinsey & Company estimates that brands around the globe spend €300 billion per year on warehousing and warehouse services. 85% of that expenditure is for operating costs like labor and space. McKinsey predicts that efforts to streamline warehousing and distribution could reduce costs by at least €35 billion.

Given the complexity of the global supply chain and the accompanying pressure on ecommerce businesses to reduce wasted time, effort, and resources, lean principles offer a clear path forward.

WBX Commerce is an industry expert in helping brands achieve greater efficiency throughout the supply chain. We offer a full suite of warehousing and distribution solutions from strategically located storage centers to DTC and wholesale fulfillment. Contact us to learn more about our services.

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