When companies and organizations want to improve their services by eliminating waste and reducing costs, they look to lean logistics.
It is an approach to business that sees companies endeavor to push at all odds to remain relevant while gaining a competitive edge over rivals.
Let’s look at how lean logistics impacts the supply chain as a whole, including an aspect called lean thinking and the 8 wastes of lean.
What is Lean Logistics?
Generally, lean logistics is a process by which companies recognize any inefficient and wasteful activity in their operations. The idea behind lean logistics is very simple: improve product flow by removing delays.
A great lean logistics model should see the company increase the speed at which products move across the supply chain. That then cascades into improved customer service and cost-effectiveness.
Here is a summary of what lean logistics is about:
- Reducing inventory risk
- Cutting supply chain waste for better service
- Reducing operational costs
- Improved profitability due to greater efficiency
As the aim of lean logistics is to improve performance and provide services that satisfy customers, companies use what we call lean thinking.
Let’s do a little more digging into lean logistics and lean thinking.
What Does Lean Mean in Supply Chain?
Lean in a supply chain relates to what a company does or how it runs its operations to ensure no delays, minimum waste, and satisfaction for the customer.
When a company employs a lean supply chain approach, speed and efficiency become its main propellers. The organization in question thus has that capacity to be better in terms of providing value to customers.
A lean supply chain is also important in that companies with this model can easily handle challenges that could potentially come from reverse logistic.
Lean in supply chain gives companies the advantage of establishing clear links to aspects like manufacturing, transportation, and overall company performance.
A better approach to lean strategies consists of having a continuous check on operations using five principles of lean. We look at what these principles are below, but generally, they provide several benefits.
Businesses can streamline processes across every level of operation and identify areas of wastage or non-value in:
- inventory (raw materials)
Companies utilize a lean approach to create efficient operations and reduce wastage in procurement, manufacturing, warehousing, and transportation. These operations cut across different types of logistics and can improve competitiveness as well as enhance a company’s overall performance.
What is Reverse Logistics?
For most businesses and organization shipping products to their end consumer on time constitutes success in the supply chain. However, (and quite often), things can be less than satisfactory if customers receive incomplete orders, wrong products or if the company needs to recall the goods for whatever reason.
These and many other scenarios call for reverse logistics. The process of moving goods from their final consumer to the point of origin is what reverse logistics is.
What does reverse logistics entail?
Generally, companies need to track and monitor their products throughout the supply chain. That includes considerations for what happens after the goods arrive at their final consumer. If there’s a need to reuse, dispose of, repair or generally create new value by moving the product from B to A, then a company would rely on reverse logistics.
Reverse logistics does have an impact on the supply chain, and companies need to ensure they:
- Identify flaws in the returned goods/products.
- Document the errors or challenges
- Work on restocking the items
Proper handling of reverse logistics in the supply chain helps companies avoid repeats of mistakes. It is from these approaches that organizations look to lean thinking.
What is the Lean Thinking Model?
Lean thinking describes a business methodology that involves decisions aimed at eliminating waste via lean strategies.
It is the foundation of any lean approach to business and allows companies to think about ways of utilizing resources to the benefit of both society and individuals.
Lean thinking as a concept involves thinking about given activities and identifying the wastes that, most often, inadvertently form part of the processes of an organization or business.
The model incorporates three concepts that are also part of the five principles of lean:
- Value streams
When it comes to lean thinking, the aim is to integrate lean practices into the business. A lean enterprise would, therefore, be one where company growth aligns with value for customers. The products the company provides meet expectations are profitable and above all, involve minimal costs that aren’t passed on to customers and others along the supply chain.
It also means that companies or organizations have an environment where every person can identify and work towards eliminating waste. Employees learn to work together to remove duplicity, the result of which is a lean enterprise with more value and very little over-cost.
`We have already mentioned that lean is about reducing wastes, which is important given the potential for wastage to negatively impact profitability.
What Are the 8 Wastes of Lean Logistics?
We talk of waste as those expenses or expended efforts that do not lead to profitability or where end products do not meet/satisfy end users.
That explains why companies are always looking for ways to optimize processes to remove any potential wastes in time, materials or costs. In lean thinking, the 8 wastes refer to any processing activity that affects value delivery.
Seven wastes relate to the original lean concept that applied to the Toyota Production System and is production-oriented. The eighth waste relates to how a business’ management manages personnel.
Here are the 8 wastes of lean:
Defects reflect incorrect information, poor documentation and lack of standards. Other wastes relate to the presence of variances within the inventory or poor quality control.
- Excess processing
Excess processing is a result of poor operational designs or management issues. Duplication, human errors and poor facilities can result in excess processing. It is where there is extra work or more than what is necessary to satisfy the customer.To counter this, businesses use a lean resource called process mapping. It involves a workflow design whose goal is to clearly define processes and optimize them to eliminate waste.
Overproduction refers to instances where production is more than the need or before it is needed. Poor automation, inaccurate information and time delays can result in overproduction.One of the effects of this waste is excess WIP, a scenario that can create more scrap among other defects.
Waiting involves all the time wasted as delays mean no proceeding to the next step in the process. Waiting in lean practices can be from human resources, the materials or WIP that triggers more waste.Waiting can lead to costs like overtime among other additional costs as processes delay. Companies eliminate waiting for waste using the same tools used to handle over-production.
Transportation wastes occur when there is unnecessary movement of goods or materials. Poor process designs or poor layouts can result in transportation wastes. Companies use value stream mapping to reduce transportation waste.
Inventory wastes relate to costs for holding the inventory and could be from raw materials, work in progress or finished goods. Companies can incur inventory wastes when there is over-purchasing, poor scheduling or forecasting. Defects and transportation waste can also lead to inventory waste.
Motion is a waste as it involves non-value adding time consumption, often leading to financial costs.Any unnecessary movement of people is a waste that can be cut using an efficient process mapping tool.
- Non-Utilized Talent
This waste revolves around failure to utilize people’s skills, talents, and knowledge. In this case, the management may allocate the wrong tasks to employees or fail to offer the right communication.Organizations are encouraged to handle this waste by way of proper training, availing employee development opportunities and incorporating everyone in process management.
What Are the Types of Logistics?
Logistics encompasses several supply chain management processes: procurement, production, transport and distribution, storage and product return or recovery.
In logistics, four types stand out with each targeted at a specific supply chain process.
- Supply logistic
- Distribution logistics
- Production logistics
- Reverse logistics
Supply logistics– all the planning and synchronization needed to have materials move on time from one location for production purposes. Supply logistics also includes transportation and storage.
Distribution logistics– when an organization moves supplies to places where they are needed. Transportation and inventory control are also part of distribution logistics.
Production logistics– this type of logistics handles all the phases of supply and distribution related to manufacturing.
Reverse logistics– as noted above, reverse logistics relates to product return or recall. It could be in supplies, distribution or from an end-user.
What Are the 5 Lean Principals?
James P. Womack and Daniel T. Jones first described the 5 principles of lean in 1997, now a major component of lean management.
Though lean thinking first focused on manufacturing, it has over the last two decades impacted all business management and transformed logistics. With lean practices in place, companies look to improve workplace efficiency through five principles that build upon each.
The 5 lean principles are:
- value stream
Identifying value for a lean team involves a constant review of the products or services from the point of view of customers. Companies employ both qualitative and quantitative analytic methodologies to arrive at what constitutes value for the customer.
Surveys, interviews and web analytics are some of the techniques organizations can use to determine what customers need and if they are willing to pay for it.
Map the Value Stream
Mapping the value stream allows lean managers and their teams to analyze and internalize value flow within the organization.
A clear understanding of the value stream means teams can pinpoint areas that add value to customer needs. If certain activities constitute non-value adding processes, that’s waste that lean teams should seek to eliminate. It saves on costs and time.
This principle allows you to create flow, mostly by analyzing the specific steps in the supply process. The key is to find out how you can maximize efficiencies, while at the same time reducing waste.
This lean principle involves streamlining processes and steps as a way of giving customers value.
Establishing a pull in lean thinking involves limiting inventory waste and WIP to improve flow. It allows for the determination of what exactly customers need and use these to streamline the processes towards cost-effectiveness.
The first four principles of lean help reduce wastes. The fifth principle, however, offers more as seeking perfection makes for continuous improvement. The focus is on elements that add value for the customer and eliminating those that don’t.
Achieving Lean Logistics
Lean logistics and lean thinking have become crucial elements in overall supply chain management. With lean strategies, companies can optimize every step and process to remove waste. Customers get value, while companies improve their competitive edge and profitability.
If you have any questions about lean logistics or how a logistics management company can help you achieve lean logistics, give B & B Logistics a call at 1-877-512-0692.