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About the Author

Cliff Holste is Supply Chain Digest's Material Handling Editor. With more than 30 years experience in designing and implementing material handling and order picking systems in distribution, Holste has worked with dozens of large and smaller companies to improve distribution performance.

Logistics News

By Cliff Holste

December 18, 2013



Adopting Lean Manufacturing Methods In The DC

Instead of Producing Widgets – DCs Are Order Assemble Plants


Holste Says:

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The manufacturing assembly plant model provides a structured approach that supports high levels of automation while reducing the incremental labor component.
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Previous Columns by Cliff Holste

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In today’s typical high volume DC, integrated into the maze of material handling equipment and systems is a pick-and-pass order assembly operation not all that dissimilar, at least functionally, from the typical flow-through manufacturing assembly line. The major difference is the huge variety and diversity of customer orders assembled across hundreds of pick faces in the order assembly path.

But even with this additional degree of complexity, customer orders are being picked, assembled, packed and shipped in a flow-through process that has a lot in common with manufacturing assembly operations. To begin with, order fulfillment in the DC is a highly repetitive process, which is a common characteristic of manufacturing assembly lines.

Another interesting observation is that many operations that typically have been performed in manufacturing, such as kitting, packaging bulk items into minimum sales quantities, building customer specific displays, and assembling mixed SKU pallet loads (just to mention a few) are being push downstream into the DC. In addition, there has been a proliferation of labor intensive end-user value-added-services (VAS) such as, monogramming, gift wrapping, insertion of sales materials, etc.

Because most DCs today are equipped with fixed-path material flow systems, customer orders requiring special handling are routed into a Work-in-Process (WIP) area. The result is that VAS and all other special operations are handled as exceptions and as such, not integrated into the normal system flow pattern. Scheduling is further complicated in DCs equipped with automated batch order picking and sorting systems due to the unpredictable amount of time required to complete the batch. All of which is both costly and problematic.

 

Going Forward – There Can Be No Exceptions

For logistics companies and distribution planning professionals, the opportunity going forward is to begin treating DC operations and system design the same as if it were a manufacturing assembly plant. First, special operations must be integrated into the overall materials flow operation. This requires applying “lean” process analysis to the picking and assembly of customer orders. For example: looking at it from the productivity prospective, the goal may be to keep all processing areas running at their “target design rates”. However, from a “lean manufacturing” prospective it is OK to have slack or under-utilized capacity for some of the slowest processes (such as VAS) as long as they are fully utilized.

Lean manufacturing analysis strive to minimize WIP (work-in-process) which is the primary function for accumulation conveyor – queuing WIP between picking and assembly processes with different production rates. DC operations planners should start by focusing on increasing the capacity of the slowest process, i.e., VAS (and located them at the beginning of the serial order-assembly process) with all other downstream processes having a higher throughput capacity. The closer the DC system operation gets to this “pull verses push” model the more lean (efficient & productive) it will become.

DCs that are associated with the company’s manufacturing operations often have access to staff Industrial Engineers (IE). This specialized engineering resource provides DC planners the opportunity to better understand the “real” cost drivers and more easily adopt appropriate lean process analysis. For standalone DCs, IE resources are available through industry experts and independent consulting firms.

To get the ball rolling, DC executives need to seek answers to (3) strategic questions:


 
  • How can we become more efficient, leaner and more productive without mortgaging our future?
  • How can we determine the right initiatives that will grow and strengthen the business?
  • How can we better integrate special customer services into the normal workflow process?


They must reassess their business strategies/models and execution systems, and leverage these assessments to find real cost reductions and service improvements.

One way to achieve such multiple objectives is through flexibility & agility, which are the keys to managing risk. Introducing flexibility into DC system operations, which is the ‘holy grail’ of lean manufacturing, is essential if the business is to quickly respond to ongoing changes – referred to as “the new normal”. Thus, companies that are able to exercise flexibility and agility in advance of when needed are most likely to be among the best-of-bred DCs. Those who rely on incremental change, and who try not to disrupt current systems, will continue to struggle. For more information see “Rapidly Changing Logistics Requirements Drive Higher Levels of DC Automation”.

 

DC Automation – Rapidly Growing Trend

A visit to just about any U.S. and/or international material handling trade show will reveal a whole new world of proven DC automation technologies. Most of this technology is in reality not new. Foreign material handling system providers throughout Europe and Japan, driven by increasingly high labor cost and limited building space, have been automating DCs for many years. What’s new is that these providers are expanding their customer base into the U.S. where they have found a virtually untapped market for DC automation. We should note that domestic system integrators and manufacturers are now fully engaged in this emerging market opportunity.

DC automation comes at a time when the logistics industry, especially in the USA, is struggling to keep up with the ever changing demands of the online web-based consumer marketplace. Same day shipping is being offered by most consumer goods companies and next day delivery is the goal of a few trend setters. It appears that the path leading to success and better margins clearly involves the adoption of automated technologies.


Final Thoughts

The introduction of automation into the DC environment forces DC planners to adopt a more serial approach to system design. The manufacturing assembly plant model provides a structured approach that supports high levels of automation while reducing the incremental labor component. The automated DC of the future will handle greater volumes with a smaller more highly skilled workforce - just like today’s automated manufacturing assembly plants.

Happy Holidays!!

We would like to take this opportunity to thank our subscribers, readers, advertisers, and expert contributors for their continued support and feedback throughout 2013. We offer our best wishes for personal and business success in 2014.

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