Are you using lean in your logistics and transportation management?
“The most dangerous kind of waste is the waste we do not recognize” ~ Shigeo Shingo
Lean is a new way of doing business. The transportation company’s culture and behavior should change to apply Lean thinking. Lean thinking focuses on the elimination of all waste to bring value to the customer, beyond the customer’s expectations (where waste is defined as any non-value added process).
“Them (company leadership) versus us (shop floor associates)” needs to change to WE. Problem and process solving need to be done together, by leadership and associates, on the shop floor where problem and processes occur.
It is obvious why moving parts further than necessary is wasteful. Transportation takes time. There is also the frequently overlooked fact that people often have to make round trips, adding to the delay. It is surprising how far people walk in the course of a year due to many processes. Walking 100 feet to get parts 20 times a day can add up to nearly 170 miles a year.
The need to transport parts also drives inventory up, creates a need for space to store those parts, and uses energy for more forklift time and warehouse heating. The list of additional waste generated by transportation goes on and on.
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Recognizing All Your Wastes: Using The ‘8 Rights’
The goal in Lean Transportation is to use the ‘Eight (8) Right’s:
- Right Materials
- Right Quantity
- Right time
- Right Place
- Right Source
- Right Price
- Right Quality
- Right Service
5 Ways to Optimize Your Transportation with Lean
1. Customer Centric Lean Transportation: bring value to the customer
Transportation strategy should not drive how and when the product is delivered. Rather, going beyond customer expectations need to be fully understood, and transportation strategies then developed to meet those expectations with optimal inventory levels. Transportation strategy and tactics must support Lean inventory strategies.
2. Eliminate Transportation Waste: Focus on your strategic differentiator
All transportation is not waste, and transportation can be used as a strategic differentiator. Transporting more than the necessary requirements is a waste, and should be eliminated. Focus on how transportation could be your strategic differentiator in the industry.
3. Build Relationships and Measure Transportation Performance
Shippers should view transportation providers as strategic partners instead of transactional partners. Collaboration, trust, teamwork and cross-function thinking are essential to building relationships between shippers and transportation providers. Using Metrics/Key Performance indicators that measure how well the shippers and transportation providers do promotes daily continuous improvement. To build a lean supply chain, organizations need to build long-term relationships with quality carriers that are stable, dependable and committed to servicing the organization.
Related: Top 2016 Supply Chain Strategy Posts from the Supply Chain Link Blog
4. Understand Transportation Cost Structure
Transportation cost is made of two distinct areas: unit costs and productivity costs. The significant opportunity for transportation cost reduction is in productivity costs. Focusing on unit costs, or carrier rates, will only result in creating instability in the transportation network. Rather, focus on productivity: trailer utilization, total miles ran, equipment waiting time (which is a pure waste) and adherence to core carrier routing guides. No one wins when shippers beat down carriers on rates to the point where they are running unprofitably. The real goal is to negotiate carrier rates that are fair, competitive, and equitable for all parties.
5. Perform Transportation Daily Event Management
Sustained cost reduction is not realized through infrequent transportation network designs and carrier RFQ’s. Cost savings results from disciplined, daily event management and hour-to-hour focus on waste identification and reduction. Every day, start with a transportation plan, execute the plan, and then check actual condition to the plan. Any detected waste needs to be documented and followed by problem-solving. Create daily route designs, complete real-time track, and trace, generate real-time metrics, and complete daily problem-solving. This investment and focus on process discipline is the lean way.
Use the acronym PDCA: Plan, Do, Check, Act or DMAIC: Define, Measure, Analyze, Improve and Control. This can be done by individuals, but cross-functional team problem solving is more effective.
So, where do you go from here?
For the benefits of Lean to be fully realized, the organization’s transportation management needs to be integrated into the lean implementation. As stated earlier, all transportation is not waste, and transportation can be used as a strategic differentiator. Hopefully, this article has given you some key concepts to remember as you focus on how to make transportation a strategic differentiator for your firm.