Last week we continued our drill-down into the common challenges facing manufacturers and distribution businesses by focusing on Inventory (See “Four Inventory Management Challenges for 2020”). This week we’re going to dig down another level within the Inventory space by looking at it through the lens of the Six Sigma’s “Eight Forms of Waste”. Since we like to keep things to a short read of 5-7 minutes, we’ll focus on three of them today specifically in how they relate to the challenges of Inventory management.
As it pertains to the challenges we called out last week in Inventory Management, we’ll take a look today at three forms of waste in the warehouse/production floor:
- Underutilized Resources
- Waiting Time
- Extra Motion
Use What You Have Better
“Underutilized Resources” is sometimes a misleading term because it really refers to your “talent” – the unused brainpower and people power in your organization. Waste can come from wasting their brainpower by not providing rewarding and challenging work, opportunities to grow and trust in solving problems (i.e. where tasks also come with a mandatory “how” and not just a “what”). Trust to solve identity and solve problems without micromanagement is a great way to leverage your talent’s brainpower. The consequences of not doing so are lower engagement and employee satisfaction. How productive are unhappy employees? You will find it hard getting more productivity out of them if they are not motivated by their wasted talent. It’s a downward spiral, indeed. On the physical side, it is not always about maxing out the limitations of time and energy from individuals, but sometimes about having the right people in the right place or providing them the tools to work with to make the most of their time and labor.
As it pertains to “Inventory Challenges”, what are some ways “underutilized resources” are a problem?
From the human aspect of “talent”, there are a few common concepts (which may also be true in many other areas of the business too):
- Authority vs. Responsibility – do the people responsible have the authority required to do their job effectively? They may be in charge of something as important as “SKU control”, but are they also sitting at the table where decisions are made about introducing new products or retiring existing ones? Do they have direct connections with suppliers, or do they need to go through others to get the information they need?
- Do they have the tools to do their job? Is inventory being managed from spreadsheets or does your ERP/WMS have the required functionality to not only track, but also do forecasting, manage supplier delivery schedules, etc.
More Waste Comes to Those Who Wait
“Waiting” is defined pretty simply as “Waiting for the Previous Step in the Process to Complete”. Trucks idling in the yard waiting for your Receiving dock to open up a bay is one of the most easily measured examples of this, because you will already know the rates you will pay for each extra hour they are out there. But lift drivers waiting for pallets to be completed, pickers waiting for inventory replenishment, packers waiting for pickers, etc. Examples abound up and down the entire process.
In Inventory? This is prime territory for the “Wait” category. Again, tools are important. Automating the status changes of your inventory (see last week’s “Four Inventory Management Challenges for 2020” ) is key to avoiding wait time for CUSTOMERS, which could be direct cause of Lost Sales. Waiting on suppliers, on the receiving process, on a backed-up shipping dock, on a slow pick-wave, etc. are all waste that contribute to an inventory manager’s performance and spreads to the bottom line through lost sales, higher labor costs, etc.
When “Poetry in Motion” is Not
The third and final “Eight Forms of Waste” we’ll cover today is motion, as in “too much motion = waste”. Defined as “the unnecessary motion of people in a process and the unnecessary wear and tear on equipment that occurs in a process.”, it is not entirely about eliminating motion – but eliminating the motion we don’t need. One really great example is the Receiving Process, an area that has been thoroughly revolutionized by one of our partners. One major aspect often overlooked in even the most compactly organize Receiving docks is that staff are still walking across the warehouse to retrieve labels and manifests from a centralize printer somewhere else in the warehouse. This is waste that is easily measured, and eliminated, in this case by putting the printer on a cart with a powerful battery mounted on it so the printer can go where the work is. This is a good example of eliminating waste not by completely eliminating motion, but by reducing it and/or changing the type of motion involved.
From an Inventory Management perspective, “Motion” waste can mean a number of things, but one general way to look at it as anything that adds to the “Cost of Goods Sold” (COGS) that results from wasted motion. A typical example could be something as innocuous as the layout of the picking bins – which can have a very large and direct impact on both accuracy and speed, which both can affect the cost of doing business.
Let’s take the example of the humble dress shirt. A single color of a typical dress shirt can have at least thirty unique SKUs for a SINGLE COLOR. With just 5 colors, that would generate over 150 SKUs and all that entails – including 150 separate picking bins. Basic logic might lead an inventory/warehouse manager to set up an entire rack of 30+ bins for one color of each shirt, but then a picker would inadvertently make many more picking errors because the items in every bin would look identical, or they would waste a lot of time reading the tags or bin labels carefully. So the smart system scatters all the SKUs all over the picking aisles, and the inventory manager has a system that can tell them where they all are – so a picker can reduce motion by speeding up and down the picking aisles not needing to worry about which of the 150 SKUs is in that bin – it’s location means it’s the only one they need because it is surrounded by bins filled with completely different products.
Another more basic example would be moving pallets in or out of a container or truck. In a crowded warehouse where pallets are stored 2-3 deep, getting the ones you need loaded into the truck could lead to a lot of wasted motion. How do you line up the task so that the fewest possible pallets are moved in order to load the truck? Or better yet, how to develop a system so they are always put away in the manner that makes moving them most efficient?
Which One Challenges Your Business the Most?
Is there a specific form of waste that is a significantly bigger for you than others? Does your business practice Lean in a meaningful way that leads to measurable results? Are you happy with your Inventory processes and systems? Like all process improvement methods, lean is a tool, one that can be used in small and big ways. Starting with one small challenge and evaluating it from its most basic elements is a good place to start. Some recent surveys we’ve seen up to half of managers in our industry get some of their compensation based on meeting certain KPIs, so if you want to move to a more measurable approach to managing your business it helps to start with looking at observable forms of waste that go on every day on the floor.