Today, more and more companies are developing a keen interest in implementing strategies to increase logistics efficiency as well as overall productivity. These goals are achievable through the effective management of available resources. Wastes in all operations can be eliminated by removing unnecessary steps, reducing processing time, and fully utilizing the available space. These principles are the fundamentals of lean logistics.
“Lean thinking” is when a company intends to minimize the waste in their productions and maximize the value of their products. It is a way of thinking which encompasses the management of space, time, costs, and staff. Lean systems are then implemented to maximize the efficiency in the management of these resources, ultimately resulting in increased productivity. Before companies can apply lean strategies to their operations, they must be open to new ideas, understand the concept of lean and be ready to adopt new work processes in order to achieve maximum benefits.
In this issue of LM, we had the pleasure of interviewing Ms. Nittaya Rattanawongwirul, General Manager of Operational Excellence at Schenker (Thailand) and Mr. Kevin Burrell, Chief Executive Officer for Thailand, Philippines and Vietnam at DHL Supply Chain (Thailand) Ltd. They share with us their perspectives and experience with lean logistics, and how companies can successfully apply it to their operations.
Lean logistics is the incorporation of lean thinking in a supply chain. Lean thinking originated in the manufacturing sector, and is now widely adopted by other industries to meet market and customer demands for products in a timely manner and in a way that produces minimal waste. Implementing lean strategies can boost a company’s advantage in the competitive market. This thinking also applies to the way resource flows and the control of work processes, with the aim of improving production. When lean thinking was adopted by the logistics industry, logistics service providers implemented it to transportation processes.
In the past, providers focused on moving cargo from A to B, which meant that the spaces inside the vehicles were not fully utilized. They then began to devise methods to boost efficiency, reduce costs and time, while ensuring on-time delivery. An example of an early lean transportation method is called “milk run”, which involved collecting multiple loads from several customers in a single trip, utilizing the full space inside the trucks and fuel costs.
Briefly, lean logistics is an adjustment made to a customer’s work process to minimize waste and maximize value and efficiency in their logistics operations. Ms. Rattanawongwirul comments, “Lean logistics is a culture of continuous improvement, aimed at further improving or developing work processes until they reach the next level of efficiency.” Continuous improvement must be made in all areas including the analysis of processes and human resources to save costs and eliminate unnecessary steps. Likewise, Mr. Burrell says, “Lean logistics removes uncertainties from work processes. It is a method for managing resources that enables optimum utilization of capacity, time, human resources and budgets. Based on a daily forecast of customer demand, a company can plan its use of warehouse space, distribution and transportation processes as well as workforce. This planning, in accordance with Lean principles, will boost quality and efficiency in resource management and minimize resource loss.”
Clients of logistics providers are showing a growing interest in lean strategies because of their need to reduce costs and improve efficiency. However, Ms. Rattanawongwirul notes that many of the customers who have sought advice on applying lean logistics strategies from her are encountering problems in implementing changes in their operations. She says, “Many customers do not feel confident about removing unnecessary steps or using technology to reduce costs. The factor that constrains change is people. They are accustomed to the existing way of working and do not have the courage to face change.”
This mentality is the result of the work routine that people are used to. If a company faces change, they may feel doubtful about the possible outcomes. Ms. Rattanawongwirul explains, “The majority of people still lack change initiatives because they work according to routine. They do not question the way things are or take the initiative to change. This way of thinking is the complete opposite to lean thinking.” To deal with this situation, Ms. Rattanawongwirul believes that there needs to be a mutual understanding gained through a thorough explanation of the concept of lean. Customers who are unsure about changes may pose questions to help them find out whether particular steps are truly necessary or not. Organizing workshops for the customer is one of the ways to enhance their understanding.
Ms. Rattanawongwirul adds, “We have to make our customers understand and feel confident about change so that they will have the courage to change. We run workshops as a platform for us to exchange our ideas with participants and pose questions to them to make sure that they are on the same page as we are. Ultimately, once our customers have gained understanding and seen it the same way as we do, they embrace change and take action by themselves.” Thus, communication is key to creating understanding, which in turn bolsters one’s confidence to change. Once customers have changed a step in their working process, they feel motivated to change another. Furthermore, in her experience providing advice for many companies, Ms. Rattanawongwirul finds that most customers raise the question as to whether implementing lean logistics into operations yields instant results. To this, Ms. Rattanawongwirul replies, “Putting lean thinking into practice may not always guarantee immediate results. Customers should understand that sometimes it takes time to reap the reward. The success should not be measured by a quick win but through cultural change that will support a strong long-term company performance.”
Removing Volatility and Increasing Predictability
As increasing predictability is one of the methods for implementing lean logistics, Mr. Burrell comments that the greatest deterrent to achieving predictability is sales operations. The ultimate goal is to remove volatility in order to ensure the efficiency of resources and the capability to satisfy customer demands. As it is usually the sales department of a company that is responsible for predicting the sales and resource demands, the forecast tends to be made only just prior to before the customer begins to sell, causing volatility in the supply chain. As a result, the company is unable to manage its resources efficiently. Companies could prevent this potential problem by encouraging internal communication. Holding a Sales and Operation Planning (SNOP) meeting is one way, which serves as a platform for the sales department and the operations department to consult each other and exchange ideas. It is also a good idea for their logistics service providers to participate in the meeting. Mr. Burrell says, “In order to maximize efficiency in resource management based on Lean Logistics concepts, logistics service providers need to obtain a holistic view of their customers’ businesses. They need to understand the nature, plans and strategies of each of the businesses, which are different from one another.”
Magnifying Little Details
Mr. Burrell and Ms. Rattanawongwirul both believe that lean logistics not only involves a holistic view of the customers’ operations, but also an analysis of the finer details. Ms. Rattanawongwirul says, “Lean logistics permeates every single detail of our work place whether it be office or shop floor operations. For example, for certain printing tasks, we only need to change page orientation from portrait to landscape to make the most of paper space. This eventually helps reduce paper consumption by half.”
Mr. Burrell says, “when it comes to equipment design and placement, the smallest details needs to be taken into account. A barcode scanner positioned for right-handers can cause inconvenience for left-handers. This may take longer for a left-handed employee using this scanner to finish the job. This extra time required may be just seconds for each task, but given all tasks in the aggregate for the whole day, hours are wasted. A careful consideration should therefore be made before placing equipment to ensure the highest level of operational efficiency.”
“In order to see such small details, we need to understand the nature and overall strategy of our business.”
“This understanding is essential not only for smooth operations but also for waste elimination. We may think that certain steps require only additional seconds to complete. Repeating those steps, nonetheless, results in a waste of several hours and a greater impact on work. We will never be able to spot all details through to the smallest ones without first seeing the whole picture of the organization,” says Mr. Burrell.
Ms. Rattanawongwirul believes that every business needs different processes, systems and tools for Lean concepts to be implemented successfully. However, the real key to success is systematic and logical thinking. With this, one will question the efficiency of the existing process and find ways to change or remove any step that incurs waste. “It is the thinking that matters. Experience may help us see problems more easily but whatever problems we see, we need systematic and logical thinking to solve them and enable a successful implementation. It is then essential to make sure that this way of thinking is inculcated within each individual in our operations through coaching & mentoring.”At times, customers are just aiming for the best results but are not open enough to completely involve logistics service providers in the change process. This limits the providers’ access to data and ability to forecast. Mr. Burrell says, “The most improved companies are those that allow us to be a part of their teams and learn about their strategic, sales and operations planning so that we acquire a full understanding of the companies and the nature of their businesses.” A successful application of lean begins with an insight into the customer’s business plans and a search for ways to improve efficiency. Technology then plays a role in facilitating Lean implementation. It assists companies in forecasting demands and planning resources accordingly in an efficient manner.
Mr. Burrell and Ms. Rattanawongwirul both predict that lean logistics will grow in popularity in the future. It will be in great demand especially during tough economic times, as it helps to reduce costs, processes and resources, giving companies competitive advantages. Ms. Rattanawongwirul says, “In an economic downturn, applying Lean Logistics to operations can help companies reduce costs. It produces a stronger effect when many companies compete in the same market. When players in the market offer similar service rates, the ability to save costs internally will lead to increased competitiveness and negotiating power.”
Mr. Burrell comments that having witnessed the success of lean thinking in the manufacturing industry, it will next dominate the logistics industry. He says, “Waste occurs in numerous logistics activities. In the case of logistics service providers, empty truck runs on their return journeys and volatile customer demand for space all lead to waste. Implementing Lean in logistics will cut unnecessary costs and enable logistics service providers to offer more cost-effective services.”
Both experts agree that in one way or another, companies are all run the lean way, led by their desire to reduce costs, time, and resources. They may be unaware that they are implementing lean methods. Our experts believe that lean thinking will have a clearer role in the future. In addition to developing a proper understanding of the thinking, companies that are interested in or have started implementing Lean should be open to new ideas and change their mindsets to embrace change in order to derive optimum efficiency from Lean implementation and ensure sustainable development.