Applying Lean Concepts in a Warehouse Operation

Frank C. Garcia, P.E.

Director, Business Solutions & Engineering Services
Advent Design Corporation
Bristol, PA, USA
1. Introduction
This presentation shows how a warehouse operation can be improved using lean concepts and techniques.
Warehouse improvement requires optimizing material flow, order picking, replenishment, and dock operations.
Although many traditional lean techniques maybe difficult to apply, the concepts of improving material flow and
eliminating waste can be used to make significant improvement in warehouse lead time.
Many lean practitioners consider the term warehouse and lean to be mutually exclusive. However, regardless of how
fast inventory is turned, warehouses will always exist to allow a company to deal with variations in customer
demand. The key is to reduce the non-value added steps in the warehouse as much as possible and to improve
velocity and flow. Implementing a lean warehouse starts with value stream mapping. After the current state value
stream map is created, improvements can be easily developed to eliminate extra material handling, excessive travel
time, and time spent looking for products. Various lean improvement techniques such as material flow analysis,
quality improvement, and application of the 5Ss can be used. A warehouse improvement example is presented to
show how warehouse lead time, order picking time, and material handling can be reduced by 50% using lean
concepts.

2. Evaluating the Warehouse

Over the past few years the production areas have been upgraded without a corresponding enhancement of the
warehousing activities. Companies are now experiencing problems with the warehouse and distribution areas
keeping pace with the product as it is received from the various processing areas. Space utilization, material
handling, and data collection are just some of the challenges that arise. There has been a trend of increased labor to
support the warehousing requirements.
Where do you start? In order to understand where to start the implementation of lean concepts in the warehouse, one
of the most useful tools is the value stream map. The value stream is the set of all specific actions, both value added
and non-value added, that are needed to take a product through the information and production flows of a
manufacturing operation (1). The value stream map follows the production path from beginning to end and shows a
visual representation of every process in the material and information flows The maps show the linkage between
information flow and material flow for a product family. Most times the warehouse shows up on a value stream map as
simply an inventory triangle and shipping. This makes it difficult to evaluate the waste that is occurring within the
warehouse. It is necessary to show the process within the warehouse including operations such as receiving, palletizing,
putaway, order picking, order staging and preparation, truck loading, and shipping. A concept warehouse value stream
map is shown in Figure 1.

Simplified Warehouse Value Stream Map

Orders

Suppliers

Production and
Inventory Control

Schedules

Orders

Customers

Orders

Production

Shipping
Warehousing

Lead Time

Figure 1

3. Warehouse Value Stream Map

The current state value stream map shows how the warehouse currently operates and serves as the foundation for the
future state changes. The map starts with the shipping area and works back through the warehouse process to the
production area and to the suppliers. You need to start with one product family otherwise the map will be too
complicated. It is also useful to track a product family order through the warehouse operation.
The production control information flow is shown to determine how the warehouse processes are being scheduled
and controlled. At the bottom of the map, the total process time and lead time are calculated for a typical product
family unit or order. Figure 2 shows a completed warehouse current state map.
The current state value stream map serves as the starting point for developing the future state. The current state
value stream map shown in Figure 2 revealed a number of opportunities to reduce lead time and processing time in
the warehouse, including the following:

reduction in material handling time in order picking, putaway, and palletizing

reliability issues with the strapping and metal detection machines
reduction in truck loading time
reduction in time spent checking inventory location and aging

Using the current state map, the goal in developing the future state map is to make the flow continuous and to
eliminate as much waste as possible. Lead time is shortened as much as possible by implementing lean techniques.
The flow in the future state map is built around the takt time, or how frequently a unit must be completed to meet
customer demand. Takt time is simply the available working time per shift divided by the rate of customer demand
per shift.

Warehouse Current State

Value Stream Map
Blanket Orders with Daily
Releases; Supplemented with
Open Market Purchases

Spices and
Smokehouse
Materials

Hogs

Blanket Orders
with Weekly or
Bi-Weekly Releases

Packaging
Materials

Production
and Inventory Control
(Computer System)

Randomly Placed
Orders (Various Sizes)

Various
Customers

Demand:
131 to 242 orders per day
Avg: 167/day
1 to 2 pallets/order
15 to 17 orders per truck
12 to 13 trucks per day
1 route per truck

Daily
Production
Schedule
Daily

Weekly or
Bi-Weekly

(about 400)

Weekly or
Bi-Weekly

Daily Shipping Orders

& Freezer Release (5PM)

Aging
Report

Smokehouse Operations
Smoke

Wrap & Pack

Smoked
Products

Multiple
Operators
Kill & Cut

Wrap & Pack

Cut Products

Cut Products

Multiple
Operators

Multiple
Operators

Order Lead Time 3.7 to 6.1 Days

Order Processing Time: 6 Hrs
Takt Time: 3 to 4 minutes

Multiple
Operators

Metal Detection

I
Conveyor
Staging
10 cases

1 to 2
Pallet

1, 578K lbs

Conveyor
Staging

C/T =2 sec
C/O =2 min
Rel. = 95%

C/T = 2 sec
C/O = 1 min
Rel. = 80%

Palletizing
& Storage
1 to 2
pallets

I
Conveyor
Staging
10 to 15
cases

3 People
C/T = 7 sec
per case or 10
min per pallet
C/O = 0 min
Rel. = 85%
Avail. = 24.8
hrs (2 shifts)

Order Picking

I
Rack
Storage
775
positions;
7 reefers;
610K lbs

1 to 2
pallets
per order
6 to 8
People
C/T = 10 - 35
minutes
C/O = 0 min
Rel. = 85%
Avail. = 49.5 to
66 hrs (2 shifts)

2.9 to 5.3 days

6 minutes

5 sec

Daily
Shipments
(12 to 13 routes)

Strapping

1 to 2
Pallets

30 seconds

Off-Site Freezer Storage

Order Checking
& Scanning

I
Staging
Palletizing
& Dock
6 orders
(12 pallets)

1 to 2
pallets
2 People
C/T = 15 min
C/O = 0 min
Rel. = 85%
Avail. = 16.5 hrs

20 minutes

Shipping

I
Staging
for Trucks
2 orders
(4 pallets)

1 to 2
pallets
per order
2 People
C/T = 4 hours
C/O = 0 min
Rel. = 85%
Avail. = 16.5 hrs

15 minutes

(Freezer storage:
40 seconds

40 seconds

20 minutes

6.7 to 14.5 days)

35 minutes

10 minutes

4 hours

Figure 2
Figure 3 shows the future state map after improvements have been implemented in the warehouse shown in Figure
2. The process steps and information flows highlighted in red show the improvements from the current state map.
Some of the improvements are as follows:

new ergonomically designed palletizing station that reduces wasted motion and errors
accurate labeling and zoning of the warehouse racks to reduce time spent looking for products
use of barcode cases labels to track all cases and pallets in the warehouse
re-organization of the rack storage to place high moving products on lower rack levels and closer to the
shipping dock
use of radio frequency bar code scanners and a warehouse management system (WMS) to obtain real time
inventory data and pick sequences to reduce order picking time and errors. Figure 4 shows a process flow
diagram of this improvement.
reduction in warehouse job categories and extensive cross training

The lean improvements, implemented in this warehouse, reduced order processing time by 50% and lead time by
25%.

Warehouse Future State

Value Stream Map
Blanket Orders with Daily
Releases; Supplemented with
Open Market Purchases

Spices and
Smokehouse
Materials

Hogs

Blanket Orders
with Weekly or
Bi-Weekly Releases

Packaging
Materials

Production
and Inventory Control
(Computer System)

Randomly Placed
Orders (Various Sizes)

Various
Customers

Aging Data

Demand:
131 to 242 orders per day
Avg: 167/day
1 to 2 pallets/order
15 to 17 orders per truck
12 to 13 trucks per day
1 route per truck

Daily
Production
Schedule
Daily

Weekly or
Bi-Weekly

(about 400)

Weekly or
Bi-Weekly

Bar Code Scan

Warehouse Input

Daily Shipping Orders

& Freezer Release (5PM)

Bar Code Scan

Inventory Updates

Smokehouse Operations
Smoke

Wrap & Pack

Smoked
Products

Multiple
Operators
Kill & Cut

Wrap & Pack

Cut Products

Cut Products

Multiple
Operators

Multiple
Operators

Order Lead Time: 3 to 4.9 Days

Order Processing Time: 3 Hrs
Takt Time: 3 to 4 minutes

I
Conveyor
Staging
10 cases
Gap cases

1 to 2
Pallets

30 seconds

Palletizing
& Storage

1 to 2
Pallet

Conveyor
Staging
30 to 50
C/T = 2 sec
cases
C/O = 1 min
3 separate Zones
Rel. = 90%
Bar code scan

C/T =2 sec
C/O =2 min
Rel. = 95%

1, 578K lbs

Conveyor
Staging

Strapping

1 to 2
pallets
3 People
C/T = 7 sec
per case or 6.8
min per pallet
C/O = 0 min
Rel. = 85%
Avail. = 24.8
hrs (2 shifts)

Order Picking

I
Rack
Storage
775 positions;
Locator system,
A items on first
tier, additional
rack above
palletizing
610K lbs

1 to 2
pallets
per order
6 to 8
People
C/T = 10 to 15
minutes
C/O = 0 min
Rel. = 85%
Avail. = 49.5 to
66 hrs (2 shifts)
Scan bar codes

2.6 to 4.5 days

6 minutes

5 sec

Daily
Shipments
(12 to 13 routes)

Multiple
Operators

Metal Detection

Off-Site Freezer Storage

Order
Verification

I
Staging
Dock
2 orders
(4 pallets)

1 to 2
pallets

Shipping

FIFO

1 to 2
pallets
per order

2 People

2 People

C/T = 10 min
C/O = 0 min
Rel. = 85%
Avail. = 16.5 hrs

C/T = 2 hours
C/O = 0 min
Rel. = 85%
Avail. = 16.5 hrs

15 minutes

(Freezer storage:
40 seconds

40 seconds

Figure 3

13 minutes

6.7 to 14.5 days)

20 minutes

8 minutes

2 hours

FUTURE STATE ORDER PICKING FLOW

FRESH

Warehouse Management System (WMS)

SMOKED

FROZEN

GET PICK
LIST

GET LOAD
PATTERN

Truck Route Wave Pick

LOCATE PALLET
IN WAREHOUSE

LOCATE PALLET
IN DOCK RACKS

MOVE PALLET
Warehouse Management
System (WMS)

CASES 95% OF TIME

SCAN
LOCATION

REPEAT
UNTIL
ORDER
COMPLETE

PICK
CASES OR
PALLETS

Warehouse
Management
Next location System (WMS)

MOVE PALLET
Warehouse Management
System (WMS)

SCAN
CASES

STORE
PALLET

PALLETIZING
AREA
DOCK

STAGE
ORDER
MOVE TO INSPECTION
CHECK
ORDER

Warehouse
Management
System (WMS)
Truck Route

VERIFICATION
SCAN

LOAD
TRAILER

TRUCK ROUTE

MOVE TO TRUCK

Figure 4

4. Implementation and Planning

When the warehouse future state value stream map is completed, an implementation plan must be developed to convert
the current state into the future state. Once the improvements are identified, a time-sequenced list of improvement
projects can be made. A brief goal and the expected improvement should be show for each project. The projects should
be given a relative priority so that the most important projects can be scheduled first. The plan should be established to
complete the majority of the projects within three to six months. A number of the improvements in the case study fell
into this category. Organizing the warehouse improvement projects in this manner can make it easier to include them in
the capital planning process if new process equipment is required. Some of the improvements in the case study require
warehouse expansion which will take a year or more to plan and to get final management approval. The financial
benefits of implementing the warehouse improvements shown on the future state value stream map can also be
calculated, including an estimated payback period.

5. Summary
Lean concepts can be successfully applied to a warehouse environment. Value stream mapping can be a valuable tool
for developing and implementing warehousing lean improvement projects. The process of creating the value stream
map helps to train the warehouse team on lean techniques and to reveal opportunities to reduce waste. Some of the
traditional lean techniques such as cellular manufacturing and setup time reduction may not be applicable to most
warehouse environments. However, once the value stream map has been developed, the waste in the warehouse process
can be easily identified and eliminated using
improved order processing and tracking
reduced material handling
improved inventory organization
cross training
quality tracking
Using lean concepts can lead to significant reductions in warehouse order processing time and lead time while
improving inventory and order processing accuracy.

Biographical Sketch
Frank C. Garcia, PE
Advent Design Corporation, Bristol, PA
Partner and Director, Business Solutions & Engineering Services
Mr. Garcia, a registered professional engineer, served seven years in the U.S. Navy submarine force after graduation
from the U.S. Naval Academy. After completing his military service, he obtained his Master of Engineering in Industrial
Engineering from the Rochester Institute of Technology. In addition, he has 14 years of varied industrial experience in
engineering, quality assurance, and operations management. He has worked for Mobil Chemical Company, Burroughs
Corporation, Spectra Graphics, and the Department of Defense. His experience includes planning and implementing
plant expansions in manufacturing, warehousing and materials handling systems. He has been responsible for Quality
Assurance and Customer Service for multi-plant operations; engineered, justified and installed major manufacturing
equipment systems; and has successfully managed manufacturing operations with staffing into the hundreds.
As a manufacturing engineering consultant for the past 14 years, Mr. Garcia has worked and managed projects involving
material handling improvements, plant layouts and relocation, packaging line design and installation, and quality
improvement. He has been involved with many lean manufacturing implementations involving setup reduction, cellular
manufacturing, and value stream mapping. He has assisted in the development of manufacturing improvement strategies
for national and international companies. His projects have been in the chemical, food, pharmaceutical, electronics,
defense, and consumer products industries.
Mr. Garcia is a senior member of the Institute of Industrial Engineers (IIE) and American Society for Quality (ASQ). He
is also a certified Systems Integrator (IIE), Quality Engineer (ASQ), and Quality Manager (ASQ).

References
1.

Shook, J., Rother, M., 1999, Learning to See: Value Stream Mapping to Create Value and Eliminate Muda, The
Lean Enterprise Institute, Brookline, MA.