LEAN LOGISTICS

INTRODUCTION
Every class we have had and every paper we have read has shown us that logistic activity
involves delivering products and services where they are required at the exact time
needed. In order to achieve this, logistics require the correct and precise administration of
order processing, inventory, transportation, but also the consolidation of warehousing,
materials handling and packaging, all these activities through an integrated network of
facilities. We can see in our daily life that it is very difficult to imaging accomplishing a
whole variety of operations such as, manufacturing or international commerce without
logistics.
In an effort to go deeply into the logistics wide and complex world we are willing
to investigate an specific area of it, which we believe is the main goal of todays
logistical operations: Lean Logistics. Having a Lean system, without waste, allows us to
give better and quicker response to the demand, and makes enterprises improve in many
if not all activities.
Writing this report represents not only giving definitions, and researching the
most possible information that can be extracted from different reliable sources, it is more
than that. It is interpreting data, analyzing information, and demonstrating how effective
this logistical approach can be inside a company.

DISCUSSION
Companies are always pushing themselves to improve in order to obtain an advantage
over their competitors. They frequently feel the need to reduce costs, time and inventory.
One way that has been proven to make an organization improve notoriously is a supply
chain process, better known as Lean Logistics.
This process involves all departments in a company. It is based in eliminating
waste in order to reduce costs, lead times and improve product quality. As we can image
it is a philosophy that can be applied to any company, regardless if it is big or small.
Lean Thinking originated from manufacturing methods used by Japanese
automotive manufacturers. Due to minimal resources and shortages, they employed a
production process that worked with minimum waste. Soon, this thinking spread to all
manufacturing areas, new product development and supply chain management
(Adaptalift-Hyster, 2012). After a few years, the world began hearing about this
philosophy and some scholars found out that these idea not only improved process but
also reduced cycle times, defects and quality, therefore costs went down and the
companys profitability went up.
Around the 1980s, there was another discovery. Western Scholars began saying
this methodology wasnt only for manufacturing companies, but also for any type of
company or process. That was when other branches of lean were born. One of the first
branches that emerged was Lean Logistics, since companies perceive that by improving
manufacturing processes; their restrictions moved towards the procurement, storage and
distribution processes (Adaptalift-Hyster, 2012).

Lean logistics are agility principles applied to all logistical processes, from
purchasing raw material to the distribution of the final product. Lean means doing things
in a better way. It represents flexibility, speed, flow and elimination of wastes. The most
important thing is to eliminate inventory, this means every inventory that is not needed to
support operations and customer needs must be removed. For that, it is necessary to
identify wastes. Which according to Eduardo Escobedo Operative CEO at Socconini
Consultores-Lean Six Sigma Institute, wastes are all those activities that do not add
value.
Lean Principles
Lean Thinking involves a constant cycle of looking for perfection by eliminating
waste and maximizing product value. This means that end-customers do not pay for
companys inefficiency and waste.
Figure 1. Achieving minimal waste requires four basic principles.

Source: Adaptalift Hyster, 2012.

1. Specify value: Customer value is recognized and developed along the supply
chain network.
2. Map out value stream: Identifying all processes along the supply chain
network, which will allow eliminating the processes that do not create value to the
entire product. Understanding from this mapping how the value is created into the
product from a customers perspective.
3. Create a product flow: Implementation of the factors outlined in order to make
valuable processes to occur in a light system; minimizing interruptions,
inventories, and downtime.
4. Establish customer pull: Manufacturing only in response to customers that
needs it; implying that demand information is available across the supply chain.
What these four processes look for is: perfection, to continuously improve every
process, reducing waste and magnifying value.
Lean logistics main objective is to make companies more efficient. The 21st
century is an era where there is huge tendency to global competency, in which even less
quality products are competing. So, a competitive advantage needs to be offered,
maintaining quality, improving prices and lead times. That is basically what customers
are looking for: quality, costs and delivery.
In order to achieve lean logistics inside an enterprise, a multiform operational
integration is needed, commonly known as Logistical Synchronization. It pursues to
arrange the flow of materials, products and information within the supply chain
participants to decrease duplication and unwanted repetition to a total minimum.

In order to be able to achieve this synchronization approach and reach lean logistics
elimination of waste is essential, but first we need to know what types of wastes there are
and how you detect them. Lean methods point out seven types of waste (Harrison and
Van Hoek, p. 194, 2008):
1. The waste overproduction: making or delivering too much, or too early. Instead
what need to be done is Just in Time, where neither you deliver too early nor too
late. This type of waste generates unevenness or material lumps, which is
definitely bad for quality and productivity.
2. The waste of waiting: it is seen whenever time is not well used, in other words
when time is not used effectively. It is usually happening when you wait for
operator, by parts or by customers
3. The waste of transporting: moving parts around from one step to the next add
zero value. Double handling, conveyors and movements by forklift trucks are
examples of this type of waste. Placing operations as close as possible to each
other not only helps minimize waste but also strengthens communications
between them
4. The waste of inappropriate processing: money and time wasted because
something in the production process went wrong. Utilizing a large, central process
that is shared between several lines is an example of this waste. Another example
is a process that is incapable of meeting quality standards demanded by the
customer
5. The waste of unnecessary inventory: inventory can often show that flow has
been disrupted, and there are some basic problems in the procedure. Inventory not

only covers problems, but it also increments lead times and increases warehouse
requirements.
6. The waste of unnecessary motions: activities that are not necessary to be
performed within the supply chain. If operators have to walk, stretch or run
themselves excessively, then these are needless motions. Other examples are
taking stores requisition for signature and moving parts from one container into
another.
7. The waste of defects: having defects represent time and money. The longer the
defect remains undetected, the more cost is added. Defects are confronted by
activities like quality at source and prevention, but never detection.
Recently a new type of waste has been added to the list of the seven previous ones:
8. The waste of not using the talent of our people: not using experiences or skills
of those who know the procedure very well. It happens when bosses do not listen
to employees, it involves loosing time, ideas, abilities, improvement opportunities
and learning potential (Quesada-Pineda, Buehlmann and Arias, 2012).
Lean logistics encourages analyzing business processes deeply to establish the
baseline of value-adding processes and to identify the incidence of these seven previously
mentioned wastes (Harrison and Van Hoek, 2008). The objective is to obtain data that
can be processed evenly and in harmony. If the analysis is more detailed the better, as it
helps understanding procedures and the relationship, which is done by the supply chain
mapping. The implementation of lean thinking is the way an enterprise brings their
processes under control. Following systematic approach to deal with waste, minimizing
defects, minimizing downtime and to maximize productivity and simplicity.

Lean Logistic Challenges

In the article: Lean Logistics Essentials What, Why, and How by LTD
Management, it is exposed and briefly explained that for both supply chain management
and the implementation of lean logistics, challenges need to be confronted. These just
mentioned, are additional issues that a company must deal with in order to achieve a
successful lean process. Some well-known challenges are lack of know-how, opposition
to change, lack of resources and commitment.
According to LTD Management (2015), some other challenges that might appear
when trying to introduce lean systems are:

Global Logistics: Tests the additional time required to move for a long distances
resources or products. As known, supply chains require lots of people involved to
bring or finish a product. Bringing lean throughout the extent of such a big supply
chain results very challenging.

International Sourcing: Bringing up material or finished goods from across the

world results on a big obstacle to lean. The lead-time is long and time is wasted.
Because of these, orders with big amounts of resources are needed. This results as
another test when implementing lean systems.

Accounting: Lean manages cost in a different way standard cost accounting does.
Also, standard accounting systems dont recognize time issues and rework is
managed differently. Finally, lacking financial support to waste brings up
challenges on the development of lean systems.

Organization silos: Implementing lean systems create gaps. These gaps develop
areas where waste evolves and removing this waste might result a challenge.

External partners: Because there is many people involved in supply chains, a lot
of suppliers and services providers exist all along the chain. Nevertheless, some of
these do not have a lean culture. Implementing lean systems outside the company
can also be a test.

Lean Logistic Tools

According to the LTD Management (2015), a Logistics & Supply Chain Management
Consulting enterprise there are tools to becoming lean and reducing disadvantages. Each
has differences as to ease of use, time to implement, benefits and risks. Some of them are:

The 5Ss: Sort, Straighten, Sweep/Shine, Standardize, and Sustain/Self discipline.

By using the 5Ss a visual way to waste reduction is developed.

Rapid setup: Also known as changeover, which can be used on seasonal

products, new products and fast-moving ones. Lowering the time uses less
warehousing areas.

Standardize: Involves defining the who, what, how, where and when. It helps
firms to improve takt time and cycle time.

Kanban: Represents a new, exclusive way to understand warehousing and

inventory position within the supply chain. It presents a way to coordinate multistep processes for multiple products. With kanban, small stocks of inventory are
placed in dedicated locations for supply chain control (LTD Management, 2015).

Workcell: Is a unit greater than an individual operation but smaller than a

department. It is independent as to equipment and resources. The potential
application is with mixing several operations into a central area that exists where
warehouse does additional activities, such as assembly.

Six Sigma: An advanced tool to quality. The focus is variation, controlling and
preventing errors. Statistical measurement is essential. It is used throughout the
supply chain, not just in select activities or locations. This tool helps lean supply
chain management to achieve its highest level.

Advantages of lean logistics

There are also several advantages when implementing lean logistics. Some of
them are to be explained briefly (Lean Blog, 2013):

Reduced inventory risk: manufacturers can be able to diminish inventory risk. If

the supplier develops inventory or products earlier than required, the holding cost
may grow. Also, this can lead to an increasing risk of inventory becoming useless.

Better service: With lean logistics, delay reduction can be accomplished. By

reducing lead-time and supply chain waste, a better response to demand is given.

Eliminating Waste: Key feature of lean logistics. Manufacturers are able to

reduce non-value adding activities within the chain (waste of time, effort, etc.).

Reduced Cost: When eradicating inventory risk, cost of inventory management

decreases.

Greater profits: Capital is free for other investment.

Greater efficiency and performance: Long-term advantages for a company are

developed; including improved working capacity and efficiency.

Way to success: A manufacturer can achieve quality of product delivery and

customer satisfaction if logistics thinking is implied in the supply chain.

Disadvantages of lean logistics

According to J. Lang Wood (2014), the use of lean logistics will also have
counterparts. Some of these are mentioned above:

Supply Problems: as inventory is kept small, there is a great dependence on

suppliers that are able to provide products for the manufacturing process without
interruption or delay. Employee strikes, transportation delays or error in the
quality of a product coming from the suppliers end can develop manufacturing
holdups resulting on fatal outcomes. Also, suppliers may not like to sell products
or services in small amounts or tight schedules, resulting on disagreements and
difficulties.

High Cost of Implementation: Applying lean philosophies often means ripping

off previous infrastructure and systems. Employee capacitation can delay
operation and acquiring competent managers and machinery can increase a
companys expenses.

Lack of Acceptance by Employees: applying lean manufacturing processes

might develop employees stress and rejection, because the lack of habit and
preference on previous methods. Also, a lean process requires constant employee
input to achieve quality control, and old employees can feel unqualified to
achieve this.

Customer Dissatisfaction Problems: Any disruption coming from the supply

chain may result on a problem that affects customers.

CONCLUSIONS
Although it is true that the implementation of Lean Logistics might represent some
challenges to the firm and that it can also bring disadvantages and the increase of
expenses, there are a lot more advantages and capital revenues are bigger after its
implementation.
We know lean logistics means not wasting time, resources and ideas. It involves reducing
capital tied up to inventory, eliminating warehousing and transportation activities,
developing customer service and satisfaction. Once it becomes clear that logistic
processes generates waste, it is possible to conclude that each company requires to know
which types of wastes are generated. The next step will be to remove them and prevent
their recurrence. If this practice becomes common, it enables the elimination of a set of
sources of inefficiency that, therefore, improves operations and generates profitability.
Nevertheless, this type of logistic requires not only changing your way of doing things, it
also requires strategic alliances with suppliers that follow a lean culture and are able to
respond to firms specifications as a day-to-day supply chain management is needed. We
can summarize that this type of logistic results in:
- Reducing stock inventory, while maintaining and improving service level.
- Increasing production capacity.
- Reducing errors and defects.
- Shorten the average time of delivery.
- Improve the use of available storage space.
- Improve functional support offered by the information systems to logistics
processes.

- Having working areas more efficient, clean, tidy and well distributed

After determining how efficient and effective this approach is and in what it results, we
can conclude that Lean Logistics has become a practice required, given the need to
increase productivity and the efficiency in order to increase competitiveness.

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