welcome to Footlik & Associates Complete Design Capabilities for Distibution and Manufacturing

..:: 5/22/2007 ::..
Think Twice Before Going Lean
There is a huge difference between going "Lean" and going out of business.
Robert B. Footlik, PE
Footlik & Associates, LLC
Evanston, Illinois

Over fifty years ago Professor C. Northcote Parkinson first postulated his famous law that: “Work expands to fill the time available.” Anyone who has visited a Supply House counter in mid morning or mid afternoon is intimately familiar with how this operates in a real world situation. The old supervisory remedy for this condition was to bark out an order for “Everyone to get busy!” At which point everyone leaves the counter area so that they look busier.

You may also be familiar with the Marine slogan about being a “Lean, mean, fighting machine.” Sounds great, reasonably alliterative, but is this the proper image for customer service in a Fastener Distribution business?

With these two points in mind, think about those articles that have been appearing in the trade press extolling the virtues of “operating lean.” This is touted as a universal panacea for manufacturing, service industries and distribution. The theory is that by eliminating all the “fat” one can successfully compete in a multinational, multi-industry race of some sort. Sounds great, but not many of the authors have critically examined what “lean” means in a Distributor operation, especially one as heavily customer oriented as Fastener Distribution. Before going with the lemmings on this migration, it would be wise to reexamine your operations and develop lean criteria and solutions that work in your context.

Minimizing the head count without sacrificing your future
Minimum manning in any Supply House is the number of people required to serve counter customers and walk in traffic, plus one person to take care of the warehouse. Obviously this works for a small branch, but is it equally valid for a larger operation. The answer is a qualified yes, provided you manage their available time to best advantage. A simple example of this is to post a sign at the loading dock that “Receiving hours are from 9:00 AM to 11:30 AM and from 1:00 PM to 4:00 PM, other times by appointment.” Notifying your regular carriers and drivers about this policy and gaining their cooperation means that personnel who are not fully occupied will definitely have more demands on their time. A simple problem with a simple solution, right? Only up to a point.

Going too lean means that there will be insufficient staff to deal with erratic, but often predictable peaks and valleys; to say nothing about emergencies. A good time to observe this in action is while standing at the check in counter at an airport, or staring at the flight information board while waiting for your flight. Some airlines seem to have leaned themselves into bankruptcy by totally neglecting customer service and forgetting that having adequate personnel and equipment is easy when everything goes according to schedule and completely forgetting that bad weather and mechanical delays can make a shambles of any tight schedule. Avoid the Jet Blues and look for what is practical, from your customer’s perspective, not just the expediency of the moment or unrealistic expectations of inappropriate benchmarking.

From this we learn that the minimum staffing is what is required to serve the counter, plus one warehouse worker, plus other reserve individuals who can help out at peak times. If the peaks are predictable, such as a “Monday morning rush hour,” that additional head can be a part time staffer. This individual might be employed elsewhere (fireman, soldier, farmer), retired (even from your operation) or a housewife from the neighborhood. Their job is to come in and provide that additional pair of hands and smiling face that minimizes your customer’s waiting time and increases their satisfaction. This technique can also work for the warehouse or overtime. One of our most successful clients maintains a voicemail box to advise whether there is a short term, immediate need for additional warehouse staff. Everyone, including the sales personnel, clerical staff, executives or even prescreened family members can, and does, come in to work overtime. This is a great team building exercise and it certainly gives the “white collar” personnel a taste of exactly what goes on in the warehouse.

Another proven technique for a STAFDA member is the “Boss’s Club.” Rather than standing around, customers are allowed to pick their own orders in the warehouse—but only if they belong to the right club. How do they become members? By regular purchases above a threshold, paying their bills on time, developing trust and rapport with the counter staff and taking a one hour orientation course on how to work safely n the warehouse. If the general public can pick their orders at Lowe’s and Home Depot, why can’t trusted and trained customers do this in your facility? This can be a win-win solution for everyone.

Want to reduce overtime, especially on night shifts? Let the people go home when all the work is completed, the trucks are loaded, the shelves restocked and the floors are clean. Pay them for the full eight hours, regardless of when they leave. Most people would rather have time off than extra pay when overtime becomes oppressive. If they are leaving “too early” wait until someone leaves and don’t immediately fill the position, or better yet, as the workload increases don’t add more bodies.

Lean inventories that don’t sink the company
The fastest and most profitable way to achieve this is to clean up the inventory. If you follow the advice of most Professors (with little real world experience) “lean” means eliminating the slower moving items. Don’t fall for this fuzzy thinking because the “C” and “D” materials define your position in the market. Clearing out this supposed “dead wood” ultimately leaves your customers with the impression that you are not the right solution for them. This moves your operation down their list of preferred sources. As you are well aware, time is the most precious commodity and when you really need something would you rather go where you know the supplier will have what you are looking for, or would you rather go to the nearest store and hope they have it?

In a successful Distributor context, a lean inventory is one that turns the “A” and “B” items for greater profitability. An easy way to achieve more turns is to simply reexamine the minimum stock that is kept on hand. Far too many Fastener Distributors are still maintaining a safety stock as though they were placing paper orders, not transmitting purchase orders over the Internet. This automatically saves at least one week, without any impact on service. What’s this worth? Take the total purchases made for the entire year (in dollars), divide by 52 weeks and multiply the answer by the current interest rate. What’s this worth to the warehouse? Not much if the space is reasonably empty, but there could be a huge improvement if the space is limited. One week less inventory in a facility with 4 turns is a theoretical 8% reduction in stock. In actuality, since the maximum impact will be on the fastest moving items, the effective saving could be as high as 20% less material on the floors or clogging staging.

Next go to the loading docks and critically examine every single object that you find there. The real enemy of efficiency in any operation is clutter. To become leaner in this area, just ask one simple question, “Do we absolutely need this here?” Returns, desks, files, chairs, calendars, even pens and pencils can be eliminated. Although Darwin never studied the mating habits of inanimate objects, staging and work areas often appear to have become populated with junk overnight. Sort of like wire coat hangers in a dark closet. The object of this exercise is to leave in place only what is absolutely essential for day to day operations. Getting rid of the clutter makes all the tools and materials easier to find and control. Enhancing efficiency in getting things into stock and into the hands of customers translates into greater productivity and fewer errors everywhere. Lean thinking is not just for inventory.

If this technique works at the loading docks, why not apply it everywhere, including the offices?
Simple concept, big results in both removing the “fat” and making people aware of the need for keeping everything under control.

Leaning the facility by stretching the walls
In previous articles I have mentioned in passing the use of alternative facilities, such as public warehouses, trailers, sea/land containers and tents for gaining more space on a temporary basis. Obviously the physical characteristics, value and immediacy of the materials must be evaluated before leaving the building, but there are ways to stretch the walls internally and raise efficiency.

Stop looking at the merchandise and start looking at the “holes.” This means climbing a ladder and getting above the stock to see how much space is available if you go up instead of out. Then look behind the shelf stock. All too often there is lost space waiting to be reclaimed at a reasonable cost in terms of both dollars and time. Reengineering the layout to use more relevant storage mediums can also save huge amounts of space. This is abundantly clear in a Fastener Warehouse using 4’ deep shelving stocked from both sides or pallet racks instead of shelving. Often this is the result of evolution instead of planning, with storage equipment that was purchased cheap or inherited.

The solution is to create a “Master Plan” for what the layout should evolve into, and then implement the plan as time and budgets allow. No time or no budget? Go back to the first paragraph. Amazing results can be achieved a little a time over an extended period.

Even a simple reorganization of shelf stock can result in more space, with a bonus of greater efficiency. If the shelves are all equally spaced, and the products are not all the same size, the solution is obvious. Condense the inventory to a tighter configuration and reclaim the space for additional storage. A more subtle benefit is that walking distances are automatically reduced, especially if the fastest moving products are place in prime locations adjacent to main aisles instead of down long narrow aisles. By creating a “quick pick” zone at the aisle ends the total travel distance/order can be significantly reduced.

This technique works best with clip type adjustable steel shelving, but even old wood bins can be replaced a unit at a time, over an extended period. Just do this one section or family at a time and be patient. Generally the speed of the process increases dramatically as the project progresses. This is due to conquering the learning curve while simultaneously adding more working space for maneuvering.

Making more hours in the day…life beyond the usual 24
Time skipping can do wonders for many operations, and the cost can be zero. After achieving some success with the projects outlined above you will gain a better feel for what can be accomplished and how long the tasks will require. Apply this knowledge by reorganizing the work day to take advantage of both part time help and full timers who start at staggered times. Just because the traditional warehouse workday has been from 7:00AM to 4:00 PM is no reason to continue this way in perpetuity. Some of the staff can start at Noon or even 3:00 PM to overlap with the other teams and clean up the day’s receiving and stocking. With an extended workday order picking and truck loading can be accomplished at night. This gives you more time for customers to place their orders and the trucks can go out before the morning traffic builds.

Even if your customers are not open early in the morning, the drivers can do their longer transit runs full and work their way back as the truck empties. Track how this works, then go back to the first paragraph again and reclaim the saved time by adding more stops or developing programs such as inventory management of the customer’s stockroom or other value added services. More income and a tighter relationship with the customers is certainly a great way to multiply the time and labor savings.

Don’t neglect new technologies that can greatly extend your workday at little or no cost. For example, with branches in multiple time zones, and voice over Internet or call forwarding a branch that is open can answer the phone for the branches that are closed. This adds more time both in the evening and in the morning. Just remember to retrain your customers to take advantage of this service. And retrain your staff to think of the phone as a two way device, not something to stare at until it rings. Telemarketing across time zones can keep the orders flowing even after the branch that will physically is closed. With staggered work hours you can even cut 24 hours off of the delivery cycle without any additional costs.

Even if you do not have a branch in another time zone, you may have a buddy. Those nice folks that you met at the last convention (you know, the ones in the photographs displayed in this magazine) might just be willing to work this technique with you. If neither of you compete geographically and you both can benefit without adding any more staff, this is a simple way to gain a longer work day, tap into the expertise of all the personnel involved and better satisfy the customers.

Is there more?
Of course there is. This article is only a catalyst; we just haven’t fully explored the opportunities. If you have practical ideas along these lines that are working for you, send them to me at robert@footlik.com and I’ll compile them and publish the best. No prizes are promised, but the greatest innovations come from those who are closest to the challenge and creative enough to come up with innovative solutions.

This process never really ends until you become a “Lean, sweet, customer service machine.”

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