Planning a Lean Inbound Logistics Strategy
The inbound flow of raw materials and parts is a major area of opportunity to gain efficiencies and decrease the total cost of your supply chain. At LeanCor, we refer to our inbound logistics solutions as lean logistics engineering. The lean logistics engineering process incorporates several complex factors including volume fluctuations, sourcing changes, and lead, window, and service times to determine transportation modes, sourcing locations, freight consolidation, trailer loads, route combinations, and freight sequences. With lean inbound logistics processes, you can control what parts to receive, when to receive them, and in what quantity. This customer-focused engineering optimizes resources, minimizes cost, and maximizes customer service.
Here are seven action steps to plan a lean inbound logistics strategy:
1. Collect data on current inbound logistics:
As with other areas of a fulfillment stream, the first step in moving to a future state for inbound logistics is to make the current state visible by collecting data. This should include:
- Supplier shipping locations
- Part numbers purchased from each supplier
- Part number consumption – quantity obtained from each supplier
- Pickup and delivery frequency from each supplier
- Transportation costs to support the current network
Verifying, standardizing, and compiling information may require substantial effort, but accurate information is vital for understanding the inbound logistics process.
2. Map the current inbound logistics network.
Based on the data collected, you can review a map of supplier locations, part-quantity volumes, and current delivery frequencies from each supplier. From this, you can create a map that was used to identify and plan milk-runs and shipping-consolidation opportunities. Working with planned delivery frequency (documented in the PFEP), your team can determine how to consolidate volumes within your entire supply base in order to increase delivery frequency while reducing (or at least stabilizing) transportation costs of the inbound logistics network.
3. Develop an inventory strategy based on pull.
The goal is to have minimal raw-materials inventory at your facilities. But like most manufacturers, you will need some inventory to protect yourself from part shortages and other unexpected variations. The solution is to create an inbound supermarket to hold small amounts of supplier-material inventory. You can determine appropriate inventory levels and space requirements by reviewing each part’s PFEP.
4. Develop a transportation strategy based on pull.
A supplier-material supermarket system will need an external logistics network to support it. Lot sizes, MOQ’s, consolidations, and delivery frequencies will need to change to match pull replenishment cycles. This can occur without driving up costs, even though it involves moving to smaller, more frequent deliveries.
5. Move from warehousing to cross-docking.
A cross-dock is a facility that consolidates material from multiple suppliers going to the same destination or splits up material from individual suppliers going to multiple destinations.Unlike a warehouse, a cross-dock never stores material. It simply redirects it within a few hours (or at most a day) from inbound vehicles to outbound vehicles, while it is on its way from suppliers to customers.
Cross-docking is an important technique to support flow and reduce the need for warehousing. Warehousing means receiving items, storing them while waiting for demand, picking the items, and then shipping or moving them. Storing, waiting, and picking are all wastes that should be eliminated.
6. Develop a packing strategy based on pull.
Packaging plays the same role in inbound logistics as it does in outbound logistics. Smaller lot sizes and minimal packaging allows for more efficient utilization of trailers and better connection with production-line processes. Logistics can collaborate with production to identify the best packaging to support the production lines. Many manufacturers accomplish this through the use of returnable containers. But purchasing returnable packaging requires a capital expenditure.
7. Develop daily logistics engineering and PDCA.
Lean transportation and facility management are a part of a planned system that must be managed daily. This is particularly true for inbound logistics, for which complete control is critical to the success of all downstream processes. Too many organizations do a one-time logistics network analysis, implement a new plan, and then fail to check the plan. Within days performance to the plan will deteriorate as operational variables and assumptions change, often resulting in under-used transportation resources, increased inventories, and a reduction in fulfillment-stream performance.
In order to make a planned system a reality, it’s a best practice to hold daily PDCA meetings to review inbound logistics. Attendees should include logistics engineers, material planners, and representatives from core carriers. They should review:
- Carrier performance
- Carrier feedback on routing
- Supplier constraints to optimal design
- Supplier fill rate
- Utilization of transportation equipment
- Unplanned problems