Lean Defined: What is Waste? (In Logistics)
We’ve all heard the phrase, “you can’t make something out of nothing.” Resources are necessary to accomplish anything great or small. However, problems arise from using resources unproductively, applying the wrong resources, failing to tap into necessary resources, or directing resources toward the wrong outputs. In each of these instances, waste is created. Costs are incurred, time is consumed, opportunities for value creation and growth are lost, and customers are left less than satisfied.
The first step in lean thinking is to understand what is value and what activities and resources are necessary to create that value (“value-add”). Once value is understood, everything else is waste. Defined, waste is “useless consumption or expenditure; use without adequate return.” Lean practitioners use the Japanese term “muda” when referring to waste, although they have typically done so in a manufacturing context. Taiichi Ohno, author of Toyota Production System, devised seven manufacturing wastes: Overproduction, Inventory, Overprocessing, Correction, Waiting, Conveyance, and Motion.
While much has been studied about these wastes in a manufacturing environment, relatively little is mentioned of the wastes in logistics. Logistics wastes are just as prevalent as any other functional area of the firm though they are not always as visible, given the scope of logistics activity. In fact, it has been suggested that more than 80 percent of the work in logistics takes place outside the view of supervision—further suggesting that precise, yet robust processes must be developed for logistics. There are eight logistics wastes we need to eliminate:
Defects (Correction): Waste that is created when we are doing things over because they were not done the first time (“re-work). Quality can always be improved if the focus is on quality at the source and mistakes are not passed down the supply chain.
Overproduction: The king of waste. Many other wastes are created when we produce more than the market demands. Lean focuses on building “takt time,” which means the “beat of the customer” in order to avoid overproduction.
Waiting: All waste that exists because we are waiting for material, people, upstream processes, customer orders and all other dynamics that result in waiting time before we can perform our work.
Not Engaging Employees: Waste is created when we fail to engage our team members, fail to share best practices and fail to work collaboratively.
Transportation: Transportation in excess of what is required if inventory and flow exist in the network. This includes underutilized equipment, inter-plant shuttles, trailer demurrage and other transportation wastes.
Inventory: Waste created by carrying inventory in excess of what is required to service the customer. This is caused by overproduction, forecasting errors, long lead time and batch thinking based on economies of scale paradigms.
Motion: All motion that does not add value to the product or process. Examples of waste in motion include walking around, and searching for materials or tools.
Excessive Processing: The waste that is created when we do more than is required to meet customer needs. An effective tool to identify waste in processes is to create a value-stream map. “A value stream map is a paper-and-pencil representation of every process in the material and information flow, along with key data. It differs significantly from tools such as process mapping or layout diagrams because it includes information flow as well as material flow. Value-stream mapping is an overarching tool that gives managers and executives a picture of the entire production process, both value and non value-creating activities. Rather than taking a haphazard approach to lean implementation, value-stream mapping establishes a direction for the company” (Lean Enterprise Institute).
As in life, business is about managing trade-offs. Trade-offs are found not only across business functions but within each one. The most commonly held trade-off in logistics is that between the level of service offered to customers and the cost incurred in providing that service. This trade-off describes our challenge to manage total logistics cost.
When you focus on total logistics cost, you are essentially making the supply chain work in your favor. And it is through this level of coordination that your supply chain can outpace those of rivals.
Written by Derek Browning, Lean Deployment Executive at LeanCor
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