Given the low margin nature of most distribution businesses, it is imperative to maintain the lowest possible labor costs. This paper will show how to use Lean and Six Sigma tools to minimize the labor required to pick, pack and ship orders from a warehouse.
This distribution company embraced Lean as part of their company's strategy to consistently reduce costs and improve customer service. They began their journey by applying Lean and Six Sigma tools to their primary operation, warehousing, picking, packing and shipping packaged goods to customers.
This project used 3 Lean Six Sigma Tools:
- Spaghetti Maps
- Pareto Analysis
- 5s Visual Management
Visualizing the Problem with Spaghetti Maps A Spaghetti Map is a simple Lean tool to help visualize extra movement of people within a process. It establishes baseline performance, shows the need for improvement and provides insight into how to redesign the layout of a work-area. They can sometimes be combined with time studies to break down each step and its duration.
The Lean Team at this Distributor began the project by creating a Spaghetti Map of the current state. For 3 orders, with a total of 7 items, the warehouse attendant traveled all over the warehouse, covering from one end to the other and almost all 4 corners. This is a lot of movement for 7 items.
At the Pack & Ship area there was repetitive and un-necessary movement. One table is for packaging, a different table has the UPS computer, a different table has the internal ERP system computer (that closes the order and moves it to the invoice queue) and yet another table has the ticket printer. Finally, they stored boxes about 25 feet from the packaging area. Each order required a separate trip to box storage.
The Spaghetti Maps make the case that this warehouse could have improved; Reducing the labor required to pick, pack and ship orders.
Using Pareto Analysis to Make Improvements They next moved to using a Six Sigma tool, Pareto Analysis, to analyze how to reduce the move-time required to pick, pack and ship an order. Pareto Charts were developed in the late 1800's by an Italian Economist, Vilfredo Pareto. He used this analysis to determine that wealth was skewed to a small proportion of the population. In his time, 80% of the land in Italy was owned by 20% of the families in Italy. From Vilfredo we derived the Pareto Principal or 80/20 rule. This is commonly used in sales, with 80% of sales generated by only 20% of customers.
They created a Pareto Table for the number of times an item was on an order (or was "picked"). Quantity or Sales $ was not important for this project as we were concerned with reducing move-time. Therefore, how many times a warehouse attendant had to go to that item to pick it, was the critical metric.
Item Code, Orders,% Total, Cum%
CW-932-42, 476, 1.08%, 1.08%
CW-035-44, 433, 0.98%, 2.06%
AW-255-19, 432, 0.98%, 3.04%
WE-823-09, 330, 0.75%, 3.79%
TW-114-02, 297, 0.67%, 4.46%
AW-255-31, 263, 0.60%, 5.06%
NW-115-45, 258, 0.58%, 5.64%
HW-040-27, 255, 0.58%, 6.22%
TW-332-72, 251, 0.57%, 6.79%
SW-008-32, 248, 0.56%, 7.35%
TW-134-11, 227, 0.51%, 7.87%
TW-124-12, 222, 0.50%, 8.37%
MW-000-68, 215, 0.49%, 8.86%
AW-744-54, 207, 0.47%, 9.33%
VW-330-06, 200, 0.45%, 9.78%
SW-201-60, 197, 0.45%, 10.2%
This table shows the items that make up the top 10% of "picks". There were about 6000 items kept in this warehouse. Sixteen items accounted for 10% of all picks! The concentration of the top items was much higher than 80/20. It was actually 80/10, with 10% of the items accounting for 80% of the picks.
Warehouse Re-Layout The team then mapped the location of these top 500 items. The top sellers, in terms of "picks", were located all over the warehouse.
To view the Spaghetti Maps and this location-diagram go to http://supplyvelocity.com/whitepapers.asp.
To reduce the move time required these top 500 items were moved as close as possible to the Pack & Ship Area. Many of the smaller items were moved right into the Pack & Ship area on shelves next to the packing table.
Then the Pack & Ship Area was rearranged. The boxes were moved right next to the packing table. The ERP and UPS computers were put on the same table. Everything was as close as possible.
The result was minimal movement to pack and ship products to customers.
Control Plan Every 6 months the Vice President of Operations reruns the pick-velocity report, and maps out the location of top 500 items. As items fall off the list they are moved further back in the warehouse. As items move onto the top 500 list they are moved as close as possible to the Pack & Ship Area.