Well-used digital transformation can amplify the results of lean logistics

Increasingly advanced and accessible technologies have been sparking efforts toward digital transformation in every area of companies, whether in customer relations, new business models, digital manufacturing or industry 4.0, etc.

In times of growing competition between companies and of customers demanding ever greater agility, logistics operations become a fundamental strategic element and certainly also present great opportunities for digital progress. By analogy with manufacturing, the term logistics 4.0 is sometimes used to describe this movement.

Just as we discussed in a previous leanmail about advanced manufacturing and lean,  digital transformation in logistics only makes sense when it is aligned with a clear purpose of adding value for customers, and it is therefore part of the company's continuous  lean transformation.

How, then, can we obtain all possible synergy by integrating these concepts into digital lean logistics?

Below we present five points that stand out as good opportunities to be analyzed:

1. Improving “physical and information” processes to adopt digital lean logistics

First of all, for a company to enter digital logistics, it is important that it already has improved “physical and information” processes, which will be further optimized with the new technologies.

What often happens, however, is that many companies that move into digital logistics do so without first “fixing” their processes, which are full of waste.

It is not wrong, then, to say that the prerequisite for a company to adopt digital logistics is, first and foremost, to improve its basic processes. Thus, it is necessary first to apply lean philosophy to achieve maximum operational and information efficiency in the processes that already exist.

Once there is a minimum base of rationality, efficiency and stability in the processes, the digital application can bear fruit, improving the processes even further where necessary, pulled by the value requirements that are important to customers.

2. Generating speed and accurate information for the customer

It is in the information flow of handling and delivery operations that an important connection of digital lean logistics occurs.

The lean tools applied in production processes make it possible to have the right products, in the minimum quantity necessary, available to be shipped when customers demand them.

Once this product has been prepared in the most optimized way possible, by applying concepts and techniques of the lean system in logistics and administrative processes, digital technology is then used to inform the customer that the product is ready and will be delivered shortly.

Similarly, the lean system will encourage the company to seek to optimize the product delivery route. To do so, digital technologies can show the best routes through artificial intelligence software already available on the market, which also allows the company to have a real-time view of where its delivery vehicle is.

This same artificial intelligence can also change the route in real time to avoid, for example, a traffic jam, a location with a traffic accident, etc. This connection between lean concepts and digitalization will provide a better customer experience, with more agility and quality in the product delivery process.

3. Implementing the pull system precisely

In addition, from the supplier's or distributor's point of view, digital logistics can help implement a basic concept of the lean system: the pull system.

For example, through technologies that make it possible to know more quickly what demand needs to be met, triggering orders to suppliers more precisely and quickly and preventing overproduction.

Or what shipment is coming from the supplier, when it will arrive and how it will need to be received. Using software and data-sharing clouds, it is possible to know exactly which trucks are coming to the Distribution Center and what their detailed composition is, in terms of quantities, pallets, weights, packaging, etc. This makes it possible to size in advance the labor that will need to be used, no more and no less.

Here we have another connection with the lean system. In other words, to solve the problem of receiving material as quickly and at the lowest cost possible, the company improves its process and creates a receiving schedule, using for this purpose the information that comes from the supplier, which was placed, for example, in a digital cloud.

Thus, digital lean logistics can help improve the productivity of handling and storage by knowing in detail what demand is expected throughout the day and for the following period, making it possible to optimize the work.

4. Optimizing warehousing

As for warehousing techniques, the existence of various specific software packages that help organize materials and manage orders is nothing new. The new trend is for these technologies to be increasingly connected.

Some time ago, it was common to use a WMS(Warehouse Management System) to help with warehousing, but it had no connection, for example, with the company's ERP(Enterprise Resource Planning), which receives customer orders. There was, then, a “physical transition” between one software and the other.

In digital lean logistics, on the other hand, these systems work connected, in such a way that this makes it possible to schedule the preparation of items in an optimized and fast way, according to the orders.

For example, when the demand expected for the following day changes, the materials preparation area can quickly know that this demand has changed, so as to adjust the preparation, adapting itself, which will certainly speed up deliveries and avoid possible delays. In this case too, the pillars of lean and digital logistics go hand in hand. The first optimizes the way materials are picked and stored, and the second connects this process with real demand. In this way, resources are optimized and costs are reduced, while serving the customer better.

5. Promoting real connection throughout the chain

Another fundamental result of digital lean logistics concerns the connection it generates in the logistics chain. For example, some companies have improved their pull system by allowing their supplier to see the real consumption of customers at the end of the chain, acting through replenishment of what was actually sold at the point of sale, rather than based on forecasts or on orders delayed by a long information flow.

Digital lean logistics today makes it possible to connect all these parts of the chain: the customer, the demand for what they order, buy and pick up, the point-of-sale inventory, carriers, the distribution center, the supplier that will manufacture, the supplier's supplier, etc. Visibility of real demand can be created for the entire logistics chain, for example, through a digital cloud where real demand data will be shared throughout the chain.

This avoids a common problem in chains in which the lean system has not been properly adopted, which is the bullwhip effect”: a small variation in demand at the far end ends up generating a large variation in various parts of the chain. This is because the information takes time to reach everyone, generating insecurity and a succession of orders and production larger than necessary.

These are some of the points we have observed as promising in applications of digital transformation that enhance lean logistics, and they are only just beginning.

Each company should analyze what makes the most sense for its customers, processes and needs, certainly adding several other opportunities, as part of its continuous improvement journey.