Lean Logistics: examples presented at Lean Summit 2010
By adopting concepts of the Lean System in logistics, such as Pull Systems, Milk Run and Supply Routes, among others, large companies operating in Brazil and around the world – such as Bosch, Volks, Schulz and Stihl – are gaining more space for production in their plants, increasing efficiency and productivity, as well as reducing costs, inventories and line stoppages.
They are becoming much more efficient by applying, in both internal and external logistics, the concepts of this production philosophy inspired by the Toyota model, which also generates fantastic results for this highly strategic area of business: logistics.
As a result, they are discovering that “being lean” in logistics can become a competitive differentiator in this globalized market, especially in Brazil's current phase, in which the accelerated economic growth of recent months has been increasingly exposing the chronic shortcomings of our national infrastructure – affecting companies' business.
Bosch in Campinas, for example, has already achieved a series of positive, concrete results by implementing Lean in internal production logistics – a model that was detailed in August, in São Paulo (SP), at Lean Summit 2010, by Narciso D. Fontana, Logistics Engineer and Project Coordinator at Robert Bosch, in the talk “Increasing the productivity and efficiency of the supply system”.
Among the main results is the reduction of materials on the assembly lines and in the warehouse from approximately 2 days to about 2 hours. In addition, the company managed to reduce line stoppages due to lack of material from approximately 2 times a day to “isolated cases”.
Bosch created a system for measuring the efficiency of the supply routes, which stood at 60%, but whose indicator has already reached the level of 98%, with significant gains for both logistics and production.
In supplying the plant, for example, the company established the “On Time Delivery (OTD)” system, which means “the right part”, in the “right place”, with the “right quality”, “at the right time”.
In addition, Bosch implemented in logistics one of the foundations of the Lean System: Standardized Work. The company believes that this makes it possible to make difficulties and problems visible, in order to then maximize continuous improvement.
In this context, the company prepares the supply cycles following the Lean tool called “Milk Run” – a method that accelerates the flow of materials, in which vehicles follow a route to make multiple pickups and deliveries at many different units. This allows the operators/warehouse staff a quick setup for supply, in order to then supply the operators on the production lines.
Bosch also applied some of the main Lean tools in logistics. For example, Value Stream Mapping, a diagram that makes it possible to detail all the steps involved in the material and information flows needed to make the operation efficient end to end; the A3, a practice pioneered by Toyota, in which problems, analyses, corrective actions and action plans are written on a single sheet of paper (A3 size), usually using charts and figures; as well as the Problem Solving sheet (FSP) and PDCA, the acronym for Plan, Do, Check and Act, which means carrying out an improvement cycle based on the scientific method of proposing a change in a process, implementing that change, analyzing the results and taking the appropriate measures. The goal of all this is to promote the identification and elimination of waste in the logistics chain. The idea was to make hidden problems visible, in order to then eliminate the root causes.
Narciso D. Fontana, Logistics Engineer and Project Coordinator at Bosch, explained that the company established a “logistics vision” for 2012, which is “to have Lean Logistics in the Logistics Flow from customers to suppliers, ensuring: 1- A pull and leveled system throughout the logistics chain; 2- Reduced volume of components in the logistics flow through frequent and standardized deliveries; and 3- Simple and robust processes”.
External logistics:
Bosch also achieved a series of positive, concrete results by implementing the Lean System in external logistics – as also detailed in August, in São Paulo, at Lean Summit 2010, by Valdir Trevizanutto, Logistics Engineer and Project Coordinator at Roberto Bosch, in the talk “Increasing inbound and outbound productivity”.
In this context, the company adopted, for example, two fundamental systems of the Lean System: the “Pull System”, with which it managed to reduce inventory by 30%, and the “Milk Run”, which ensured a 43% reduction in freight expenses.
The Pull System occurs when the supplier's delivery is fully adapted to the customer's needs; and the “Milk Run”, as already mentioned, a typical Lean logistics system, is one in which the customer picks up the material at the supplier, unlike traditional logistics, in which the suppliers individually deliver their products.
In the Lean Milk Run System, logistics becomes a process planned down to the smallest detail, to run like a Swiss watch. At Bosch, for example, Valdir Trevizanutto explained, the “Milk Run” has the following characteristics: fixed pickup and delivery times, fixed pickup frequencies and an agreed quantity of parts previously defined between the parties. And only one vehicle per route is used to make the pickup at the suppliers.
Volks:
The Volkswagen plant in Taubaté (SP) has also already achieved a series of positive results by implementing the Lean System in internal logistics, as also reported in August, in São Paulo, at Lean Summit 2010, by Frank Sowade, Plant Director at Volkswagen, and Elielson Marostiga, Executive Superintendent of Industrial Eng. & PMP Wave at Volks, in the talk “Supplying in kits to increase productivity”.
According to both, with Lean logistics the company obtained a series of benefits. For example, it increased productivity by 9.8%, vehicle production per employee by 7.2% and production volume by 5.5%.
So much so that the Volks plant in Taubaté is recognized today as an example of the application of Lean concepts within the automaker, and a fundamental factor in its “Lean success” was the application of these concepts to internal supply logistics. Just to give you an idea, today parts go to the point of use within Volks in kits ready to be used, avoiding accumulation in the assembly area.
Schulz:
Schulz has also already achieved a series of positive results by implementing the Lean System in logistics, as detailed by Bruno Luis Salmeron, Operations Director, and Anderson Tomasi, Lean Manufacturing Specialist, both from Schulz - Automotive Division, in August, in São Paulo, at Lean Summit 2010, in the talk “The autonomous internal supply system”.
According to them, by implementing supply routes and pull signals between the warehouse and machining, the company obtained a series of gains: freeing up physical space, eliminating both unnecessary inventory within the plant and production stoppages, assured supply, as well as greater safety and ergonomics. And not only that: they managed to standardize schedules, ensure the use of kanban and keep aisles unobstructed.
The company implemented “Supply Routes” in internal logistics, aiming to improve service in supplying raw parts for automotive machining.
The “old and traditional” system relied on moving parts by forklift, which, according to the company, required a large amount of space for raw material in the cells (with low turnover), generating delivery delays and a lack of standards.
But with the implementation of parts movement through supply routes, the space for raw material in the cells was reduced (providing high turnover), and delivery delays were eliminated and service to the cells was standardized.
Stihl:
And Stihl also achieved a series of positive results by implementing the Lean System in logistics, as further detailed by Leonardo Pierozan, Supply Chain Manager at Stihl Ferramentas Motorizadas, in August, in São Paulo, at Lean Summit 2010, in the talk “Integrated supply chain management”.
With typically Lean logistics, the company increased inventory turnover by 25%, decreased line stoppages due to lack of materials by 71% and reduced total logistics cost by 17%.
The company achieved this by expanding the application of the lean philosophy to inbound logistics, through the pull system and routes shared with local suppliers.
At the planning level, the company created a methodology based on Takt Time, the time available for production divided by customer demand, defined in the S&OP (Sales and Operations Planning) process, which became the guide for planning the 3Ms: Machine, Manpower and Materials.
Lean in logistics: to “get around” infrastructure shortcomings:
Initiatives such as these – by Bosch, Volks, Schulz, Stihl and so many other companies that are discovering the advantages of applying the Lean System in logistics as well – can become a competitive differentiator, for example, in the face of our country's already widely known logistics problems, caused by the weaknesses of highways, railways, ports, airports, urban road networks, etc., which cause congestion in cities, roads, ports and airports. There is also excessive bureaucracy, with requirements for unnecessary documentation. And our export and import freight rates are much more expensive than international standards.
These inefficiencies in the country, as we already know, cause high costs, as well as low productivity and losses of competitiveness for society and for companies. And they may hinder the continuation of high growth rates. The traditional solution would be to increase investment levels. Obviously! But that is also expensive and time-consuming. And companies cannot wait.
However, we can go beyond the obvious and think differently. In other words, think “lean” in logistics, as large companies are already doing. If we look at these problems from a new perspective, we can envision simpler and more efficient solutions, with almost immediate results.
One also notices an enormous amount of materials waiting to be loaded onto ships or planes which, in turn, also sit idle longer than they would need to.
And, frequently, one also notices, on the one hand, customers waiting for late products to arrive and, on the other, suppliers who rush and strive to deliver, still late – often having to invest extra resources to recover from or avoid setbacks.
In short, if on the one hand there are evident shortcomings in the country's infrastructure, on the other, the infrastructure that does exist is poorly used by companies that insist on using that traditional, inefficient and expensive logistics system.
In other words, it is perfectly possible to optimize our deficient existing infrastructure without any investment, but with a “simple” change in the way of thinking about and doing logistics.
Understand the Lean mindset applied to logistics:
But how to do it? First of all, it is vital to promote a change of mindset: the basic premise is to recognize that the activities of moving, transporting and waiting for products are always “waste”. That is, they do not add concrete value to the product offered. And, therefore, they need to be avoided, eliminated or reduced as much as possible.
To do this, the Lean System has already developed a series of practices and tools tested and proven in different business environments.
For example, the concept of “frequent deliveries”, always made in “small lots”, according to customers' exact and immediate needs, using “right-sized” vehicles. And scheduled to always take place directly at the product's point of use, without intermediaries. In this way, “pull systems” replace “push systems”.
In addition, lean logistics needs to have stable and standardized operations. And follow the pace of real demand as closely as possible.
Furthermore, lean logistics must also operate under a system that encourages the exposure and resolution of problems, so that “kaizen” (improvements) is done every day in all processes and activities.
This alone brings a series of gains. For example, in reducing companies' inventories, thereby eliminating a good part of the costs embedded in storage and material handling. Or in eliminating “intermediaries”, who often only add costs and little real value to the process. In this way, costly warehouses disappear or are transformed into “cross-docks”, quick storage locations used only for the transfer of products.
So, what are the concrete results frequently found? There is a significant reduction in total logistics costs, from 20% to 40%, as well as inventory reductions, improvements in delivery levels, and freeing up of logistics capacity (trucks, forklifts, physical space, etc.), among other benefits.
All of this always follows the typical mindset of the Lean System, which advocates the continuous simplification of processes and flows, setting aside the typical traditional thinking of “managing complexity”, in which increasingly complex information systems only serve to hide failures and shortcomings.
In short, the lean logistics system needs to be like a river that flows smoothly.
Lean logistics is more effective even when companies' logistics is outsourced. One should seek to create incentives for the “logistics partner” to adopt the system. Of course, in this case, one of the greatest difficulties is convincing these third parties of the efficiency of the new practices, which may seem, at first, like a threat to their business, since “the lower the logistics costs, the lower the logistics operator's revenue”.
But one should seek to convince the partner, showing that lean logistics can not only improve the efficiency of processes but also reduce costs on both sides.
With this, companies and their customers win, as they come to have lower costs, more competitiveness and more quality. But society as a whole also wins, as it comes to make better use of the current weakened logistics infrastructure. As has demonstrably been happening, for example, in the cases of Bosch, Volks, Schulz and Stihl.
*José Roberto Ferro is President of the Lean Institute Brasil (www.lean.org.br), a non-profit organization created to disseminate in Brazil the Lean System, inspired by the Toyota Model, and is "Senior Advisor" to the Lean Enterprise Institute - USA.
PS – There will be a new opportunity to discuss cases with the companies and their specialists on March 22. The Lean Institute will hold the Lean Logistics Seminar, in which professionals and our specialists will present the state of the art of Lean Logistics applied in success cases. The event will take place at BOSCH, in Campinas. Information and registration on our website.
