Lean Warehousing Principles: What Are They and How to Implement Them

Lean warehousing principles make it possible for businesses to maximize their productivity while minimizing the use of resources.

For a logistics company, a warehouse is indispensable. Warehouses play a major role when it comes to the whole supply chain, which is dynamic and involves a lot of processes. Aside from the stocking of inventory, warehouses perform other key functions such as sorting, handling, distributing, and processing, among many others.

How then can a company maximize its warehouse while minimizing resources? This is where lean warehousing principles come in. These principles are more like a guide for companies to be able to maximize the productivity of their warehouses. 

What is Lean?

Lean is a systematic approach and philosophy that aims to maximize value for customers while minimizing waste in all areas of an organization’s operations. It originated from the Toyota Production System and has since been adopted by various industries and sectors and is widely regarded as one of the most vital components of e-commerce business success.

The core principle of Lean is to eliminate non-value-added activities or processes, known as waste, and focus resources on value-creating activities. By doing so, Lean helps organizations enhance efficiency, reduce costs, improve quality, and ultimately increase customer satisfaction.

What is Lean Warehouse Management?

Lean Warehouse Management applies Lean principles and practices specific to the warehousing and logistics strategy of an organization. It focuses on optimizing the flow of materials, information, and resources within a warehouse, aiming to eliminate waste and improve overall efficiency. 

Lean Warehouse Management involves various strategies and techniques, such as:

1. Standardized work processes
2. Visual management 
3. Continuous improvement

The 332 billion dollar warehousing and distribution logistics market is big enough to generate significant waste. By implementing Lean principles in warehouse operations for e-commerce and retail operations, organizations can achieve greater productivity, reduced lead times, improved inventory accuracy, and increased responsiveness to customer demands. 

Types of Lean Warehousing Principles

Some lean warehousing principles are straightforward and involve following a set of instructions. Other principles use visual cues, which allow warehouse personnel to have an overview of the processes within the warehouse. These cues often represent the movement of goods within the warehouse, similar to what happens in an e-commerce supply chain.

We look at some of the popular lean warehousing principles that are currently being used by e-commerce companies across the globe, including the:

1. ‘5S’ principles
2. Value stream mapping; and 
3. The ‘Kanban’ system

The ‘5S’ lean warehousing principle

The “5S” was pioneered by a Japanese company, and these principles aim to increase efficiency in the warehouse. The “5S” represents the Japanese words “seiri,” “seiton,” “seiso, “seiketsu,” and “shitsuke”. The English equivalent of these words are sort, streamline, shine, standardize, and sustain.

How can companies implement the ‘5S?’ Warehouse personnel simply have to keep in mind the ‘5S’ words. 

1. Sort

“Sort” involves ensuring that unneeded items lying around the warehouse are removed and packed away, thus increasing usable space. There are a few different ways to conduct the sorting process, however, the method is hardly the concern in this principle. The intention holds more importance. 

In an ideal operation, a business will break down all the operations into different types of tasks and operations. Post that, these tasks are to be reduced to the least amount of steps. This step can also help eliminate obsolete inventory and maximize profits.

2. Streamline

“Streamline” or “set in order” means personnel should be able to organize their workspaces and organize tools so that they can be within arm’s reach of workers. Organizing the workspace also minimizes workers’ movements. 

One of the ways to do this is to minimize distances between the loading dock and where the items are placed. This can ensure safer movement of articles and allow the business to onboard fewer employees.

3. Shine

“Shine” means employees should clean the work area after using the said area. This also means removing clutter and debris. Upkeep and maintenance is a crucial part of the warehousing system and can be the difference between accurate order fulfillment and shipping delays. Warehouses can adopt daily cleaning routines and install cleaning charts for regular cleaning.

4. Standardize

“Standardize” means warehouse managers should be able to document best practices and share them with workers. Standardization or uniformity is among the most efficient ways to ensure efficiency within a system. And one of the most important ways to do this is to conduct a thorough onboarding process and follow it up with regular training for all employees.

5. Sustain

Finally, “Sustain” means each of the previous steps should be religiously followed on a daily basis. To fully enforce this step, it is imperative that the e-commerce business in question performs routine assessments of its processes. Accordingly, the business will also have to implement best practices as required. 

Keeping up with this lean approach can be incredibly beneficial in the long run and contribute to a clean, focused, and highly motivated warehousing system.

Value stream mapping (VSM)

Value stream mapping (VSM) is another lean warehousing principle that is often used by warehouse managers. VSM is a process that managers use to understand the workflow in the warehouse, the interactions between processes in the warehouse, and the potential gaps or concerns in these processes.

VSM allows a manager to have a visual map of the workflow. The manager can then identify which items are being stored inefficiently and which items are being handled too often. Visual mapping also allows the manager to improve the layout of the warehouse depending on the items.

For example, fast-moving items should be strategically placed so that they are easy to access or reach, while slow-moving or non-priority items can be placed in certain areas.

Aside from the movement of goods and products, VSM allows managers to have a strategic view of the flow of information in the warehouse, an example of which are the steps that a worker needs to accomplish a specific task. A manager can then use the information to create a diagram to illustrate the workflow and hopefully improve the supply chain and logistics within the warehouse.

The ‘Kanban’ system

The ‘Kanban’ or ‘pull’ system focuses on inventory management in the warehouse. “Pull” means this system “pulls” supplies or items from the warehouse based on what items are in demand or what items have been ordered. 

The ‘Kanban’ system aims to make the supply chain more efficient by creating an orderly flow of items. This system is unique because it uses cue cards to manage or control the movement of items. For instance, ‘kanban’ cards are exchanged between warehouse departments so that the movement of items is precise. Ultimately, ‘kanban’ aims to reduce the guesswork when it comes to determining how many items are there in the inventory, how many items have been ordered, and how many items are left in stock. 

‘Kanban’ also minimizes bottlenecks, because ideally, new work or processes cannot be started until the ongoing work or process is completed. Basically, ‘kanban’ reduces traffic in a warehouse operation, which is similar to an assembly line.

For example, if somebody in the labeling station sees that the items being processed do not match, the labeling station will not receive additional items until the issue is resolved. In this scenario, the worker can identify the issue and prevent it in the future.

Implementing lean warehousing principles for your e-commerce business

Imagine a scenario where a warehouse for an e-commerce company is facing significant inefficiencies in its operations. The warehouse is disorganized, with products scattered across different areas and no clear layout or labeling system. Employees waste time searching for items, leading to delays in order fulfillment and increased customer complaints. Additionally, inventory levels are frequently inaccurate, resulting in stockouts and overstock situations. The company realizes the need for improvement and decides to implement Lean principles to address these challenges.

Here are three use cases for the lean warehousing principles that the company can implement to better warehouse operations.

Applying the 5S Principle

The first step is to implement the 5S principle: Sort, Set in Order, Shine, Standardize, and Sustain. 

1. The warehouse undergoes a thorough cleanup and reorganization. Unused or unnecessary items are removed (Sort). 
2. A logical layout is established, with designated locations for each product category and clear labeling (Set in Order). 
3. Regular cleaning schedules are implemented to maintain cleanliness and safety (Shine). 
4. Standardized processes and procedures are established, including guidelines for inventory management, picking, and storing (Standardize). 
5. Finally, regular audits and employee training programs ensure that the improved practices are sustained over time (Sustain).

Using Value Stream Mapping

Next, the e-commerce business performs value stream mapping to identify and eliminate non-value-added activities. They analyze the entire flow of materials and information, from the moment an order is received to its delivery. Bottlenecks, delays, and redundant processes are identified and targeted for improvement. By streamlining the value stream, the company reduces lead times, improves order accuracy, and enhances overall efficiency.

Implementing the Kanban System

To further enhance efficiency, the company adopts the Kanban system. Kanban involves using visual signals to control the flow of materials and ensure that inventory is replenished only when needed. 

The company sets up Kanban cards or electronic systems to track inventory levels and trigger replenishment based on actual demand. This reduces overstock situations and enables a just-in-time inventory management approach. 

With the Kanban system, the warehouse is able to optimize inventory levels, improve order fulfillment speed, and minimize waste associated with excess stock.

Benefits of Lean Warehousing

Reduced deadstock, and optimizing floor space can be extremely useful for any e-commerce business, in the long run. Read on as we explore the benefits of lean warehousing:

1. Improved Product Quality

Adopting a lean warehousing approach also helps greatly improve product quality. This happens due to the reduced amount of time that workers otherwise spend on tending to deadstock or overstock. Lean warehousing becomes a gateway to focusing on things that actually matter, such as customer satisfaction. In the end, a leaner warehouse management system benefits both customers and employees.

2. Waste Reduction

In the age of sustainability and eco-consciousness, waste reduction is of utmost importance. Lean warehousing walks the line of efficiency and waste reduction very well. This process is based upon the idea of limiting inventory and raw materials, hence also cutting down on waste. Moreover, having a bird’s eye view of the company owing to Value Stream Mapping also allows the business to eliminate any wasteful processes, therefore, running a less cluttered, more efficient warehouse.

3. Reduced Inventory Costs

This is the primary reason why most warehouse managers and business owners find themselves opting for the lean warehousing approach – it drastically reduces inventory costs. Given that the lean approach cuts down quantities of inventory as well as raw material, it opens up ample space. Storage opportunities grow as more floor space opens up. And in several cases, businesses even find themselves moving to a smaller warehousing facility adding to the cost-efficiency.

Which lean warehousing principle is right for you?

In terms of logistics and the supply chain, lean warehousing is not simply cutting costs by reducing the number of workers or using small spaces, but it is about making operations more efficient. Lean warehousing is the effective use of warehouse space and personnel. It aims to reduce the complexities of a warehouse operation and logistics; identify bottlenecks; and reduce downtimes in the supply chain, among others.

An efficient warehousing operation has become a necessity, not just for logistics firms, but for a wide range of businesses across the globe, including retail and e-commerce firms. And if it is the optimization of warehousing that you’re looking to achieve, outsourcing your e-commerce logistics might be the easiest way for you to achieve it. Sign up with Locad and simplify warehousing today!

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