Menlo gets lean

The third-party logistics provider figured lean was too good to leave to manufacturing.

By Gary Forger, Editorial Director
Modern Materials Handling November 1, 2005

Looks can be deceiving. Take Menlo Worldwide's warehouse in Brownstown Township, Mich. as an example.

This 250,000 square foot facility, known as the Great Lakes Lean Logistics Center, is quite orderly. All of the aisles of rack are neat and clean. It's all almost too orderly, neat and clean.

There's also not much materials handling equipment to be seen. Some lift trucks. There's rack, of course. And someone mentioned a warehouse management system (WMS) running on a server away from the warehouse floor.

A quick look in shipping belies that there's much happening there either. People are putting items into yellow boxes perfectly squared up in quadrangles on the floor. How neat, again. Every 20 minutes, the boxes get emptied and the items moved to packing just prior to shipping. How efficient.

Not far from the shipping area, a small group of workers is watching one of their peers explain some changes that are going to be made in picking procedures. It's all carefully mapped out on a presentation grid. And the person making the presentation has just spent the past two days planning these changes with three other people from the team. No supervisors or managers were involved.

Over on a wall next to the break room, are several other charts plotting various performance levels in the warehouse. The bottom line is that the Great Lakes Lean Logistics Center has shipped roughly 8,000 orders in the past two weeks without shipping a single wrong part or quantity. A recent audit showed that inventory accuracy was 99.9906%, or a few hundred dollars on several million dollars of inventory.

Yes, looks can be deceiving.

Rather than being some sleepy backwater of Menlo's third-party logistics (3PL) network, this Center is the home of the company's move into lean warehousing. Not only is this the pilot site for the effort, but it is the model for rolling out lean warehousing worldwide. And this is the story of Menlo's bet that lean is too good to leave to manufacturing.
Getting started

The idea of lean warehousing was brought to Menlo by Greg Lehmkuhl, vice president of global automotive, as a key enabler for long-term improvement.

The premise was very simple, says Jeff Rivera, senior manager of automotive warehousing. "Lean is all about eliminating waste." And Menlo saw an opportunity to improve its 3PL warehousing operations by going lean.

As Rivera puts it, the fundamental goal of lean is to reduce the time and resources needed to convert customer orders into high-quality, low-cost deliverables. Rivera, by the way, was brought into Menlo to manage this project due to his experience working in a lean manufacturing operation as well as in warehousing under a manager who had worked for Toyota.

Menlo's template for lean warehousing (see drawing below) is built directly on the Toyota lean manufacturing template.

All metrics are focused on service, quality, delivery, cost and morale. The three pillars of making that happen are just-in-time, people and built-in quality. Just-in-time is based on doing only what is needed when it is needed at the rate of customer consumption. The people aspect is focused on flexible and highly motivated people. And built-in quality relies on tools from error-proofing and designing for warehousing to elimination of variations.

But as Rivera and others soon discovered when this facility opened in July 2003, the template is a great starting point. Lean warehousing success happens only by actually doing it.

When the Center opened, it had only one customer and just 13 people. It also didn't have much history about demand for the parts it was handling. That required great flexibility, recalls Rivera. It also allowed people to focus on processes, refining them at every opportunity.

Constantly refining processes is essential to lean success, points out Bob Blevins, operations manager at the Center. Since startup, he says, they have been focused on eliminating non-value-added steps to reduce total lead time. Doing that allows the warehouse to be more responsive and efficient.

"We're not out there trying to reduce costs but working to reduce waste," Blevins says.

More than two years into the project, the Center has a different look today. However, the basic tenets of lean continue to guide all activities.

What started as one automotive customer now has three with a fourth set to come in quite soon. There are now 85 people on the warehouse floor. The racks have roughly 7,000 storage locations today. About 16,000 lines are being picked and shipped a month, accounting for 65,000 pieces. And those numbers will increase as that fourth customer starts up.

Even though a WMS is directing activities, the pick system is paper-based. There are no wireless terminals. Rather than assigning work in increments of 4 or 8 hours, workers operate in 20 minute segments. That maximizes flexibility and allows labor to be best used to minimize response time to orders.

Underpinning day-to-day operations are the basic tenets of lean: manage flow throughout the warehouse and set expectations.

The Center is set up as a series of mini-warehouses in a big building. Meanwhile, items are slotted in storage based on a commodity code that segregates parts by size and velocity (fast movers up front, slow movers in the back). This tends to minimize congestion not just of parts but of workers who are storing and retrieving parts, maximizing flow in the facility.

Individual workers are assigned responsibility for maintaining order in individual aisles. The person's picture is posted on the rack at the end of an aisle along with a list of responsibilities and a sign-off sheet for completing those. Order in the aisles also helps to maximize flow.

Picking and other assignments are handed out to workers from a central desk. Each paper pick list details what needs to be done in the next 20 minutes.

"What we have here is a team of short order cooks," says Blevins.

Pre-set amounts of time have been assigned to each task required, setting expectations for all.

Picked items are brought to the shipping area. Items are placed in boxes in designated areas, where they are confirmed as the right part and quantity. They are then packed prior to loading on over-the-road trucks.

As Blevins explains, team leaders, not supervisors or managers, own all of these processes. He calls them "the glue that holds all this together." Supervisors and managers, on the other hand, address roadblocks that are holding back leaders and their teams.

Bonuses of hourly team members are tied directly to meeting various metrics. Those cascade from broader goals set and reviewed by Menlo with its customers on a quarterly basis.

Team leaders determine how to meet those metrics and improve processes. There are several techniques used here.

For instance, every Wednesday, each department takes an hour to meet and discuss its performance. That forces people to constantly look at how they can improve. The hour also renews Menlo's commitment to provide the tools needed to make the operators successful, says Blevins.

Every month, a Kaizen event is held. For three to five days, workers focus not on the day's picking and shipping, but on how to improve an operation. As many as six people will work on that at a time.

Another technique for continuous improvement is called "parking lot ideas." These are often ideas that came out of the Kaizen event but could not be addressed there. Similarly, a small group will work for a day or two to find a way to make improvements.

In all cases, the conclusions these groups reach are shared with the rest of the team and implemented.

"The great thing about where we are now," says Rivera, "is that we are only now just scraping the surface. There's lots more to come."

And he's not just talking about what's happening at Brownstown Township.

Menlo currently operates more than a dozen lean warehouses, all based on what has been learned at this facility. But it won't stop there. The company is rolling out the concept to all of its facilities worldwide during the next year.