Lean is a process improvement/management methodology that comes from the Toyota production system. Their main drive was to eliminate waste in processes while respecting their employees. The methods worked so well that they have been used in industries as wide ranging from building airplanes to ordering office supplies at a school. Warehouses across the country of various sizes adopted lean methods to improve control of inventory and suppliers.
I am going to start out by saying I am absolutely no warehouse/supply chain management expert. I am quite new to looking at warehousing. I am used to using lean principles but some of the tools and methods in lean warehousing are new to me. I find it extremely interesting and exciting because the amount of money and time that goes into inventory management. I am wading in slowly and have talked with warehouse folks at several housing authorities across the country. I am also talking with warehousing professionals from outside the housing sector as well as consulting best practices, reading books and going to free meetups in the Seattle area about supply chain management. Anyone working in supply chain management in public housing or outside, please feel free to comment and give feedback or criticism. You will not hurt my feelings.
Lean Inventory Basics: Here is what I have learned so far and what should at the minimum be helpful to you. I always go into any new situation by going to the GEMBA or where the work is being done. Spend meaningful time in your warehouses and understand every process and every step. Do not go in like a cowboy. Meet your staff and respect them. They know what’s happening and will lead you to the choke points. Listen and learn from the knowledge already in place. Ask what is working well and what is not working well. If you start off with the solution before understanding the entire situation, chances are new processes will fail.
As you start accessing and process mapping out what is happening and talking with staff, try to gauge if the current system is working well for them. Here are some tips on what you can look for.
Process/Workflow Movement:How does your inventory move through the entire value stream? How does it enter? What happens when it enters? Does it get entered into a system? How long before it is put away and where and why does it go where it goes. You want to focus on eliminating waste within your warehouse work. Here are some key ones to look at.
- Look at your transportation and movement of inventory. Usually transportation and movement are seen as two separate wastes but I am combining them here. Is there unnecessary movement in finding products? Do you store some electronics in one part of the warehouse but others across the way? Do you put high use items on the bottom shelf where people have to bend over? Think about where inventory is put and what unnecessary movement is caused because of that.
Are you a housing authority with no inventory? Hmmmmm. Are your staff running to Home Depot three times a day because they need to get a part? Is that really just-in-time? Windshield time is a major waste. Just-In-Time principles might work better for manufacturing than public housing warehouses. That is just a thought and feel free to disagree. If you have a vendor managed inventory system that is super locked down, please share!!!!
- If you are ordering goods in anticipation of possible demand, you can easily have access inventory. This could come in the form of the maintenance tech thinking he needs ten of this or twenty of this. It could be a bin that is almost empty. Do you just reorder or is there a thoughtful process in place? Overproduction causes you to waste both materials and money spent storing the excess inventory.
- Waiting is a huge waste. Do you not have the product on hand when needed? Why? Is it vendor outages or do you have no good re-ordering systems in place?
- Are you over processing? In the case of a housing authority, it could be layering too many processes in ordering/procuring goods. This can add time to resupply.
- Look for defects in processes. Are you accidentally putting wrong numbers into the systems? Is there a lot of manual work that could cause errors/defects?
Pull: Ok now that you identified waste within your warehouse and cut back on it, it’s time to look at further steps. I spoke with a few warehouse supervisors at housing authorities who are either using a pull system or trying to implement something similar. Pull inventory management is when you only order when needed as needed and uses data and restocking times to help determine ordering. I read an article recently that an employee of the New York Housing Authority wrote about supply chain management. They gave their vendors scorecards. When there were back orders that counted against the vendor. When you really understand your consumption rates and vendor records of resupply, you can have a very frank conversation about resupply times.
Once you straighten out supply issues and understand your vendor’s capabilities, you can work with how often you are ordering different skews. Figure out your consumption and establish minimum/maximums on how much you want to carry. Work in the time to re-order and come up with a Kanban pull system.
Kanban: Kanban can be as simple or complicated as you want it to be. In the inventory management world, a two bin system might work best for a housing authority. If you use 20 drip pans a month, you might want two bins with 10 drip pans in each one. You could re-order after the first bin is empty. If your supplier resupplies on time, you should have your next 10 in as the second bin is running dry. This allows you to always have enough inventory on hand but not too much access. Play with the Kanban and do some research. I have found that Seattle Children’s Hospital has been really helpful giving us advice about setting up Kanban for inventory management. If it is larger items like sinks and toilets, the same concept applies but maybe you use a card.
Random Thoughts After Talking with Housing Authorities: I spoke with PHAs’ from across the region and the country in the last couple weeks. Some PHA’s claim to have no inventory but in reality just don’t track inventory. They still have high usage items in broom closets throughout the city. From talking with housing authorities, the common themes seem to be:
- No inventory officially but inventory stored in smaller quasi warehouses.
- Central warehouses with varying levels of supply chain management happening
- Mini-warehouses in the form of maintenance vans with varying levels of inventory or non-inventory happening.
- Warehouses where the maintenance techs do most of the ordering based on their experience.
- Warehouses where a core warehouse team delivers all needed inventory to the sites as needed.
- One housing authority that is looking to close down warehouse and move to Just-In-Time with vendors bringing to sites.
- A few warehouses using vendor managed inventory. However; in zero of those instances where the vendors actually ordering the inventory. It was more of an exclusive contract where 70%-80% of the inventory was ordered through the vendor and the purchasing process was a little quicker.
With all of that said, I think we are all looking to find better more efficient ways to run inventory. I am very skeptical when I hear Just-In-Time in the sense of housing authorities because back orders and spotty delivery history just makes me nervous. Running to the local Home Depot regularly may not qualify as Just-In-Time unless you have figured out some type of super smart streamlined delivery model where a few employees are making runs.
Continuous Improvement: I am completely aware that reducing defects within your warehouse will take time and moving to a data driven warehouse will require more time and hard work. Once that is achieved, it will be about continuous improvement. Keep looking for ways to improve and run a better inventory management system. Get people involved throughout the agency. Go outside your agency. Engage local universities to see if they have supply chain management programs. You will never reach a completely optimal state so continuous improvement is the goal.
Conclusion: The best part about the public housing industry is the depth of knowledge and willingness to share. There is really no need for consultants in many instances because the combined experience of professionals in the industry can help bridge gaps. Whether your PHA is super advanced in supply chain management or just figuring it out, let’s hear what is happening out there.
Feel free to disagree with me or share best practices. I am personally looking to connect with any supply chain experts or warehousing/inventory wizards out there. If you are running Just-In-Time inventory management, we would love to learn from you. For now, we are going through the steps of looking at waste in our warehouses seeing what makes sense as far as Kanban and Pull oriented systems.