Most distribution centers follow the same basic operational sequence: product is received, an order is built, and the order is shipped to a customer.  The individual processes within each of those three phases vary from location to location, but a common denominator in most distribution centers is the presence of a warehouse management system (“WMS”).

By Dan Anderson

Background

Most distribution centers follow the same basic operational sequence: product is received, an order is built, and the order is shipped to a customer.  The individual processes within each of those three phases vary from location to location, but a common denominator in most distribution centers is the presence of a warehouse management system (“WMS”).  The WMS performs several key tasks, one of them being the tracking of inventory throughout the warehouse, including the individual pick slots.  This allows forklift operators to replenish proactively when the system tells them that product is low at a certain location.  For warehouses without a WMS however, forklift operators are forced to replenish reactively.  Their replenishment is limited to driving around during breaks and looking for product that needs to be refilled and individual order builders flagging them down after they’ve run out of product.  This method of replenishment leads to several problems, the most prevalent of which is that order builders are often stuck at empty pick slots for minutes at a time while forklifts search for and refill empty product.  This paper will examine how a simple kanban (KAHN-bahn) system, while not as ideal as a WMS, is a simple and worthwhile replenishment solution for distribution centers without system driven inventory.

An Overview of Kanban Systems

At the most basic level, a kanban is a signal that authorizes the production or movement of items through a system. (Pereira, “Kanban Overview”)  It is a just-in-time tool used in Lean production environments to help ensure that product is where it needs to be, at the right time, and in the amount that it is needed.   The kanban is a crucial part of a “pull” system, where inventory or product is moved according to demand of the customer as opposed to a “push” system, where overproduction is rampant and excess inventory can be found within and between most activities. 

In many situations, a kanban system includes physical cards that signal when more product is needed.  Oftentimes when a product is running low, a kanban card will be moved to a visual “post” that signals to someone (sometimes a material handler, or even the previous process, etc.) that more product or raw material needs to be gathered or produced.  This ensures that every product or material will always be available to the person or process that needs it.  A kanban system in theory can be implemented at every level of the supply chain, essentially eliminating the risk of a stockout (barring any adverse external factors). 

Example: Large Beverage Distributor

During a recent project West Monroe Partners observed a situation identical to the one described in the introduction.  The warehouse did not have a WMS and relied on pallet builders to flag down forklift operators in the middle of the operation when replenishment was needed.  West Monroe recorded the following corresponding metrics:

Total Delay Percentage: 5.5%

Percentage of Total Delay from Replenishment: 18%

Average Length of Replenishment: 1.80 minutes

Min: 1.39 minutes

Max: 2.28 minutes

While the client had a long term vision to adopt a WMS, they needed a solution in the meantime to minimize the time spent waiting for replenishment.  In response, West Monroe designed a simple 1-card kanban system to move from reactive replenishment to proactive replenishment.   This system essentially anticipates when a product is going to run out and make sure that there is always product available to be picked in a slot.  How it works is like this: 

Clear kanban posts are installed on the vertical racking beams to the left of each slot.  Each post contains a bright laminated card with the information of the product the slot contains.  These cards remain in the posts until the corresponding product reaches a certain layer or case threshold as determined by the facility.  Whenever a pallet builder picks a case that goes below that threshold, they grab the card and bring it to a visually prominent location where forklifts generally travel (for our facility, the supervisor perch near the front of the aisle) at the conclusion of their order.  The forklift operators then see the kanban cards, remove them from the post, replenish the corresponding items, and replace the card. 

 This system is currently in the process of being implemented at the client site.  Once realized, West Monroe anticipates a complete or near-complete elimination of waiting for replenishment among pallet builders.  Based on the average wait time for replenishment stated above, the frequency of pallet builders needing to wait for replenishment, and the number of orders of the facility, an average of about 92 minutes of non-value added time is expected to be eliminated each day.  This also translates to a drop of overall congestion by at least 18%, or from 5.5% to 4.5%, and a potential increase of at least 7 more pallets per day.

Average Wait Time for Replenishment

Average Orders per Day

% of Orders with Waiting for Replenishment

Minutes Spent Waiting for Replenishment per Day

Average Time to Complete an Order

Number of Additional Orders Able to Be Fulfilled per Day

1.8 Minutes

408 Pallets

12.5%

91.8 Minutes

13 Minutes

9 Pallets

Note: This does not include the indirect time of grabbing the kanban card and dropping it off, but as the designated location is located in the normal path of travel we expect it to be minimal (6-8 seconds) and negligible for simple calculation purposes when compared to waiting almost 2 minutes for replenishment.

Conclusion

While a full WMS is the ideal for managing and tracking inventory within a distribution center and the other benefits of having one are certainly significant, temporary and simple solutions like a kanban system can be a cost-effective way of achieving similar results in a quick timeframe.  If this solution was implemented across several warehouses with various replenishment times and frequencies, the benefit could be of even larger significance.

Works Cited

Pereira, Ron. "Kanban Overview." Online & DVD Based Lean Manufacturing Training and Lean Enterprise Training Videos. N.p., n.d. Web. 16 Apr. 2015.

 

Dan Anderson is a Consultant in West Monroe's Operations Excellence practice.