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Lean Inventory: Highly Functional Warehouses Propel Businesses To Success In E-Commerce

Warehouses play a critical role in the supply chains of e-commerce operations. 

Highly functional ones ensure timely delivery of products, lower overheads, customer satisfaction, and competitiveness.

The wastage of materials and other items hinders the smooth operation of warehouses. Warehouse managers can prevent that by tapping into lean inventory.

Here I’ll go into: 

Let’s dive in.

What Is Lean Inventory?

Lean inventory is an inventory management technique that seeks to enhance your inventory value through the elimination of waste. It uses continuous improvement concepts to reduce the waste of materials, time, and non-value-adding processes. 

Adopting a lean philosophy helps warehouse managers to cut down their order processing and lead time, improve the handling of materials and accuracy of orders, and enhance inventory organization.

Warehouse Management Problems

Running a warehouse is not devoid of problems and challenges. Often, warehouse managers encounter issues because of the wrong floor layout, poor time management, product picking, and inaccurate product orders. 

There is also the huge problem of waste materials and wasted time and effort that affects performance at all levels in a warehouse. Here are the five common types of waste that warehouse managers may have to deal with as quickly as possible – otherwise their businesses may incur considerable losses.

Types Of Waste

  • Overproduction: This type of waste happens when more products are produced than needed in the market.
  • Idle Inventory: Products and materials that are sitting around in the warehouse due to being defective, lacking demand, poor processes, and other issues.
  • Transport: Excessive movement of materials, equipment, and people that leads to product damages, non-valuable work, wear and tear, and exhaustion.
  • Motion: Unnecessary movement of people and equipment, such as moving, stretching, lifting, searching for files, and other repetitive movements, that results in waste of time, energy, and effort.
  • Defects: Products that deviate from the standard design and specifications and fail to meet customer expectations.

How Lean Inventory Helps Eliminate Waste?

Lean inventory techniques can be effectively applied to warehouses. As they help identify waste, it becomes easier to eliminate it. 

They do so by determining customer demand, value-added and non-value-added processes, standardizing processes, ensuring that the flow of products is smooth, reducing waste of time and effort, and making the team responsive to changes in the market. 

Lean inventory techniques also establish a culture of continuous improvement—which is important to keep your customers satisfied.

The Principles Of Lean Inventory

The five principles of lean inventory enable warehouse managers to meet the objectives of their e-commerce operations and ensure effective warehouse management:

Value

Define value from the customers’ perspective—how will they benefit from lean inventory? Following that, do value stream mapping (VSM). It’s one of the key lean tools that help determine where to implement the concept of lean inventory. Leveraging a value stream map—a flowchart—warehouse managers can follow the product family path from production to shipping.

This helps identify value-added and non-value-added processes and eliminates as much waste as possible. It also highlights opportunities for improvement.

Flow

Involved understanding of inventory flows in the warehouse to ensure there’re no bottlenecks and delays. It helps determine whether products are needed by customers or not, and prevents shipping delays due to unorganized stockpiles and unnecessary inventory.

Pull

Means customers can “pull” products from warehouses as needed. The improved flow leads to a smooth movement of products—and only when customers demand them. It leads to the elimination of overproduction and idle inventory waste.

Responsiveness

Respond and adapt to changes in the market. Warehouse managers who follow lean 

inventory principles can quickly do that because of regular evaluation of inventory flow and customer demand.

Perfection

Continually refine lean inventory processes so that the warehouse becomes highly functional. Warehouse managers must involve every employee in implementing lean concepts.

Kanban: Lean Methodology 

Kanban is a popular lean inventory methodology. It uses the JIT (Just-in-Time) technique to prevent overproduction and overstocking. 

As the term implies, the inventory arrives when products or other items are needed and not before that.

It enables warehouses of e-commerce businesses to stock only the needed products, materials, and equipment and replenish stock quickly.

5S System of Lean 

5S System of Lean offers a methodology to keep the warehouse environment safe, clean, uncluttered, and organized. It helps reduce waste and optimize productivity. The five elements of this methodology are:

  • Sort: Determine and categorize products, materials, and equipment as needed and unneeded. A warehouse manager can paste a red tag on unnecessary items and waste. These items can then be moved out for disposal or recycling. This helps organize the warehouse floor space as well as eliminates waste.
  • Straighten: Organize the needed items properly. Warehouse managers can neatly arrange them and then label each product, material, and piece of equipment for ease of use. 
  • Shine: Once the items are organized, thoroughly clean the warehouse, and do it regularly. A clean warehouse environment makes it easier to identify waste and equipment malfunction.
  • Standardize: Standardize the best practices, which means maintaining the first three pillars, Sort, Straighten, and Shine, of the system. Schedule regular sort, straighten and shine activities.
  • Sustain: Make it a habit to follow the first four System of Lean elements. A warehouse manager can instill this habit in each employee through posters, pocket manuals, regular checks, team meetings, and performance reviews.

Best Practices Of Lean Inventory

Some of the best practices of lean inventory include:

  • The main objective of lean inventory is to deliver the right product, in good condition, to customers without delay, so the demand and the needs of customers should be regularly assessed.
  • Maintain an accurate record of customer demand, products, equipment, and other essential items.
  • Standardize processes to ensure a smooth flow of products and shorter order processing time.
  • Everyone at the warehouse must work as a team to provide value to customers.
  • Encourage cross-enterprise collaboration.

Achieve A Highly Functional Warehouse

Lean inventory ensures a clean and well-organized warehouse, improves visibility, order processing, quality tracking, reduces order-picking time, and reduces the time and effort of handling materials. All these enable warehouse managers to achieve their objective of highly functional warehouses, which leads to happy customers.

Lean inventory techniques effectively transform warehouses into an organized system that delivers value to customers in significantly less time and with minimal effort.

By Bryan Christiansen

Bryan Christiansen is the founder and CEO of Limble CMMS. Limble is a modern, easy-to-use mobile CMMS software that takes the stress and chaos out of maintenance by helping managers organize, automate, and streamline their maintenance operations.

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