International Journal of Management Sciences and Business Research, Oct-2016 ISSN (2226-8235) Vol-5, Issue 10

Inventory Management through Lean Logistics and Warehousing Techniques

Author’s Details:
(1)
Shahzad Nasim, Syed Muhammad Maaz, (3)Faraz Ali, (4)Moin Ali Khan (1)PhD Scholar,
(2)

Hamdard University, Karachi Pakistan (2)Graduate Research Assistant, IoBM Karachi Pakistan
(3)
visiting faculty, Dadabhoy Institute of Higher Education, Karachi Pakistan 4Head of Supply
Chain Department, IoBM Karachi Pakistan
Abstract
Inventory is one of the eight deadly wastes in Lean. It is caused by overproduction (producing more than
is immediately needed) but in turn it causes several other wastes. How does excess inventory manifest
itself? I.e. Extra space, Extra people, waste conveyance, extra costs. Inventory management in lean is
built around the same principles that govern most lean activity: create a simple set of tools that can be
used directly in the workplace that will help surface problems so that they can be addressed. Inventory
management is thus quite different in lean, starting with the view of inventory as a waste rather than an
asset. From a practical point of view, what this means is that inventory reduction is built into the fabric of
the system , just like it is for any other waste. Because of this, they are typically no special efforts or
programs aimed at reducing excess inventory. Reducing inventory is a part of everyday work life.In this
paper we will cover two important topics for the supply chain , warehousing and logistics. We will cover
the traditional view of physical control of inventories, then the relationships between the warehouse and
the organization and then we review traditional logistics activities. In second half of this research paper
we will review distribution requirements planning, Lean warehousing and Lean logistics.
Keywords: Lean logistics, Inventory management, waste, distribution

Literature Review Looking at what is needed to do some basic risk

management , the resource template is a good
So what does green Lean/ resource management starting point. It provides some of the
have to do with risk management ? If you think information needed to assess risk, but we need to
about it, a lot more than meets the eye. Risk look at in a different way. we are going to
management , specifically within the supply, is a continue to look at resources , but we are going
process of identifying items within the supply to expand this list to cover additional resources.
chain that could cause problems. Granted, this is Also , we are not concerned with output, but
a pretty broad statement , so we will try to break rather a high level risk assessment. Table below
it down so it makes sense and can be used to shows a risk management template. This risk
actually manage risks assessment is to provide a framework to identify
risk items that should be addressed. We have
As we mentioned in the our report, risk purposely avoided assigning probabilities, point
management is full of challenges , mostly values, etc., that often get people wrapped up in
because of two extremes : either nothing is done preparing the process but often failing to act-
, or it is made so complicated it either can't be what we like to call getting ready to get ready.
done or the users get caught up in the Risk management in this framework provides a
complexity . In most cases, people just really list of items that can be prioritized and then
don't know what to do. So , where to begin? worked on. For example , you may identify a
Again , your value stream map is a great source commodity in your product that appears to be
documented for risk management. In doing this, headed for a shortage position , that will make it
another similar template will be used , but this tougher to get and more expensive. Your choice
time, it will be used throughout the map, not just is to live with this or do something. The " do
in work centers. something can be a lot of things: start forward

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buying to alleviate some of the shortages price exploring the possibility. We hope these
increases , or examining if you replace that templates will help you to talk / fret about these
commodity with something else, or at least topics less , and actually do something.
Resources Risk Factors
Outbound Transits Suppliers risk-availability , cost trends, health of transportation
Transportation markets

Commodity Item/Commodity risk-market cost and availability trends

Supplier Supplier risk-number of suppliers, market health, location of supplier, in outbound
transport risks, tier-related risks- suppliers and commodity

Market Customer/market risk-dependence , health of product line , competition , price

trends

Waste Waste risks-availability of service , price of disposal , recycling and/or emissions

real/potential costs, hazardous material issues - handling and handling cost trends

Labor Availability of skilled employees, specific skills-internal and external ( suppliers,

tiers) and cost of labor trends

Assets Age of equipment systems, availability of service parts and technicians systems still
supported?
Utilities Cost and availability trends
Research Methodology
Strategic Development of Lean needed and best suit your particular situation. By
using those principles and tools, an organization
logistics can design a business excellence model that will
There is no question that lean will contribute fit the culture and goals of the company.
positively to logistics an supply chain activities.
The Two Perspectives of Lean Logistics
The challenges are to understand how to
leverage the value of Lean in Logistics. Lean Lean Logistics # 1
principles ca n sometimes is counterintuitive, The inbound logistics function supporting a lean
making it difficult for operations people to manufacturing facility.
embrace the value proposition. For Example, a
transportation manager will struggle with the Lean Logistics # 2
concept of increasing frequency of deliveries if
personal performance is measured on
transportation costs. Hence, lean logistics can be Logistics activities where the overall operational
implemented successfully; it must be a strategy is based on Lean principles and tools.
cooperative initiative. This is not to say that a This can include transportation, warehousing,
company must be a lean organization prior to order management, material handling an
implementing Lean in the logistics function. inventory control.

The important lesson is that Lean teaches us With these two definitions in mind, it becomes
sound business principles. Lean is not a trend, apparent that lean logistics has the potential to
fad or flavor of the month. They are well become a confusing and complicated model. The
packaged set of business excellence principles goal then is to simplify the complicated. That is
and tools. The trick is to unwrap the package what we have attempted to accomplish in this
and choose the principles and tools that are project. Reviewing and analyzing all lean and

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six sigma with the logistics function. Our goal is significant initiative. We all need to be on the
to arm the logistics professional with the same page! This is especially very true for the
knowledge required to reduce waste, manage logistics function , where a cooperate global
inventories, and create more effective processes. logistics strategy may not exist.

The Importance of Logistics Bridge

Model
The use of a model allows an organization to
talk a common language, the first step to any

Any model that spotlights on results will be Lean tenet by making a model that can be
multidimensional. With logistics span Model , comprehended by all levels of the association.
the measurements depend on the progressive By taking after the model , the CEO will realize
system of a normal association. The model takes what will be expert , as will the senior
a gander at logistics from the perspective of administration and cutting edge supervisors. The
CEO first then penetrates down to the vital level Logistics span model gives a participate
and in conclusion depicts the strategic regions methodology that can be utilized to execute a
for effective usage. This methodology takes after world class incline logistics framework.
The Inventory Holding Cost

Stock conveying cost determination is the doors. As an organization's normal rate of profit
possibility of doing as such as often as possible. for new speculations advances, so excessively
Stock conveying expense ought to be alert, as should the stock conveying cost rate. The rate
dynamic as an organization's business open decided at one point in time ought not be held in

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such respect that it can't be addressed over the cover request by requesting littler amounts all
time and returned to. Stock conveying expense the more much of the time from your supply
is not liable to change significantly inside the sources., along these lines accomplishing more
course of year , yet ought to dependably mirror stock turns. “Inventory turns" alludes to the
the truth of the organization's changing cost quantities of times every year that normal stock
conditions and venture open doors. offers. The quantity of turns is normally decided
in view of the estimation of normal stock and the
When you have a superior handle on what it is business volume at cost, communicated
truly costing you to hold stock, interest ought to scientifically as
swing to how deals can be augmented with
minimal measure of stock. Every single other Inventory turns= Sales volume at cost/ value
thing being equivalent , you ought to attempt to of average inventory

Estimated Annaul Manufacturing Investment

2016, $36.00
2015, $34.00
2014, $33.00
2013, $31.00
$40.00 2012, $29.00
Manufacturing Cost

$30.00 2011, $26.70 2016

2015
2014
$20.00
2013
$10.00 2012

$- 2011

SIX SIGMA AND LOGISTICAN stocks because of assortments in supplier

quality, transportation trustworthiness,
The possibility of distinction diminishing is creating process limit , and the customer
first to logistician. As communicated, demand outlines. In a manner of speaking,
logistics is about regulating stock, directing whether we can fathom and control
stock is about administering change. In case assortments in our methodology from the
we look at different sorts of stock, we will suppliers to customers, then we will have the
plainly see why assortment accept such an ability to reduce our reliance on the
essential part by the way we manage backings radically. In such way, logistician
inventories all through the business and need to see themselves as analysts like the
store system. people who make rates for mischance
security. Analysts look at key variables the
For example, prosperity or bolster stocks are
time of drivers, sexual introduction of the
inventories that we need to fence against
drivers, sorts of vehicles driven, measures of
inquiries (i.e, the assortments from the
past behavior ( eg speeding tickets and
standard). That is, we keep up security

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mishaps) and thereafter they choose security Lean and Six Sigma across four categories
rates that mirrors the variably in the data this
is essentially why the sixteen year old male 1- Strategy and planning
who drive sports auto will have the most
raised assurance rate. 2- Problem Solving

LEAN AND LOGISTICIAN 3- Operations

The effect of incline toward the logistician is 4- Measurements

noteworthy. A typical confusion of the VOICE OF THE CUSTOMERS
incline reasoning is that it just discovers
application in assembling settings. The When it comes to logistics services it is
objective of incline is to wipe out waste and easy to see that all the customers want the
diminishing work in procedure inventories same services or expected the same level of
and thusly, diminish process and assembling service some customer see value added
lead times, at last expanding store network services like labeling an packaging , and
speed and stream. Incline additionally have other call for transportation and storage and
a key social components to it that is pivotal still others seek transportation. Among those
to the logistician, the idea of " aggregate calling form transportation services , one
expense" . The incline specialist does not customer may expect 95% on time
concentrate on individual cost components, performance ,98% for another and 100% for
for example, transportation or warehousing , yet another. Clearly , a uniform approach
yet rather concentrates on aggregate design and fulfillment will not accommodate
expense. With stock conveying cost customer diverse needs.
speaking to 15 to 40 percent of aggregate
logistics costs for some ventures , settling on Key expects of the customer the supplier
choices taking into account complete must understand include answers to the
expense has emotional ramifications for the following questions
logisticians. Sadly however, numerous
1- What are the goals of customers?
associations never grasp the aggregate cost
idea completely, as poor choices are made 2- What are the motivating forces behind
ceaselessly in light of customarily noticeable these goals?
cost drivers like transportation ,
warehousing and per unit buy costs. 3- What are the customer's challenges
constraints and resources ?
STRATEGY AND PLANNING TOOL
4- How can we help the customer meet these
Lean and six sigma are designed to be goals, given the challenges ?
comprehensive programs . Embedded within
two initiative are pervasive philosophical PACKAGING AS VISIUAL CONTROL
principles, values , models and tools. This
creates a challenges when trying to describe Today numerous assembling operations in
lean and six sigma have to offer when North America are for all intents and
combine. As well it can make training and purposes free of nonessential bundling.
implementation challenging because However , the infrequent shipments can
employees may get confused between theory appear at these plants in the old standard,
and practical next steps. folded box . The presence of the creased

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bundling serves as a vital message that delegate. The buying specialist should first
something is amiss in the framework. discover the chance to start the call at time
at which somebody is liable to be at the flip
One of the three conceivable things has side to acknowledge it. While most real
happened organizations give every minute of every
day/365 client administration accessibility, it
1-The supplier has obtain excessively couple
stays a long way from all inclusive. Thus ,
of compartments, making it impossible to
the call may restricted to the cover in the
handle the require the volume at the plant.
hours of operation for both client and
2-The returnable holder has neglected to supplier. A client on the US east drift may to
advance back to the legitimate supplier that defer an early morning call until the west
requirements totes for ensuing use drift the supplier is open for business.

3-The supplier has fabricate parts ahead of

time of the need , out dividing kanban the
Electronic methods of correspondences have
interest for the parts
made request transmission for all intents and
.ORDER TRANSMISSION purposes case . Electronic information
exchange EDI has been hailed over the
Ordinary Methods of correspondence can previous decades for its capacity to facilated
make a request transmission and tedious between the client's PC and supplier's PC
stage all together cycle. Take , for the without human intercession and the blunder
occasion, a request transmitting via the variability inborn in human movement in
telephone between the clients acquiring addition to , EDI frameworks are the not
operator and supplier client administration totally shape interruptions

THE SIMPOC MODEL 2- Inputs : What are the inputs for the process?
This may include material, people or
To answer the question " What does a information.
standardize process look like ? "we need to
break down the process itself. The good news is 3-Measurement : How do we measure the
that all processes are made of the same basic purpose to ensure the success?
variables. The SIMPOC ( Supplier- Inputs-
Measurement-Procedure-Outputs-Customers) 4- Procedure : What are the procedures for the
model defines the key variables and provides a process? This includes documenting the process
framework for documenting standardize steps and timings of each step.
processes by answering the following questions
5-Outputs-What are the expected outputs of the
1-Supplier :Who supplies the inputs for the process? These can include actual products,
process. information, or documentation.

6- Customers- Who are the customers of the

process and what they do they expect ?

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The SIMPOC is a valuable---- tool to compare the current condition of processes and to
develop standardize operations.

Mondelez Process : Receiving Function of Two Divisional Manufacturing Facilities

SIMPOC- Receiving Function Plant 1 Plant 2

Supplier to process Ordering Department Purchasing

Input for the process Receiving Schedule ASNs

Measurements Receiving Time none

Procedures Documented None

Outputs Part to Line side Parts to stores

Customers Line Side Stores Area

This high level of process of a SIMPOC shows can be saved by applying looser controls to low -
how the tool can be used to compare processes dollar-volume class items than the high -dollar-
in different facilities. Clearly, these two plants volume class items.
have a very different processes in place to
receive material. Methodology ABC Classification
If we can document the SIMPOC for each The characterization of a gathering of things
process in our operations, the result will be a set in diminishing request of yearly dollar
of documented standard operations. Once this volume ( cost increased by anticipated
accomplished , the standard is set as noted , a volume) or other criteria. This cluster is then
standardize , documented process is one that
part into three classes, called A, B and C.
new team members can quickly understand and
contribute to immediately. Even though a The A gathering for the most part speaks to
process become standardize , however , we 10% to 20% by number of things and half to
should not become content with it. The vision is 70% by anticipated dollar volume. The
always seek new , better ways to perform the following gathering , B, normally speaks to
work around 20% of the things and around 20% of
the dollar volume. The class C contains 60%
Traditional Physical Control of to 70% of the things and speaks to around
Inventories 10% to 30% of the dollar volume. The ABC
Let's start the warehousing portion of the session
rule expresses that exertion and cash can be
with discussing what warehousing is all about. spared through applying looser controls to
In basic terms , it is all about the physical low - dollar-volume class things than will be
control of inventories , typically finished goods connected to high - dollar - volume class
inventories. One major tool that typically has things. The ABC rule is appropriate to
been used to help maintain this control is ABC. inventories , buying , deals, et cetera.
The ABC principle states that effort and money

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ABC has been broadly utilized and is pressure are key to keep clients recharged and
extraordinary device to organize how stock inventories under control.
is dealt with; certain SKUs in the stockroom
are more vital than different things. As
Combination :The joining of framework and
beforehand specified, ABC investigation is individuals , collaboration, must be both inside
utilized to oversee inventories in distribution and outer. On the off chance that it is not , then
center. This normally done by utilizing the there are holes , potential for postponements and
ABC to set up cycle numbering cycles, with blunders and disappointments in the store
A sections being tallied more as often as network process
possible than C parts; the A sections are
obviously more vital than C parts. Despite
the fact that this is valid on a general level, DISTRIBUTION REQUIREMENTS
care must be taken not to disregard the B PLANNING -DRP
and C things , the absence of C things can
1-The capacity of deciding the need to
close you down pretty much as fast as an A
renew stock at branch stockrooms. A period
thing would.
- staged request point methodology is
Moreover , numerous stockrooms use ABC utilized where the arranged requests at the
to set up physical stock areas , with A branch distribution center level are "
sections being set up either near the delivery detonated " by means of MRP rationale to
zone ( front of distribution center) of end up gross prerequisites on the supplying
basically in the brilliant zone-rack range source. On account of multilevel dispersion
ordinarily at a physical case of this Figure systems , this blast procedure can proceed
beneath down through the different levels of
provincial distribution centers ( expert
FMEA AND LOGISTICS SKILLS stockroom, manufacturing plant stockroom,
Logistics is the cornerstone to store network and so on) and get to be contribution to the
administration achievement. It is not about expert generation plan. Request on the
transportation or warehousing; The logistics supplying sources is perceived as reliant ,
center is :The development of item : This is
and standard MRP rationale applies.
more than transportation of products. the modes
and bearers chose must supplement the
production network methodology and must be
receptive to the requirements of clients and 2-More by and large , recharging stock
whole chain. computation , which might be founded on
other arranging methodologies, for example,
The development of data : Information
period request amounts or supplant precisely
innovation is vital to being responsive. It must
be both inward the endeavor - and outside , with what was utilized , as opposed to being
clients and suppliers constrained to the time staged request point
approach.
Fetched: This is the expense of the whole
inventory network , both working and capital. It LEAN WAREHOUSING
is not only the expense of discrete cost variables,
for example, cargo or warehousing. First , we are going to talk about Lean
warehousing and how it builds on some of the
Time/Service: Supply fasten administration is best practices that many warehouse people
customized to and receptive to every client. To already do. Although the setting of inventory
pick up an upper hand , administration and time levels is an important part of warehousing , we

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have already know that subject , so we are going warehouse. Note that not all the items that need
to assume that the inventory levels are proper. to be controlled are critical ; this list can be
So , what are some of the key items , other than viewed as the major cost drivers in the
inventory, that are important to manage in the warehouses.

Example of DRP mechanics

Week
Warehouse A
1 2 3 4 5 6 7 8
Gross
Requirements 80 80 80 70 80 90 90 90
Schedule receipts
Project on hand 90 10 30 50 80 0 10 20 30
PLO receipts 100 100 100 100 100 100
PLO releases 100 100 100 100 100 100

Week
Warehouse B
1 2 3 4 5 6 7 8
Gross
Requirements 30 30 30 20 20 30 90 35
Schedule receipts
Project on hand 90 60 30 0 30 0 15 30 45
PLO receipts 50 50 50 50
PLO releases 50 50 50 50

Week
Warehouse C
1 2 3 4 5 6 7 8
Gross
Requirements 60 60 70 70 80 80 90 90
Schedule receipts
Project on hand 170 11 50 80 80 10 30 50 60
PLO receipts 100 100 100 100 100
PLO releases 100 100 100 100 100

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Week
Central Supply
1 2 3 4 5 6 7 8
Gross
Requirements 200 150 200 150 250 250 100 0
Schedule receipts
Project on hand 170 350 200 0 150 200 200 250 150
PLO receipts 300 300 300
PLO releases 300 300 300

Quality Lead Time

Warehouse A 100 1
Warehouse B 50 2
Warehouse C 100 2
Central Supply 300 2

Inventory Labor
There is no doubt that this is cost driver 1, but This is cost driver 2 and , as we will discuss, is
we have discussed how inventory levels are set. probably the least controlled
A warehouse is just another " supermarket"
where goods are held for sale, and you only have Lean warehousing looks at space use as being a
a supermarket if you cannot match when and critical issue to deal with. Space usage is
where customers want product with your ability commonly referred to as slotting , but it goes
to supply the goods on a timely basis. In most beyond the concept of where items are placed
cases, shipping lead time is a normal expectation within the warehouse; it also takes into
for customers, so you also have to consider the consideration how much inventory is put into the
additional manufacturing or supply time. Can location and attempts to create a handful of
you deliver product to the customers at or under standard location sizes.
the lead time that they expect ? If customers
expect immediate or near -immediate order Slotting is a simple concept : put higher velocity
fulfillment , then you may need one or more items closer to point of use, then slower velocity
warehouses. The process for identifying where items. The reason to do slotting is that it can do
these need to be located is not changed in Lean. more to save labor cost than just about anything
However , how much inventory is held will be else. How? By reducing the travel time-walking
calculated by the same rules we discussed in or driving in the warehouse. If your faster
determining supermarket size. moving items are closer to their point of use
either receipt or shipping , then people will be
traveling less to put away or pick these items.
One of the biggest issues is in how to do
Space slotting. Some people think that slotting can
Typically warehouse space is assigned on a only be done with a warehouse management
square foot basis and is probably cost driver 3 system, but most warehouse management
.many organizations find themselves with too systems, especially those included as standard in
little space, given that space is used inefficiently most ERP systems, generally available do not do
and growth is usually not planned for symptoms slotting .
of this are leased trailers or outside /off-site
warehouse space. Example :

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The example is an excerpt from a monthly turns The next step is to simply sort descending , on
report that has been edited ( Note : The turns are the YTD column. This can guide you on where
totally fictitious). The key here is that we are to slot. Next , add a slot column to help. The slot
looking at year to date (YTD) issues. Make sure column is where you will fill in where you plan
you have at least six months of data, which to put that item. This requires that you have a
should be enough to be representative sample logical warehouse location system. This is
unless the majority of your items are short term typically done with a mix of alphanumeric
or seasonal type items. If that is the case , you characters that represents
may want to set up two slotting areas : one for
seasonal items and other for non seasonal. As  Aisle
you can see , the excerpt has a wide range of  Rack
YTD issues quantities  Shelf
 Bin

Slotting in Excel starts with gathering data

Current YTD Days Lead

SKU Description Inventory Issues Turns Time Last Year's Sales Unit
30-5681T A 187 2073 11.085 1 9
73-1650 B 108 194 1.796 416
CAW-23 C 83 194 2.337 1 2062
E-59X D 11520 6912 0..600 120 0
LABEL-2 E 48144 7056 0.146 1 4911
LAM-182 F 417739 445261 1.065 1 3249541
M20G G 2079 7003 3.368 1 25090
MDF12-68A H 45 194 4.311 123
PEN-WH I 3622 2069 0.571 1 14079
PS-43 J 107 2046 19.121 18
TUBING-6 K 6300 337000 5.349 1 960800
VPF-19 L 436100 316300 0.725 1 4013883

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The next step is simply sort descending on the YTD column. This can guide you on
where to slot
Last
Days Year's
Current YTD Lead Sales
SKU Description Inventory Issues Turns Time Unit Slot
LAM-
182 F 417739 445231 1.065 1 3249541
TUBING-
6 K 63000 337000 5.349 1 960800
VPF-19 L 436100 316300 0.725 1 4013883
LABEL-2 E 48144 7056 0.146 1 4911
M20G G 2079 7003 3.368 1 25090
E-59X D 11520 6912 0.6 120 0
W-184F M 2640 6888 2.6609 100 120
30-
5681T A 187 2073 11.085 1 9
PEN-WH I 3622 2069 0.571 1 14079
PS-43 J 107 2046 191.21 18
73-1650 B 108 194 1.796 416
CAW-23 C 83 194 2.337 1 2062
MDF12-
68A H 45 194 4.311 123
CONCLUSION
In this research we have reviewed the details new approach that has strengths from the
about managing inventory through lean logistics traditional approach as well as a new strengths
and warehousing approach that means waste from the core value. Lean is a complete
less supply logistics network. lean logistics operating system, and needs to be approached
covers a pretty broad number of items, and we and adopted as such , not just as a set of loosely
will cover these during the remainder of the connected tools created to eliminate waste.
research. Lean logistics is the application of
Lean principles within the logistics part of the REFERENCES
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concept respect for people in this case and routing problem”. Transportation Science 23, pp
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