When most material managers think of lean manufacturing and material handling, they think of the many well-publicized techniques for reducing waste and improving material flow. These tools include setup time reduction, standardized work, five S, value-stream mapping, pull production and continuous flow. But that's only the beginning.
The managers and employees of Canada Post Corp. (Ottawa) have been learning about and applying such tools for more than 10 years. To great success. Collectively they have freed up more than 3 million sq. ft. of floor space, allowing the corporation to consolidate facilities across the country. Such efforts have contributed to a run of 10 profitable years.
Today, on top of their efforts to improve mail flow within each facility, Canada Post is working to unify its operations, standardizing processes and best practices across the organization. The constant goal: The right product in the right place at the right time, all of the time.
Canada Post's journey began in the mid 1990s when an operations executive took an interest in lean and process excellence, and struck up a working relationship with Jim Womack, co-author of Lean Thinking (Simon & Schuster, 1996), and founder of The Lean Enterprise Institute (Boston). A core team of people spent a week at a Wiremold (West Hartford, Conn.) facility, one of the companies featured in Womack's book. Based in Winnipeg at the time, Fred Pollard was one of those people.
Initially, Pollard recalls, the focus was on freeing up real estate. First, his people had to rid themselves of a batch mentality. On the floor they began by looking at the handoffs between mail handling processes. That meant " keeping things moving versus running two million or 10 million pieces through a process, accumulating it, running it through the next process, accumulating it, and running it through the next process," he says.
When they started their lean initiatives there was no free space in the Winnipeg facility. Over time they rearranged machines and cleaned up the mail flow. "By the time we were done we had free space and we were letting space out to third parties, picking up some revenue that no one had ever dreamed of in the past," he says.
Pollard is currently director of mail operations support in the greater Toronto area. "In Toronto, we had five letter mail facilities. Those five became one, occupying a footprint that nobody would have thought was possible many years ago," he says.
To direct the mail flow to the appropriate location, 12 hubs in the Toronto area separate the mail before it goes to the three regional sorting facilities. At one time each plant processed every kind of mail. Now they focus on a particular product line. The three in the greater Toronto area specialize in letter mail, parcel post and special product, such as airmail and express mail.
The hubs save time in two ways. First, Pollard says, the mail wasn't sitting in traffic with nothing happening to it for an hour during rush hour. Second, the mail no longer arrived at the sorting facility looking like a "dog's breakfast." It could be fed directly into the highspeed optical scanning equipment, rather than go through a preliminary step to clean it up.
A high-speed, 40-minute drive southwest of Toronto, the Canada Post sort facility in Hamilton was another early lean adopter. Mary Miller, process excellence advisor for the region, likens their process excellence journey to learning mathematics. Each subject builds upon the next—algebra, geometry, trigonometry and calculus—to achieve a higher level of proficiency.
In 1996 Hamilton managers began to change processes, moving machines closer to one another to reduce workin-process inventory. In 1997 the Hamilton plant was reorganized into business units, which reduced rework and changeover times, and generally improved customer focus. Supervisors went from being functional specialists with responsibility for machines, to generalists with end-to-end value stream accountability, and a much better understanding of quality and customer requirements, Miller explains.
In 1998 they stopped using an overhead conveyor, dubbed the "green monster" by those working on the floor. The conveyor was installed when the facility opened in 1990 to carry incoming mail from the receiving dock to the initial sorting area.
"The problem was it hid too much," says Miller. With the mail stored above in the conveyor, employees couldn't see how much work there was to do, and there was no sense of urgency. At the time the challenge was to reduce mail flowthrough time from 24 hours to 16 hours—a 4:00 p.m. to 8:00 a.m. work window—in line with customer service targets. Today all the mail is sorted by 5:00 a.m.
More recently, in 2004 process visibility improved even more when they moved the manual sorting terminals from a special room—where employees reviewed scanned letters that the optical character readers could not decipher—out onto the floor within each business unit. If there's a problem, the mail that has to be manually coded begins to accumulate. Managers and team leaders can quickly see if they need to increase staffing in the visual inspection booths, or address a technical problem that's causing a low read rate through the optical readers, which typically scan, bar code and sort 83% of the mail flow automatically on the first pass.
By 2001 the culmination of major and minor process improvements at Hamilton had reduced annual operating expenses by $5.6 million, floorspace by 46% and material handling equipment by 33%. The next step: Replicate the success across the country and connect the isolated pockets of process excellence.
Beyond the four walls
Miller coordinates process excellence efforts in a region that includes all of Ontario accept for the greater Toronto area. She also participates on a national council that meets once per month with representatives from each of the six regions and the head office. They discuss best practices that they would like to implement, and the status of ongoing projects.
Specially trained "lean six sigma" leaders coordinate many of these projects. Armed with a black-or green-belt training certification, they collect data and apply lean materialflow and six sigma statistical tools to identify the greatest opportunities for improvement, and then implement changes. The project leaders carefully document each project so successful initiatives can be shared and replicated in other locations. "We try not to duplicate the projects across the country, so we can use these limited resources to move us forward," says Miller.
Contributing to organizationwide process awareness, in 2000 Canada Post launched a "business transformation" initiative that replaced a legion of legacy information systems with a single system from SAP. The program connected core business processes, including customer relationship management, financial reporting and HR services, and combined more than 70 disconnected databases into a single information source. Standardization of such administrative processes, says Miller, meant that when managers talked about the standardization of operational processes, people had a better understanding of what they were talking about.
Today director-level "process owners" oversee the induction, sort, transportation and delivery processes. Within sort, the process owner is responsible for looking at the 22 different plants across the country to see how they are different and determine how they could be improved.
"What we're trying to do is get standardization across the company, and this is one of our methods for doing it," says Miller. "If a best practice comes up, the process owner writes out the specification for it. Then we take those specifications and we look at the different areas within our region. We determine what the gap is between the specs and what the current process is. Then we reduce the gap."
One of these supply-chain best practices currently being distributed across the corporation has to do with how mail arrives at the sort facilities from the post offices and hubs.
Canada Post's primary metric is delivery time. In 2004 a system-wide audit reported that 96.8% of mail arrived within the service targets, which range from next day to four days depending upon distance. Working back from these customer requirements, managers in the mail depots—the local facilities where mail is inducted at one end of the supply chain, and sorted by route for carrier delivery at the other end—determined that they need to receive a raw mail volume profile of 50% by 12:00 a.m., 30% by 2:30 a.m., and 20% by 4:30 a.m. The mail could then be ready for the carriers— of whom there are 6,000 in the Toronto area alone—to begin their routes at 9:00 a.m.
In order for the sort facilities to meet the volume delivery profile, explains Scott MacKinnon, they have to receive incoming material from the hubs that fits a certain "purity" profile. Part of a supply-chain integration team, MacKinnon works out of the South Central letter processing plant in downtown Toronto. The facility processes nine million pieces of letter mail per day. Over the past six months they've been tracking the quality of incoming mail at the receiving dock— whether it was labeled and pre-sorted correctly—and reporting that quality back to the depot managers.
The goal of the tracking effort is to drive up the ratio of pure product, which can immediately be loaded into automatic sorting machines that process 30,000 pieces of mail per hour, skipping a preliminary step to edge and orient the letters, and saving three hours of cycle time. The better the incoming mail quality, the less handling and rework required, and the more capable the operation is of sending out 50% of the total daily volume in the first shipment.
Working back from these same customer requirements, MacKinnon says they have recently restructured their transportation schedules so that trucks will arrive from and depart for the depots within specified windows. Standardizing the transportation windows forces standardized scheduling within the plant so the trucks can pull out on time. For example, if the first delivery to a given depot has to arrive at 11:30 p.m., it may have to leave South Central at 10:35 p.m., which means the product has to be pulled at 10:15 p.m., and so on back up the line.
"Years ago it was always a mad rush on the dispatch. Things coming and going. Chances for flaws and loss of integrity in quality were a lot higher than they are today," MacKinnon says. "Input quality and scheduling excellence, the combination of those two items will give us extremely strong capability of providing one-day local-tolocal letter mail delivery out of this plant to our delivery customers."
After 10 years on the process excellence road, if they could start over again, Miller says she would have worked to get upper management buy-in much earlier so that improvements could have been rolled out nationally more quickly. "We had pockets moving along the journey," she says. "We're just getting the coordinated effort in the past year or two."
The black-and green-belt projects and process owners are improving that national coordination. As is the fact that everyone is starting to speak the same language.
"In the past we'd get together and everybody had a lot of opinions about what was wrong and how to fix it," says Pollard. "What happens in settings like that is you don't get the best solution. The person with the loudest voice gets his or her way. This is really a toolset that allows people to work together and come up with the best solutions."
Pollard notes that Canada Post management hasn't always valued the input of the frontline employees. That's changing. It has to. With limits on postage rate increases, growing email use that has reduced total mail volume, population growth that's increasing the number of delivery destinations (and costs), and some extremely capable competition, everyone needs to work together. Good thing they've already started to make some progress.
Canada Post aligns its material handling processes across the supply chain to serve customers better.
Canada Post At A Glance
Volume: 37 million pieces of mail per day, 10.9 billion pieces of mail per year (2004) processed through 22 major plants.
Transportation: 6,000 vehicles, one of the largest fleets in Canada; 550 domestic mail flights every day; and more than 20,000 delivery routes.
Employees: 70,000 full and part-time employees, many of whom are represented by the Canadian Union of Postal Workers (CUPW). Canada Post is the country's 7th largest employer.
- 96.8% on-time delivery rate for letter mail, exceeding the target of 96%. Delivery targets range from one to four days depending upon distance.
- 10 consecutive years of profitability
- 2004 fiscal year: revenues of $6.7 billion Canadian, up 5% from the previous year, net income of $147 million. In 2005 Canada Post paid a $59 million dividend back to the government.