'Waste Not, Want Not'

May 1, 2005
So said the always-practical Benjamin Franklin. So also say more and more industrial managers and management gurus. In fact, the lean enterprise has become a corporate model for some aspects of plant-floor thinking throughout the world.

Clearly, ideas about minimizing waste have always been around in business. What changes is what not to waste and how. A few decades ago, we wasted a lot of metal in machining and bragged about it and we wasted a lot of energy and ignored it. If your machine could remove a lot of metal from a piece of bar stock in a few seconds, you got management's attention. Similarly, in material handling, virtue was found in the biggest warehouse, having the most stock possible. Well, seemingly smaller is better today.

"Lean" is the latest term for concentrating on maximizing efficiencies in industry from material utilization to storage minimums. There are numerous experts on the topic. One that has become particularly well known is the founder and president of the Lean Enterprise Institute (Brookline, Mass.), Jim Womack. His group offers courses, papers and a now-classic book Lean Thinking (Free Press, 1998) on lean production by Womack and Dan Jones, president of the Lean Enterprise Academy in the U.K.

So why all the talk today about the lean enterprise? The "new" aspects of lean thinking, Womack explains, are matters of degree and the attempt by some in industry to consider its "application to everything." In other words, some are trying to use lean concepts for all aspects of an enterprise, not just production and the plant floor, such as improving warehousing efficiencies.

Consider the history of ideas about efficiency, he suggests. After Henry Ford and his River Rouge plant showed how to take in iron ore at one end and turn cars out at the other, industry developed ways to apply efficiencies to a higher variety of products with high velocity as well, such as the methods made so famous by Toyota.

"Five years from now we will be handling even more data. While the trend, the goal, is to have no stock at all, that will never be the case," he adds. Why? "While inventories in general are perhaps 10% of what they were a few generations ago, what Toyota calls a 'standard inventory' will always be required. That's their term for buffer stock, or safety stock in case of breakdowns in the supply chain."

Keeping it simple is a basic principle in lean management. Having a huge, everything-ever-needed inventory moves a company to ever more complicated information technologies.

"In the 70s, everything was going to be automated and we would have lights-out, robot-filled warehouses with huge AS/RS systems and no workers. Well, it didn't work out that way," Womack says. "Companies found that those enormously complicated systems were just too difficult to maintain and manage. Toyota in particular developed instead a very sophisticated approach to managing warehouse workers with careful training. They found that often the efficient use of human resources is a better approach than the highly automated warehouse."

The basic idea today is to avoid wasted money, time and material. An inventory system based upon the principles of lean thinking requires top management input on policies about downtime and response time for customers as well as suppliers. As Womack notes, top management has largely ignored warehouse operations and workers.

"Now they are learning how important they are. With proper training, warehouse workers can do a better job of efficient stock storage and retrieval than automated systems," he says.

It will be important to watch as manufacturing tries to adapt lean thinking to all non-production functions of the enterprise. Womack says that attention to lean concepts in warehousing is still unusual in industry.

"Sophisticated, lean thinking is new and therefore rare in warehouse management today," Womack adds. "In past years, management almost ignored the warehouse operations or tried to automate it. Today, warehousing offers management an opportunity in terms of training employees in lean thinking techniques that can up customer satisfaction and production significantly."

Meanwhile, a goal for business in Womack's opinion is to eliminate warehouses altogether. More companies, he believes, can move to cross docking where small amounts of needed parts move directly from suppliers to the plant floor. Having a "standard inventory," he says, "means no need for a warehouse."

All in all, Ben Franklin would be amazed at all the ideas and systems being examined these days to keep a penny saved—and earned.

"With proper training, warehouse workers can do a better job of efficient
stock storage and retrieval than automated systems," says Jim Womack, co-founder and
president, Lean Enterprise Institute.

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