Making a Business Case for Lean MHE
Q: What are the biggest cost drivers in a distribution center?
A: Distribution centers are driven by four primary costs. Labor is usually the largest cost, which is why companies focus on it so much. Second is the building itself. Third are the IT systems necessary to support the operation. Finally, there’s materials handling equipment (MHE).
Companies typically don’t focus on MHE but they should, because it is a cost driver. Consider, for example, the considerable cost differential between having a dense storage strategy—with very narrow aisles and automatic guided vehicles—and an operation that requires flex space and wider aisles for lift trucks to maneuver. Another example: using a 5,000-pound forklift when all you need is a 2,500-pound model. It’s important to match equipment to specs and priorities to eliminate excess costs.
Costs are also bundled by decisions to buy or lease; or whether to perform preventive maintenance internally, through an original equipment manufacturer, or outsource that responsibility entirely. While many companies automatically focus attention on removing labor costs, opportunities to reduce costs and create efficiencies can be found by taking a lean approach to materials handling.
Q: How has a lean approach to materials handling equipment and processes evolved?
A: Lean has traditionally had a great impact on manufacturing operations. But interest is growing in applying lean principles across the supply chain, where the total cost of moving goods to market goes well beyond production. You can take steps out of the process, increase density, reduce inventory, enhance quality, expedite movement, and reduce total costs in many areas between the manufacturer and consumer. MHE is one example.
Many companies are already on a lean manufacturing path. But once they see that those same concepts apply to different functions and activities—and they identify improvements that can be made—everyone becomes interested, because it’s a competitive differentiator. Lean can take warehouses to new levels of efficiency.
Q: How can companies apply lean to make MHE and processes more efficient?
A: Lean can work in a few different ways. For one, it defines expectations. If a facility doesn’t set goals, employees will come up with their own—and they might not be optimal. Visual management helps demonstrate expectations, display performance, and incentivize improvement. When problems arise, they can be immediately addressed and rectified.
There are also more practical lean returns. Companies can look at how they slot a building so fast movers are closer to the ground and to the front; or use a U-shaped cell layout to take unnecessary travel time out of the operation. On the labor side, voice-directed picking and automation free up hands and time. These, and countless other examples, are good reasons for companies to evaluate implementing lean MHE.