Logistics is a critical function for manufacturers because it's the process that links all parts of their supply chains. Even so, manufacturers often don't consider the warehouse a priority for implementing continuous-improvement initiatives. According to the 2005 IW/MPI Census of Manufacturers, 82.3% of 583 plants surveyed implemented improvement methods at the production level, while only 39.3% reported similar efforts at their shipping and logistics departments.
More manufacturers might reconsider their current logistics practices if they knew the potential savings they could achieve. For example, Rochester, N.Y.-based photographic film producer Eastman Kodak Co. has realized "savings in the millions" in transportation and inventory costs by implementing lean logistics, according to John Kaemmerlen, manager of export and import operations for the $14.3 billion company.
Kodak began developing lean logistics in 2002 with the help of Erlanger, Ky.-based logistics systems designer Transfreight LLC. Transfreight kick-started the lean process for Kodak by helping the company establish a crossdock to improve the flow of material moving from its suppliers through its warehouse and to its plants within its main industrial campus, Kodak Park.
The company already had a "fast-flow" warehouse that it referred to as a crossdock, but by lean standards wasn't a true crossdock because it accumulated inventory, says Rick Upton, business analyst for logistics and development for Transfreight. "A crossdock in the true sense is associated with lean, and lean is not inventory -- at least not a large volume of inventory," Upton explains. "It's meant to be more of a break bulk, fast-flow facility that is just changing direction of that freight, trying to create that high-frequency, small-lot situation."
Kodak started its lean crossdocking project by selecting three suppliers that were close enough to allow for one-day deliveries, Upton says. Instead of having the suppliers deliver materials individually two to three times per week, Kodak scheduled daily pickups or "milk runs" from the three vendors and combined their materials onto one truck.
Once the material arrives at Kodak's crossdock, it's separated by vendor and plant destination in staging lanes. Kodak developed its crossdock layout using several kaizens, which resulted in visual controls such as Post-it notes that indicate when material is scheduled to leave or arrive, Kaemmerlen says. The company then created a daily outbound schedule for materials being shipped to plants in Kodak Park.
The low-level, high-frequency deliveries reduced the amount of line-side and supermarket inventory from the three suppliers at its Kodak Park plants from 10-plus days to three or four days, according to Upton. Kodak also eliminated an entire floor of inventory.
By early 2005, Kodak had expanded its milk runs to 30 to 40 suppliers, according to Upton.
The biggest challenge in getting manufacturers to adopt an extensive milk-run system is getting them comfortable with minimal inventory levels, Upton says. "In any type of lean logistics environment, they need to be benching themselves against Toyota. They deal with hours [of inventory], and most companies we work with are dealing with days and very few deal beyond that just simply because of comfort level. They don't have enough confidence in their production-planning capabilities."
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