Lean Management within Freight Forwarding Companies

Over the last two decades the concept of Lean management has become ever so popular. Its roots started in the manufacturing industry, but more recently it has been adopted into service industries, including logistics service providers and freight forwarding companies. In this post we will provide some detail on the origin, different types of waste, workers satisfaction, just in time, and some of the common problems encountered when freight forwarding companies adjust to using a Lean philosophy.

Origin

The Lean concept was developed as a methodology to eliminate waste in one’s organisation so more value can be provided to customers. Here we look at any kind of redundant activity, gaps in processes and even waste of human resources. The Lean philosophy was first developed by the Toyota auto manufacturer in the 40s and later became adapted as best practice by many kinds of organisations. Lean is defined by the Lean Enterprise Institute as “The core idea is to maximize customer value while minimizing waste. Simply, Lean means creating more value for customers with fewer resources.”

Different types of waste

Lean methods aim to create value for customers by minimizing all types of waste from sources as varied as material defects, to worker ergonomics. Some waste is easy to detect, like a faulty or misaligned machine that is producing a high number of defective items. Other forms of waste include wide ranging environmental conditions that impede working efficiencies, such as poor lighting which impacts the readability of instructions or documents to the printer being too far from the team that needs it. One of the most overlooked items is usually the waste of human talent or human resources. This means not identifying and using the individual’s capacity and talents to the utmost capacity. The whole roll out of the new philosophy is doomed if the initiating top manager is not changing their own thinking about how the business creates value and waste first.

Workers satisfaction

For any Lean philosophy to be successful adapted, the workplace requires input and participation from all production staff. They are most likely the first to see where waste and inefficiency occurs. Not only are employees the resource itself that has usually the most creative answers, but they will respond positively to change if a sincere effort is made to involve them in the improvement processes. When they observe that their ideas are incorporated and used for this purpose a sense of pride and ownership is created and the employee will identify their work place as part of them and not just as a place to go to.

Just in time (JIT)

The JIT is an element of Lean and aims to minimise inventory as it ties up large amount of capital and resources. Equity that is tied up in inventory of raw and also finished goods has a negative impact on cash flow. Money is also saved by decreasing warehousing expenses. The ideal JIT would have raw material arrive at the perfect point when it is needed in the production of finished goods. This is where logistics providers are of most important value and poor performance can often cause tremendous problems for the manufacturer, while the provider is never responsible from a fiscal perspective. The important message here is that it is a goal to strive towards, thus making improvements toward this ideal. JIT is fine for a stable environment and delivery times are known, reliable and stable. If they are not then the JIT scheduling could leave you vulnerable to bottlenecks or you run out of material too soon and need to air freight at exorbitant amounts. All of this has the potential to interrupt the production itself.

Competitive Advantage

The competitive advantage is not just simply reducing costs. This view might create fear amongst certain types of employees that are naturally at risk of redundancies. Lean philosophy and techniques will inadvertently introduce systems and develop skills in staff that support changes in the workplace that new sales can create. Also, space saved in a warehouse may make room for new product lines. The same applies to time saved. Staff may be able to absorb more work with the same resources due to the new found agility.

Opportunities for improvement for freight forwarding companies

Some of the areas where freight forwarding companies have found improvement through adopting a Lean philosophy include:

  1. Filling out customer information correctly and completely every time when entering data into the main freight forwarding operations system/CRM
  2. Standardising how information and documentation is passed along through multiple departments within the freight forwarding company
  3. Minimise printing through dual screen usage and electronic filing
  4. Not accepting incomplete bookings
  5. Improving the clarity of job descriptions

Downsides and new inefficiencies

From my experience with manufacturing and freight forwarding companies adopting a Lean philosophy, a lot of the techniques have been overused and more effort ends up being put into policing practices. This happens when too many resources are put into tracking changes and this becomes a mean to its own ends. I have witnessed a company’s own business improvement department was larger than any other operational department. Therefore, before implementing changes, one has to put a value to the change. It has to be visible and traceable in the most simplistic of ways.

Conclusion

Whatever system an enterprise decides to embark upon, change is good. Moving from a traditional management style to a more horizontal, inclusive and consensus based style is desirable, there needs to be balance, between the goals and the execution of the ideas. The end game is something that needs communicating to employees and their participation is vital. A holistic approach is needed where the “Big Picture” is not only translated in more value for the customer and better investors return, but also an improved working place where the well-being of the employee lies at the heart.

 

 

 

Published with permissions from Bob Vavich