One of the best ways to improve profitability in your warehouse is to reduce or eliminate waste. I addressed this in my last article, “Streamline Ecommerce Fulfillment with 5S Methodology,” as many ecommerce warehouse operations include a lot of waste.
I described the lean concepts from the Toyota production system that focus on the Japanese term “muda” (or “waste”), which typically occurs in seven categories. Although Toyota is a manufacturing environment, the lessons work well across any business — from an office to a hospital.
For this article, I’ll add an eighth category. Eliminate or reduce these eight categories of “waste” from your ecommerce fulfillment process to improve profits.
8 Types of ‘Waste’ in Ecommerce Fulfillment
1. Overproduction is the concept of producing a product before it’s actually required. Typically, we don’t think about overproduction in a warehouse environment. But most every warehouse overproduces. Examples include building shelves that are never used or are unsuitable for future projects, or making more boxes than a project needs, or making more kits than are actually sold.
2. Waiting in the manufacturing world focuses on the efficiencies between processes. Evaluate how much time you and your employees wait before completing the next activity. It can be as simple as the picker waiting for orders to print, or a product to be pulled down from a higher location, or waiting for equipment that is being used by another employee.
3. Transporting is a significant cost that adds no value to the product. Evaluate the product cycle in your warehouse — from arrival through shipping — and identify the appropriate number of times a product should be “touched.” This evaluation should include distance and travel time. Can distance and travel time be reduced? Is it worth the effort?
For example, say you have an upcoming sale for four SKUs that are located in different parts of the warehouse. If you moved the four SKUs close to each other, would the effort be worth the savings gained from the reduced picking time?
4. Inappropriate processing typically refers to excessive or unnecessary steps. For example, a warehouse that receives only single SKU inventory in cartons will not have to sort or separate multiple SKUs, therefore reducing the steps required to receive the inventory, while also improving accuracy.
5. Unnecessary inventory is typically the most significant waste to a retail business. Besides tying up money — see “What’s the True Cost of Inventory?” and “SKU Management Ensures Inventory Profits” — it requires floor space, creates barriers in movement, and delays the identification of problems.
6. Unnecessary motion refers to the waste identified by evaluating ergonomics, such as reaching, bending, standing, walking, lifting, and stretching. A simple example is the height of a workbench that forces an employee to be hunched over, or a ladder height that forces an employee to stretch on his toes to get an item.
7. Defects happen for many reasons. Identifying why they occur is key. Using the wrong size box for an order, or insufficient packaging, or faulty material in production can all produce defects.
8. Underutilization of employees is not typically considered one of the seven waste items. However, many practitioners have begun to acknowledge and include it. Examples include not having the right employee for the job, or required skills not matching the job, or a lack of training to perform the job.
Implementing Change Is Difficult
Evaluating your team can be difficult. Many managers fear that they cannot overcome the obstacles and therefore never proceed. Obtaining outside help can assist with this.
Do not tackle all the issues at once. Create a plan that is based on the change that will yield the greatest return first and then proceed to the next one. Changing a process or behavior is often difficult and can take time. Involve your team members so they will understand the purpose of the changes, to execute the changes on their own.