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What is Lean Logistics, and how does it work?

Jan Tore Pedersen | 04. May 2018
3 minutes read

Lean Thinking is a business methodology that originated in the Japanese automotive industry during the late 1980s. Its core idea is to maximize customer value while eliminating waste from all processes. Simply put, Lean means creating more value for customers with fewer resources.

 

Lean logistics defined

In the logistics sector, Lean is being widely adopted as a way to recognize and eliminate wasteful activities from the supply chain in order to increase product flow and speed. This concept is known as Lean Logistics and has become a staple of supply chain management. 

Lean Logistics is all about improving operations at all levels and optimizing the supply chain by minimizing waste. This is achieved through better inventory and material management, and by eliminating unnecessary steps in delivery, such as: 

  • Minimizing stocks / eliminating excess inventory
  • Minimizing transport of “air” (transportation resources should be filled as much as possible)

Lean is not a program or short term cost reduction program, but the way companies operate to eliminate waste along entire value streams, with the ultimate goal of providing perfect value to the customer.

 

The four principles of lean logistics

  • Specifying value: Customer value is identified and added along the supply chain network.
  • Mapping out value stream: Identifying all processes (flow of materials as well as information) along the supply chain network in order to eliminate the processes that do not create value to the overall product. Mapping out value stream enables you to see at a glance where the delays are in your process, any restraints and excessive inventory. This helps you understand how the value is created into the product, from the customer’s perspective.
  • Creating a product flow: Applying the above factors and making the value-creating steps occur in tight sequence, so the product will flow smoothly toward the customer, all while minimizing interruptions, inventories and downtime.
  • Establishing customer pull: A pull system is a production or service process that is designed to minimize on-hand inventory by working directly on the basis of customer demand. Goods are delivered as they are required by the customer. This is also known as a “Just in time” system, as it operates just in time in delivering goods when they are needed, instead of accumulating inventory. The pull system requires demand information to be available throughout the supply chain.

In order to achieve Lean Logistics, start the above process again and continue it until a state of perfection is reached, in which perfect value is created with no waste.

 

Conclusion

In today’s market, logistics companies are embracing Lean initiatives to uncover and deal with waste and efficiencies. Implementing Lean Logistics into your business brings significant improvements not only to one specific area of the supply chain, but to the entire value chain as a whole. 

Lean Logistics enables logistics service providers to respond to fast-changing consumer demands with higher quality, lower cost, less need of working capital, and faster throughput times. Also, data sharing becomes much simpler and more accurate.

 

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Source: Logistics & Materials Handling Blog


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