Satellite Building Relocated

Due to the soft Arizona economy, our facility has relocated our furniture building into a much smaller space. In the distribution world, more space isn't always better than less space. In our case, we were able to make several improvements in our process through relocation.

First, we moved more product into our primary building. This translates to a higher percentage of orders being filled from our primary building and improves our productivity rates. We will spend less time off site at the satellite building and there will be less time spent driving between the two buildings because only one trip per shift will be required.

Second, the new building is much closer to our primary building. Our previous satellite building was 15 minutes away, so 30 minutes was spent daily driving for each trip. The new facility is 3 minutes away, so 6 minutes for each trip. Obviously, there is a gain of 24 minutes per trip, with two associates in the truck, for a gain of 0.8 labor hours per trip.

Couple those results with the reduction of one trip on average per night and the labor savings is 1.8 hours per day or just over 450 labor hours per year! That is equal to gaining a full time associate for 11 weeks at no cost! This is LEAN at its best, a true reduction of transportation waste!

Third, because we have much less space, we pay a lot less for that space. Our rent expense for off-site space will decline by nearly 80%, a very significant savings.

So we spend less money and increase warehouse productivity at the same time. These are the gains we look for all the time with LEAN production!

T-Outs Kaizen Team

In theory, inventory on hand for a given item should always be accurately reflected in the computer inventory file. Inaccuracies can cause us to either carry more inventory than we need for a given item, or to disappoint a customer by not being able to fill an order we thought we could fill. From a LEAN perspective, both are problems to be corrected by tightening processes to maintain strong inventory control. If we have 100 widgets on the shelf, our computer system should say we have 100 widgets as well.


Several times per day, our computer system communicates to our customers that we have an item in stock, but it is not available on the shelf when the warehouse associate goes to pick the item for the order. This situation is called a T-Out in Phoenix, and our objective is to have as few as possible. In October and November, our T-Out rate in Phoenix was too high at 0.13%. Our target is 0.10%.


During the 3rd week of November, we gathered a Kaizen team to look at our T-Outs and see if we could bring them down below our target. The team included six associates, two from inventory control, two from the receiving and put away shift, and two from the order fulfillment shift. They determined there are four significant opportunities for improvement that, if improved, will reduce T-Outs in Phoenix. Those key opportunities are Housekeeping, Pick Accuracy, Product Astray, Low Stock on Hand. The team created a RASIC chart with all action items to improve each area, a person assigned as responsible, and a completion date. We expect to see a 40% reduction in T-Outs, beginning as early as late December.

Tier 4 Meeting Board

Phoenix has incorporated tiered meetings into the operation on every shift. Delivery, Warehouse 1st Shift, Warehouse 2nd Shift, and the Office team all have a daily Tier 1 meeting, usually at the start of the shift. These meetings are conducted by Leads or Supervisors and all shift associates attend the meeting.

Tier 2 meetings, held by Supervisors with their Leads, are also conducted daily, often more than once per day. Department Managers are conducting Tier 3 meetings, usually daily. These higher level meetings are held by Managers with their Supervisors and cover LEAN components and continuous improvement opportunities.

So what is this Tier 4 Meeting? This is a daily meeting with the Managers and the Director of Operations, a recap of the key performance indicators for the prior day. A 3' X 4' MDI board has been designed to record and review all the metrics. Trends are reviewed briefly, and the team makes certain that unfavorable trends have root cause analysis underway and countermeasures applied or soon on the way. Notes are made right on the board, making location performance very visual for all associates to see clearly and apply improvements.

Scanning Improves Accuracy

Phoenix has spent the past six weeks training associates and rolling out new processes for handling inbound freight. With over 10,000 different items in stock, it is easy to receive a product and lose it before it finally ends up it the correct warehouse location. Using technology, Phoenix has improved inventory accuracy through the addition of a carton tracking system using bar codes and scanners.

Using the new process, cartons arrive via semi-trailer and are unloaded. Products are received using the scanner (which immediately makes the item available for sale) and scanned to a pallet. Some items have ASN pallet tags (pallet ID bar code) which make receiving even faster! That pallet (whether built or ASN tagged) is moved and scanned to a drop zone. The pallet or individual cartons are then scanned to a specific warehouse location, at which time the system declares the product as "putaway" where it belongs! Every warehouse location available for storage of product has a unique barcode.

With these tools in place, every carton can be tracked from point to point as it moves from the receiving dock to the assigned warehouse location. If it is side tracked along the way, an exception report flagged the carton and notes where it was last scanned, making it easier to find. If an associate selects the wrong item, the wrong pallet, or tries to put something away in the wrong location, immediate feedback is provided by the hand held terminal. The associate can make the necessary adjustment and perform the function correctly.

In the next 60 days, we'll be adding scanning to our outbound processes. Since we already scan cartons at delivery, we'll have comeplete electronic tracking for items from receiving to delivery. The impact on inventory accuracy is expected to be significant. This is one example of how we are using technology with LEAN to improve our performance to customers!

CI Project - Inventory Accuracy Improvement

The team in Phoenix has struggled with T-Outs (unexpected inventory shortage) for the past couple of years. There has been improvement, but it has never been sustained. Recently, a team of inventory control, receiving and stocking associates worked together to improve our inventory accuracy. In addition, our much improved (and sustained!) facility housekeeping has helped to identify items out of place on the stock shelves.

The net result has been astonishing! Over the past three weeks, T-Outs in Phoenix have declined by 40%! The facility has met the inventory accuracy target for the past three weeks, and even had a day with no T-Outs at all! This is terrific improvement! It represents much hard work and effort over many months, and demonstrates the effectiveness of LEAN in our workplace. These results don't come from one or two improvements. Rather, these results are the product of many small improvements over those months, which are finally beginning to pay big dividends!

Expected vs. Actual

Phoenix has been working hard to integrate the concept of expected versus actual thinking in production. Following a basic LEAN concept, we are establishing an objective standard based on prior performance in a given area. We measure our actual performance against that standard. Both expected and actual performance are recorded on an MDI board or document. Some measurements are taken during the shift, while others measure the entire shift.

As the actual data is posted with the expected data, abnormalities are discovered. These abnormalities are discussed in the Tier 2 meeting by the Leads and Supervisor of the team, and with frontline associates in the next Tier 1 meeting. These abnormalities can be either favorable or unfavorable. Efforts are made to understand and replicate the favorable abnormalities, while unfavorable results receive countermeasures as soon as possible to get back on track.

Areas where Phoenix is applying this principle include Bin Production, Bulk Production, Truck Loading, Item Profiling, and Delivery Performance. Improvements have been noted in each of these areas.

Expected versus Actual performance measurement doesn't accomplish the desired result by itself. It must be combined with Tier Meetings, Leader Standard Work, and use of an Action Item Board to apply countermeasures quickly. When those elements are used together, the results can be very powerful!

Kaizen - Housekeeping Sustained!

Phoenix has been through several cycles of housekeeping improvement ... that is, we clean up, we slide downhill, we clean up, we slide downhill, etc. For this event, the Kaizen team was charged with improving our ability and sustaining that improvement. The scope of this project was to focus on warehouse bulk aisles, static bin aisles, and flow rack aisles. Representatives from both warehouse shifts participated on the team.

After four days of hard work, cleaning, and debate, the Kaizen team developed a plan to bring the warehouse up to standard by the end of March, and more importantly, to sustain the spring cleaning long into the future!

For the initial clean up, all warehouse and office associates will be involved, including supervisors, managers, even the director. Training was provided for all associates to establish a standard to which all may work. A Standard Operating Procedure or Standard Work Document was written to measure and maintain the standard over time. Daily maintenance assignments have been issued so each aisle in the building is refreshed daily and returned to standard, as well as inspected by a Lead or Supervisor. The Leader Standard Work documents for all leaders have been updated to include a daily review of the housekeeping in each aisle. Following this road map, housekeeping standards in Phoenix will move sharply forward and remain there!

The Kaizen team expects to improve Safety, Accuracy, Productivity and reduce Damage as a result of this event. Some of these will be difficult to measure specifically to this event, but it is consistent with other recent events in Phoenix as the same areas will be impacted. Most importantly, the Kaizen event will help associates show respect for themselves, each other, and our customers by maintaining a clean, well organized work environment. Everyone prefers to work in a neat and tidy operation!

Kaizen - Bin Carton Flow

Phoenix has been working to make improvements in the flow of order cartons along the primary conveyor line. In early February, a Kaizen event was held to look for opportunities and make improvements. The team had 8 members, including managers, a supervisor, a lead, and front line associates. Everyone made good contributions and the results are proving substantial.

The scope of the event was all zones from the production printer to the rough sort process. This included order printing, induction, flow rack, static bin, check pack, and rough sort. Out of scope was bulk and truck loading. In the past, cartons have been bunching up and stopping the conveyor line in spots. The event objective was to smooth the flow of cartons on the conveyor while maintaining the integrity of our production waves (pitches).

The event ran from Feb 5-8 and the early results are very encouraging. In fact, the first three days after the event demonstrated a productivity gain of nearly 4% versus the previous 10 business days! Such a gain translates to one full time person, and since we are running overtime right now, that full time person earns time and a half! If sustained through the year, such a gain will translate to more than $40,000 in annual savings!

Class II Item Creation

After focusing on the holidays in December and working through the early January rush period, we are back in the saddle and focused on process improvement in Phoenix!

A Continuous Improvement team addressed the issue of creating new Class II items when an item has too much product to fit only in a bin-pick position. Too often, such items were being held for 1-4 days waiting until someone had time to change the status and find a bulk rack position for the product. This was causing inventory discrepancies as orders would be released but no one could find the product.

Several solutions were attempted over the past year, but nothing seemed to make an impact. A team of associates in Phoenix met and divided responsibilities for the process, making some adjustments to the process along the way. Now all Class II items are processed and put away in bin and bulk racks before the next production shift begins. Manual stock-outs have dropped by 40% in the two weeks since. What a wonderful improvement!