Lean Distribution

"Kirk Zylstra's focus on the customer is a fresh approach to lean. Companies that can bear the burden of variability will develop a strategic advantage in today's volatile market."
—Travis Jarrell Institute of Industrial Engineers Program Committee Chair

"Lean Distribution is a comprehensive yet concise work with clear leanings. Kirk's experience across a range of industries brings a unique understanding of common opportunities and solutions available to optimize distribution processes. Lean techniques, typically effective in manufacturing processes, are applied in the downstream supply chain in a practical and productive manner that will offer something to any business distributing tangible goods."
—F. Jeff Duncan Jr. VP, CIO, and Director of Technology Louisiana Pacific Corp.

"Lean Distribution has robustly captured the revolution occurring in today's increasingly competitive and global supply chain. Eliminating losses through lean manufacturing and lean distribution initiatives will become even more critical enablers to organizations developing cost-advantaged supply chains."
—Rick McDonald Director of Manufacturing The Clorox Company

Preface xi

Acknowledgments xv

Chapter 1 Taking the Lean Approach 1

The Lean Change in Distribution 2

The RFID Change Dilemma 2

The Forecast Barrier 3

The Balancing Act 4

Business and Operational Plans 6

Forecast Accuracy 7

Another Approach 8

The Traffic Analogy 9

Improving Distribution Operations 13

Lean Paradigm Shifts 13

Book Approach and Contents 16

Lean Distribution Framework 17

Lean Distribution Transformation 22

Role of Information Technology 24

Applications for Lean Distribution 25

Summary 29

Chapter 2 Distribution Challenges 31

Customer Directions 31

Global Sourcing 33

Cost Reduction 33

Lean Streamlining 35

New Challenges? 36

Functional Silos 38

Summary 39

Chapter 3 Optimizing Distribution 41

Distribution Sports Franchise Analogy 42

Optimizing Distribution 43

Technology Infrastructure 48

Lowering Production/Sourcing Costs 55

Improving Inventory Management 56

Maximizing Asset Utilization 58

Technology Directions 63

Summary 65

Chapter 4 IT Transforms Distribution Processes 67

Distribution Business Processes 68

ERP Transformation 71

Summary 83

Chapter 5 Lean Operating Capabilities 85

The Lean Approach 86

Managing Uncertainty with Lean 92

Lean and DRP: Collaboration 98

Lean-Enabled Collaboration 104

Summary 109

Chapter 6 Customer Service Policy 111

Customer Service Policy 112

Segmentation 121

Service Strategies 125

Summary 127

Chapter 7 Buffer Strategy 129

Buffer Strategy 130

Determine Service Strategies 136

Service Distinctions 146

Summary 158

Chapter 8 Replenishment Cycles 161

The Pipeline Approach 162

Replenishment Time 165

Delivered Cost 170

Summary 183

Chapter 9 Pull Approach 185

Pull Trigger 187

Replenishment Orders 193

Inventory Targets 196

Buffer Management 198

Summary 204

Chapter 10 Conclusion 207

The Simplicity Challenge 208

Planning Transformation 209

Lean Distribution Benefits 211

Selling the Lean Distribution Vision 213

Implementing Lean Distribution 215

Index 219

"... would recommend it ... to understand ... fundamentals of making the transformation from a production "push" to a demand "pull" supply chain." (Supply Management, April 2006)

"...arguement it advances is that traditional forecast-driven approaches to supply chain management are inappropriate in today's turbulent markets." (Supply Management, March 2006)

KIRK D. ZYLSTRA is an independent consultant specializing in supply chain and manufacturing operations transformation. He teaches operations management and supply chain part-time at the University of Washington Business School in Seattle, Washington. He is a retired partner of a major international consulting firm, where he served major manufacturing, distribution, and retail companies during his more than twenty years with the firm. He has been a featured speaker at the Institute of Industrial Engineers (IIE) and other conferences on supply chain and Lean manufacturing. For more information about Zylstra and Lean transformation, visit www.profit-chain.com.

Many companies in diverse industries have implemented Lean manufacturing practices and successfully reduced operating costs, slashed inventories, reduced floor space, and improved customer service. However, few companies have successfully implemented Lean principles across distribution operations. The barrier: most distribution systems are based on inherently inaccurate forecasts that “push” inventory to warehouses to accommodate fluctuations in customer demand. This book shows how to break through the forecast accuracy barrier by applying proven Lean practices that reduce costs and simplify distribution processes.

Lean Distribution addresses the most challenging issues currently facing industry: forecast revisions and inaccuracies, customer demands to limit inventory exposure, and the need to reduce supply chain costs. Compounding these issues is the global sourcing firmly entrenched in industry. Global sourcing entails longer supply-chains, compounding the chronic limitations of forecasting, planning, and supply chain optimization. While these problems appear to have mutually exclusive solutions, Lean simplifies distribution operations and processes to bring results.

Lean Distribution resolves the forecasting dilemma and provides an actionable road map to transform the supply chain with specific recommendations to implement improvements. Lean embraces the variation and inaccuracy inherent in forecasts and customer orders to focus on reducing lead time, reducing lot sizes, and increasing reliability, yielding the flexibility and simplicity required to achieve consistent results. This book goes beyond describing the principles and a foundation to provide a comprehensive, real-world framework and specific recommendations for customizing a Lean approach to transform distribution in any business.

Derived from the author’s experiences assessing product flow and implementing Lean principles in diverse companies and industries, Lean Distribution presents a proven, real-world approach to distribution—an approach that saves money and improves customer service.