Building a Lean Fulfillment Stream: Rethinking Your Supply Chain and Logistics to Create Maximum Value at Minimum Cost by Robert Martichenko and Kevin von Grabe is the latest publication from the Lean Enterprise Institute. The book guides readers through the application of lean principles in a fulfillment stream.
The Fulfillment Stream
So what is a fulfillment stream? According to the authors it is the flow of parts and finished products that flows through various companies and facilities into the hands of the customer:
It includes all of the activities that move materials and information from suppliers to end customers: planning, sourcing, transporting, manufacturing, inspecting, sorting, packing, and consuming, as well as managing the entire process.
This definition is remarkably similar to the definition of a value stream. How exactly is a fulfillment stream different from a value stream? The book does not say, and leaves one wondering at the distinction for what could otherwise be called a supply chain. The book does use value stream maps as a central tool in redesigning the fulfillment stream and to demonstrate the implementation of lean tools.
Eight Guiding Principles
The authors list eight guiding principles for designing lean fulfillment streams:
- Eliminate all the waste in the fulfillment stream so that only value remains.
- Make customer consumption visible to all members of the fulfillment stream.
- Reduce lead time.
- Create level flow.
- Use pull systems.
- Increase velocity and reduce variation.
- Collaborate and use process discipline.
- Focus on total cost of fulfillment.
These are an interesting mixed bag of objectives (reducing lead time, reducing total cost), the means (eliminating all waste) and tools to do so (level flow, pull, visibility, customer collaboration, velocity i.e. small frequent deliveries). As such they are not design principles in the same way that the other LEI value stream mapping “Eight questions managers need to answer when designing the future state” are design principles, which ask, “Where can we apply or implement..?” the following:
- Ship direct or from finished goods
- Continuous flow
- Supermarket pull system
- Leveling the production mix
- Process improvements to enable the above
This may seem like a matter of semantics but it is important to be clear when we state that something is a prime directive or guiding principle and not to mingle objectives with means.
7 More Wastes
The authors list seven types of waste in fulfillment as system complexity, lead time, transport, space, inventory, human effort and packaging. Listing lead time as a waste within a fulfillment stream seems inappropriate since it is simply a measure of process performance. The underlying delays, system complexity, transport, human effort and inventories all result in lead time. It seems as redundant to list lead time as a waste as adding cost of poor quality would be to the manufacturing 7 wastes when defects / correction already exists. Packaging waste in this book does not refer to the act of packaging or the waste of packaging material itself, but to “the wrong types of goods in the wrong quantities resulting in damages, excessive inventories, and corrections downstream.” In manufacturing terms this would be a waste of processing due to inappropriate process, equipment, product or packaging design.
Mapping at Great Distances
Although strictly speaking this is not a book about “value stream mapping for the supply chain” but rather a book that teaches how a wide range of lean and logistics best practices can be applied across a fulfillment stream, it is understandable that more time was not spent on the nuts and bolts of how to go about capturing reality across a supply chain. However the question of how to map logistics processes that span a wide geography was not adequately addressed. The advice to “capture what is happening with data, interviews, photographs, videos, etc.” leaves too much room for mapping teams to treat the fulfillment stream analysis as a data gathering exercise rather than learning by going to the gemba. Making any improvements in the shipping, receiving, trailer-yard management, and supplier collaboration are certainly impossible without going to the gemba, so it seems worth insisting that the fulfillment stream map be created through go see rather than second hand information, even if this takes more time.
Cost Reduction Focus
The fictional company fulfillment stream mapping team goes from mapping to solution to financial results in each chapter. Lacking discussion of how specific implementation challenges were overcome, such as trade offs between more frequent deliveries and increased costs for inbound and outbound logistics, it makes the entire transformation seem too easy. For example inbound delivery frequency was increased from 1,000 units once per month to 50 units daily. While this is the correct thing to do from a lean point of view, the book does not make it clear how they arrived at this decision or how the reader is to make this type of cost-benefit decision in real life.
While the story of the transformation of this fictional fulfillment stream is very focused on total cost, no mention is made of sustainability or green logistics principles as part of the mapping and decision making process for designing supply chains. As the environmental impact of globalized supply chains is a topic we cannot ignore, any discussion of total cost should increasingly include sustainability elements.
JIT vs. Kanban/flow?
The distinction of JIT from Flow/kanban on page 79 in the “Replenishment Method Analysis” table is inconsistent with the industry standard definition of JIT and leaves room for confusion. The standard definition of JIT, on page 34 of the Lean Enterprise Institute’s Lean Lexicon, 2nd edition states “JIT relies on heijunka as foundation and is comprised of three operating elements: the pull system, takt time, and continuous flow.”
In Building Lean Fulfillment Streams the concept of JIT seems to exclude flow and pull, the idea of repetitive and stable demand (heijunka) and the authors recommend:
“Use with material that has relatively low frequency of consumption and is used in variable quantities at variable intervals. This material does not have as stable a consumption pattern as material suitable for kanban.”
Perhaps “make to order” or “fulfill to order” would be a better description than Just in Time and avoid confusion.
Use of Visuals
There are over 40 charts and illustrations in the book, the majority of which are tables full of numbers and text. While these numbers are very useful it reinforces the impression that improving the fulfillment stream is more of a paper exercise than a go see, learn and do. For example in the Shipping, Receiving, and Trailer-Yard Management section where the authors explain that at the fictional company, “Disciplined schedules and visual placards had been established in the trailer yards” in order to improve perfect order execution from 58% to 85%. Anytime the solution is “visual” and the book contains no visuals to illustrate how this was done not only is it a teaching opportunity lost but the failure to practice what we preach – make it visible.
The Total-Cost Supplier Comparison and the Returnable Container Calculator tables are both gems. More simple, clear and useful tools like these are needed in books about continuous improvement.
This book is not for the lean beginner. In order to apply many if not all of the tools and systems recommended to redesign the fulfillment stream one must be familiar with VSM, flow, pull, kanban, leveling, PDCA to name just a few. The authors provide helpful references for further reading and study from within the Lean Enterprise Institute catalog. The narrative is told as a series of faits accomplis, or actions taken by the fictional company to implement lean. To those familiar with these tools and their application within supply chain logistics and distribution operations, these lessons are useful. However the explanations of these systems do not provide adequate detail to allow the beginner to do much more than gain an idea of where they might be added onto a current state map.
This book provides a great overview and introduction to logistics concepts, vocabulary and processes. This book is a primer for the intermediate to advanced lean practitioner wishing to learn how to map and improve value streams that cross through logistics, distribution and supply chain operations. Impact of sales could use more attention. It is a valuable addition to the LEI library.