Tuesday, September 17, 2013

"Lean” Supply chains

From the articles this week, we understand the different Lean Manufacturing processes especially Kanban. With the boom in online shopping, what do giants such as Walmart and Amazon do to make their supply chains “Lean”?

 In an article published by the University of San Francisco on “Walmart’s Keys to Successful Supply Chain Management”1, the author talks about how “cross-docking” adopted by Walmart favors timely distribution of freight, more effective use of transportation assets and higher flexibility of demand.

What is “cross-docking”?
“It is the practice of unloading materials from an incoming semi-trailer truck or railroad car and loading these materials directly into outbound trucks, trailers, or rail cars, with little or no storage in between.”2

                                                     Source: 5 Ways to Benefit from a Cross Dock Facility, tuscma.com

Applying the 5 ways to benefit from a Cross-Docking facility3 to Walmart one can estimate how cross-docking makes Walmart Lean.

1.     It eliminates the need for a storage/ warehouse facility as sorting is done while unloading and loading trucks and the good is not stored over 24 hours.
2.     It is ideal for “Just-In-Time” service as stock coming into the center is already allocated for a replenishment order generated by a retailer in the supply chain.
3.     It benefits their Transportation network by combining shipments from a number of suppliers that arrive in the less-than-truckload quantities to gain full-truckload quantities. 
4.     It reduces the number of personnel required at the delivery point due to minimum handling.
5.     It derives additional value by conducting services such as labeling, sorting and repacking during cross-docking itself.
According to an article by the Hofstra University4, Walmart delivers about 85% of its merchandise using this method. They have also been using cross-docking since the 1980s.

Cross docking is fairly people intensive where the manager of the terminal must be well trained. Also, creating a cross-docking terminal is expensive. How have smaller companies  managed to streamline their supply chains without investing in cross-docking terminals?


Other References:
Factory Efficiency Comes to the Hospital (NY Times, July 9, 2010)

The Evolution of the Toyota Production System (Chaudhury and Hansa, IBS Case Development Center, 2004)

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