lean warehousing1445813/...keywords: warehouse-optimization, lean, six-sigma, kanban, kaizen sida...
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LEAN WAREHOUSING
Bachelor of International Business Engineering
Industrial Engineering
at the University of Borås
Neda Thomsen & Sami Modaresi
Borås 2019
Degree project includes, 15 credits in the Engineering program, Industrial Business
Engineering at the University of Borås
BSc in International Business Engineering
Specialization: Industrial Engineering
Neda Thomsen
Sami Modaresi
sida II
Authors: Neda Thomsen
Sami Modaresi
Date: 2019
University: Högskolan i Borås
Institutionen Ingenjörshögskolan
501 90 BORÅS
Telefon 033-435 4640
Type of thesis: Bachelor Thesis
Category: International Business engineering
Supervisor: Andreas Bäckäng
Enrad Company
Bo Månsson
IH, Högskolan i Borås
Supervisor: Bo Månsson
IH, Högskolan i Borås
Examiner: Bo Månsson
Keywords: Warehouse-optimization, Lean, Six-Sigma, Kanban, Kaizen
sida III
Preface
This thesis comprises 15 credits and finishes our education in the engineering program,
International Business Engineering at the University of Borås. The degree project was carried
out on Enrad Company in Borås. During the period July 2019 to September 2019.
After reading several courses in logistics, Business, quality and control it has been rewarding
to test and apply our knowledge in one real company.
The thesis has dealt with warehouse and other subdivision that affect this part.
We would like to thank our supervisor, Bo Månsson for his guide and help during this project.
We would like to thank everyone at Enrad Company who have set up and helped us with
answers to the questions and obtain material. We especially want to thank Andreas Bäckäng
and Carl-Mikael Eiserman for all their support.
Neda Thomsen
I would like to thank my family, my mother, my father and my sister for all their supports.
And finally, to my loving and supportive husband, Björn Thomsen: my deepest gratitude.
Thank you very much for your support and your love during this work.
Sami Modaresi
I would like to thank my most supportive and encouraging people in my life; my mother,
father and my only sister who always has been believing me and my decisions.
And a special thanks to the best supervisor, Bo Månsson who has support us patiently during
this study with his useful and supportive ideas.
Borås, oktober, 2019
Neda Thomsen Sami Modaresi
sida IV
Abstract
This thesis is based on inspecting, presenting and defining Lean Warehousing. With applying
this philosophy, it is possible to minimize the wastes and maximize productivity and
affectability in the warehouses.
Enrad is the company that locates in Borås and is the producer of industrial coolers and heaters.
Attentive to the first interview with parts of company members that were very interested to
reorganize and standardize their warehouse, exploring the problem that exists right now in the
place of producing and stocking makes easier to refine and refit the organization.
The main purpose of this thesis is analysing the current situation of company, identify the
obstacles and suggest the theoretical finding in order to apply Lean Warehousing, in additional
to have smoothing production within reducing the different kind of wastes.
Applying Lean does not mean to use this philosophy just in a special place in the system, it
means to implement this approach in all the processes and actions that execute behind and inside
the company. Lean is the assessment of any process that consists wastes and costs.
The procedures of progression would be done in the first step by data gathering through some
qualitative data like interview and own observations. At the second step, detail analysing and
mapping the actual condition, and at the third stage clarifying the most related techniques from
Lean in order to eliminate or remove the reasons of wastes and their effects. obviously, the
information will be presented to managing team and then to the other members.
the main problems were recognized: Incorrectly design of spaces, warehouse managing and
furthermore weak leadership that cannot satisfy the demands of warehouse and staffs.
sida V
TABLE OF CONTENTS
Preface …………………………………………………………………………………. Ⅲ
Abstract ………………………………………………………………………………… Ⅳ
1. Introduction .......................................................................................................................... 1
1.1 Company Description .................................................................................................... 1
1.2 Background ................................................................................................................... 2
1.3 Problem formulation ..................................................................................................... 3
1.4 Purpose .......................................................................................................................... 3
1.5 Goals ............................................................................................................................. 3
1.6 Limitation ...................................................................................................................... 3
1.7 Outline ........................................................................................................................... 4
1.8 Data Collection .............................................................................................................. 4
2. Method and material ........................................................................................................... 5
2.1 Qualitative method ........................................................................................................ 5
2.2 Quantitative method ...................................................................................................... 5
2.3 Research Methodology .................................................................................................. 6
2.3.1 Primary Data………………………………………………………………………. 6
2.3.1.1 Interview…………………………………………………………………………. 6
2.3.1.2 Observation ……………………………………………………………………….6
2.3.2 Secondary Data ……………………………………………………………………. 6
2.3.2.1 Books and articles …………………………………………………………………6
3. Theory ................................................................................................................................... 7
3.1 Lean ............................................................................................................................... 7
3.1.1 Toyota production system .......................................................................................... 7
3.1.2 Principle of lean philosophy ....................................................................................... 8
3.1.3 Seven wastes .............................................................................................................. 9
3.1.4 Lean 5S ..................................................................................................................... 10
3.1.5 Kanban ..................................................................................................................... 11
3.1.6 Six Sigma ................................................................................................................. 11
3.1.7 Kaizen ....................................................................................................................... 12
3.1.8 Heijanka ................................................................................................................... 12
3.2 ABC Analysis ………………………………………………………………………..13
3.2.1 Steps in ABC Analysis …………………………………………………………….14
3.2.2 Utilization of ABC analysis in warehousing ………………………………………14
3.2.3 Applying ABC analysis in the warehouse …………………………………………14
3.2.4 How ABC analysis treat the items according to the category……………………...14
sida VI
4. Analysis ............................................................................................................................... 18
4.1 Data Gathering ……………………………………………………………………….15
4.2 Enrad company current situation ................................................................................. 16
4.3 Lean and use of this methodology in Enrad company ................................................ 18
4.3.1 Six Sigma and Kaizen .............................................................................................. 18
4.3.2 Lean and seven wastes in Enrad ............................................................................... 18
4.3.3 Recommendation for efficiency improvements ...................................................... 20
4.3.4 Lean and wastes ....................................................................................................... 20
4.3.5 Applying 5S .............................................................................................................. 20
4.3.6 Applying Six Sigma ................................................................................................. 20
4.3.7 Applying Kaizen ...................................................................................................... 21
4.3.8 Applying Kanban ..................................................................................................... 21
4.3.9 Combination of Six Sigma and Kaizen .................................................................... 29
5. Discussion ............................................................................................................................ 23
6. Result ................................................................................................................................... 24
7. References ........................................................................................................................... 26
8. Table of figures .................................................................................................................. 29
sida 1
Introduction
1.1. Company Description
Saving energy by implementing technology, this is Enrad Company’s vision.
Enrad is a Swedish company that has improved a new, unique technology which reduces
energy consumption by cooling and heating system.
Enrads’ products consist of two parts:
- One advanced and well-developed system
- One modular liquid cooling unit
Their patented, unique and intelligent control system “Alpha”, controls the compressors,
circulation pumps and coolant fans for optimal operation and adapts the cooling systems to
the real need.
The cooling/heat pump system consists of a series of modules that are manufactured in an
optimal environment for the highest quality. The module series simplifies and shortens the
installation process considerably.
Enrad produces three different cooling systems:
1. Shop refrigerate (cooling machine): for grocery stores that want to reduce their energy
consumption by up to 40% and change out their existing cooling system without that the
daily operation is affected.
2. Cooling process: for cooling process that requires careful temperature, Enrad’s cooling
system gives an efficient, friendly-use and simple solution which decrease energy
consumption.
3. Comfort cooling: Enrad ensures that, on healthcare facilities, in office places and public
environments, the temperature stays at a comfortable level under the whole year. Their
machines adapt quickly to the current situation needs and reduce the energy
consumption.
Together, these two units form and build the market’s most efficient cooling system. A
system that provides more consistent and unchanged temperature and can decrease
energy consumption by up to 40%.
Thanks to the unique module concept, the installation is fast, smooth and simple. With test-
run and factory-ready units you are guaranteed good quality control. The compact modules,
also save valuable surface in the engine room. As Enrad uses a climate neutral refrigerant
Propane R290, impact on the environment is minimal and moreover, when you can reduce
the energy consumption by up to 40%, great opportunities to develop business activities in
other areas are provided.
The goal for Enrad is to be the most energy-efficient and environmentally friendly alternative
in cooling and heat pump technology.
Enrad AB is listed on the Spotlight Stock Market since 24/07 2017 under the name
(ENRAD) and is traded via banks and stockbrokers.
sida 2
1.2. Background
Like so many of other companies Enrad Company suffers of unorganized warehouse. According
the interview that have done, they are interested in upgrading and organizing the production and
storing areas.
In this case the importance of improving or reordering is the impact of changes that automatically
happens in the other parts of the company.
Most of problems exist in their warehouse that locates, almost close to the production district.
Unorganized surfaces on the shelves and on the floor, irregulating on the placing of materials,
unplanned functions and inefficient construction have negative impact on their system
performance. Mentioned reasons create wastes. Wastes in time, movement, and cost.
The intention of this thesis is collecting the correct data, then analysing the reasons and
suggesting the scientific theories in order to have efficiency in producing and warehousing.
In first step, analysing the current situation of Enrad and finding out the roots of problems. It
comes to be easier to evaluate which kind of solution is profitable.
Second step, proposing managers the solutions and implementing the results among the other
member of company and at the third step, applying the recommended theories are in the focus.
Lean warehousing is the philosophy of reducing wastes in all dimensions. Any kind of actions
or movement that don’t add value to the organization must be remove or reduce.
Nowadays customer demands have increased, and the volume of warehouses gone higher, Lean
Thinking and applying the recommended tools of this theory will be helpful.
The reason of recommending this philosophy is demonstrating the effects of wastes and the
impacts of wastes in the organizations. In this way Lean helps companies to detect and eliminate
the reasons and roots of problems by Six-Sigma,5S and seven wastes. Subsequently for
continuous improvement offers the combinations of Six-Sigma and Kaizen.
Other advantages of using this concept in the mentioned company and other organizations are
keeping the system more safety for employees and customers, producing with high quality,
decreasing delivery time with better response time and minimizing the costs.
sida 3
1.3. Problem formulation
Transparency and planned steps are the main issues in the production. It is significant to prevent
defaults and problems that happens beside large volume of warehouse, deficiencies, and wastes.
In order to eliminate the problems which may occur by having large and unfunctional warehouse
that could result in its own turn, deficiencies, and waste, we must have an organized warehouse
which would result in waste minimization and better functioned warehouse.
During this research two main questions have been discussed, which could help the Enrad
company to upgrade their warehousing by minimizing (alternatively removing) waste that occurs
during the production process.
A. What are the background and roots of the current quality problems at the company?
B. How could all wastes be managed and even eliminated in the best-case scenario that
comes up during the different processes in the production phase.
1.4 . Purpose
The purpose of this thesis is minimizing wastes in time, place, and eventual costs.
Concurrently, raising of the quality level in the warehouse, at Enrad Company.
The mentioned goals will be figured out by gathering information, observation, interview and
searching in websites and books with the help of Lean manufacturing and Six Sigma.
The results of this research will be propounded in form of suggestion to this company in order
to maximize efficiency, affectability and subsequently design a well-planned warehouse.
1.5. Goal
The goal of the work is to apply the suggestions which would be squeezed from the results of
the study at the Enrad Company’s warehouse, get the results in warehouse management and try
to minimize/eliminate the wastes in mainly all sections of this place.
1.6. Limitations
The problems that exist in different parts of this company affects other parts, which is going to
complicate our work. This company needs an emergency reinforcing in their system.
The lack of information flow makes this work harder.
sida 4
1.7. Outline
Brief overview
1. Introduction and report about the company
2. Describe the methods and material
3. Describe different kind of theories
4. The current situation of Enrad company
5. Analysis
6. Using theories and analysis to present appropriate suggestions to Enrad company
7. Conclusion and results
1.8. Data collection:
Data gathering is one of the most important aspects in research study. In order to decide and
analyze, managers need to gather quality information.
Constantly data collection, allows management to analyze the problems and simultaneous,
survey and search new strategy to get great efficiency.
The processes of data gathering are collecting and measuring the variables, that are in focus and
answering the important quality questions, testing the assumptions and evaluate the results.
Incorrect data does not help the practical analysis. It is important to have clear information
about, what are the purpose of the data collection.
In order to answer the questions:
A. What are the quality problems at the Enrad company which affect the efficiency level?
B. What are the background and roots of the current quality problems at the company?
C. How could all wastes be managed and even eliminated in the best-case scenario that
comes up during the different processes in the production phase.
The focus on this research is on the reasons and trying to gather data with interviews,
observations, secondary data like books and document analysis.
sida 5
2. Method and material
Qualitative and quantitative method
Research method are divided into two different and broad part, Qualitative and Quantitative
methods
2.1. Qualitative method:
This method of research does not include any numerical data; therefore, the result of this
research prepares an in-depth analyse of the questions why and how things that happened.
There are different sources of qualitative data gathering. Comparing to quantitative method,
qualitative method seems to be much more general in the case of data gathering, but there are
still some common techniques for gathering information.
Group discussion: Which may involve two or more participants discussing an issue.
Secondary data: includes company reports, diaries.
Interviews: interview with company staffs about currently situation, maybe interview with
supervisor.
Observation: it may include gathered information from the laboratory conditions, things that
were seen by participants and then analysing the data. books and articles.
Data analyse: As qualitative data are gathered from different sources, they can entirely in range.
Organizing and coding data into groups and themes or arranging computer packages to analyse
the data could be some of the methods which could be useful to generate the result of the
research. However, the best way to analyse a qualitative research is to discuss and figure out
the results with academic participants and supervisors.
2.2. Quantitative method:
Quantitative research’s main data is formed by numerical information, gathered from different
sources. These data can be used in different way in order to analyse a theory, that at the end
may be rejected or supported.
In order to construct and arrange graphs and tables of raw data, this type of information is used.
Data analyse: One of the procedures to analyse and describe quantitative data is statistics.
Statistics can generate useful information in order to plan. In data summarizing, patterns
description, connection and relationships analysis, statistics come to help us.
sida 6
2.3. Research methodology
This research is based on qualitative methods, which does not say so much about numerical
data, but on the other hand, analyze the research questions by gathering other information than
numerical data.
In this research, some different ways of data collection have been used, such as interviews with
the case study company directors and product engineers, many helpful and challenging
discussions in the participant group, fact observation at the company during the visits that the
group had, and many E-books and articles which gave us a deep vision over the hole subject.
The ration to choose this method, was that it gave us a much wider and deeper understanding of
existing problems and possible solutions based on existing and effective theories.
Using different ways of collecting data, resulted in deeper understanding of problems as well as
the hole subject, which in its own turn, helped us to generate a better and more understandable
analyzes.
2.3.1. Primary Data
Primary data are those that gathered by researchers in specific case study. Primary data
compiled by the researchers themselves, first and basic approaches to gather the data are
interview, observations, and questionnaires.
2.3.1.1. Interview
Interviews were conducted to obtain the information about how the current situation at Enrad
company is.
Two times interviews have done. First meeting with CEO of company to getting general
information about production, warehouse, personals, and future goals and concurrently some
questions about the existing obstacles that influence the targets.
Second interview with the purchasing and warehouse manager within the details about the
routines in the production and warehouse area, suppliers, customers, employees, and existing
problems at the mentioned parts.
2.3.1.2 Observation
Observation at the company and special in the production and warehouse to get the general
overview on the current situation in order to figure out the best solutions.
2.3.2. Secondary data
Secondary data have been already gathered from other sources for other targets. It is helpful to
gather data with the help of secondary data. These kinds of data are available to use easily and
can save time and cost. The most criticism on these data is the coordination of information with
the new case study. Examples of secondary data are books, articles and internet.
2.3.2.1. Book and Articles
Literature study have done by reading the relevant theories, articles and books. It Creates
possibilities to analyze and evaluate the primary data, through searching on books, internet and
scientific articles.
sida 7
3.Theory
3.1. Lean
Lean manufacturing established in 1940 in Toyota Company. This philosophy is still used in so
many companies. The main idea is to reduce costs with eliminating wastes (Muda). Lean
represented many tools to catch the goals. The advantages of applying Lean is decreasing lead
time, decreasing cost of operations, improve quality and satisfied customers.
All the actions that cannot add value to our system, are unnecessary and create wastes.
In order to eliminate wastes, it is important to identify the flow of the actions and controlling
constantly over the system to find the defects and defaults.
Lean applies, to move our system toward perfection and constant improvement. Figure 3.1
presents Lean Manufacturing.
Figure 3.1 Lean manufacturing, PeterPaul
https://peterpaul.com/capabilities/lean-manufacturing
3.1.1. Toyota Production System
Toyota production system is the philosophy that get inspired from Lean philosophy. In this
methodology employees and team working are in focus.
According to Lean, the efficient utilization of employee’s time, making them involved on
decisions and persons individual responsibility are the key factors.
Under TPS, all the actions and movements must add value to the system and make more
productivity and efficiency.
Toyota Production system is optimizing the production with removing all the wastes which
leads to more efficiency and consequently lower costs. Figure 3.2 presents Lean production
principles.
sida 8
Figure 3.2 Lean production principle, Mimani
https://mimani2.wordpress.com/2010/03/24/lean-production/
In order to eliminate wastes and costs TPS presents two basic methods of Lean Manufacturing.
‘’Jidoka’’ and ‘’Just –In-Time’’
Just in Time: Strategy to manage and organize the raw-material or semi-finished material
directly to the production. The main goal of JIT is avoiding large stock which creates many
kinds of wastes.
According to JIT, management sends signal to production when customer order comes. Instead
of building larger volume of stock gives opportunity to focus on resources and materials that
the company is going to be paid for. Just in time presents a useful methodology to the processes
in order to produce things that will be used in next process.
The advantages of applying Just in Time methodology are:
Minimizing inventory, avoiding overcapacity of work, high quality mechanism, eliminating
machine defects and trustful suppliers.
Jidoka: Autonomation is the way to certify of our product to meet the customers expectation.
Applying this methodology enables the system and process to pause if some problem happens
and let you deal with this, to detect main causes. Jidoka is a simple approach that protects the
company with avoiding low quality production and controlling takt time.
In order to deliver products without defects Jidoka relies these four principles
1. Detect abnormality
2. Pause the process
3. Repair the defects
4. Analyse and investigate root of causes.
sida 9
3.1.2. Principles of Lean Philosophy
1- Define value: To identifying the meaning of value in customer’s perspective. Value is
created by producers but, value defines through the customers. Furthermore, it can be
formed by companies and experts.
2- Value stream: To identify the sequence of processes and actions. Actions and processes
from suppliers and raw materials to the final customers.
3- Flow: The value adding steps must be added to the flows to remove interruption and
delay. It needs a major reorganization in the system. Such a system that shows the entire
display of current workload for all the parts and units. (Visual control)
4- Pull: Producing according to customer orders. All the procedures must be planned once,
the customer order comes.
5- Perfection: Nothing is ever finished in our system. Constantly controlling and reducing
the wastes and continually improvement in order to have profitable layouts. Figure 3.3
presents the Lean Methodology.
Figure 3.3 Lean Methodology, Indiamart
https://www.indiamart.com/proddetail/lean-methodology-2832244688.html
3.1.3. Seven Wastes
In order to eliminate wasteful actions that causes quality decrease and create costs, Lean specifies
seven waste points:
1- Transport: Is the movement of products and other parts like employees. These kinds of
unnecessary movements resulting time wastes and cost.
sida 10
2- Over production: Production and action that come to pass without any customer’s order,
makes waste. This kind of waste is root for many problems. producing more to have
safety stock, causes so much movements and much volume in storage.
3- Inventory: Enormous storage results huge costs. It is so harder to find the materials
when there is a huge inventory and it causes more movement, and capital investment.
To reduce this problem Lean aspires JIT.
4- Defects: Frequently defects and errors beside suppliers, poor quality, poor delivery etc.
causes and roots of defects must be searched continually.
5- Incorrect Processes: A process that creates incorrect products must be corrected
immediately in order to preventing the wastes in time and cost.
6- Waiting: waiting for resources such as material, tools and material information cause
raising lead time and other wastes.
7- Motion: unorganized workplace leads to unnecessary movement between employees
and machines. Moving in the workplace in order to searching tools and materials must
be eliminated.
3.1.4. Lean 5S
In order to build a work environment with quality and optimize efficiency, Lean recommends
five steps. To catch the best results, it is better to do steps in order.
5S Seiri (Sort): In order to sorting materials must go through the workplace. Check and
determine which of materials will be needed in our workspace and which one must be removed.
5S Seiton (Set in order): Placing and organizing items in ergonomic way. Put them in right
place to have better access for workers. In order to minimize extra movements.
5S Seiso (Shine): In order to prepare a purpose-driven workplace, it needs to have routines in
cleaning the places, arranging tools and machines.
5S Seiketsu (Standardize): When all three mentioned steps are completed. Standardization
comes in focus. Creating schedules and charts in order to standardize operating procedures.
5S Sitsuke (Sustain): Maintaining four mentioned steps, updating them continuously and
keeping all workers involved, helps company to sustainable improvement. Figure 3.4 presents
5S Methodology.
sida 11
Figure 3.4 5S Methodology, Wikipedia
https://en.wikipedia.org/wiki/5S_ (methodology)
3.1.5. Kanban
Kanban is a visual method for controlling the materials, product, and plans. In order to have
pull system Kanban helps companies to control and balance demands behind the available
capacity.
Kanban uses as information system in the form of cards and in more advance state is commonly
applies in software development.
Kanban can be involved from the first step to the final process. It works with pull system as
capacity authorization instead of push system that items push in the process when demanded.
furthermore, it works like sending signals to the system to inform it is time to begin next parts.
When material is needed, one signal sends to system and informs others for replenishment.
Applying Kanban helps system to minimize overflow of material.
3.1.6. Six Sigma
Beside Lean manufacturing philosophy there is another way to give our system continuously
improvement and constantly customer satisfaction. Six Sigma is an organized methodology for
improvement in processes and quality management.
Six Sigma applies, to have statistical decisions and reduction in process variations. In order to
verify the variations and gather the valuable data, each actions and processes must be
identified. The principal of Six Sigma uses in managing system such as analysing data and
detecting the defects and weaknesses.
Six sigma methods divided into two methods: DMAIC and DFSS
DMIAC is a methodology behind Six Sigma that can reduce quality costs. It consists of five
definition.
1- Define: To define all processes, problems, improvement goals and customer demands.
sida 12
2- Measure: To identify the factors that have effect on results. There are two kinds of
factors, controllable and uncontrollable. Those uncontrollable factors cause wastes and
inefficiency. It is difficult to identify, predict and remove these factors but in order to
minimize the effects, it is helpful to use diagrams and Pareto chart.
3- Analyse: To determine the roots and reasons of poor performance and variations.
Steps in Analysing:
. Root cause analysis: To figure out the causes.
. Failure mode and effects analysis: To determine processes and products and
possible failures.
. Multi-vari chart: To discover different type of inconstancies and variation.
4- Improve: To review those three mentioned steps in order to figure out proper process
performance and remove the causes of variations.
5- Control: To measure and control the goals and processes in previous steps. Utilization
of some approaches like, Statistical quality control and 5S are also useful.
3.1.7. Kaizen
Kaizen is a methodology for continuous improvement. In order to apply this methodology, we
do not need to use specific tools. The goals beside this technique is elimination of wastes and
staffs hard working and in the other side, having better productivity.
Kaizen empowers all the people in one system to take responsibility for their work and try to
identify and analyse opportunities for improvement.
The benefit of applying this technique is resource utilization, continuous improvement,
efficiency, and satisfaction between employees.
Four steps to perform this methodology: Plan, do, check, act.
Kaizen defines three kinds of wastes that can impact the all the systems
1. Muda: Means all the actions and processes that do not add value. Wastefulness and
uselessness.
2. Mura: Means acting irregularly without uniformity.
3. Muri: Means acting unreasonable and overburdening beyond one’s power.
3.1.8. Heijunka
Heijunka is a methodology for reduce the Mura and Simultaneous Muda. Heijunka means
leveling. It improves your immediately reactions to the demands that changes and empower
you to utilize available capacity so much better. The goal is avoiding producing in batch and
minimize inventory.
Advantages of using this methodology are producing according demands and reduce inventory
costs, avoid overburden, make value to customer, flexibility to fluctuations.
sida 13
3.2. ABC Analysis
ABC analysis is a comprehensive approach to inventory management that is used in categorizing
inventories, customers, and suppliers. This method divides inventory into different parts and
categories, within the analysis of the cost of each unit and how many parts are in the units. In
many cases, an ABC analysis follows the Pareto principle
By applying ABC analysis to the inventory management system, management can separate
stocks into three different phases, to minimize costs and increase profits. In this case, the
inventory can be balanced in levels and costs.
ABC analysis divides inventory into categories A, B and C.
Category A have 70-80% of annual consumption and they account 5-20% of the total amount in
the inventory. Category A can be evaluated with the highest volume value.
Category B have 15-25% of annual consumption and they account 30% of the total amount in
the inventory. Category B can be evaluated with the medium volume value.
Category C have 5% of annual consumption and they account 50% of the total amount in the
inventory. Category C can be evaluated with the lowest volume value.
Objects that categorized in Level A are the most important in the system and therefore require
high customer service and high cost. Figure 3.5 shows ABC Classification.
Figure 3.5 ABC Classification, Effso tools
https://tools.effso.se/wp-content/uploads//2011/05/abc-klassifikation02.jpg
B-items benefit from an intermediate status between A and C. An important aspect of class B is
the monitoring of potential evolution toward class A or, in the contrary, toward the class C.
C-items should be reordered less frequently. A typically inventory policy for C-items consist of
having only 1 unit on hand, and of reordering only when an actual purchase is made. This
approach leads to stock-out situation after each purchase which can be an acceptable situation,
as the C-items present both low demand and higher risk of excessive inventory costs.
sida 14
ABC analysis is the broad method that restricts, and highlights finished goods and gives
companies a feedback on the current inventory situation. This method does not consider the items
that are in the first phase of the production cycle, but it continuously adds value to Category A.
In some cases, the company may lose out on selling
A-articles because it should have high cost and high delivery service with comparing C-items.
3.2.1. Steps in ABC analyzing
1-Verifying of items and goals: reduce costs and increase profits by using the right items with
the right amounts for production or safe items directly to customers.
2-Collecting data and information during analysis: the amount of object data and all costs that
included ordering costs and transport costs.
3-Sorting: categorization of items from the bottom within their costs.
4- Classifying categories and make the best decision: Strategic cost management that
continuously reviews the categories and costs to monitor the causes of success or failure in all
decisions.
3.2.2. Utilization of ABC analysis in warehousing
Utilization of ABC analysis provides the opportunity to arrange and handle the inventory.
Planners can make priority to choose the items that are more requested. After priority, it comes
to be easier to arrange and prepare the warehouse with the consideration of high and low
demands, which companies can eliminate undesirable items.
3.2.3. Applying ABC analysis in the warehouse
Another benefits of ABC analysis are to get strategy to decide the prices which, companies can
increase the prices for the items that was more requested.
After analyzing items, it is easier to choose one single supplier for item A, which located in
highest volume value in order to minimize transportation costs.
In order to have more control over the items and their level, it needs to constantly update the
dimension of demands. Because through the time, items with category A and B can replace with
item C.
3.2.4. How ABC analysis treat the items according to their category
Item A: These items must be taken in focus and must be in safety place in the warehouse. It needs
continually update and control over these items and must be in more accessible locations.
Item B: Items that places between item A and item C. These items can change eventually place,
to the top beside Items A and maybe down beside items C.
Item C: Using these items is in the lowest level and they take more place in the warehouse. In
order to organize, companies should decide and prepare one-unit place, just for this item.
sida 15
4. Analysis
4.1. Data Gathering
Current situation of company has researched and gathered needed data to analyze the
performance of the store. Aggregated data about the areas that have occupied and related
department.
Observation:
Data gathering performed by detailed observation. With four goals in mind.
1- Identify and evaluate current situation of the warehouse
2- Figuring out those places that have more capacity to storage the materials
3- Checking out the existing condition of material placement
4- Evaluating the best opportunity to redesign in order to using areas more efficiently
Interviews:
It is important to search the data among those persons that working in the company to gain quality
overview of current situation. Interviews gave the basic information to analyzing the best
solutions and solving existing problem.
Two meetings at Enrad company:
1- Andreas Bäckäng, CEO of company
Basic and primary data gathering about the performance of whole company, difficulties,
targets and obstacles.
2- Carl-Mikael Eiserman, Logistiks manager
Talking about every single activity that happens in the warehouse and production area.
Deficiencies and reasons of them. The result of this interview was helpful to understand
the most effective aspects that suffer the system is: unplanned surfaces, not organized
warehouse and lack of scientific planning.
sida 16
4.2. Enrad companys current situation:
Production:
Production and warehouse are planned in the same place. There are three persons that are
working in production with special assignments.
All the instruments and inventory are mixed in the same place.
They have problems to find right tool for the right skill. There is not any kind of plans for
placing rubbish and tools.
Warehouse:
1- Brief description of warehouse:
As mentioned, the mixing of production and warehouse causes disorder.
It would be advisable to separate warehouse from production. Replacement of storage shelves
in favor of further advancing articles for production department.
The idea of the wall that exists between warehouse and production was initially intended to
serve as a means of smooth handling of materials between the two departments. The wall is an
obstacle to communication and transport between storage and production.
The shelves are in the wrong place with completely wrong planning. A shelf stands in the
middle of production area and prevents access. Another shelf on the store occupies both space
and accessibility.
Non-usable materials take space on the mentioned shelf in stock, to the disadvantage of all
other production and documentation.
The shelves in the stock that are placed in the right space are unusable because of wrong
planning and wrong forklift, according to shelve itself.
Each technician lacks an individual workbench and its own tools for more effective
construction.
Suppliers:
1-Chassis that they receive from supplier are in separate semi- finished packages. this cause
waste in place and in lead time.
2-The lack of constructors causes inaccuracy in supply chain.
3-Missundrestanding exists between suppliers and company which causes in fail delivery in
wrong time.
sida 17
Customers:
Delivery time to customers is approximately three months and payment terms are 1 to 3
months, which reduces cash flow in their system.
The company must be sure to afford to pay employees, suppliers and other staffs.
Information flow:
The lack of communication and exchange of information between managers, staffs and other
subsets, influence the whole system.
Enrad Company uses the main system (Monitor) for sailing, planning, inventory and economy.
There was not any transparent answer about how they use this system or which of them have
access to this system.
The lack of right communication between managers and other persons in production creates
confusion. This un transparently, exchange of information is caused that the operators make
decisions that solve the problems temporary.
sida 18
4.3. Lean and usage of this methodology in Enrad Company
According to our interview and own observation. There is not any kind of organizing and
techniques that was applied. Not Lean, nor other techniques either.
It was our recommendation to Enrad Company to define the goals, problems and customer's
expectations.
In order to analyze and investigate the problems: They should identify the root of fails and
defects, and at the second step, try to remove or at least reduce the reasons of variations and
problems.
There was not any identified improvement plans in mentioned company which, uses to have
continually control and continually improvement.
During this project in Enrad Company, we have found different kinds of problems that causes
other fails and irregularity in other parts.
4.3.1. Six-Sigma and Kaizen
According to the data gathering, all the employees and managers work with their own methods
that are absolutely, out of the frame and the low level of regulations in supplying, sorting,
packing, producing, and delivering.
In order to drive the system toward efficiency and profitability, there was not enough qualified
employees and none of them have heard about Lean philosophy and other techniques.
4.3.2. Lean and seven wastes in Enrad
Transport: Transportation of material is done by trucks that don't have ability to move materials
at the top of the shelves and at the same time the untargeted moving of employees, because of
lack of space to find the tools, are the cause of wastes in time and cost.
Inventory: Sorting in Enrad is done without any plans. Materials are located on the floor.
optimization of shelves, locating unnecessary and scrap things on the shelves and on the floor,
saving useless old metal pipe on shelves and storing small tools in not properly way, causes
wastes in time and cost.
Defect: Irregular supplying and unplanned processes makes defects in storing and producing
step.
Incorrect process: Irregular storing of material, not organized warehousing influence other parts
and section which produce waste in time and cost.
Waiting: Employees wait for receive, needed material that comes, sometimes with troubles and
searching small tools during production moment, causes waste in time and cost.
sida 19
Motion: Lots of unnecessary movement in the warehouse in order to transport materials and
find the tools, causes waste in time and cost. Figure 4.1 shows current situation in Enrad.
Figure 4.1 Current situation in warehouse and place of production
sida 20
4.3.3. Recommendations for efficiency improvements
According the data at Enrad Company in the warehouse happens many kinds of wastes that
influence other activities.
The wastes cost precious time and money. In order to figure out problems and wastes. Decides
to list existing wastes according lean principles.
4.3.4. Lean and wastes
1- Absence of label on small tools on the shelves in production area. (Muda)
2- Large amount of material remaining on the benches. (Muda)
3- Unplanned small tools and screws that was mixed on the shelves. (Muda)
4- Not updating courses for employees to react against problems (Mura)
5- Employees do not try to use the existing place in proper way. (Mura)
6- Absence of proper schedules and flow of information pushes employees under press in the
production. It is difficult for them to manage. (Muri)
4.3.5. Applying 5s
In order to organize workplace and get more efficiency and profitability, it is so useful to apply
5S.
5S treats in the warehousing with identifying the materials ,sorting and maintaining the
materials and spaces, sustaining the orders and makes employees understand how they should
work.
Sort (Seiri): Those materials that is needed must be available. In order to catch the goal, those
things that are not useable must be remove.
Set in order (Seiton): All the tools, materials and forklifts must be in the right place in order to
minimize wastes in the space, transport and time.
Shine (Seiso): Enrad needs emergency cleaning’s routine. One clean workplace creates better
enviroment for work, more efficiency and fewer wastes.
Standardize (Seiketsu): Make schadules and routines in order to stabilize managing and
handling the procedures.
Sustain (Shitsuke): Those menthioned three steps must continually check and control.
Employees and managers in Enrad Company should constantly review and update the follow
and routines.
4.3.6. Applying Six Sigma
In order to intensify processes Enrad Company should apply Six Sigma. For minimizing
variations and defects.
sida 21
Applying Six-Sigma in Enrad Company divided into five steps
1- Define: They need to identify the processes of production, warehousing and problems. In
this case locating materials in unsuitable places is on focus.
2- Measure: They need to collect data and figure out the uncontrollable and controllable factors
that make wastes. Those factors that are controllable must be eliminate or reduce. In this case
mixing scrap and tools on the benches and saving old unusable materials on the shelves and on
the other hand using not capable forklifts that make wastes.
3- Analyze: After detecting and investigating the problems, analyze the root of the issues.
4- Improve: After removing or eliminating the reasons of defects and variations, it is time to
schedule the proper processes.
5- Control: Continuous renewing and updating the routines and procedures in order to have
sustainable improvement.
4.3.7. Applying Kizen
Focusing to remove three kinds of wastes Muda, Mura, Muri in the warehouse and production
place.
Muda: Cooperation between employees and managers to constantly remove wastes and
continually improvement. Eliminate useless and wastefulness activities with the help of layout
and flow of information to give visual point of view to all the members in Enrad company.
Mura: It is advisable for Enrad Company to increase their skill though Lean warehousing,
efficiency and profitability processes.
Muri: Irregularity in the workplace make overburden on employees which make stress and
waste in their time and ability. In order to have useful staffing, logistic manager should
immediately arrange and redesign the warehouse.
4.3.8. Applying Kanban
According to the interview with logistics manager, they don't have enormous amounts of
customer order. They don't supply in large amounts either, but the lack of regulations and
techniques causes disorder in stored material and on the production.
It is so advisable that, they can provide other kinds of information flows in their system.
Kanban can provide this company the opportunity to send the signals to each other and inform
the answerable person to provide needed materials.
4.3.9. Combination of Six-Sigma and Kaizen
The Six-Sigma methodology is the collective methods to quality improvement. In order to
obtain this goal Six-sigma offers the techniques to eliminate the variations and wastes.
sida 22
Six-Sigma is the useful way to eliminate variation, but in the long period companies should
plan to improve constantly. In this case Kaizen offers the monitoring and at the same time
continuous improvement. Combination of Kaizen and Sig-Sigma makes both stronger to catch
the goals.
Enrad Company can utilize the Six-Sigma's Plan - Do - check and Act
Plan: Set up plans and arrange the goals. (Customer value, eliminate defects, continuous
improvement)
Do: Find and analyze the approaches that give company best results.
Act: Begin to act after removing of wastes and figure out the approaches.
Check: In the final step control to achieve the goals
The benefits of using Kaizen at the same time is helping the Enrad Company to gain the
constantly improvement. Kaizen gives opportunity to monitor and check, durability of quality.
Figure 4.2 presents combination of Six-Sigma and Kaizen.
Figure 4.2 Combination of Six Sigma and Kaizen, Universal Class
https://www.universalclass.com/articles/business/using-kaizen-and-six-sigma-together.htm
sida 23
5. Discussion In this chapter we will summarize our findings and results and some more description about
suggested methods.
There are four different categories of works in Enrad Company’s warehouse.
Receive, store, pick, produce and pack. These thesis presents the coordination of Lean
warehousing with mentioned activities and warehouse management. In order to applying and
deploying this philosophy, managers and employees have a big responsibility to reduce the
wastes, inventory and at the same time increase the accuracy and productivity.
This is important to provide better service to customer at the same time. application of Lean
thinking in one system involves all the members and actions.
Enrad is a company that searches and wants to reduce the defects and wastes.
How this system can be pushed forward to improvement phase?!
Lack of proper layouts and lack of communications are the basic reasons.
In order to mapping and redesigning the place, first of all, Enrad needs to use lean,
to unify whole system. Considering all the parts that are related like a chain to each other and
thinking that every single inconsistency influences other parts.
The responsibility of changes is something that must be started beside managers and then
permeate on the other sections.
Defining and listing current activities, goals and figure out the reasons of wastes and
incompatibility will be done in the second phase.
Removing the wastes, disorders, catch the goals, constantly control and give value adding
activities can be done in the third phase. In the last-mentioned part, it’s important to
continuously check and control the procedures and push the system in the direction of
improvement.
sida 24
6. Results
How Enrad can start renewing and redesigning?
In the theory and analysis, we have described very detailed, the reasons of wastes and defects in
Enrad Company and the methods that Lean presents to catch the goals.
In this part we summarize the suggested methods and procedures.
First, we suggest Kaizen: The reasons of choosing this methodology is the importance of
detecting the wastes that happens permanently in their system and because of getting the habit
they cannot recognize. According our analysis Muda and Mura are seen in every single part.
In second level we suggest Six Sigma: The reasons of choosing this methodology is the
importance of analyzing and measuring the size, type and reasons of wastes. Applying DMIAC
is useful.
Defining the type of wastes and measuring the size of them. Analyze the wastes and the impact
of them in variations. Controlling and balancing after detecting problems and removing them is
important for this company.
This is so advisable to utilize Sig Sigma and Kaizen permanently close to each other. The
meaning of improvement defined in Kaizen. If Enrad applies Kaizen and Six Sigma both
besides, they could raise the speed of promoting.
In third level we suggest 5S: The reasons of choosing this methodology in the third level is
starting to organize and redesign the warehouse after finding and analyzing the causes of
wastes.
Sort the thing and materials as soon as possible to remove the wasteful things that located
everywhere. Automatically they will see the effects of removing useless things. More place and
more effect.
After sorting we recommend the combination of ABC Analysis with set in order in 5S
ABC analysis of inventory is absolutely recommending to Enrad, in order to classify the
materials according their value of importance.
Searching tools and materials were two, identified time wasting factors in their system. ABC
analysis can be used in very simple way to categorizing the most usable materials and lowest
usable things.
Four most usable materials that employed in the production were chassis, frameworks of heat
and cool machines, pipes and motors.
We suggest them, to consider these four basic things in their A category, which is important to
investigate them in right way. These things must be in the most accessible locations on the
shelves and safer places. unfortunately, chassis located on the floor and shelves were empty.
Pipes everywhere mixed with unusable old pipes.
sida 25
Every electronics device can be categorized in B Category, which takes the second important
classification of value. Locate them on the higher shelves in the warehouse.
Every old unusable pipes that located in the center of warehouse and other unreliable small
materials can be categorized in the C category, which are the factor of wastes in their system,
can locate on the top of the shelves, those shelves that placed beside the walls. Figure 6.1
represents categorization of materials according to ABC analysis in Enrad Company.
Figure 6.1 the categorization of materials, according to ABC analysis in Enrad Company.
Making fresh and cleaning routines in this system will be helpful. Mixing rubbish and materials
Made inefficacy. Scheduling the routines for supplying, producing and all the actions that
happen in the warehouse to standardize the procedures.
And at the end we recommend to the Enrad Company to continuously check and control and
review the methods that they will apply in their system.
It's so important to organize and redesign their warehouse, but at the same time it's most
important to sustain the quality of improvement every day and all the time.
sida 26
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8. Table of figures
Figure 3.1 Lean Manufacturing .......................................................................................... 7
Figure 3.2 Lean Production Principle ................................................................................. 8
Figure 3.3 Lean Methodology .............................................................................................. 9
Figure 3.4 5S Methodology ................................................................................................ 10
Figure 3.5 ABC Classification ........................................................................................... 13
Figure 4.1 Current situation in warehouse and place of production ............................ 19
Figure 4.2 Combination of Six sigma and Kaizen ........................................................... 22
Figure 6.1 The categorization of material according ABC Analysis in Enrad company 25
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