Sunday, July 18, 2010

Book Review: Building a Lean Fulfillment Stream

I just finished reading the latest publication from the Lean Enterprise Institute (LEI) Building a Lean Fulfillment Stream by Robert Martichenko and Kevin von Grabe.

Building a Lean Fulfillment Stream

The authors define the critical principles of a lean fulfillment stream and the total cost of fulfillment. A fulfillment stream is:
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.
The total cost of fulfillment is all of the costs of moving material from one end of the fulfillment stream to the other.
These go far beyond the transportation costs most firms calculate to include the carrying and storage costs of inventory, the cost of material handling equipment and labor, and the management time devoted to gathering all of the information needed to constantly monitor performance. These costs also include all of the transport, inventory, handling, and management costs incurred by customers and suppliers along the fulfillment stream.
The authors list eight guiding principles for creating lean fulfillment streams:
1. Eliminate all the waste in the fulfillment stream so that only value remains.
2. Make customer consumption visible to all members of the fulfillment stream.
3. Reduce lead time.
4. Create level flow.
5. Use pull systems.
6. Increase velocity and reduce variation.
7. Collaborate and use process discipline.
8. Focus on total cost of fulfillment.
The process of understanding and improving the fulfillment stream follows the same process of value stream mapping. The current state data includes total lead time, inventory (average days on hand), inventory carrying costs, and perfect-order execution. The execution of a perfect order is characterized by “8 Rights”:
Right quantity
Right product
Right place
Right time
Right quality
Right source
Right price
Right service
The future state vision must include a plan for these 6 areas of the fulfillment stream:
Customer collaboration
Outbound logistics
Shipping, receiving, and trailer-year management
Material ordering
Inbound logistics
Supplier collaboration
The authors stress collaboration across all functions and firms as the way to minimize the total cost of fulfillment. They use about half the book to describe actions that can be taken in the 6 areas to minimize waste in the fulfillment stream. There is a stronger emphasis on total cost of the fulfillment stream rather than customer value. While they list the steps for improvement there is very little discussion about how to engage those parties in the fulfillment stream for such a successful collaboration.

This book is not written for a beginner and can’t stand on it’s own. Knowledge of VSM, takt time, flow, pull, kanban, supermarkets, leveling, PFEP, and PDCA are a pre-requisite for this book. I would recommend combining this workbook with Learning to See, Creating Continuous Flow, and Making Materials Flow LEI Workbooks.

Learning to See: Value Stream Mapping to Add Value and Eliminate MUDACreating Continuous Flow: An Action Guide for Managers, Engineers & Production AssociatesMaking Materials Flow: A Lean Material-Handling Guide for Operations, Production-Control, and Engineering Professionals

Building a Lean Fulfillment Stream is a much needed and very complementary addition to the LEI workbook series. The workbook is easy to read with lots of illustrations and examples. It highlights a number of supply chain strategies that Lean organizations will want to understand. This is a good place to start for those lean leaders getting ready to tackle improvements in their supply chain. I recommend adding this book to your Lean library today.

Note: Jon Miller, Karen Wilhelm, and Brian Buck have also written about Building a Lean Fulfillment Stream.

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