Lean Warehousing: A Case Study in a Retail Hypermarket

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Proceedings of the International Conference on Industrial Engineering and Operations Management
Dubai, UAE, March 10–12, 2020
© IEOM Society International
Lean Warehousing: A Case Study in a Retail Hypermarket
Hamdi Bashira, Mohammad Shamsuzzamanb, Salah Haridyc, Imad Alsyoufd,
Sustainable Engineering Asset Management (SEAM) Research Group
Department of Industrial Engineering and Engineering Management,
University of Sharjah, Sharjah 27272, United Arab Emirates.
ahbashir@sharjah.ac.ae; bmshamsuzzaman@sharjah.ac.ae; csharidy@sharjah.ac.ae;
dialsyouf@sharjah.ac.ae
Abstract
Lean principles have been increasingly used in the field of manufacturing over the last decades, and their
applicability has recently spread from production to warehousing. In this context, a number of studies have
reported that lean warehousing, a relatively new concept, can play a significant role in decreasing the cost
of logistics operations and reducing delivery time, thereby increasing customer satisfaction. However, the
subject of lean warehousing is still in its infancy, and there is a need for more empirical studies to confirm
its usefulness. In response to this need, this paper reports on work done on the application of lean concepts
to the shipping process in the warehouse of a major hypermarket chain. The results show that time savings
up to 16% might be achieved in the cycle time of the shipping process, and the labor cost can be reduced
by 25%. The findings of this study are valuable to practitioners who are interested in implementing lean
warehousing.
Keywords
Retail Hypermarket, Lean, Warehouse Processes
1. Introduction
Lean manufacturing came into existence from a research program that scientists from the Massachusetts Institute of
Technology began in the 1980s. However, the idea and principles for lean manufacturing were derived from the
Toyota Production System (TPS) that started in the early 1940s, which Toyota Motor Company developed to produce
the best quality cars at the lowest cost and with the shortest lead time. This was done through eliminating waste on
the basis of two pillars, Just-In-Time and Jidoka (Bhamu and Sangwan 2014). Just-In-Time (JIT) is a quantity control
technique of providing the right quantity at the right time at the right location. Jidoka is the second pillar, which means
“humanized automation,” is a sequence of cultural and technical matters concerning the use of equipment and
manpower together; it involves utilizing individuals for specific tasks they can perform and allowing devices to self-
regulate the quality. Jidoka technically uses approaches, such as Poka-yoke (a technique for fool-proofing a
procedure), Andonis (Lights which are visual displays to indicate the status of the procedure specifically; the
abnormalities in the procedure) and 100% examination by machines. Lean thinking is grounded on five principles;
value, value streams, flow, pull, and perfection:
1. Identify the value – Identify and specify the process (products/services) from the client’s perspective to add value
and ensure full client satisfaction. Value can be identified with tools like value management, simulation, and
function deployment.
2. Map the value stream – Investigate the essential steps necessary to make a product/service by excluding the non-
value steps and create a value stream. A mapping value stream will help knowing how the value for the customers
is created through the steps.
3. Create the flow of the processes – Create efficient steps, which are defined as the value stream. Exclude steps,
such as batch-and-queue, which possibly cause delay, backflow, or damage, from the workflow.
4. Establish pull – Supply and produce only upon customers’ demand to minimize the waste of resources.
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Proceedings of the International Conference on Industrial Engineering and Operations Management
Dubai, UAE, March 10–12, 2020
© IEOM Society International
5. Seek perfection – Attempt for perfection by supporting the above-listed actions with continuous improvement
and repetitively eliminating uncovered successive layers of waste.
With the necessary adaptation, the applicability of lean principles has expanded from the automobile industry to other
industries, including construction, textile, service, food, medical, electrical and electronics, ceramic industry,
furniture, etc. (Bhamu and Sangwan 2014). According to Liker (2004), every organization business regardless of its
type can benefit from lean not necessary by imitating the tools that Toyota utilized in a specific manufacturing process
but also by developing principles that are correct for the organization or businesses and by practicing them, to attain
high performance that continues adding value to customers and society. A literature review revealed that despite the
increasing attention that lean warehousing has received in recent years, the related body of contributions is still limited,
particularly in the food industry warehouses which is characterized by the short life cycle of the perishable and non-
perishable items (Gopakumar et al. 2008). In warehouses, employing “lean” concepts for identifying and eliminating
the wastes is one method that can be implemented to maintain a short turnaround time for the goods while increasing
the utilization of the warehouse resources like put-away personnel, fork-lifts, and storage aisles. As shown in Table 1,
all types of waste recognized in manufacturing are also transferrable to warehouse environment (Ackerman 2007):
Table. 1 Production wastes in a warehouse environment
Lean warehousing is a relatively new subject. This is perhaps due to the fact that the lean philosophy focuses on the
reduction of inventory, which is considered as waste. Nevertheless, in practice, most warehouses add value to
customers by creating time and place utility. One important way to maximize the value added is to practice lean
distribution. Lean distribution can be defined as minimizing waste in the downstream supply chain while making the
right product available to the end customer at the right time and right location (Reichart and Holweg 2007). According
to Mahfouz (2011), lean warehousing aims to increase responsiveness to market demand and reduce the total cost by
simplifying distribution operations. The literature review reveals that the studies on lean warehousing have focused
on three issues: (1) lean warehouse design (e.g. Dharmapriya and Kulatunga 2011; Shah and Khanzode 2015), (2)
lean warehouse operations (Abdoli et la. 2017; Buonamico et al. 2017; Gopakumar et al. 2008, Chen et. al. 2013;
Dotoli et al. 2015; Shah and Khanzode 2018), and (3) assessing lean warehousing (Wu et. al. 2016; Sharma and Shah
2016).The study by Gopakumar et al., 2008 is perhaps one of the few studies that demonstrated the use of “lean
Waste Type
Production
Warehouse
Waste of production
(overproduction)
A waste of materials is caused by
overproduction in manufacturing.
Inventory excess is considered an
overproduction waste in warehousing.
Waste of time
(waiting and idle
time)
Waste of time
The same as in production
Waste of
transportation
Needless material and tools movement
In the process of handling materials,
unneeded movements cause waste.
Waste of inventory
Inventory waste happens when purchasing or
storing excessive supplies, materials, and
other resources.
When stock-outs are frequent, poor
inventory control causes waste.
Waste of processing
This waste comes from unnecessary
processing that does not add value to the
item produced.
When over-checking happens, it is
considered as waste.
Waste of motion
Needless movement of workers
When there is a search for items or tools
that cannot be located, this causes waste
in movement.
Waste of defect
Items that are defective are a waste of
production resources.
Errors result in waste.
Waste of creativity
Workers’ unused creative ideas are
considered a waste of human resources.
The same as in production
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Dubai, UAE, March 10–12, 2020
© IEOM Society International
concepts” to reduce the process wastes in the food distribution industry by optimally assigning trucks to the receiving
docks.
The above brief literature review reveals that the topic of lean warehousing is still in its infancy, so there is a need for
more studies to further validate the applicability of lean principles from a production environment to the context of
warehousing. In response to this need, this paper reports on work done on applying the concept of lean principles in
the central warehouse of a large hypermarket chain as a case study.
2. The Study
As shown in Figure 1, the warehouse of the hypermarket is divided into three areas—area 1, area 2, and area 3. Each
area consists of two storage sections—one for food and another for non-food. The food section consists of six shelves
that are two sided, whereas the non-food section consists of eight shelves that are also two sided. The material handling
equipment used inside the warehouse includes 5 forklifts, 18 manual hydraulic lifters, and 8,000 pallets. Shipping and
receiving processes are performed by 75 workers who rotate between three shifts in a day. Three steps were carried
out to conduct this study —evaluating the current warehouse operations to identify possible wastes, identifying and
assessing alternative improvement options, and recommending actions for improvements. These steps are carried out
for the receiving and shipping processes in each section (food and non-food). In the following, we describe the work
done for the shipping process in the food section.
This warehouse receives orders from 28 branches of the chain. As shown in Figure 2, once the orders are received,
requisitions from different branches are printed and then sent to the pickers in charge. Each picker has a specific region
that he/she is responsible for. The collected items form the shelves are placed on pallets. Once a pallet becomes full
of items, it will be sent to the waiting area, which is located nearby the exit point. The same pickers who were in
charge of picking the items from the shelves will perform an operation called “products undergo evaluation.” In this
operation, the collected items are checked in terms of quantity and make sure that they are damage free. Subsequently,
pallets are loaded in the trucks to be shipped.
A value stream map (VSM) was created to identify possible wastes. VSM is a lean management tool used to represent
all of the product or service processes/activities (value added and non-value added) from start to end, showing both
materials and information flow. In the warehouse environment, value-added time indicates the time when the item
moves through the processes of the warehouse. The first step in creating a VSM was to collect current information by
walking along the actual pathway of material and information flow (Summers 2011). Then, based on the data obtained
by conducting the time study, the current value mapping for the food section shown in Figure 3 was created. This map
helped classify the operations into two categories: value added and non-value added. As shown in Table 2, products
undergo evaluation, which is a major non-added value operation. The estimated average duration of this operation is
about 30 minutes, i.e., approximately 23% of the time required for the shipping process is spent on this operation.
3. Improvement Solutions
Two alternative improvement suggestions were identified to minimize the time spent on products undergoing
evaluation—the use of barcode technology and the use of radio frequency identification (RFID). A barcode is an
optical machine-readable that presents information related to the item to which it is appended. The code is a small
image of bars basically consisting of a patterned group of lines, spaces and sometimes numbers designed to be scanned
and read by a barcode reader. A laser beam comes out of the scanning machine and then reads and translates the
reflected light (from the lines and spaces) into numerical data that are then transferred to a central processing unit
(CPU) for direct action. The purpose of barcodes is to transfer product information from an item to an automated
system. Barcodes have many different classifications; the major ones are one- and two-dimensional barcodes, and
each major type includes minor ones, as well. Barcodes are overlooked as a technique for reducing cost and saving
time. An important and practical method that can be used by industries aiming to increase efficiency and reduce
overhead, barcodes are both cost-effective and reliable (Groover 2018). When running a busy store, you must keep
track of all the items sold in order to manage your inventory and ensure that you have enough in stock of what
customers want. One of the simplest ways to do this is to check each shelf and look for an empty space and refill it.
Otherwise, you could write on a sheet of paper what customers bought at checkout and then make a list of all purchases
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Proceedings of the International Conference on Industrial Engineering and Operations Management
Dubai, UAE, March 10–12, 2020
© IEOM Society International
and reorder your stock. This is acceptable for a small store, but when it comes to large industries, such as the warehouse
in the present case study and its branches storing and selling thousands of items, barcode technology will be much
more beneficial and efficient in keeping a centralized record on a CPU system, as barcodes have the ability to track
goods, prices, and stock level accurately. RFID involves a wireless system that uses radio-frequency electromagnetic
fields to transfer data from the products assigned a label to enable the automatic identification and tracking of records.
The RFID system consists of a reader and a label. The label associates itself with the reader by transferring a unique
identification digit through a radio link. For example, in passive RFID, the reader can read or write records from/to
the RFID label by using radio indications. In logistics processes, RFID entrances are often used to read labeled objects
(Groover 2018). However, because of its low cost, the first alternative, i.e., barcode technology, is preferred by the
decision makers in the current case study. According to the constructed future VSM (Figure 4), implementing this
alternative will lead to reducing the duration of the tackled non-added value operations by 90%, and consequently, the
cycle time of the shipping process is expected to be reduced by 16%. Implementing this alternative is also expected
to reduce the labor cost by 25%.
Figure 1. Warehouse layout
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© IEOM Society International
Figure 2. Shipping process operations
Table 2. Value-added and non-value-added operations
Operation
Value-added
time
Non-value
added time
Print the requisitions
15 minutes
Classify the requisitions
10 minutes
Segment the assigned pickers
10 minutes
Start picking with the helpers
11 minutes
Put the orders in the pallets
28 minutes
Forward them to the waiting area
3 minutes
Products undergo evaluation
30 minutes
Transfer data entry
8 minutes
Load the products into the truck
13 minutes
Print, report, and attach the shipment report
10 minutes
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Proceedings of the International Conference on Industrial Engineering and Operations Management
Dubai, UAE, March 10–12, 2020
© IEOM Society International
4. Conclusion
This study was conducted to provide further support to the findings of previous studies on the benefits of applying
lean principles to warehouse operations by using the central warehouse of a major hypermarket chain as a case study.
VSM was used to evaluate the current operations of shipping and receiving processes of both sections (food and non-
food) of the warehouse. However, what we presented in this paper is work done concerning the shipping process of
the food section only. The results confirmed that using lean concepts can lead to significant reductions in warehouse
order processing time and labor cost. One limitation of this study was the use of deterministic data to construct VSM.
Alternatively, a stochastic version of VSM could be used in future studies.
Acknowledgments
The authors gratefully acknowledge financial support from the Sustainable Engineering Asset Management (SEAM)
Research Group, University of Sharjah.
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Figure 3. The current VSP
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Figure 4. The future VSP
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Biographies
Hamdi Bashir received his PhD degree in 2000 from McGill University, Montreal, Canada. Currently, he is an
Associate Professor of Industrial Engineering and Engineering Management at the University of Sharjah. Prior to
joining this university, he held faculty positions at Sultan Qaboos University, University of Alberta, and Concordia
University. His research interests are in the areas of project management, manufacturing systems, quality management,
and healthcare management. He is a senior member of the Institute of Industrial and Systems Engineers (IISE).
Mohammad Shamsuzzaman is currently an associate professor in the Department of Industrial Engineering and
Engineering Management at the University of Sharjah, UAE. He obtained his Ph.D. in Systems and Engineering
Management in 2005 from Nanyang Technological University, Singapore. His current research focuses on quality
control and improvement, reliability, simulation, and multi-criteria decision-making. He is a member of the American
Society for Quality.
Salah Haridy is an assistant professor in the Department of Industrial Engineering and Engineering Management at
the University of Sharjah, UAE. He received his M.Sc. and Ph.D. degrees from Benha University, Egypt and Nanyang
Technological University, Singapore in 2008 and 2014, respectively. He is the recipient of the 2013 Mary G. and
Joseph Natrella Scholarship awarded by the American Statistical Association (ASA) and the 2014 Richard A. Freund
International Scholarship awarded by the American Society for Quality (ASQ). His research interests cover quality
engineering, statistical process control and design of experiments.
Imad Alsyouf is an associate professor of Industrial Engineering, employed by the University of Sharjah, UAE. He
is the founder and coordinator of the Sustainable Engineering Asset Management (SEAM) Research Group. He has
produced more than 30 conference and journal papers. He has about 27 years of industrial and academic experience
in various positions in Jordan, Sweden, and UAE. His research interests include reliability, quality, maintenance, and
optimization. He has developed and taught more than 25 post and undergrad courses. He delivered training courses in
Kaizen, TQM, and organizational excellence.
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