CASE STUDY – By streamlining its internal processes, an agribusiness company in Brazil managed to reduce its material handling cycle time by 75% and the associated costs by 66%.
Words: Adionil José Fumagali Júnior, Project Manager, Lean Institute Brasil
In 2018, an agribusiness organization in the state of São Paulo, Brazil, improved its material handling cycle by 75% and was able to increase its productivity without adding more staff and with low investment. They did that by rethinking their handling process from the finished material picking (located at the production unit) up to its arrival at the distribution center outside the factory (some 40 kilometers from the initial location).
Because the company’s internal warehouse couldn’t house any more material, the decision was made to send some of the production to an outside warehouse. This meant the volumes that had to be transported were huge – approximately 12 trucks of 24 tons each were moved daily, the equivalent of nearly 288 tons of material (each ton corresponded to about a pallet of material).
This solution led to an even bigger problem at the entrance of the business: a large number of vehicles now had to wait there every day for the material to be loaded. On average, eight hours would pass between the moment a truck arrived at the entrance gate and the time it left for its destination.
Some of the observations by the people involved in the process:
- The trucks used in the process were hired individually.
- The loading time for the vehicles was not set by anyone, with each being loaded on a first come, first served basis.
- The vehicle sequence was not clear.
- The team would only decide which material to load moments before the loading took place.
- Even though there were people available and areas ready for loading, delays were common, which led to waiting – which had a big impact on time and money for organization.
The team tried to make countless improvements, but without fully grasping the situation. They tried to optimize the process, reduce queues, delays, overtime, and waste in general. However, all their efforts were in vain because there had been no proper analysis of the problem at hand. On average, eight hours were still the norm for each truck.
STUDYING THE PROBLEM
The team could not understand why they could not improve. They felt they were getting nowhere but knew that something had to be done. The process had to be reviewed, to find a way to make an effective and sustainable improvement. First, it was necessary to fully understand the problem aforementioned – the delays and extra costs on the picking and material handling process – and set a clear objective to significantly reduce these losses and improve this process. Lean Thinking could support this process of analysis and transformation.
After aligning the leadership and the team with the problem, the next stage was to analyze the process and each of the steps involved to understand which change had to be implemented. During the analysis carried out by the team, it became clear there were a number of causes:
- Lack of flow in the loading process.
- Constantly stoppages and interruptions during the activities.
- Lack of clarity on the activities performed by the people involved in the process.
- Different types of vehicles involved in the process with different capacities, different ways of loading, and different states the vehicle (old, new, with mechanical problems, etc).
- Delays and losses on all activities involved in the flow.
THE IMPROVEMENT PLAN
After the team understood the causes of the problem, it was easier to tackle one by one to get to the expected improvement. The concept of continuous flow was then applied to the process: producing and moving one item at a time (or a small batch of items at a time) through a number of processing steps, continuously. In this system, a staple of Lean Thinking, each step in the process only does what is required by the following step.
During the implementation, a number of gaps appeared preventing the activity from being carried out as planned. The team seized the moment to see the opportunities to improve the operator safety:
- The movement of the operator close to the forklifts and conflicting handling areas.
- Different floor levels for the different steps in the picking and material handling process.
- A 10-meter distance from the floor to the place where the material is loaded onto the trucks in one of the steps, which involved lifting and lowering the pallets on different occasions.
- Significant risks with product quality problems and damages due to the transportation of materials to the vehicle.
By collecting the data mentioned above and observing the moments when the operator stopped and the moments when the work did not flow correctly, the team created a plan based on the operator’s workflow to align operator, material, information, and equipment. Another point was to understand the equipment, the docks, and the forklifts available and to rethink how these sets of physical resources could be better connected with the operator’s work.
As for operator safety, the team looked to eliminate the risk of accidents in loading and adjusted some of the equipment and resources – with the help of leadership – to adapt the process and make it safer. A change plan was then set up, defining deadlines and the people responsible for each action. This further increased the participation and involvement of the team, who could now see that the company was committed to their safety and that they were an essential part of the transformation process.
The whole team was empowered to learn more about Lean Thinking, which transformed their mindset and made their every-day work more efficient.
To integrate and train the team, the entire area was demarcated, and standardized work was introduced for the operators. Starting there, activities were monitored and any deviation from the standard was quickly tackled according to their impact on the flow and delay in the loading process. A new concept became paramount at this stage: daily management, the monitoring and management of the main business metrics as defined by the strategic deployment.
The team understood that in addition to standardizing their work, it was necessary to review the use of their physical resources and equipment. This aligned the whole process to the operator’s work, from the collection of material at the warehouse to the picking on the ground for loading, from checking the materials were at the right docks to the loading and shipping of the vehicle.
Throughout the transformation process, the act of making adjustments to the next steps constantly changed the mindset of everyone involved and created a greater understanding of the waste present in the process. As a result, it was possible to further reduce the problems that were not initially visible and further improve the process. Leadership support was crucial to ensure the sustainability of improvements.
As the changes continued, it was necessary to streamline the vehicle entry process to make it smoother, create an internal handling flow for the vehicle until it arrives at the dock, and connect this process with the loading time for each vehicle. Combined, these improvements resulted in a 47% gain in process time and productivity in approximately four months of work.
Considering the great results obtained, the team took the decision to take another big step and saw the opportunity to hire and rent vehicles based on the estimated volume they needed to handle. They also installed two hydraulic docks in the picking and material loading platform. These changes demonstrated there was opportunity to achieve significant financial gains, too.
With a better understanding of the daily shipping demand and the introduction of takt time (the time available for production divided by customer demand) of loading, the process now only needed two vehicles working for eight hours to handle all the material. All extra handling costs were eliminated, and the total cost of the process was reduced by more than 66%. There were some extra improvements stemming from the new system:
- A work rhythm was created thanks to the introduction of a set vehicle route in the two work units. Now the entire operation in both locations knows the moment when the vehicle arrives, so that the material can be previously separated for loading.
- The destination is pre-determined based on the volume and where to store the material received.
- Standardization made the process of entering and leaving the sites, as well as loading and unloading, easier.
- The vehicle’s checklist and operator registration for each handling was simplified.
In addition, a review of the contracted resources and hired vehicles in the handling process allowed the team to identify any idleness in the processes. Some of those processes were above the takt time, which required some balancing of the different stages in the process to seek greater productivity.
This change in the process (coupled with some small investments) improved operator safety as well as productivity, impacting the process by an extra 28%. As a result, the initial eight-hour cycle from the moment the vehicle arrives to the gate and the moment it was ready to go was reduced to a 80-minute cycle for the picking and loading of material and a 120-minute vehicle cycle – a 75% reduction.
THE LESSONS LEARNED
Over the course of 12 months, the company made all adjustments in the process and changes in equipment and physical area and was able to significantly reduce all extra costs. They achieved a 66% reduction in the total cost of material handling and a 75% reduction in vehicle cycle time, from arrival to departure. These changes were replicated in other units of the business, which demonstrated the opportunity to bring Lean Thinking to other company processes.
These changes took a long time and required a lot of work. Leadership alignment and support was present at every moment, which guided the entire team on this new journey. The alignment of the leadership with the objective, which connected the whole process, helped to keep the team motivated and ensure changes were consistent. A success factor for this project was to clarify the different steps of the change process for the entire operation: to ensure this, the team created a monitoring system to control activities, which helped them to understand the gaps and ensure alignment within the team throughout the process.
Originally published in the Mundo Logística Magazine (in Portuguese).
Source: Lean Institute Brasil
Adionil Jose Fumagali Junior is Project Manager at Lean Institute Brasil.