Ch00fm-pgs-Martichenko/Goldsby

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Lean Six Sigma Logistics
WHAT IS LOGISTICS?
There seem to be as many definitions of “logistics” as there are logisticians. And
this is not a bad thing! Why? Because logistics is so far-reaching and yet so
integrated into our businesses that it is hard for one definition ever to meet the
challenge of summing up what we do in a few short sentences.
Although logistics does involve internal operations and stretches to up- and
downstream trading partners in the supply chain, it is fair to say that any
definition of logistics will need to involve the management of inventory, whether
it is in the form of hard goods (materials, people) or soft goods (information).
If there is no inventory to move around, there is no need for logistics.
WHAT IS LEAN?
“Lean” concepts are deeply rooted in the Toyota Production System. In its
purest form, Lean is about the elimination of waste and the increase of speed
and flow. Although this is a high-level oversimplification, the ultimate objective
of Lean is to eliminate waste from all processes. According to Lean theory, at
the top of the list of known wastes is excess inventory. More simply, we need
to eliminate any inventory that is not required to support operations and the
immediate need of the customer. In this book, we identify excess inventory
along with six other potential sources of waste in logistics: transportation, space
and facilities, time, packaging, administration, and knowledge. Clearly, each of
these resources — all necessary for logistics planning and execution — be-
comes waste when not utilized effectively to generate: (1) the greatest possible
value in the eyes of customers and (2) healthy return for the company.
Lean and the Logistician
The impact of Lean on the logistician is significant. A common misconception
of the Lean philosophy is that it only finds application in manufacturing set-
tings. The goal of Lean is to eliminate waste, decrease work-in-process inven-
tories, and, in turn, decrease process and manufacturing lead times, ultimately
increasing supply chain velocity and flow. Lean also has a vital cultural element
to it that is crucial to the logistician, the concept of “total cost.” The Lean
practitioner does not focus on individual cost factors such as transportation or
warehousing, but rather focuses on total cost. With inventory carrying costs
representing 15 to 40 percent of total logistics costs for many industries, making
decisions based on total cost has dramatic implications for the logistician.

What Is Lean Six Sigma Logistics?
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Unfortunately though, many organizations never embrace the total cost concept
fully, as poor decisions are made continually based on traditionally visible cost
drivers like transportation, warehousing, and per-unit purchase prices.

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