The primary objective of this project was to optimize the end-to-end (E2E) logistics flow of a mobile manufacturing facility with a turnover of $300 million (2000 Crore INR). The goal was to reduce high freight costs, decrease cycle time, and enhance overall efficiency through Value Stream Mapping (VSM) and Lean Six Sigma DMAIC methodology.
Background
The mobile manufacturing facility faced several challenges impacting its logistics and supply chain processes, including:
- High freight costs
- Long cycle times
- Inefficient material flow
- Suboptimal carrier and routing options
- Excess inventory and scattered material
Methodology
The project followed the Lean Six Sigma DMAIC (Define, Measure, Analyze, Improve, Control) methodology to systematically address these challenges.
Define Phase
The project team identified key problem areas:
- High freight costs
- Long cycle times
- Inefficient logistics and supply chain processes
Management’s focus was on reducing the conversion cost per unit and improving supply chain response time.
Measure Phase
The team conducted an in-depth analysis of the current logistics flow, assessing various parameters such as:
- Freight cost per unit
- Cycle time from order receipt to delivery
- Carrier and routing options
- Material handling and packaging processes
The baseline performance was calculated based on the 2011 business case, with a focus on Europe as the primary region contributing to 85% of the volume.
Analyze Phase
The analysis phase involved identifying the root causes of inefficiencies through:
- Cause-and-effect diagrams
- 5 Why analysis
- Affinity diagrams
Key issues identified included:
- Non-optimized carrier choices and routing
- Delays in customs clearance and onward connections
- High lead times from pick-up to delivery
Improve Phase
Several improvement initiatives were implemented to optimize the logistics flow:
- Value Stream Mapping (VSM): Mapping the current state and designing a future state with streamlined processes.
- Mode Conversion: Shifting a higher percentage of shipments from air to sea to reduce costs.
- Carrier Optimization: Selecting carriers with better transit times and lower costs.
- Packaging Redesign: Improving packaging to reduce volumetric penalties and enhance space utilization.
- Consolidation: Grouping shipments to improve efficiency and reduce handling costs.
- Freight Negotiation: Negotiating better rates with carriers based on volume and service agreements.
Specific actions taken included:
- Implementing a Kanban system for material replenishment
- Establishing a supermarket concept for better inventory management
- Redesigning packaging to reduce material costs per unit
Control Phase
To sustain the improvements, the team introduced:
- Daily monitoring of logistics performance metrics
- Regular training programs on Lean Six Sigma and logistics best practices
- Continuous improvement initiatives through regular reviews and audits
- Implementation of control charts to track key performance indicators (KPIs)
Outcomes
The project led to significant improvements in logistics efficiency:
- Freight Cost Reduction: Freight cost per unit was reduced from $2.42 to $2.29, a 5% reduction.
- Cycle Time Reduction: Total cycle time was reduced from 10 days to 8 days, a 20% reduction.
- Cost Savings: The project achieved an annual cost saving of $500K.
- Cycle Time Reduction: Overall cycle time reduced by 41%, significantly enhancing supply chain responsiveness.
- Customer Satisfaction: Improved logistics efficiency led to better customer satisfaction and reduced complaints.
Conclusion
This case study demonstrates the effectiveness of Lean Six Sigma DMAIC methodology and Value Stream Mapping in optimizing logistics flow in a mobile manufacturing facility. By addressing key issues such as high freight costs and long cycle times, the project significantly improved operational efficiency, reduced costs, and enhanced customer satisfaction.
Acknowledgments
The successful implementation of this project was due to the collective efforts of the dedicated project team, which included representatives from the logistics, material planning, procurement, quality, and finance departments.
Future Plans
Building on the success of this project, the organization plans to further optimize logistics flow by:
- Expanding the use of Value Stream Mapping to other regions and processes
- Continuously reviewing and improving carrier and routing options
- Enhancing collaboration with suppliers and logistics partners for better efficiency and cost savings.
By continuously focusing on logistics optimization, the facility aims to maintain its competitive edge in the mobile manufacturing industry and drive further growth and success.
