Lean implementation in logistics

Abstract

The study focuses on logistic operations of the case company, Biohit Group. It is a part of a wider lean development project, and therefore logistics of Biohit Group is evaluated from perspective of lean philosophy. An issue of how inventory management and control has to be organized to facilitate logistic processes and to support better customer service is addressed. A closely related subject is how daily logistic processes can be improved. These two issues are included into the following research problem: how should non value adding activities occurring in ordering, order processing, dispatching and reception of goods be eliminated or improved in order to make logistic value streams of Biohit more efficient? The objective of the thesis is to give concrete guidelines how to change current logistic management and procedures in Biohit Group in order to support weekly ordering cycles and better delivery reliability in the future.

Theoretical section is divided into two main chapters that are logistics and lean thinking. Related literature and previous studies are covered. Empirical section goes first deep into the parent company’s end of the logistic chain and then to the subsidiaries’ logistics. Material was gathered using on-the-spot interviews and a questionnaire consisting of both quantitative and qualitative data. A lean tool called value stream map is used to illustrate logistic processes.

A key finding is that the subsidiaries’ orders from the parent company do not match with the needs of subsidiaries’ customers. The subsidiaries anticipate delivery problems of the parent company and therefore hold excess inventory, which results in low inventory turnover rates. The subsidiaries’ tendency of ordering in big batches decreases the delivery reliability of the parent company. Corrective actions are required simultaneously in the parent company and in the subsidiaries. Shorter and more accurate delivery times within Biohit Group are needed. Better information sharing is a prerequisite for developing more efficient ordering and inventory management practices. Variation in sizes and timing of the subsidiaries’ orders to the parent company has to be reduced. This can be done by ordering in standard-length cycles using kanban to replenish stock. Inventory turnover is suggested to be suitable indicator for logistics to monitor inventory performance. /Kir10