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Implementing Lean Strategies At Lagaay International

Presented By: Noor al Husni 0797177 Thesis 05-07-2011 Rotterdam Business School

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ACKNOWLEDGEMENT
My grateful thanks go first of all to my God, the one who gives me hope, strength and to make me prosper in whatever I do. My sincere appreciation goes to my caring father and loving mother, who both stood beside me all this time. Who had the patience and understanding, and gave me the chance to enlighten my future. The word thanks wont be enough, comparing to all what they have done for me. Special thanks go to my supervisors Mr. Mein and Mr. Bulters who made it possible for me to write this thesis and to have the chance to broaden my experience and increase my knowledge in the field of logistics. Who also have guided and gave me positive advises with helpful comments throughout this project. My thanks goes to my supervisor at Lagaay International, Mr. ALberda, who gave me this opportunity to work together with him on this project. Who had all the trust and believe in me. It was a pleasure and an honor for me to be part of their esteemed company.

Noor al Husni July 2011

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ABSTRACT
Lagaay International is a global supplier of medicines and medical supplies for ships, located in Rotterdam. It is one of the most important ports in the world. The main activity of Lagaay is providing medicine, medical devices and safety equipment to several ships in the world's major ports and offshore related industries. Because of inefficient use of the warehouse department, the company has excessive workload. The main question in this report is: How to improve the warehouse department at Lagaay Lagaay International desires to improve the warehouse through Lean Thinking. The purpose of this study is to provide the company with an analysis of the warehouse department and how Lean strategies can contribute to increase the efficiency in the company. This will be done through primary and secondary data. Lean is recognized to be one of the most powerful and effective way of building and maintaining continuously improving businesses. Using Lean Thinking strategies, companies can improve itself continuously over the long term. The idea of Lean Thinking is it uses a smaller amount of human effort to carry out the work, less material to make products and services, shorter time to develop and less energy and space to produce it. Lean is powerful since it is so easily learned and applied by everyone. Lean is for everyone.

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Table of CONTENTS
Acknowledgement.........................................................................................................................................................3 Abstract ................................................................................................................................................................................4 Chapter 1 ...........................................................................................................................................................................7 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 Purpose ..............................................................................................................................................................7 Company ............................................................................................................................................................7 Organization Structure .................................................................................................................................9 Problems ......................................................................................................................................................... 10 Research Questions & Objectives .......................................................................................................... 10 Fishbone Diagram........................................................................................................................................ 11 Why Lagaay is interested in Lean? ....................................................................................................... 12 Chapter Summary ........................................................................................................................................ 12

Chapter 2 Literature Review .................................................................................................................................. 13 2.1 WHAT is Lean? ..................................................................................................................................................... 13 2.1.1 The Logic of Lean ........................................................................................................................................ 15 2.1.2 Where is Lean .............................................................................................................................................. 16 2.1.3 The Principles of Lean .............................................................................................................................. 17 2.2 HISTORY of Lean ................................................................................................................................................. 18 2.3 Methods and strategies of Lean .................................................................................................................... 20 2.3.1 The 5S System .............................................................................................................................................. 20 2.3.2 7 Types of Waste......................................................................................................................................... 21 2.3.3 The Just In Time System (JIT) ............................................................................................................... 22 2.3.4. Group Technology (GT) .......................................................................................................................... 22 2.3.5 Kanban ............................................................................................................................................................ 23 2.3.6 Value Stream mapping ............................................................................................................................. 23 2.3.7. Six Sigma ....................................................................................................................................................... 24 2.3.8 Total Quality Management (TQM)....................................................................................................... 25 2.3.9 Theory of Constraints ............................................................................................................................... 25 2.3.10 Total Productive Maintenance (TPM) ............................................................................................. 26 2.3.11 Business process management (BPM)............................................................................................ 27 2.3.12 Flow and Pull Tools................................................................................................................................. 28 2.3.13 Customer and Value-Stream Tools ................................................................................................... 28 2.3.14 Management Tools .................................................................................................................................. 29 2.3.15 Perfecting tools ......................................................................................................................................... 30 2.4 Summary ................................................................................................................................................................ 30

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Chapter 3 Methodology ............................................................................................................................................. 31 3.1 Primary Data ......................................................................................................................................................... 32 3.2 Secondary Data: ................................................................................................................................................... 33 3.3 Data reliability...................................................................................................................................................... 34 3.4 Methodology of the Research questions ................................................................................................... 35 3.5 Relevence Tree..................................................................................................................................................... 37 3.6 Summary ................................................................................................................................................................ 37 Chapter 4 Findings ....................................................................................................................................................... 38 4.1 What makes Lean Thinking challenge so special? ................................................................................ 38 4.2 What is the procedure of the warehouse at Lagaay? ........................................................................... 41 A brief description of the role of the employees ...................................................................................... 43 (Summary of the interviews)............................................................................................................................ 43 The Procedure When Products Are Received............................................................................................ 44 The Procedure When Products Are Collected ........................................................................................... 45 4.3 What are the problems occurring in the warehouse department? ................................................ 46 Products do not have a fixed location ........................................................................................................... 46 Too much inventory ............................................................................................................................................. 46 Products have two inventories ........................................................................................................................ 47 Identical number is too small ........................................................................................................................... 47 Poor job description ............................................................................................................................................. 47 4.4 What are the possible barriers of Lean Thinking at Lagaay? ........................................................... 48 4.5 Summary ................................................................................................................................................................ 49 CHAPTER 5 CONCLUSION ................................................................................................................................ 50 Chapter 6 Recommendation................................................................................................................................... 54 6.1 Making one inventory instead of two through Group Technology ................................................ 55 6.2 Solving bottleneck through Theory of Constraints ............................................................................... 56 6.3 Improving Job description through Business Process Management............................................. 57 6.4 Solving the problem of too much inventory through JIT system .................................................... 57 6.5 Map of the current warehouse (Ground Floor) ...................................................................................... 59 6.6 Map after implementation (Ground Floor) .............................................................................................. 60 6.7 Map of the current warehouse (First Floor)............................................................................................ 61 6.8 Map after implementation (First Floor) .................................................................................................... 62 6.9 Implementation plan ......................................................................................................................................... 63 Chapter 7 Bibliography ............................................................................................................................................. 65

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CHAPTER 1
In this chapter the reader will be informed about the purpose of the thesis, an introduction of Lagaay International and the problems which the company is facing. There will be also the research questions, objectives and a Fishbone diagram (also known as Ishikawa diagram) introduced.

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PURPOSE

The main purpose of this thesis study is to provide Lagaay International with an analysis of the warehouse department and which Lean strategy approach could contribute to increase the efficiency in the company. The company wants to implement Lean strategy in the organization and therefore there will be a study made on Lean.

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COMPANY

The following information regarding the company Lagaay, its mission and visions has been received from Salma (Quality Manager of Lagaay). Some parts were translated from Dutch to English by the researcher. Other parts which were already in English have not been changed. Lagaay International B.V. is an organization with a rich experience and history in supplying medi cal equipment and maintaining medical outfitting on board of vessels or oil platforms. The company was founded in 1879 by Abaraham Lagaay, with the name Apotheek Lagaay. After being successful in the Dutch market, Lagaay decided to go international. For some years the company has been ensured of a strong position on the world market for the so called medical care suppliers. Lagaay has a great experience and knowledge of medicines and supplies approximately 5000 different medical products to ships. Because of the core business and experience for many years' Lagaay it had a leading position in the market.

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Lagaay International B.V. has over 125 years of experience in stocking and maintaining medical outfittings on board of vessels or oil platforms. The medical outfitting on board of these ships or rigs falls under the shipping regulations of the country where the ships are registered. Lagaay is in close contact with these legislative institutions in every country to be sure that the products and information which are provided by Lagaay are up to date. The company does not only supply medicines and medical equipment but it also inspects the medical lockers on the board of the ships and certifies the stock on board when needed. Lagaay knows out of experience that the medicines on the ships do not get the necessary attention. Therefore the company decided to develop the Medical Care System. In short the Medical Care System (MCS) consists of: Getting a stock-list of the medical stock which is on board of the ship The list is inserted in an automated system Generating a quotation with the necessary replenishments for a new certificate for 1 year Delivery of the ordered medical products on board of the ships The system will notify when certificates expire again This system reduces the handling- and transport costs and is therefore very appreciated by customers. Additionally, because Lagaay keeps track of expire dates of the medicines on board, it can at all time share this information with the customers and informs them when medicines are outdated. By updating and improving the system and the contact between Lagaay and its customers the company makes sure that in this way it keeps a lead on the competition. Mission To take a total care of our customers need and consistently optimise the service and idea of our company (Joris Alberda)

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1.3

ORGANIZATION STRUCTURE

The organization structure of Lagaay International shows the tasks of supervisors and employees, it uses a hierarchical tasks performance within the organization. Lagaay has an open and informal communication that provides a favorable and comfortable working environment for employees. The values of Lagaay are based on good internal communication and teamwork. Employees are reflecting this social and positive attitude also towards its customers. During an interview Joris Alberda said: Customers do not depend on us, it is the other way around, we depend on the customers. Therefore customer satisfaction is an important daily job to carry out. The company has a total of 29 employees who are divided in different departments. Employees are regularly rewarded with bonuses or promotion when dealing in the correct way and showing effort. The following chart shows the hierarchical roles inside Lagaay International.

FIGURE 1 COMPANY CHART

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1.4

PROBLEMS

Within every company there are certain problems, this also holds for Lagaay. The company faces several problems regarding efficiency. This study will focus on the warehouse department. One of the problems which the company faces is that it does not have a good structure that allows the employees to work efficient. Second, there is a lot of unnecessary inventory. Third, products are not placed in an efficient order; employees need to walk a lot to complete an order. Fourth, there is not a specific structure for new coming employees. Finally, the identical codes on the products are very small; it is a struggle to read them. Therefore there will be a study made to analyze the process and give recommendations for improvement.

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RESEARCH QUESTIONS & OBJECTIVES


Research Objectives To evaluate how Lean Thinking strategies are applied. To examine and evaluate the procedures and processes within the warehouse department. To examine and evaluate which problems the warehouse department is dealing with.

Research Questions What makes Lean Thinking challenge so special? What is the role of the warehouse department at Lagaay?

What are the problems occurring in the warehouse department? What are the possible barriers of Lean Thinking at Lagaay?

To examine what the barriers are to adopting Lean Thinking Strategies at Lagaay.

FIGURE 2 RESEARCH QUESTIONS AND OBJECTIVES

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1.6

FISHBONE

DIAGRAM

FIGURE 3 FISHBONE DIAGRAM

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WHY LAGAAY IS INTERESTED IN LEAN?

The principles of Lean Thinking in an organisation are known as the worlds most powerful and effective way of building and maintaining continuously improving businesses. Using Lean Thinking strategies, Lagaay can improve itself continuously over the long term. Lagaay knows that there are many problems in the company and it is important to do something about it as they cannot just sit still. Sayers and Williams (2007) says that the days of doing things in the same old way are gone as the global pressures are forcing every company, organization and everyone to embrace some type of approach and strategy for improving performance and the management systems. The Lean strategies are getting more popular as it offers organisations a rational, proven and accessible path to long term success. It is not the same as other methods: Lean is something that everyone can use, understand, deploy and can benefit from (Sayer and Williams 2007). Lean Thinking principles and techniques are proven to have been practiced successfully by thousands of organisations of every type and size in every industry worldwide, spearheaded by nearly 50 years of continuous improvement by one of the worlds most successful corporations (Sayer and Williams 2007).

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CHAPTER SUMMARY

In this chapter the purpose of the thesis, an introduction of Lagaay International and the problems which the company is facing has been discussed. In addition, the research questions, objectives and a Fishbone diagram have been introduced. In the next chapter the literature review of Lean Thinking and its methods will be discussed.

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CHAPTER 2 LITERATURE REVIEW


In this part there will be a detailed explanation given regarding the secondary research. The literature will be based on the Lean concept and its theories. There will be a total of 15 theories discussed.

2.1 WHAT IS LEAN?


When hearing the word lean, it raises a thought of something being flexible. It can perhaps give an image of athletic people. According to Sayer and Williams (2007:9) Lean also means light weight, in the sense of speed and agility with a sort of edge or underlying aggressiveness that recalls the rhyme lean and mean. Taking this idea into consideration lean is not only a physical condition but it is also a discipline. The principles of lean are not only to make people flexible, but to keep them in that shape. Sayer and Williams (2007:9) explain that: Lean people are committed to being lean; they act a certain way in their habits and routines. Lean isnt a fad or diet its a way of life. It is important to know how this can be applied in the business world. Lean thinking strategies are methods of how to improve business and companies productivity, efficiency and quality of its products or services (Sayer and Williams 2007). Approximately fifty years ago, American and Japanese specialists have developed new concepts and methods of how to make the business more productive and efficient while improving the quality as well. These techniques have been working successfully for many decades both in the car - (Toyota) and aviation industry (Boeing). When considering the company Toyota, in the year 1988 when Womack and Jones looked at this company they saw a very interesting system in the company. When they investigated this, they saw that this company needed lesser amount of effort to design and make their products. It required less investment to achieve the set level of production capacity. In addition to this, Womack and Jones saw that the company also had fewer defects. Toyota had even fewer 13 | P a g e

suppliers comparing it with other companies. When investigating the company further, they saw that Toyota needed lesser inventory at every step and they even had less employee injuries (Sayer and Williams, 2007:10). Womack and Jones came to the conclusion that a company like Toyota, which tries to use less of everything, is a Lean company. This is how the term Lean became related with the business industry - the skills to achieve more with less. According to Sayer and Williams (2007:10) the idea of a Lean organisation is using lesser amount of human effort to carry out the work, lesser material to make products and services, shorter time to develop them and less energy and space to produce them. They became familiar with customer demand and developed high quality products and services in the most efficient and economical way possible. Table 1 explains the similarity of mass production and Lean Enterprise.

FIGURE 4 MASS PRODUCTION VS LEAN ENTERPRISE

Source: Sayer and William (2007:10)

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Several years ago Lean Thinking has become a worldwide movement; it has been practised by many companies around the world for decades. Therefore throughout the years, the term Lean has made a certain set of ideas and concepts: giving attention and focus on customer value, accepting a philosophy of continuous increase in development, providing exactly what is needed on time, which is based on customer demand, keeping things moving in a value-added and a useful way, using techniques for reducing and minimizing waste, respecting people and focusing on long-term vision and relationships (Sayer and William 2007).

2.1.1 THE LOGIC OF LEAN


It is important to consider how Lean thinking works. According to Sayer et al (2007) the logic of Lean can be identified as: In a business which aims to sell products and services to customers, everything begins and ends with what the customer needs and demands (Womack and Jones 1996) The customer is the only true judge of value. The customer is only willing to give their money for the product or service when they consider it is a fair exchange of value. The product or service has to be the right combination of quality, in the right place, at the right time and at the right price (Sayer and Williams, 2007) Creating value is a process. When a combination of steps rightly performed will result in a product that the customer might value, this can be done by the right steps of marketing, design, production, processing, delivery and support (Sayer and Williams, 2007) Waste reduces the efficiently of the value making process. Things that naturally sneak in the process can slow down the process from flowing rapidly and effectively will prevent the creation of customer value (Womack and Jones 1996) A perfect process has no waste and every step in the process should be able to act fully only when it is needed, flows completely and adapts to perform precisely as needed. In this way the process will develop and deliver products and services avoiding any kind of waste. (Sayer and Williams, 2007) 15 | P a g e

Perfect processes make the most of customer value. The closer to excellence a process turn out to be, the more effective the making of value, the more pleased the customers, and the more successful the endeavour (Womack and Jones 1996) No one has ever experienced the ideal process, this is because when companies find the best way how to process, they find out that it can always be improved. Therefore, Lean is the strategy to move towards to give the methods and tools for pursuing the perfect process. (Sayer and Williams, 2007)

2.1.2 WHERE IS LEAN


According to Womack and Jones (1990), Lean can be found wherever there is waste and anywhere there is a chance for improvement, mainly it can be found everywhere. Lean is not limited to any particular part of an organization or a function within a company, it is flexible. Lean can be described as a business improvement plan. What a common misunderstanding regarding Lean is that it many people describe it as a manufacturing quality program, however this is not the case. The philosophy, principles and practices of Lean are appropriate anywhere and are most helpful when applied across the entire organisation (Allen, 2000). Functions and practices of Lean are as follows: Lean Production or Lean Manufacturing, Lean Office and Lean Administration, Lean Management and Lean Thinking (James Womack and Daniel Jones 1996). Each of these concepts represents a part of Lean in its own way, Lean is all of these and even more, but its main focuses on the processes that create customer value (Bamber and et al, 2000). Thus, Lean focuses on the processes that create value, which in its turns are cross-functional. This means that the process is assisted by many well-organized and disciplined teams. In addition to this individuals are cross trained as well.

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2.1.3 THE PRINCIPLES OF LEAN


According to Womack and Jones (1996) the main principles of Lean strategies are: It is important to define the exact value from the perspective of the end customer, in terms of a specific product, with specific capabilities, offered at a specific price and time. All the industrial thinking must realize the Muda (Japanese term for waste) from the customers view (Womack and Jones, 1996) Identify the whole value stream for each service or product and eliminate the waste. By identifying these value streams, it gives a clear picture and shows the unnecessary steps which brings no value to the end product or service, and therefore can be removed (Womack and Jones, 1996) Make the remaining value creating steps flow smoothly towards the customer; this is by working on each design, order, and product continuously from beginning to end, so that there is no waiting, downtime, or any kind of waste between the steps (Alcazar, 2003 and Montgomery, 2006) Let the customer pull the product or service from the value chain, in this way there will be no waste in a way of overproduction. In other words, providing what the customers need only when they want it (Ranky, 2006a) Pursue perfection within the whole chain. For a company that uses the Lean Thinking it places a lot of emphasis on perfection. The idea of the total quality management is to systematically and continuously remove the root causes of poor quality, achieving zero defects (Ranky, 2006a)

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2.2 HISTORY OF LEAN


The term "Lean" was first implemented in the 1980s (Womack et al, 1990). As it described above, the implementation of Lean practices resulted in using less of everything (e.g. labour, time, materials etc.) when considering mass production. The Lean concept is based on the Toyota Production System, which was developed in the 1950s after World War 2 (Cusumano, 1994). This concept was introduced as an alternative option for the mass production techniques in the Toyota factory and this has resulted in a higher productivity and quality levels. One of the most studied systems of operations management within the business industry is the Toyota Production System (TPS). There were many companies which have visited Toyota to see the system in action. Dozens of books have been published regarding its success. It can be said that Lean is essentially a repackage of the Toyota Production System. All methods of Lean have been practised by Toyota. The beginning of Lean Thinking started on the shop-floors of Japanese manufacturers in innovations at Toyota Motor Corporation (Shingo, 1981, 1988; Monden, 1983; Ohno, 1988). In Japan there are some high levels of scarce resources, while in the same time these resources have high competition. As a result the Japanese needed to find a way of how to deal with this. Therefore they have designed the just-in-time (JIT) production system, the Kanban (way of pull production), respect for employees and high levels of employee problem-solving. According to Womack et al (1990), the importance of Lean began by the western manufacturing community when there was a clear performance gap between Toyota and other carmakers, especially when this was highlighted by the book The Machine that Changed the World, which also shaped the term Lean production.

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The main types of Lean Manufacturing can be described as (Oliver et al, 1992): Team-based organisation involving flexible, multi-skilled workers taking a high degree of task responsibility for work in their areas Active shop floor problem solving structures, central to continuous improvement activities Lean operations, which strengthen problems to be surfaced and corrected High commitment human resource policies, which encourage a sense of shared destiny Joint destiny relations with suppliers, normally in the context of much smaller supply bases Cross-functional development groups Close links to the purchaser The implementation of Lean practices in the Japanese car industry has concluded that these companies have a better performance in terms of productivity and quality when compared to their European or North American counterparts (Oliver et al, 1994). On the other hand, although European and North American manufacturing companies have taken on board a few of the principles, very few have shown evidence of all aspects of the Lean Manufacturing model (Sohal et al 1994 and Sohal, 1996).

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2.3 METHODS AND STRATEGIES OF LEAN 2.3.1 THE 5S SYSTEM


According to Christopher D. Chapman the 5S system is a systematic and organic to Lean production, it is a business system for organizing and managing manufacturing operation that will eventually requires less effort, employees, capital and time to make the same amount of products with fewer defects. The 5S system will create a work environment that is disciplined, clean and well ordered (Christopher D. Chapman 2006). Seiri (Tidiness) keeping on hand only whats needed for the process the rest is redtagged and removed; this will make it easy when looking at the naked process. Seiton (Orderliness) a place for everything and everything in its place for immediate retrieval and use. Seiso (Cleanliness) keep the workplace clean, spotless and shining. Seiketsu (Standardisation) it is the condition achieved when maintaining the first 3 pillars. Everyone plays a role. Shitsuke (Discipline) Through the strength of personal will and self-esteem, one makes a habit of maintaining the established procedures every day. The 5S is used as a platform for developing a management system by the similar use of total productive maintenance (Bamber et al., 2000). The main definition of 5S in the West is housekeeping (Becker, 2001; Christopher D. Chapman 2006). In Japan the 5S practice has started in the manufacturing sector and then extended to other industries and services sector.

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2.3.2 7 TYPES OF WASTE


Waste can be found everywhere. Waste in time, wasting money, wasting time to travel, and wasting energy on non-valuable things. T. Ohno identified seven forms of waste. These seven forms are: 1. Waste of Overproduction producing more that the customer actually needs, meaning that the supply is higher than the demand. 2. Waste of Time people can waste a lot of time, in the sense of waiting for machinery, waiting for other people or on materials. This goes as well for machinery that needs to wait for people, tooling or raw materials etc. 3. Waste of Transportation there can be a lot of waste on transporting products over long distances which then need double or triple handling. 4. Waste of Processes unnecessary or inefficient processing e.g. removing burrs caused by dull tools. 5. Waste of Inventories inventory hides problems and causes extra handling, extra paperwork, extra space and extra cost. 6. Waste of Motions any motion of people or machines which does not add value to the product or service. 7. Waste of Defective products scrap, rework, customer returns and customer dissatisfaction. (Garimella, 2006)

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2.3.3 THE JUST IN TIME SYSTEM (JIT)


The Just-In-Time System (JIT) produces only the necessary products at the necessary time, in necessary quantity (Peter Berling 2010). JIT System is a method where the production lead time is certainly shortened by having all processes produce the necessary parts at the necessary time and have on hand only the minimum stock necessary to hold the processes together. So, it minimizes the non value adding operations and non-moving inventories in the production line. The result of implementing JIT will be shorter throughput times, better on-time delivery performance, less inventory, lower costs (which leads to greater profits), higher equipment utilization and a quicker response to customers orders (Uchikawa, S.(1977). Another important aspect of the JIT system is the use more of a pull system to move inventories through the production line. JIT is most appropriate for companies that use production flows that does not change, meaning that processes or products that are repeated in the same way again and again.

2.3.4. GROUP TECHNOLOGY (GT)


According to Slack et al. the purpose of Group Technology is to combine all the similarities of components, products, services and processes together to reduce movement and improve the product flow. Therefore, all the products with similar characteristics and the machinery necessary for producing the products are grouped together. The group is also called a cluster group and can be based on the size, shape, process or treatment steps characteristics. The goal is to identify a set of product with similar process requirements so that changeover times or walking time are minimized. GT is viewed as an essential and necessary step in maintaining a high quality level and profitable production (Slack at al 2007).

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2.3.5 KANBAN
Kanban comes from the Japanese word and means card or visible record (Schonberger 1982). A Kanban system ensures that inventories are supplied on the basis of its consumption. It rearranges parts and mechanism based on actual expenditure at the point of use. Stock-outs frequently lead to an over-buying of parts, creating waiting lists, and backorders which is in this case at the company Lagaay. The Kanban way is a pull system; it only supplies when its needed, not earlier or later (Shingo 1989). Consider two methods: one is being used and the other is full. When the first bin empties, the operator keeps working, using the second bin. The blank bin is sent out for replacement. A full one returns before the operator runs out from the second bin. The signal can come in many forms: a bin, a card, a signal, or any type of sign which is appropriate in the organization (Metty et al 2005; Sayer and Williams 2007).

2.3.6 VALUE STREAM MAPPING


Mike Rother (2003) explains that the value stream map is a graphical image of how all the steps in the supply chain of the product or service are being produced. It includes the process steps, inventory, information flow, and lead time. So basically, these are all the steps from the raw materials until the customer receives the product or service. It flows from left (raw materials) to right (finished products). It can be seen as a flow of river channel, there can be seen which steps gives a value to the product line and which not. According to Sayer and Williams teachings (2007) the purposes of the value stream map: It provides a common language and common view to analyse the value stream It shows how the information flows to trigger and support those activities It shows where the activities add value and where they dont It always has the customers perspective and is focused on providing to the customers expectations 23 | P a g e

In a single view, it provides a complete, fact-based, time-series, representation of the stream of activities, from beginning to end, which is required to deliver a product or service to the customer

2.3.7. SIX SIGMA


Six Sigma was developed in the mid-1990s; it was announced as the worlds greatest problem solving methodology. With a well-defined functioning, training and management structure, Six Sigma gave form and focus to the request of quality tools and techniques. It was first developed as an internal quality plan at Motorola, which was a big success (Harry and Crawford, 2005). Six Sigma hit the national stage following its successful implementation by General Electric in 1996. Six Sigma is a way to identify and control differences in the processes that most affect performance and profits. Following a strict methodology, trained experts known as Black Belts analysed the root cause and implement corrective action. The goal of Lean Six Sigma is: identifying the customer, defining value stream, identifying the waste defect, measuring the defect, identifying the root causes of the defect, identifying the best solution, implementing the solution and monitoring the progress. (Adams, 2003)

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2.3.8 TOTAL QUALITY MANAGEMENT (TQM)


Total Quality Management (TQM) is a strategy for a quality driven organisations. TQM is for quality to act, as the driving force behind an organisations entire leadership, design, planning, and development efforts (Calingo, 1996). Total Quality Management focuses on the culture of the organisation. The cultural part demands a quality perspective in all aspects of the companys processes. Like other initiatives, TQM highlights customer orientation, commitment from top management, constant improvement, fact-based choice making, fast reply and worker participation. All the quality and statisticalanalysis tools are applicable under TQM. TQM has been practiced in manufacturing, education, government and service industries (Eisenhardt, 1989). Lean is in TQM principles and practices. Therefore, Lean is similar to TQM; it can act as the umbrella strategy for the business corporation. (Madu et al, 1996).

2.3.9 THEORY OF CONSTRAINTS


The idea behind the Theory of Constraints (TOC) is that in any process there can be a bottleneck. This means that processes are vulnerable because the weakest process or part can always damage, break or at least reduce the outcome. TOC is from time to time referred to as constraint management (Atwater, 1994). TOC centralised on removing the constraints that limit an organisations performance from achieving its full potential. TOC, with its importance on process flow and waste reduction, is an effective tool set for Lean practitioners that investigates bottlenecks in the value stream. TOC is mainly useful with its focus on throughput (Feather and Cross, 1989; Dettmer, 1995a+b).

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2.3.10 TOTAL PRODUCTIVE MAINTENANCE (TPM)


Total Productive Maintenance (TPM) is a business process improvement and a value-added preservation concept. (Nakajima, 1988) TPM is about productivity improvement, with the first approach to optimize and maintain plant and machine equipment. TPM centralise on maintenance as an essential part of the business (Taguchi and et al, 1989). The goal of this strategy is to ideally increase production while, at the same time, increasing employee morale and job satisfaction. TPM has been developed from TQM and is proven as a successful foundational methodology within a Lean framework (Billesbach, 1994; Sayer and Williams 2007).

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2.3.11 BUSINESS PROCESS MANAGEMENT (BPM)


Business Process Management is about optimizing the business processes. This strategy is a broad management approach that strives for effectiveness and efficiency of the organization with innovation and flexibility (Sayer and Williams, 2007). In many cases BPM is linked with technology and software systems so that not every department will have their own administrative. According to Sayer and Williams BPM practises are: Modelling tools help describe and classify standardized work. Data-integration ability captures significant supplier, inventory, cycle time, position, delivery and other value-stream description parameters. Activity-monitoring equipment regularly checks the presentation of processes against control limits. BPM is the system matching portion to Lean, assisting Lean answer in technology. Lean practices for a set of facilitating equipment and techniques that centralise the organisation on getting rid of waste and making the most of customer value. Even though these tools are important, the people are as much important. A successful Lean journey puts as much importance on the people in the organisation as it does on the methods, equipments and techniques of Lean practice. The journey must connect everyone, repeatedly teach and train them, confront and empower them. Workers must be safe and feel protected in their work surroundings and job situations. They have to be inspired and motivated and salaried. People are highly appreciated in the Lean organisation. They are more significant than tools, equipment, material and capital (Sayer and Williams, 2007).

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Lean Tool Box


2.3.12 FLOW AND PULL TOOLS
In the flow of value chain and especially focusing on pulling the products towards the customer is the basic idea of Lean. Lean tools can improve and put in practice the flow and pull techniques. These tools are to set the speed of the system and eliminate obstacles within the flow. According to Emiliani (1998) he advices to apply the flow tools first, when implementing these tools, there can be seen which obstacles there are and this can be eliminated (by e.g. kanban based tool). The perfect Lean Toolbox consists of the customer and value-stream -, the perfection- and the management tools. The organization will need all these tools to make Lean work efficiently. To maintain balance in the organizations system, it is important to have a complete balance of the tools. When not doing so, Lean practices can fail in the organization or not work as it should (Sayer and Williams, 2007). This is usually the case when implementing a tool at the wrong time or not fully. According to Karlsson (1996), the company cannot use only one Lean tool like Kanban and hope to be widely successful throughout the organization. It is important to take the whole system into considerations. To be successful, it is required to use every tool, all the principles of Lean and apply it in the organization.

2.3.13 CUSTOMER AND VALUE-STREAM TOOLS


Within any organization, it is necessary to understand who their customers are and what customer is all about. This is a basic need for business or company when implementing the Lean strategies. Lean tools can help capture the voice of the customer, know what the customer wants versus needs and measure the competitive marketplace. (Collins and Huge, 1993;Bounds et al, 1994; Best, 2004)

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To be able to capture the voice of the customer, it is important to translate that information into language that the organisation can understand and use it. According to Sayer and Williams (2007) the interrelationships of quality are: Understand the voice of the customer and translate it into functional requirements Translates the functional requirements into product design requirements. Translates product-design requirements into process design requirements. Translates the process-design requirements into process-control requirements. This can be done by the organization through customer surveys, focus groups, personal interviews, product clinics, warranty data, or third-party industry reports.

2.3.14 MANAGEMENT TOOLS


Lean requires not just a strategic vision, but a daily discipline. It is important to look at the shortand long term vision of the company to implement the right tools. It is also necessary to learn from the experiences, both the successes and the failures (Sayer and Williams, 2007). Within the organization, everyone needs to be concerned and committed on an everyday basis, without attention of management and the leadership of decision-making. The changes developed in a Lean function are sustainable. Like other aspects of Lean, managerial tools are visual; along with the customer and value-stream tools, the flow and pull tools, and the perfection tools. These tools make up the Lean toolbox, which are needed to support Lean practices. (Womack and Jones, 1996; Sayer and Williams, 2007) A successful management team directs both the long-term strategy of the organisation and the daily activities of the business. This goes as well for a successful Lean organisation. Creating the master plan and measuring everyday progress to that plan is necessary. In keeping with Lean basics, the process of strategy growth, deployment and measurement should be easy and visual. (Ohno, 1988; Womack and Jones 1994)

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2.3.15 PERFECTING TOOLS


In a Lean environment it is about evaluating the whole chain to a standard and then working on improving it, so it not only changing some general things and thats it. By using information, data analysis and visual tools can help in identifying exactly where waste and defects are gathering up. Along with the customer and value-stream tools, flow and pull tools, and the management tools, it will create the overall Lean toolbox. These tools are all needed to support Lean practices. (Womack and Jones 1996; Sayer and Williams, 2007) Beginning with Standardised Work, one pursuit of perfection begins with standards. When having a standardisation it can be very effective. The standardisation of the activities, processes and measures directly enables the Lean objectives of higher quality, lower costs, better efficiency, successful communications and the maximum value for people. According to Womack and Jones (1994), standardised work (from time to time referred to as standard work or standard developments), applies at all levels and in all regions of the business: Specification standards comprise images and quality, methods and tools, communications and terms. The term standards comprise company rules and policies, business management, regulation and fulfilment. Technical standards comprise materials, components, products and services.

2.4 SUMMARY
In this chapter the Literature review has been discussed. The reader is now informed about Lean Thinking and its methods. 15 strategies have been elaborated. In the next chapter the methodology will be explained and how the research will be done.

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CHAPTER 3 METHODOLOGY
In this part an analysis will be made regarding the research aim and objectives of the research topic. It is based on the research onion-model of Mark Saunders et al. There will be elaborated which primary and secondary data has been chosen and its reliability. A relevant tree has been introduced at the end of this chapter. A research can be conducted very efficiently when is it well organized and planned (Olivier, 2004). It is important how to get the needed information when it is also important to be reliable at the same time. As Johnson and Clark (2006) state: as business and management researchers we need to be aware of the philosophical commitments we make through our choice of research strategy since this has significance impact not only on what we do but we understand what it is we are investigating. Therefore it is of great importance to know and plan the research strategy. To have a complete and reliable solution to the research questions it is necessary to gather information through various sources and observation techniques. Saunders et al (2008) classified research into six layers and labelled the model which presented as the research onion-model. This model includes the philosophies, approaches, strategies, choices, time horizons, techniques and procedures. The main idea of this onion-model is to present a clear outline for the most suitable methods and strategies when starting a research. It provokes knowledge and gives ideas to find an answer on a research question. For every research question the principles of the onion-model will be used in a general way.

FIGURE 5 ONION MODEL

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Source: Sauders et al (2008)

3.1 PRIMARY DATA


According to Saunders et al. (2009) the primary data is data collected specifically for the research project being undertaken. The Business dictionary declares that primary research is experiments, investigations, or tests carried out to acquire data for the first time, and not through books or published sources. In other words, it does not exist yet. The primary research which will be done for this research is through interviews with managers of the warehouse, employees of Lagaay and through observation of the researcher. The aim of the interview is to gain knowledge of the workers and to see their perspective as well as for the managers. The type of interview which is used for this research is the semi-structure interview. According to Saunders et al (2009), semi-structure, also referred as qualitative research interview (King, 2004), are when the researcher has a list of questions to be answered, it allows as well new questions to be brought up during the interview as a result of what the interviewee has to say. Harris and Jud (2002) explain that proper interviewer behaviour can help greatly in achieving their goals. It depends on the research question how many employees will be interviewed.

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3.2 SECONDARY DATA:


Saunders et al. (2009) explains that secondary data are data used for a research project that were originally collected from some other purpose in the first-hand. The secondary data which are used in this research are books, academic journals, academic research, company reports and reliable internet websites. Saunders et al (2009) describes the advantages and disadvantage of the Secondary data, these are summarized in the table below.

Advantages:
- If data is needed quickly - May have fewer resources requirements - Can provide comparative and appropriate data - Can result in unforeseen discoveries - Durability of data

Disadvantages:
- May be collected for a purpose that does not match your needs - Access may be difficult or costly - Aggregation and definitions may be unsuitable

FIGURE 6 ADVANTEGES AND DISADVANTAGES

Source: Sauders et al (2009)

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3.3 DATA RELIABILITY


The questionnaire was so designed to make sure it collected all the data that was required for the research questions. While making the questionnaire, the researcher made sure that the questions were necessary, understandable, short and straight to the point. According to Sauders et al. (2009) he states that in context of research ethics refer to the appropriateness of your behaviour in relation to the rights of those who become the subject of your work or are affected by it. In this research all the participants who were involved, through the questionnaires, had given their agreement to contribute in this research and provided information which was necessary. The warehouse manager and employees who were direct involved in the warehouse were briefed on what the research was about, what it was for and what would happen with the data. They were also informed that the information they gave would be dealt with in strict confidence and it would only be used for this research project only.

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3.4 METHODOLOGY OF THE RESEARCH QUESTIONS


In this part of the methodology, four research questions will be presented and which techniques are used to answer it. The questions are: 1) What makes Lean Thinking challenge so special? To provide an answer for this research question it is important to do this through secondary data. The tools which will be used are books, academic journals, and academic research. 2) What is the procedure of the warehouse at Lagaay? For this research question is it important to consider the qualitative research in the form of a survey, observation and in-depth interviews. These methods of information gathering has a very flexible form at Lagaay as the employees and managers will be available for this and it will be most reliable source. Three employees will be interviewed for this to have a full perspective on the procedures of the warehouse. The type of interview which will be used is the semi-structure interview. There will be as well archival research used for this research question. 3) What are the problems occurring in the warehouse department? The method which will be used for this research question is through primary data. This will be conducted by the researcher, through observation and focus group. There will be an in-depth interview made with the manager and with two workers of the warehouse. The reason for choosing the manager for an interview is because he is most experienced in the department. The reason to consider the workers for this question is because they are dealing with these things every day and therefore it is important to consider their opinion as well. They can provide information which the manager might overlook.

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4) What are the possible barriers of Lean Thinking at Lagaay? The method which will be applied in chapter 4 for this research question is by primary data. The primary data will be done through observation, focus group and in-depth interview with all the departments. For all of the research questions there will be a limit of websites used as most of them are not reliable. Thus, essentially the research will be done in two ways: Primary research (surveys, observations and in depth interviews) and Secondary research (literature review).

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3.5 RELEVENCE TREE

To improve the warehouse department

First Research Question What makes Lean Thinking challenge so special?

Second research Question What is the procedure of the warehouse department at Lagaay?

Third Research Question What are the problems occurring in the warehouse department?

Fourth Research Question What are the possible barriers of Lean Thinking at Lagaay?

Research Methods Secondary Data: - Books - Acedemic Journals - Acedemic Research Primary Data: Qualitative Research Methods: Primary Data: - Observation - Interviews - Focus groups Research Methods: Primary Data: - Observation - Focus group - Interviews 3.6 SUMMARY
In this chapter there has been an analysis made on how the research questions will be answered and how to perform it. The research has been broken into two studies, primary and secondary research. The types of methods are elaborated and a relevant tree has been introduced. In the next chapter the findings will be presented and the research questions will be answered. 37 | P a g e

Research Methods

- Interviews with employee's


- In-depth interview with the manager of the warehouse

FIGURE 7 RELEVANT TREE

- Archival Research

CHAPTER 4 FINDINGS
In this section the findings of the research questions will be presented. The main objective of this part is to find out which Lean strategies are best fitted for an efficient warehouse. This is done by answering the research questions and by executing the research methodology according to chapter three.

4.1 WHAT MAKES LEAN THINKING CHALLENGE SO SPECIAL?


For this question it is important to know the thinking behind Lean. As described in chapter two, the main idea of Lean is to maximize customer value while in the same time minimizing waste. In other words, it is creating more value for customer with fewer resources. The story below gives an idea how companies are working at the moment. Companies are working hard but not efficient. The story of a woodsman There was once a woodsman who was cutting his woods and was working very hard. A passer was walking and saw the man working so hard that he was sweating, so the passer decided to walk towards him. The passer noticed that the axe of the woodsman was bold. He asks him why his axe was bold and suggested him to blend it first and then to continue, as it would be easier for him to cut his woods. The woodsman who was fully concentrated on his work looked at the passer surprised and answered: No, that is impossible, I cannot stop, I need to continue my work, or otherwise I will never finish my work on time. (Freek Dekker 2006)

In real life there are many companies who are working hard and committed to their work. However, the question is, are they doing this efficiently? Companies do not have the time to visit their customers, employees are making many hours because systems crash that leads to delays, systems are updated manually which consumes time and energy.

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The principles of Lean Thinking in an organisation are known as the worlds most powerful and effective way of building and maintaining continuously improving businesses. Using Lean Thinking strategies, Lagaay can improve itself continuously over the long term. Sayers and Williams (2007) says that the days of doing things in the same old way are gone as the global pressures are forcing every company, organization and everyone to embrace some type of approach and strategy for improving performance and the management systems. The Lean strategies are getting more popular as it offers organisations a rational, proven and accessible path to long term success. It is not like the other methods, Lean is something that everyone can use, understand, and can do so everyone can benefit from (Sayer and Williams 2007). Lean Thinking, principles and techniques are proven to have been practiced successfully by thousands of organisations of every type and size in every industry worldwide, spearheaded by nearly 50 years of continuous improvement by one of the worlds most successful corporations, Toyota (Sayer and Williams 2007). Lean is a solid suitable for all types of problems. It is broadly appropriate in any situation, combining old way of thinking into new tools and techniques. Lean doesnt make any mistakes and is accessible to anyone, with any budget; it is a serious commitment which a company and employees need to make. It requires the whole company to work together to make the company as Lean as possible. Lean Thinking provides a way to specify value, line up value-creating actions in the best sequences, conduct these activities without interruption whenever someone requests them, and perform them more and more effectively. (Womack and Jones, 1996 :15) The framework of Lean is broad and it embraces tools and techniques to solve problems. The most important tools of Lean are already elaborated in the Literature review. Many performance improvement tools are strictly modified for special disciplines, it requires advanced skills but 39 | P a g e

however with Lean Thinking this is not necessary. Lean is powerful, in part, since it is so easily learned and applied by everyone and therefore it is for everyone (Sayer and Williams 2007). Lean is a philosophy and proven to improve the businesses and organisations for the long-term. Lean is about adjusting people and systems to deliver a continuous stream of value to the costumer and eliminate any kind of waste in the process. Lean is a practice at all levels and performs time after time, as well as to constantly improves companies performance (Williams 1996). To conclude this research question, the idea of a Lean organisations use a smaller amount of human effort to carry out the work, less material to make products and services, shorter time to develop and less energy and space to produce (Sayer and Williams 2007). That is why Lean Thinking is a special tool which seriously needs to be taken into consideration when, in this case, Lagaay wants to improve a process in the company, in this case the warehouse department.

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4.2 WHAT IS THE PROCEDURE OF THE WAREHOUSE AT LAGAAY?


In this part the reader will find the procedure of the warehouse. To answer this question it is important to know a short history and current situation of the warehouse. In 2000 Lagaay has bought warehouse in Van Helmonstraat, Rotterdam. The dimension of the ground floor is 800m2, while the upper floor is 588m2. In total warehouse has approximately 5.000 different products, which together has a value of 700.000. The products are medicines, medical equipment and safety equipment. When arranging the store they did not take into consideration to arrange it in such a way that products are placed in groups. The choice for placing the products was not based on a qualified layout. In the last two years, the workers did not manage the warehouse in a specific system or structure. New products were given free locations and not in their own groups. Therefore the warehouse started to be disorganized, products groups started to have two locations or several locations and they started to put these products in pallets. During the researchers observation, it was noticed that there are three processes: Receiving products, products being stored and products going out. When receiving the products they will be unloaded at the entrance hall of the warehouse. In this hall, all items are being checked for the correct amount, data, damage and quality. The items are provided with a receipt and the warehouse manager will book these items in the system. The system which Lagaay uses is called Account View. Finally the products will be stored in the warehouse. When the workers control the products and find damage in it, they inform the manager of the warehouse, he then informs the purchase department how many items are damaged or lack. The purchase department, in its turns, contacts the supplier to look for the necessary solution. The manager of the warehouse will be updated over the decision.

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For loading and unloading products, the workers use a pallet truck (a tool used to lift and move pallets). To move products in the ground floor, it uses a normal pallet truck. For moving products to the first floor, workers use an electric pallet truck. There are a total of 2 pallet trucks and 1 electric pallet truck. When the products are checked they will be placed in the storage area. Within the storage area, products are then placed in pallets and/or shelves. The bulk products are placed in top of the warehouse, if there is no place for it in the shelves. Lagaay makes use of the semi- free location system. This means that certain product have a fixed location while other products are placed where there free space. The products are stored in such a way that is decided by the experience of the warehouse manager. Pallet (meters) Length Width Height 2,90 m 1,10 m 3,00 m Shelves (meters) 1,00 m 0,50 m 2,00 m

TABLE 1 DIAMENSIONS OF PALLET AND SHELVES

The order pickers then pick the products according to the picking list. They walk with a basket or cart (depends on the size of the orders list) through the warehouse and grab the product from the shelves by hand. Workers decide the route they want to walk, there is not a specific route to walk as every order is different. Between the shelves within the warehouse it is not possible to pass another cart, as the pathway is quite small. The workers know where to find the products, usually products are on stock. If not, workers need to go on the other floor to check if the products are there, as products can be placed in two places. This is quite frustrating for the workers, as it takes a lot of time and energy to go on the stairs and check if products are out of stock in both places. If articles are not available during collection, it will be placed on a 42 | P a g e

backorder list. Eventually, the orders will be scanned and packed by the workers and are ready to be shipped. The delivery is done by private courier, TNT, DHL or DPD. Within the warehouse department there are several employees involved. Each has their own visions, interests and responsibilities. The employees are an important influence when implementing Lean strategies in the warehouse and making it a success. The workers who are directly involved in the warehouse are: warehouse manager and the order pickers. Other employees who are indirectly involved are: sales staff, purchase staff, quality manager and director.

A BRIEF DESCRIPTION OF THE ROLE OF THE EMPLOYEES (SUMMARY OF THE INTERVIEWS)


Warehouse Manager: Receives and checks the products which arrive. These products are then recorded in the computer program AccountView. After booking the products a receipt is printed out for the administration department. Afterwards, products are then placed in smaller tubes or packages; this is usually done by a worker. When the worker packs all the products in smaller portions, the warehouse manager places the products in the warehouse. Order pickers: They receive a picking list of the items which is needed to be collected. Pickers have to know where items are stored within the warehouse. Purchasing department: This department must ensure that a minimum stock of medicines, medical equipment and safety equipment are available. When products are received damaged, this department contacts the supplier and finds a respectable solution. They also purchase the desired price at a competitive price.

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THE PROCEDURE WHEN PRODUCTS ARE RECEIVED

Products received

The goods have arrived at Lagaay. Jan (Warehouse manager) signs for received products.

The Warehouse manager and courier quickly checks the amount of boxes received.

Acceptance of the products


Making notes on the receipt of the courier, purchase department will be informed.

First Check: Are there any shortage? No Second Check: Checking products for any damage
No damage

Yes

After the first check, the products are carefully checked for any damage or missing part.

Damage

Manager will inform the purchase department about the amounts of defects, supplier will be contacted.

After passing all the checks, the products are noted in the computer system AccountView.

The orders are placed in the computer system AccountView

Products are placed in smaller tubes


After the products are labeled and repacked the products are placed in the warehouse.

Workers will receive from the warehouse manager which products need to be repacked in smaller tubes or packages. (This information is provided in AccountView.)

Products are placed in the warehouse

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THE PROCEDURE WHEN PRODUCTS ARE COLLECTED


In the warehouse there is a black box located, in that box workers can find the picking / order lists. These order lists has been put by the sales department. Workers need to take the products which are described in the order list.

The basket / cart are being prepared to put all the products of the order in it. In the basket there are elastics or plastic bags to combine products which have the same identical code (products which are the same). When products are being collected, it is important to check the identical code on the product and compare it with the order list, as products might look the same, but can be very different.

Worker takes the picking / order list

A basket / cart is prepared

Collect the products

The warehouse is divided in different laws of different countries. Every country has its own location. On the order list there is a clear description regarding the location of the product.
Workers need to look further to find the same identical number, if they did not find it in that location, workers need to look for the second location where the product might be.

Check: Does the identical code match?


Yes

No

When products match the identical number, they are placed in the basket / cart. If there is more than one of the same product needed, workers bound then with in a plastic bag or bound them with elastic.

Products are placed in the basket / cart


The queue is a place where all the baskets / carts are placed to be checked by the scanners and placed in boxed to be transported.

Products are placed in queue to be packed

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4.3 WHAT ARE THE PROBLEMS OCCURRING IN THE WAREHOUSE DEPARTMENT?

In this part the reader will be elaborated on the problems which the warehouse department is struggling with. This is done by partly through an observation of the researcher and partly through focus groups. For every problem the researcher asked different employees to make sure the problem is not personal but it is found in the whole department. The results of the meetings with employees, several interviews with Jan (warehouse manager) during the whole research, and observation of the researcher are combined together to have a full understanding of all the problems concerning the warehouse.

PRODUCTS DO NOT HAVE A FIXED LOCATION


As described in the previous part, Lagaay uses an ERP system AccountView. With this program it is able to see where the products are located. However, the researcher noticed the location showed on AccountView does not always match with the real location of the products. For example products on the shelves have a different place than what the system shows. These products, which do not have a fixed location, takes a lot of time to be found by the workers.

TOO MUCH INVENTORY


Some products are being ordered in huge amounts. During the interview the researcher asked why it is done this way. Jan (warehouse manager) answered: to receive discount from the supplier. The problem which occurs when ordering in huge amounts will not fit in one location; therefore it will be placed in different place(s). In addition, the bulk supply is not placed in a logical order as well. It takes extra time to find the correct medicine when it is out of stock.

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PRODUCTS HAVE TWO INVENTORIES


The researcher observed that within the warehouse there are products which have different locations. This creates confusion and uncertainty among the workers. When a product is out of stock in one location, workers need to go to the different location and see if it is on stock there. During the interview, workers elaborated that this cost a lot of time and effort.

IDENTICAL NUMBER IS TOO SMALL


On each box there is a product description written. The product description which is written on the boxes where the products are found, are very small (3x15mm), the font which is used is 8. Workers need to watch very carefully if the product number on the product matches the product number on the order list. This cost extra time and effort, during the meetings, the researcher find out by the workers that they pick around 20-40orders a day (approximately between 500700 products). The workers concluded that looking on the product number on every product can be very frustrating.

POOR JOB DESCRIPTION


According to the Sales department, there are on average between 20-40 orders received per day. The orders are distributed to the workers who are assigned by Jan (warehouse manager) to pick up products. The workers collect orders according to their own preference. For new employees and trainees there is not a clear job description for them. The manager usually explains shortly how to pick an order and thats it. Workers waste a lot of time finding the products and looking for a good strategy how to pick the order as quickly as possible.

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4.4 WHAT ARE THE POSSIBLE BARRIERS OF LEAN THINKING AT LAGAAY?


In this part the barriers of lean thinking at Lagaay will be elaborated and discussed. This is done by the researchers observation and with an in-depth interview with Joris Alberda. There is also secondary data used to clarify some problems which might happen. According to Mattew May (2010) many companies are afraid when it comes to change. Companies rather do it how they always have been doing it. When interviewing Joris Alberda he noted that there are some barriers when changing the warehouse department. During the interview, Joris was explaining that Lagaay is dependent on the system `AccountView`. This was implemented as a new ERP-system in 2009/2010. During the implementation, the company adjusted this system in a way that it will be most beneficial and efficient for the company. However, when they adjusted the system, it has become now a very complicated system where there are a lot of possibilities for error if there is a small change in the system. He concluded by saying: There is no will nor money to invest in a new system. The manager and employees at Lagaay all agree of this barrier. According to the Sales department another possible barrier for Lagaay is because of the last minute character of the business they are in, the company needs to respond in a flexible way to the demand of the market. This makes automatization and standardization sometimes a dangerous option. Some examples where it is important to be flexible are the package size and labels. The warehouse department does not fully agree to this statement. Jan (manager of the warehouse) says it is possible to have some standardized things, and the rest we can leave it flexible. One of the workers said that there are some things that will almost never change, so why wont we improve that system if it is not doing things efficiently? For the purchase department it does not affect whether there will be standardization or not.

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For the purchase department they have to deal with several important factors, not only price and lead time, but for example expiry dates and inventory space. When implementing a new system or strategy, the purchase department asked if this can be taken into consideration they must know exactly if inventory space will be changed. One of the possible barriers which all departments agreed on is time. The company does not have time to implement a system. Time is a very valuable resource at Lagaay. Benjamin Franklin (1785) explains that time is money. Therefore when implementing a strategy, Lagaay asked the researcher to make it as short and quickly as possible, while in the same time it must be efficient. During an interview Joris explained that within the company, there are a lot of miscommunications. One of this is information within one department where employees from another department are not aware of it. This leads to a lot of miscommunication within the company. Joris is afraid that this will still be the case when implementing a new strategy in one department. The logistic department raised a possible barrier regarding transportation. For some medicines there are restrictions when transporting them. For example there is a federal regulation on the transport of narcotics. However, according to the researcher and the warehouse manager when implementing a new system in the warehouse, transportation will not be effected. All of these possible barriers will be taken into consideration when a new system will be implemented at Lagaay.

4.5 SUMMARY
In this chapter the findings of the four research question have been answered. In the next chapter the conclusion will be presented.

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CHAPTER 5 CONCLUSION
The purpose of this chapter is to present the reader with a conclusion of the research performed in this document. There will be a conclusion given on chapter 1, 2, 3 and 4. At the end of this chapter the reader will understand the motive why Lean is important for the warehouse department and how this can be made possible. Chapter one describes the principles of Lean, in a company Lean is recognized to be one of the most powerful and effective way of building and maintaining continuously improving businesses. Using Lean Thinking strategies, Lagaay can improve itself continuously over the long term. According to the missions, vision and problems of warehouse department a fishbone diagram has been executed. Research questions have been contributed to understand the concept behind Lean Thinking. Furthermore, the procedures of Lagaay warehouse and the possible barriers of implementing a new system have been elaborated. In the second chapter Lean thinking, its techniques and principles are elaborated. The idea of a Lean organisation it use a smaller amount of human effort to carry out their work, less material to make their products and services, shorter time to develop them and less energy and space to produce them. They became familiar with customer demand and developed high quality products and services in the most efficient and economical way possible. Lean is powerful since it is so easily learned and applied by everyone. Lean is for everyone (Sayer and Williams 2007). The tools which were described are: 5S, 7 types of waste, Just In Time System (JIT), Group Technology (GT), Kanban, Value Stream Mapping, Six Sigma, Total Quality Management (TQM), Theory of Constraints, Total Productive Maintenance (TPM), Business Process Management (BPM), Flow and Pull Tools, Customer and Value-Stream Tools, Management Tools and Perfecting Tools.

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The third chapter describes the methodology. It shows in which approach and methods the research questions will be studied. Reasons for primary and secondary data are showed and to know how / when is data reliable or not. In the fourth chapter the findings of the research questions are provided: What makes Lean Thinking challenge so special? This research question can be concluded by saying that Lean is a solid suitable key for all types of problems. The framework of Lean is broad and it embraces tools and techniques to solve difficulties. Lean strategies are getting more popular as it offers organisations a rational, proven and accessible path to long term success. It is not like the same as other methods, Lean is something that everyone can use, understand, and can do so everyone can benefit from (Sayer and Williams 2007). The most important tools of Lean are elaborated in the Literature review. Many performance improvement tools are strictly modified for special disciplines, it requires advanced skills but however with Lean Thinking this is not necessary. Lean is powerful, in part, since it is so easily learned and applied by everyone and therefore it is for everyone (Sayer and Williams 2007). What is the procedure of the warehouse at Lagaay? In this part there have been an in-depth analysis made regarding the process of the warehouse. There are basically three processes involved: Receiving products, products being stored and products going out. A short description of the procedure is as following: Products are picked by workers and made ready for shipment

Products are received

FIGURE 8: SUMMARY OF PROCEDURE IN THE WAREHOUSE DEPARTMENT

Products are checked, repacked and placed in the warehouse

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Within the warehouse department there are several employees involved. Each has their own visions, interests and responsibilities. The employees who are directly involved in the warehouse are: warehouse manager and the order pickers. Other employees who are indirect involved are: sale staffs, purchase staff, quality manager and director. What are the problems occurring in the warehouse department? In this part five problems of the warehouse have been discussed. The problems which examined were: 1) Products do not have a fixed location, products on the shelves shows a different location than what the system was showing. The products with different locations are time consuming to be found. 2) There is too much inventory, some products were ordered in huge amounts which caused extra inventory and inventory being placed in two (or more) places. 3) Products have two inventories; this was creating confusion among the workers. When a product was out of stock in one location, workers needed to go to the different location and look if it was on stock there. 4) Identical number of the product is written too small, the product description which is written on the boxes where the products are found, are very small. Workers concluded that looking on the product number on every product can be very frustrating. 5) Poor job description, for new employees and trainees was not a clear job description. Workers waste a lot of time finding the products and looking for a good strategy how to pick the order as quickly as possible. Which strategies would be best possible for the warehouse department? In this part there are four strategies of Lean Thinking are elaborated which can solve all five problems of the warehouse. The first strategy which was described is called Group Technology. Group Technology is to combine all the similarities of components, products, services and processes together to reduce movement and improve the product flow. The way how this will be implemented is products which are similar will be placed together on one fixed location, in this way that walking time will be minimized. 52 | P a g e

The second strategy which was described is called Theory of Constraints, the idea behind this theory is that in any process there can be a bottleneck. Find the bottleneck and destroy it. In the warehouse bottlenecks are the small identical numbers on the products. Workers need to read carefully the identical numbers and match this with the picking list; this process slows down the workers as these numbers are very small written. When taking this theory into consideration and implementing it, this can minimize the time what is spend on reading the identical number. The third strategy is called the Business Process Management, this strategy is about optimizing the business strategy. This is partly suitable for the warehouse, when considering the poor job description at the warehouse. According to Sayer and Williams (2007), a part of the BPM practises are making a model tool to help workers know what it is required of them and showing them, usually through job description, how to achieve this in the most efficient way. The last strategy which was discussed is called the Just In Time System (JIT), this shows that it is important to produces only the necessary products at the necessary time, in necessary quantity. The result when this theory will be implemented, the warehouse will have less inventory. When having less inventory there will be no need to place products in different locations because of the limited space This will also save space and will lead to a quicker flow in the production. During this research, when introducing Lean Thinking for the warehouse department, it was noticed that within the company there was a lack of clarity within the organization. (New) Employees didnt receive trainings and there was no job description to follow. These have been taken into consideration when new strategies will be implemented. The future of Lean across all industries is limitless, the principles, methods, tools and techniques can be applied in any business in any situation. In the business, organisation or any kind of industry through Lean, eyes will open up new pathways for development opportunities. Opportunities for industries improvements are all around. The potential for Lean is limitless. 53 | P a g e

CHAPTER 6 RECOMMENDATION
In this part there will be 6 strategies presented of which can improve the warehouse department and how to implement it. When studying the theories of Lean Thinking the researcher found out that it is important to consider several theories to make the warehouse as efficient as possible. The methods which are used to give a recommendation for Lagaay have been done partly through primary and partly through secondary data. The primary part has been conducted by the researcher, through observation and focus group; this has been done to see how these strategies can best fit the warehouse. Secondary data has been also included in this part; these are theories which are described in chapter two. The theories which are taken into consideration are the seven types of waste, Kanban, Group Technology, Theory of Constraints, Business Process Management and Six Sigma. As it is elaborated in the second research question, a short summary of the procedure in the warehouse are:

Products are received Input Products are being checked for amount and damage Products are being repacked in smaller amounts Products are placed in the warehouse

Process

Output

Products are picked by workers Products ready for shipment

FIGURE 9: SUMMARY OF THE PROCEDURES AT THE WAREHOUSE

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6.1 MAKING ONE INVENTORY INSTEAD OF TWO THROUGH GROUP TECHNOLOGY


According to Slack at el the purpose of Group Technology is to combine all the similarities of components, products, services and processes together to reduce movement and improve the product flow. Therefore, all the products with similar characteristics are grouped together. The group is also called a cluster group and can be based on the size, shape, process or treatment steps characteristics. Group Technology theory is viewed as an essential and necessary step in maintaining a high quality level and profitable production (Slack at al 2007). The researcher observed that this theory is very suitable in the warehouse when looking at the problem where products have two or more inventories and the products which does not have a fixed location. As described above, workers need to go to another location if the product is out of stock in the first location. During the interview, workers elaborated that this cost a lot of time and effort. The way how this will be implemented is products which are similar will be placed together on one fixed location, in this way that walking time will be minimized. When implementing this theory it is important to update the system AccountView to show the correct location. Updating the system needs to be done manually.

FIGURE 10: BEFORE AND AFTER IMPLEMENTING GROUP TECHNOLOGY

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6.2 SOLVING BOTTLENECK THROUGH THEORY OF CONSTRAINTS


According to Feather and Cross (1989) the idea behind the Theory of Constraints (TOC) is that in any process there can be a bottleneck. In this case, the bottlenecks are the small identical numbers on the products. Workers need to read carefully the identical numbers and match this with the picking list; this process slows down the workers as these numbers are very small written. When taking this theory into consideration and implementing it, this can minimize the time what is spend on reading the identical number. So, the bottleneck of the identical number can be solved by printing the identical numbers bigger. These numbers can then be placed on the shelves; in this way it is easier for workers to see the match of the numbers.

FIGURE 8: BEFORE AND AFTER IMPLEMENTING THEORY OF CONSTRAINS (TOC)

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6.3 IMPROVING JOB DESCRIPTION THROUGH BUSINESS PROCESS MANAGEMENT


Business Process Management is about optimizing the business processes. This strategy is a broad management approach that strives for effectiveness and efficiency of the organization with innovation and flexibility (Sayer and Williams, 2007). This theory is partly suitable for the warehouse, when considering the poor job description at the warehouse. According to Sayer and Williams (2007), a part of the BPM practises are making a model tool to help workers know what it is required of them and showing them, usually through job description, how to achieve this in the most efficient way. According to Sayer and Williams (2007) To be a successful company it is important to put as much importance on the people in the organisation as it does on the methods, equipments and techniques of Lean practice. It must connect everyone, repeatedly teach and train them, confront and empower them. Workers must be safe and feel protected in their work surroundings and job situations. They have to be inspired and motivated and salaried. They must know what it is expected of them and know how to do this.

6.4 SOLVING THE PROBLEM OF TOO MUCH INVENTORY THROUGH JIT SYSTEM
The Just-In-Time System (JIT) produces only the necessary products at the necessary time, in necessary quantity (Peter Berling 2010). For Lagaay, the JIT System will be a method where products are received at the necessary time and have on hand only the minimum stock necessary so that there will be no backorders. The result when this theory will be implemented, the warehouse will have less inventory. When having less inventory there will be no need to place products in different locations because of the limited space.

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The researcher has observed that to make this method more efficient it is important to make space in the inventory that will allow the product to be put in one spot /shelf. Meaning, when the box of the product is full, workers put the rest of the products above in the bulk area. When the box is empty, workers will refill the products (taking it from the bulk and refill the box). This procedure cost extra time and effort and can be easily solved. This can be done by calculating the size of the maximum inventory + the calculating the size of reorder point (when product hit the minimum level), thus calculating the size which is needed for minimum inventory + maximum inventory. When having this information make the box as big as the outcome of the formula so that all the products which are received can directly be put in the bigger box, however when products dont need that much space, place it in a smaller box. Lagaay uses three types of boxes. Small: 10x28x10cm, Medium: 17x38x10cm and large: 40x30x17cm. This will also save space and will lead to a quicker flow in the production. An example has been given in the table below.
FIGURE 9 TYPES OF BOXES

TABLE 2: USING THE JIT-SYSTEM

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6.5 MAP OF THE CURRENT WAREHOUSE (GROUND FLOOR)

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6.6 MAP AFTER IMPLEMENTATION (GROUND FLOOR)

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6.7 MAP OF THE CURRENT WAREHOUSE (FIRST FLOOR)

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6.8 MAP AFTER IMPLEMENTATION (FIRST FLOOR)

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6.9 IMPLEMENTATION PLAN


In this part the time line for implementing Lean Thinking is presented. Figure 12 shows the time line which is needed to implement all four strategies. Implementing Lean thinking strategies at the warehouse department can be done in three terms: short, medium, and long term. For this project the short consists of 2-3 months period. Medium term is a 4-5 months period and the long term is a 7-8 months period. The first step to consider is making one inventory. This has been chosen as the first step because it is important to eliminate the additional inventory which is located elsewhere. After this a calculation can be made of how much space is required to place it in one location. This step needs to be completed in a short term period and the time which is calculated for this step is 2 months. The second step is to place all similar types of products together, thus moving them from one location to another. This step needs to be done in a short term period and the time which is calculated for this step is 3 months.

FIGURE 10 TIMELINE OF IMPLEMENTATION

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The third step is making the inventory more efficient through the JIT-system. This is a medium term period and needs to be done after completing step 1 and 2. The time which is needed for this step is 3 months. The fourth step is solving the bottleneck problem, this need to be done after the products have been relocated. This has been indicated as a medium term period and can be finalized within 2 months. The fifth step is updating the system. This can only be done after the products have received new location; therefore it is placed as a long term period. The time which is needed for this process is 3 months. The last step to consider is to improve the job description. This step has been chosen as last since this focus on new employees only. At Lagaay the company deals on yearly bases 1-3 new employees and therefore it received a long term period.

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