Becoming “lean” means becoming a more effective company—one that operates with minimal waste and few errors, adding value to the products and services it provides. For wholesaler-distributors, becoming lean means continually improving the way you process orders and serve customers—from the time you seek an order, to order entry and all the way through to the delivery of products and services.

This article explains lean concepts and how they apply to wholesale distribution. Consider the following scenarios:

It's 3:50 p.m. The phone rings in the sales office. Another phone rings … and another. The fax machine beeps. The e-mail inbox fills up. Orders fly in—everything the customer needs for tomorrow. (After all, we promise that anything ordered by 4 p.m. can be delivered tomorrow.) The staff works quickly to get everything entered before the end of the day.

In the warehouse, items are being pulled and staged. One order needs two more parts. There's another box on the top shelf; we need to get the ladder. The phone rings—can we get to this guy's location between 10 and 10:30 tomorrow morning? The computer says these boxes of small parts are already reserved for another customer. Did we receive the new shipment yet? An e-mail comes in—there's a new foreman at St. Joe's; make sure the drivers know to call him before they go out there every day. Five pallets came in a special order yesterday for AEC. Where are they? The phone rings again—can we get a courier out there before 3 p.m.? Who moved the forklift? It was in aisle three 10 minutes ago. We're out of electrical tape? How can we be out of electrical tape?

At 6 a.m. the next day, the trucks are loaded and ready to go. At 6:20 a.m., we make the first delivery. No one is on the delivery site; work doesn't start here until 7:30 a.m.; we need to come back. At the next delivery site, a return is waiting to be picked up. There's not enough room in the truck yet—we can get it when we retry our first delivery. The next delivery has the address of a customer's main office—they say we were supposed to deliver it to a different location; that location is all the way back across town. A few stops later, the customer's receiving person is missing: “Can you get him on the Nextel? Can you get anyone else? Is he the only one who can sign for materials?”

At the next stop, the customer says, “We aren't going to be able to work on the east wing until next week. Can you take those back and redeliver them next Monday?” … “I can't figure out this paperwork—where does it say what is actually here instead of what was ordered?” … “Why don't you have a blue copy for us anymore?” … “Can you tell my sales guy that I need 200 feet of conduit added onto my order?” … “Why didn't they say this was backordered? I would have gotten it from somewhere else, now I'll have to wait—this changes my whole plan for the week.”

Back in the office, the phones are ringing again: “Where's my order? It was supposed to be here first thing this morning. We've been here for two hours and still don't have our stuff.” Another call comes in: “We didn't get the parts we ordered, and we got an extra box of red paint.” And another: “We're missing our paint.” And still others: “I need pricing—I'm bidding against eight others but I really need this job. What can you do for me?” … “Can you get another 50 of the 20-gallon drums out to me this afternoon?” … And so on.

Most distributors are restricted by their internal operations and by the issues and events that occur on a daily basis—all of which drive up costs. These occur in every aspect of the distribution operation.

For example:

• An order is faxed to the inside salesperson. The handwriting is unclear—is the part number C2R or 6ZP?
• The address in the computer system defaults to the customer's billing office. The jobsite where the materials are needed is 75 miles and two counties away.
• A customer requests pricing on a job he's bidding. He doesn't get the job.
• An extra 0 is entered on the order; 1,000 boxes are pulled and sent instead of the 100 that were requested.
• The order cannot be completed. Three items need to be back-ordered and sent later.
• The driver arrives at the jobsite. The foreman cannot be found. The materials are refused until tomorrow.
• Two different customers have spools of wire on the truck, one red, one white. The red spool is unloaded in order to get to the white one and not returned to the truck.
• The customer reports his bill has a freight charge even though his order met all of the conditions for free delivery.

In each of the examples above, some kind of interruption has occurred, resulting in an unsuccessful first-time pass. FTP is measured by the movement of material through the process, correct and complete every step of the way. Improving FTP means improving the correctness and completeness of an entire order at every step—from the initial request for pricing, through order entry, to receiving, picking, packing, delivery and invoicing, and continuing correctly all the way through to receipt of the final payment, with a happy customer at the end.

A high FTP has huge benefits for distributors, because every FTP failure introduces additional cost into the system. The further an incorrect item is carried through the system, the more it costs the distributor.

In the warehouse, non-productive activities can occur when materials are not put away or are put away incorrectly; when material is shelved as received, not as pulled; when materials are stored in an inconvenient location, such as when commonly pulled material is stored in the center of an aisle or in the furthest corner of the warehouse. Some common non-productive activities that can result from these problems are:

• Walking through the warehouse;
• Locating materials;
• Retrieving equipment;
• Waiting on tickets;
• Breaking down or re-packaging materials.

• Waiting for equipment;
• Waiting for access;
• Waiting for signatures;
• Waiting for unloading assistance;
• Unloading or reloading material for another jobsite that blocked the unloading of this delivery.

Distributors can identify and improve these cost drivers and move toward lean operations by focusing on improving their FTP and reducing waste in their system.

The goal of a lean strategy is to reduce internal operating costs, thereby raising service levels and increasing profitability. Improving FTP and reducing waste are the first steps toward achieving this goal. It's important to remember that lean is a journey, not a destination. Continuous improvement is the underlying concept of a lean strategy.