WMS and LEAN helps Sanistål reduce inventory by 45%

Like most other companies, since September 2008 Sanistål’s cash flow has been under pressure. An impressive reduction in inventory value by more than DKK 300 million in combination with the number of mistaken deliveries being halved have been the most important means of tackling Sanistål’s cash crunch. The background for these improvements is a radical process of change underpinned by Astro WMS and LEAN.

"I daren’t think about where we would be today if we hadn’t implemented WMS and carried out LEAN-based development of processes, management and culture. A reduction of the capital tied up in inventory by more than 300 million kroner has made a crucial difference to our cash flow in these times when cash is king," factory manager Claus Hjerrild tells us, adding: "Astro WMS gives us online and on time inventory status at our central warehouse in Billund. We are in control of inventory value and quality at all times. WMS is the foundation that enables us to work on the basis of facts when it comes to solving problems, making changes and implementing LEAN and our goal is to continually reduce inventory value and improve the quality of our deliveries and agility".

Centralisation of warehouses

In 2008, Sanistål reduced its warehouse structure from 24 locations to just two huge central warehouses in Billund and Taulov respectively. The Taulov warehouse is a newly constructed and highly automated steel warehouse while the Billund warehouse covers an area of 55.000 m2, distributed over 14 halls. The central warehouse in Billund handles all Sanistål products other than steel, which encompasses 96,000 inventory-keeping units covering HVAC products, tools, machinery, electric technology and items from the acquired fittings company Carl F. The Billund warehouse is accommodated in buildings that were previously used by Lego A/S - buildings that became vacant when Lego made its strategic decision to move much of its production abroad.

Every error is an opportunity for improvement

In 2008, the situation at the warehouse in Billund was characterised by an unsatisfactorily high error rate. The picking of items was carried out manually and was based on paper picking lists. At the same time, Sanistål was hit hard by the financial crisis in September 2008 when orders nosedived and the company went into crisis management. Sanistål’s central warehouse in Billund was forced, within a short space of time, to implement a whole range of initiatives which collectively were to ensure the company’s survival, both in the short and long term.

"We had to cut staffing levels, with the result that there were approximately 60% fewer managers and 40% fewer employees. When our staffing level was at its peak we had a total of 500 employees. At the same time, we made a conscious decision to invest massively in training and competence development because we acknowledged the fact that leadership, attitude and culture are the key to creating an operation that constantly strives to improve itself on a daily basis. The fundamental idea behind this culture of improvement is that every error is an opportunity for improvement. This type of culture does not just appear of its own accord, it requires lots of training, acknowledgement and coaching management as well as massive employee involvement. Today, we have come a long way on that journey and we believe that this has been the key to steering our operation through a crisis. You won’t succeed with crisis management if you merely stumble along blindly," Claus Hjerrild tells us.

2 steps forward: Behaviour and leadership are the keys

Since 2008, Sanistål’s central warehouse in Billund has implemented a large number of LEAN initiatives and principles, such as Value Stream Mapping, 5S, flow, team meetings, performance management, standards, problem solving meetings, Kaizen Blitz etc. The work with LEAN has been carried out under the collective title of "2 steps forward", which signifies that the central warehouse has to constantly keep abreast of errors and improvements. The work with LEAN has focused on three areas, namely operational aspects, leadership and attitudes.

"It isn’t difficult to implement a Value Stream Mapping or 5S, the major barrier is the implementation of new attitudes and behaviour. We work with the iceberg model whereby all the visible aspects of LEAN such as team meetings and tools are above the water surface while everything that really makes a difference, like leadership, attitudes and behaviour lie hidden below the water surface. Success with LEAN is completely dependent on managing to get sufficiently to grips with all the hidden aspects and initiating changes in these areas. It is difficult, but this is where the greatest and most sustainable benefits lie," says Claus Hjerrild, who has previously worked with the implementation of LEAN in a number of Danfoss companies.

WMS is the foundation

The central warehouse in Billund has been through a turbulent time and the implementation of WMS was carried out in a number of phases involving the commissioning in one hall at a time. "Gradually, as we have implemented WMS, IT management has provided a solid basis for reducing inventory value and improving quality," Claus Hjerrild explains.

A complex challenge for the warehouses

As mentioned previously, Sanistål’s central warehouse in Billund holds 96,000 stock keeping units, encompassing everything from tiny plastic ferrules to wooden floors and O-rings for huge sewage pipes and 6 metre long iron rods. This being the case, the warehouse has to be able to handle both very big orders and extremely varied orders. The warehouse comprises pallet racks, shelf picking, flow racks, block stacking and not least 42 warehouse machines where picking is done using Voice Technology.

Picking several orders at once

The new WMS means that Sanistål has gone from paper-based picking to real-time picking in so-called picking waves. In layman’s terms this means that Sanistål doesn’t pick one order at a time but picks several orders at a time and picks directly into the dispatch unit. This makes for better utilisation of picking resources and a higher picking quality.

WMS calculates the volume and weight of the order automatically and then selects the correct type of crate or box. This advanced technique goes under the name of box calculation. Along the way, Sanistål and Consafe Logistics, who supply Astro WMS, have experienced that the volume and weight alone are not sufficient parameters with which to make the correct box calculation, but that in Sanistål’s case, it is also necessary to take account of other parameters such as length, width, number and split. The parties are working on improving this.

The new picking strategy is an example of how Sanistål has incorporated LEAN into all new business processes in its quest to optimise flow and minimise waste processes. Sanistål is also continually introducing voice controlled picking in the parts of the warehouse where it makes sense.

Prerequisite for fact-based improvements

Claus Hjerrild points out a useful piece of advice for other logistics managers who are responsible for implementing new WMS in large warehouses: Do it step-by-step. "I would advise you to implement WMS in large, complex warehouses gradually and not as a big bang." The advantage of this is that the organisation will have time to build up good data discipline, learning is ongoing and security in the implementation will be higher. He also points out that a modern and efficient WMS is a crucial factor in a warehouse being able to work effectively with fact-based improvements.

Results of WMS and LEAN
The effects of implementing LEAN in combination with WMS at Sanistål’s central warehouse in Billund include:

An initial reduction in inventory value of approximately 45%
Halving of the mistaken deliveries experienced by customers
A marked improvement in the quality of consignments dispatched from the warehouse
Far fewer write-offs
Greatly improved and more valid KPIs ¿ basis for improvements
The opportunity to follow-up on everything, right down to individual level ¿ basis for improvements
Greater ability to adapt picking to the needs of the customer
Greater ability to respond flexibly to changes in the market and framework conditions

About Sanistål
Sanistål is a total supplier in the fields of HVAC and water and drainage systems, Carl F products, technical products, steel and metal and vehicle interiors.. Besides offering the broadest and deepest range of products in the market, the company offers consultancy plus a wide range of service concepts for both industry and construction. Sanistål is nationwide – and always just round the corner. We supply "just what’s needed" – from day to day. Moreover, the Sanistål Group is represented over most of the world as a supplier of solutions for the construction industry and vendors of architect-designed brand names.

Information about the company: Consafe Logistics AB

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