International Journal of Industrial Engineering, 19(7), 278-288, 2012.

AN INTRODUCTION TO DISTRIBUTION OPERATIONAL EFFICIENCY

Bernardo Villareal, Fabiola Garza, Imelda Rosas, David Garcia
Department of Engineering, Universidad de Monterrey
Department of Business, Universidad de Monterrey
The Lean Manufacturing approach for waste elimination can be applied in all sorts of operations. In this project is applied
for the improvement of a supply chain and to achieve high levels of chain efficiency. The identification of warehousing and
transportation waste at the chain level is aggregate being difficult its identification within both processes. This work
provides an introduction to the concept of distribution operational efficiency and proposes a scheme for eliminating waste
in a distribution operation. The Operational Effectiveness Index used in TPM is adapted and used as the main performance
measure. Availability, performance and quality wastes are identified using Value Stream Mapping. The scheme is
exemplified by applying it on distribution networks of several Mexican companies.
Keywords: Lean warehousing, Lean transportation, distribution waste, operational effectiveness index, supply chain
efficiency.
(Received 8 Sep 2011; Accepted in revised form 1 Feb 2012)

1. INTRODUCTION
A key feature of business is the idea that competition is made through supply chains and not between the companies
(Christopher, 1992), success or failure of supply chains is ultimately determined in the market-place by the end consumer.
Therefore, is extremely important the deployment of the right strategies to compete successfully. Fisher (1997) suggests
that supply chains must acquire capabilities to become efficient or agile accordingly to the type of products marketed (see
Figure 1). In particular, an efficient supply chain is suitable for selling functional products. The order winning factor in this
market is cost, having quality, lead time and service level as order qualifiers (Hill, 1993). The main supply chain strategy
recommended to become efficient is waste elimination (Towill et al., 2002).
The origin of waste elimination is associated with the concept of lean manufacturing. This can be traced back to the
1930s when Henry Ford revolutionised car manufacturing with the introduction of mass production. The most important
contribution to the development of lean manufacturing techniques since then came from the Japanese automotive firm
Toyota. Its success is based on its renowned Toyota Production System. This system is based on a philosophy of
continuous improvement where the elimination of waste is fundamental. The process of elimination is facilitated by the
definition of seven forms of waste, activities that add cost but no value: production of goods not yet ordered; waiting;
rectification of mistakes; excess processing; excess movement; excess transport; and excess stock.
Jones et al., (1997) have shown that these seven types of waste need to be adapted for the supply chain environment.
Hines and Taylor (2000) propose a methodology extending the lean approach to enable waste elimination throughout the
supply chain and Rother et al., (1999) recommend the use of the value stream map (VSM) and the supply chain mapping
toolkit described by Hines et al., (2000) as fundamental aids for identifying waste.
As lean expands towards supply chain management, rises the question about its adequate adaptation. Transportation and
warehousing represent good opportunities for the application and could give important benefits if applied properly. It is
well known that both activities are classified as waste. However, when markets are distant, these are certainly necessary
activities to attain competitive customer service levels. Most distribution networks have significant waste and unnecessary
costs say McKinnon et al., (2003) and Ackermann (2007). For the identification of waste between facilities and installations
in a supply chain Jones et al., (2003) recommend Value Stream Mapping for the extended enterprise. When mapping at the
supply chain level, unnecessary inventories and transportation become important wastes. Unnecessary transportation waste
is related to location decisions for the improvement of performance at given points of the supply chain. Therefore, the
solutions suggested for its elimination are concerned with the relocation and consolidation of facilities, a change of
transportation mode or the implementation of milk runs. In addition to transportation, warehousing is another important part
of a distribution network. Value stream mapping at the supply chain level emphasizes on the identification of inventory
waste. This approach does not consider the elimination of waste in warehousing operations. However, it is important to
realize that warehousing could have an important impact on the supply chain cost structure and on the capacity to respond
to customer needs. Lean transportation and warehousing are still new areas in full development.

ISSN 1943-670X

INTERNATIONAL JOURNAL OF INDUSTRIAL ENGINEERING

Distribution Operational Efficiency

Agile
Supply Chain

Efficient
Supply Chain

Functional
Products

Innovative
Products

Competitive
Factors
Cost

Match
(Lean)

Mismatch

1.
2.
3.

Quality.
Lead times.
Service.

Service
Mismatch

Match
(Agile)

1.
2.
3.

Quality.
Cost.
Lead times

Figure 1. Characteristics of supply chains

This work presents a scheme with the purpose of reducing waste in physical distribution to increase efficiency. It is
suggested to begin the waste elimination strategy with the definition of an extended operational efficiency measure, similar
to the one recommended by Nakajima (1988). This paper consists of five sections. Sections one and two are brief reviews
of the literature on lean distribution. Section 3 introduces the concept of distribution efficiency making the Operational
Equipment Effectiveness (OEE) the base measure. Section 4 presents a structure for the value stream mapping. Section 5
gives a description of the scheme utilized to decrease waste. The application of this scheme is undertaken in section 6 and
section 7 presents conclusions.

2. DISTRIBUTION EFFICIENCY MEASURE

As was previously established, the increase of distribution efficiency is achieved through the elimination of waste. This
process is guided by efficiency measures for transportation and warehousing. These measures are derived from the
principles of Operational Equipment Effectiveness (OEE) used to measure the effective utilization of resources in
manufacturing operations, Nakajima (1988). But, as Scott et al., (1998) have pointed out; the gains in OEE are not enough
because machines are not isolated. This insufficiency of the OEE measure has led to modifications to fit a broader
perspective in the manufacturing systems. For instance, Huang, et al., (2003) suggest the use of the Overall Throughput
Effectiveness (OTE) to estimate effectiveness at factory level and Muchiri, et al., (2007) propose the Overall Asset
Effectiveness (OAE) that is used to identify the losses occurring in the overall production process and a framework for
measuring production losses. This framework considers three levels of effectiveness measurement, the equipment level
effectiveness (based on OEE), the operational level effectiveness using the Total Equipment Effectiveness Performance to
include maintenance downtime and the business level effectiveness measured by the (OAE/OPE). The framework can be
further extended one more level upwards to incorporate the supply chain. At this level, the OAE has to be adapted to
consider not only manufacturing plants; but distribution installations such as warehouses and cross-docking points and
transportation assets such as trucks and railroad equipment.
Transport efficiency was originally suggested by Simmons et al.,(2004). They made the measurement with the Overall
Vehicle Effectiveness (OVE). Similar to the estimation of OEE, were calculated the availability, performance and quality
efficiency factors and multiplied to produce an overall OVE percentage rate. This measure converted the OEE losses from
manufacturing to transport operations. The result was the definition of five transport losses or wastes. These are driver
breaks, excess load time, fill loss, speed loss and quality delays. The previous measure has also been modified by Villarreal,
et al., (2010). In this case, the OVE measure is adapted to consider total calendar time as suggested by Jeong et al., (2001).
This is due to the fact that waste identification and elimination is related to the transportation vehicles utilized to move
product. Since vehicles represent a high investment, it is very important to keep them in operation all the time. Figure 2
illustrates the concepts and losses involved in the proposed measure that is called Total Operational Vehicle Effectiveness
and represented by the term TOVE. In summary, four components for the new efficiency measure are suggested;
Administrative or strategic availability, operating availability, performance and quality. The new measure would be
obtained from the product of administrative availability, operating availability, performance and quality efficiency factors.
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Villareal et al.

In addition to the types of waste given by Simmons, et al., (2004), Villarreal, et al., (2010) suggest the additional types of
waste shown in Figure 2.
The OEE measure is also adapted to analyze warehousing operations by Villarreal, et al., (2011). The measure
(represented as WOEE) considers total calendar time instead of loading time. Furthermore, since the interest is put on the
warehouse efficiency as a system, it is also suggested a measurement based on the bottleneck or most constrained operation
of the facility, similarly to the Overall Throughput Effectiveness (OTE) measure developed by Huang, et al., (2003). Thus,
improvement efforts will be focused on the warehouse bottleneck resource using a scheme based on Theory of Constraints.
Figure 1 illustrates the concepts and losses involved in the proposed measure. In summary, similar to the definition of the
TOVE measure, four components for the new efficiency measurement are suggested, being them administrative or strategic
availability, operating availability, performance and quality. Waste identification is supported by the elaboration of a Value
Stream Map (WVSM) for all warehousing operations including specific efficiency information for the bottleneck resource.
Waste identification is supported by the use of a Value Stream Map. It is suggested the elaboration of the two-level value
stream map Figure 2 presents; a supply chain level map and an installation (plant, warehouse, route, etc.) level map. The
high level VSM is intended to identify strategic waste and provide overall guidance for waste elimination at the tactical and
operational levels. Jones, et. al., (2003) suggested the extended VSM to include the supply chain as a system. Such VSM is
considered with the addition of information on the efficiency measures for the facilities or installations that form the chain.
As is shown in Figure 2, every plant, warehouse or transportation route includes its corresponding OAE, WOEE and
TOVE. At this level, the VSM focuses on product flow. The next VSM level is detailed and provides the required
information for identifying waste at the facilities. Thus, is suggested the application of Value Stream Mapping for the
operations of each installation or transport route.
The VSM suggested for transportation is based upon the work of Villarreal, et al., (2010). This map focuses on
identifying and reducing the waste related to the flow of transportation vehicles. The metrics to be used to assess are
performance and vehicle availability and performance and route quality. Finally, the wastes associated with each metric are
identified for elimination purposes. Transportation activities are defined as In-Tansit (IT), that is, while progress of the
transportation service, otherwise it would be Non-In-Transit (NIT); i.e. loading or unloading product at a distribution
center. Let us define as the transportation journey (TJ), the time specified for the transportation activity for the team of
operators and the vehicle. This may be a fixed period such as a shift of eight hours, or a variable one depending on the
distance required to travel to the customer. We will assume that there always be 24 hours per day available for the service,
and so, several transportation journeys (or services) are possible during a day. An activity is defined as Internal if it is
carried out during the TJ by the team of operators with the vehicle. If it is carried out off the TJ or by another organizational
entity, the activity is called External.
The structure of the map is divided into the macro context and the micro analysis. The macro context is directed to
identify the macro characteristics of the route (as illustrated in Figure 3), among them, the average journey duration, the
modified TOVE index and its components, vehicle administrative availability efficiency based upon calendar time,
availability wastes occurring off the route (such as vehicle nonscheduled time and scheduled maintenance time) and the
proportion of internal and external activity time. This part of the map may serve to guide the improvement efforts according
to the values of the TOVE factors; availability, performance and quality. At the same time, if all the transport activities are
internal there will be an important opportunity to improve vehicle efficiency. The micro analysis phase completes the
analysis of the wastes that drive vehicle operating availability, vehicle and route performance, and important route quality
wastes. Figure 3 gives an illustration of the concepts considered. In this phase, the availability wastes considered are driver
breaks, excess load/unload time and excess time taken by the operating team to carry out administrative activities with the
customer. Performance wastes include speed and fill losses and excess distance required to fulfill the customers orders or
demand. Quality wastes in transportation could refer to administrative errors, product defect generation and route customers
not served on time and/or partially.
The VSM considered for warehousing is suggested by Villarreal, et al., (2011) and Garza, et al., (2010). This tool
includes the description of several types of warehousing waste related to improving efficiency as the relevant performance
measure in operations. Figure 1 illustrates the concepts and losses involved in the proposed measure. In summary, four
components for the new efficiency measure are suggested; Administrative or strategic availability, operating availability,
performance and quality.

3. DESCRIPTION OF OVERALL WASTE REDUCTION SCHEME

This work suggests a two-stage, top-down scheme to guide waste elimination projects for improving distribution efficiency.
The scheme consists of four general stages:
The first stage begins with the alignment of the company strategy to the project. The nature of the resulting strategy
depends on the competitive factors identified in this stage. The waste identification phase is enriched with the use of value
stream mapping. There are two levels for waste identification; at chain level and at each facility and/or route level. This
phase should be exhaustive to set a strong foundation for an effective strategy for waste elimination.
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Distribution Operational Efficiency

Calendar time

Nonscheduled
time
Scheduled
maintenance

Nonscheduled
time

Administrative
Availability
Efficiency

Scheduled
maintenance

NIT External
NIT Internal
Availability
losses

Driver breaks
Unscheduled
maintenance

Availability
losses

Capacity loss

Fill loss
Speed loss

Capacity
losses

Performance
Efficiency

truck waiting
time
Quality
losses

% clients not
served
% demand not
met

Speed loss
Excess
distance

Performance
Efficiency

Excess
distance

Service
losses

Optg
Availability
Efficiency

Waiting time

Excess service
time

Capacity
losses

Availability
Efficiency

Operator
breaks
Breakdowns&
Unscheduled
maintenance

Optg
Availability
Efficiency

Administrative

% demand not
met

Quality
Efficiency

% Product
defects

Quality
Efficiency

% Product
defects

WOEE= ( Adm. Availability)x ( Optg.

Availability)x( Performance)x( Quality)

TOVE = (Adm. Availability)x( Optg.

Availability)x(Performance)x(Quality)
Villarreal, B., European Journal of Industrial Engineering, (Accepted)
Copyrights Inderscience Enterprises Ltd.

Garza, et al., 2011 IERC Proceedings

Figure 2. Description of TOVE and WOEE measures

The third phase consists on the determination of waste elimination strategies at the chain and installation levels. Inventory
reduction strategies as well as the strategies for transportation distribution scheme, facility relocation and transportation
mode change could be used to eliminate waste at the chain level. Waste elimination at the installation level is focused on
the definition of strategies to increase availability, performance and quality efficiencies at selected installations of the chain.
It is suggested to sequence the efforts beginning with wastes at the chain level.
The application of the previous methodology is illustrated in the following section. This is done with information
gathered from two independent efforts undertaken by a Mexican producer of frozen and refrigerated foods. The goal of the
projects was to identify and implement projects for satisfying customer demand and for reduction of the distribution cost.
The first project to decrease transportation cost was developed during 2009 and was described earlier by Villarreal, et al.,
(2009). The second project had the objective of increasing warehousing productivity to reduce cost and increase
throughput through the warehouse. This is described in Garza, et al., (2010) and Villarreal, et al., (2011).

4. IMPLEMENTATION AND RESULTS

The previously mentioned firm is leader in the production and distribution of frozen and refrigerated food in the Mexican
market. The company was experiencing high pressures to reduce operating cost and keep serving a market that considers
price and service as the main competitive factors. The firm was determined to achieve an important reduction in distribution
cost that had increased significantly because of fuel increases above the general inflation rate.
The companys distribution network has a primary distribution network that sends product from plants to Central
Distribution Centers (CDCs), and from these to Regional Distribution Centers (RDCs). It also includes a secondary
network that takes the goods from the RDCs to the retailing points or stores. The primary network includes thirteen plants,
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five CDCs and seventy four RDCs located across Mxico. It is divided into five geographical regions. This work
describes the application of the project on the Northeastern region. This zone utilized a fleet of 21 trucks and sixteen RDCs
to satisfy 15 percent of the gross national demand. The firm was also experiencing certain difficulties to satisfy demand for
this geographic zone. This section describes the project deployed for the satisfaction of the customers demands and
reduction of transportation and warehousing cost.
4.1. Waste identification phase
The phase of waste identification is carried out with the help of value stream mapping. The initial step is made at the chain
level, followed by the phase of identifying waste at the installation level (CDC, RDC and transportation routes).
Chain level waste
Waste identification is made with value stream mapping (VSM) in the distribution process illustrated in Figure 3. The
distribution consists of several sub-processes: loading finished goods at the plant, transporting and unloading them in the
CDC, loading the product at the CDC, transporting it to RDCs, and unloading product at the RDCs. At the RDCs, empty
containers are loaded and transported back to the plant where they are unloaded and cleaned.
Total product processing and distribution lead time is estimated in 7.67 days. Manufacturing value added time accounts
for 32.5%, inventory contributes with 58.7% and transportation the rest. It is important to highlight that the CDC has an
inefficient operation with a WOEE of 15% that makes it the chain bottleneck. Food transportation cycle consists of three
legs; Plant to CDC, from CDC to RDCs and from these back to the plant. Total TOVE is estimated at 33%. The firm sends
food directly to each RDC even though there are various routes with order lot sizes smaller than full truck capacity.
Installation level waste
The identification of waste at this level is limited to the CDC considered the bottleneck of the chain, and the transportation
cycle.
Warehousing value stream map. Waste identification is simplified with the use of the two-level VSM illustrated in Figure
3. The CDC has the role of consolidating product from plants and other CDCs and distributing them to Northeastern
RDCs. The second level VSM describes the operations executed in the CDC (see Figure 4 for details). The main activities
in the CDC are: Unloading, receiving, put-away, storing, picking, packaging and shipping. Has three shifts with an average
daily demand level of 350 pallets per day. Takt time is estimated at 3.8 minutes. The initial bottleneck resource of the CDC
is the Automated Storage Retrieval System (AS/RS) with a current cycle time of 8.4 minutes. Its main areas for
improvement are related to performance and operating efficiency factors with 37% and 41% respectively. The next most
restrictive operation is the picking activity. It is worth noticing that even though the fill rate provided by the CDC to the
customers is satisfactory with a 92.5%, there is an important area for improvement on the synchronization with the
transportation system of the chain. Also has to be considered that current truck waiting times are significantly high and
need to be reduced.
Identification of transportation waste. The TVSM applies to the identification of waste in transportation vehicles because
they are the most expensive resources used in transportation. Figure 5 shows the transportation cycle and highlights several
relevant wastes. The clients in this process are the CDC and RDCs. The total transportation journey is 30.6 hours. Not-InTransit time is 21.6% and consists of loading product and unloading empty baskets at the plant. All activities are Internal.
The main transportation leg time is from the CDC to RDCs with 49%.The time taken to return accounts for 26.1%. Total
In-Transit time is 78.4% and includes 3.5 hours of serving clients (CDC & RDC). The TOVE efficiency factor is estimated
at 33% and the availability and performance efficiency factors are 54% and 59.6 % respectively. There is a high utilization
of transportation outsourcing (28%). The main areas for waste elimination are identified in the availability and performance
efficiencies. The availability factor is critical to improve overall transportation efficiency significantly. Its low level is a
result of the following wastes: Truck waiting time at plant, truck idle time due to the use of outsourcing in 28% of the
shipments, truck idle time due to excess amount of vehicles and excess serving time at CDC and RDCs. The first two
wastes are related. The excess time for unloading baskets and loading food at the plant reduce the availability of the own
trucks at the CDC for next day shipments. This situation originates the need to schedule third party trucks. The performance
efficiency needs further improvement too. The main waste identified is fill loss. This waste occurs because the following
two situations. One is that various routes serve directly RDCs with order lot size smaller than full truck capacity. The other
is related with the return from RDCs to the plant; in this case, truck capacity is used 20% on average while returning
empty baskets.
The waste elimination strategy is described in this section. At chain level, the company decided that inventory levels were
considered acceptable in this zone. The possibility of relocating facilities was also discarded. Changes in the distribution
strategy are further discussed in the section dedicated to the elimination of transportation wastes. First, the strategy to
reduce warehousing waste is illustrated. Then, the set of projects designed to eliminate transportation waste is presented.

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Figure 3. Two-level VSM

Garza, et al., 2011 IERC Proceedings

283

2 mins

U nl o a di n g

1.3 mins

5 pallets

3 mins

R e c e p ti o n

Excess unload time =0.25 hrs to zero

Waiting time = 1 hrs to 0.5 hrs

Pla nts & C D Cs

1.3 mins

5 pallets

3 days

Performance efficiency = 76%

3 mins

A S/ R S

R etri e vi n g

1.3 mins

5 pallets

6. 7 t o 3. 6 m i n s

c o n s o li d a ti n g

Pic ki n g &

Second bottleneck

Performance efficiency = 49%

3 days

CDC

1.3 mins

2. 5 mi ns

Warehousing time = 3.02 days.

Final lead time = 22.7 mins

Initial lead time = 29.6 mins

L o a d/ S hi p pi n g

=
:

3.1 hrs

1.0 hrs

Excess unload time CDC = 0.3 hrs

CDC

2.0 hrs

15.0 hrs

= 15%

Excess unload time RDC = 0.5 hrs

Excess load time CDC = 0.4 hrs

Daily
pallets

container daily
mix

Truck daily
mix

Transportation
Control

1.5 hrs

RDC

Retailers

Availability effic = 54.0%

Performance effic = 59.6 %

TOVE = 33.0 %

8.0 hrs

= 15%

Excess unload time Plant = 0.5 hrs

Excess load time RDC = 0.2 hrs

Plant

Transport time = 79%

Serving time = 11%

NIT time = 10%

hrs

Journey time = 30.6

Transport Route Level

Fill loss = 80 %

Inventory days = 4.5 days

Plant time = 2.5 days

Transport time = 16 hrs

Excess load time = 0.4 hrs to zero

Excess load time Plant = 0.2 hrs

IT Activities

1.5 days

RDC

WOEE = 42%

Demand = 17 trucks/day

Fill loss = 22 %

PLAN
T

NIT Activities

Raw Matl
Supplier

15hr

Amount of daily pallets

RETAIL
DISTRIBUTION

Truck waiting time = 1 to 0.5 hrs

350 pallets/day

R D Cs

CDC Level

5 pallets

Operating availability efficiency = 74%

Final WOEE = 45.6%

Next WOEE = 33.5%

Initial WOEE = 15%

1hr

Trucks and containers

daily mix

WOEE = 15%

Amount of daily
pallets

TRANSPORTATION
CONTROL

Supply Chain Level

Trucks and containers

daily mix

99 % Capacity
100 % Own
Transit time : 1 h R : 1 h

Amount of daily pallets

First & final bottleneck

Operating availability efficiency = 65%

St ora g e

8. 4 t o 3. 4 m i n s

P uta w a y

Performance efficiency = 37%

Operating availability efficiency = 41%

2.5 days

Daily program

Operations planning

PLANT

RAW MATERIAL
SUPPLIER

Distribution Operational Efficiency

Villareal et al.

Figure 4. Warehousing value stream map

RETAIL
RAW MATERIAL

DISTRIBUTION

SUPPLIER
TRANSPORTATION
CONTROL

NIT Activities

TOVE =33 %
Truck daily mix

IT Activities

Performance effic =59.6 %

container daily mix

Availability effic = 54%

Daily pallets

Fill loss = 80 %

Fill loss = 22 %
Excess loading time Plant = 0.2 hrs

Excess loading time CDC = 0.4 hrs

Excess unloading time CDC = 0.3 hrs

Excess unloading time RDC = 0.5 hrs

Excess loading time RDC = 0.2 hrs

Excess unloading time Plant = 0.5 hrs
PLANT

PLANT

CDC

= 15%

RDC

1.0 hrs

15.0 hrs

8.0 hrs

3.1 hrs

2.0 hrs

= 15%

1.5 hrs

Total journey time = 30.6 hrs

NIT time = 10%
Serving time = 11%
Transport time = 79%

Figure 5. Transportation value stream map

4.2. Phase of waste elimination
Warehousing waste elimination strategy
The waste elimination strategy is structured under a Theory of Constraints approach. As such, the initial efforts to eliminate
waste are executed on the Automated Storage and Retrieval System.
This section is based on the works of Villarreal, et al., (2011) and Garza, et al., (2010). A detailed analysis of the
Automated Storage Retrieval System (AS/RS) was undertaken to improve performance and availability efficiency factors.
The system has the purpose of transporting pallets from the reception area to the high-rise racks, re-assigning pallets to
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different locations and retrieving pallets from the rack area to the first-level racks where order picking is executed. The
pallet storage scheme is originally random. The performance efficiency factor is estimated from the identification of three
types of losses: capacity, speed and distance losses. In this case, the capacity of the system is under-utilized since half of the
moves carried out are empty. The ideal performance considers every move of the system loaded with pallets. In addition,
13% of the moves were to re-locate pallets to a different rack position. This situation was considered as a distance loss. The
operating availability efficiency factor is estimated at 41%. About 13% of the time the system is down due to breakdowns
and corrective maintenance. Additional idle time is caused by pallets incorrectly packaged that impede the AS/RS system to
identify and locate them at the right position. There is also incoming pallets with a mix of food items that need to be despalletized to be stored afterwards. Table 1 illustrates a summary of the selected waste elimination activities. It is estimated
that current cycle time per pallet decreases to 4.2 minutes. At this point, the initial bottleneck is broken and the picking
operation becomes the next bottleneck.
The WOEE value is now based upon the efficiency factors of the new bottleneck (see Figure 4). This is estimated at
33.5% with a performance efficiency of 49% and an operating availability factor of 74%. This activity is executed in the
first level of the warehouse. It starts with the identification of the items that will be shipped to the RDCs from the orders
placed by each of them. These are retrieved by the AS/RS system from the second and third levels and relocated at the first
level. The fork lift operator moves the items to the picking and consolidation area where each RDC order is consolidated
and palletized.
These are then moved to the shipping area. The improvement options in this operation are the excess distance travelled by
the fork lift given the inefficient layout and picking procedure and because of the waiting time originated by the deficient
supply of packaging materials. Table 1 shows a summary of the implemented initiatives and the expected impact on
performance and availability. The new cycle time per pallet is 3.6 minutes.
The improvement process may continue until there are not bottlenecks in the warehouse. For this case, the operation with
the AS/RS becomes again the bottleneck. This time, the performance efficiency factor is 76% and the availability efficiency
is 65%. The new WOEE is 45%. The initiatives considered for reducing waste have the objective of improving availability.
These consist of a poka-yoke procedure to identify incoming pallets with mixed items and those incorrectly palletized. A
new area with the purpose of re-palletizing items was also designed. These projects improved availability 15% and cycle
time is decreased to 3.4 minutes. Figure 4 presents the new WVSM. There is not bottleneck operation this time.
Table 1. Summary of waste reduction initiatives for warehousing bottlenecks
Bottleneck
AS/RS
First time

Efficiency Factor
Performance
Availability
Performance

Picking
Availability
AS/RS
Second time

Availability

Initiative
- Redesign layout according to ABC on sales.
- Program truck arrivals and departures.
- Reinforce preventive maintenance program.
- Program truck arrivals and departures.
- Redesign layout according to ABC on sales.
- Redesign of picking scheme.
- Define packaging materials inventory system
-Poka-Yoke procedure for pallets
-Re-palletizing area

Impact
Increase performance factor
at least 39%.
Increase availability about
24%.
Increase factor to 95%.
Increase availability to 95%
Increase availability 15%

Transportation waste reduction strategy

The group of projects that are part of the strategy is summarized in Table 2. The assignment of excess vehicles was made to
routes that exclusively employed third party shippers. Among these, the most attractive routes were between CDCs,
because all these routes are long distance. At the end of the project was achieved a 21% increase in the utilization of the
companys fleet. The main root causes found for excess unloading/loading time waste were the staff shortages in the
unloading area and the lack of an arrival schedule of the containers with empty baskets. For these reasons, the
transportation management organization made staff changes by hiring two additional operators in the unloading area and an
extra driver for loading containers during the night shift. A vehicle arrival schedule allowed the synchronization of tasks
and the reduction of waiting times during the unloading of baskets. With this improvement, the available own trucks and
containers increased, and all shipments were made with the companys fleet instead of using external providers.
In order to improve the vehicle capacity utilization, it was decided to explore the attractiveness of implementing three
projects: timely order consolidation, routing RDCs and a collaboration effort to use backhaul capacity after serving the
RDCs. The primary distribution network includes warehouses and cross docking facilities. The options of temporary
consolidation and routing are considered only for shipments to warehouses as a final destination. The attractiveness of
temporal consolidation was determined by the low cost of capital of keeping inventory compared to the high freight levels.
Its feasibility depended upon warehousing capacity and the impact on the freshness of the foods. However, since it was
only necessary to consolidate orders for two or three days to increase significantly vehicle capacity utilization, this option
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was accepted. Routing RDCs was combined with the previous project to reduce the duration of order consolidation and
insure the required level of food freshness. In order to implement these projects, it was necessary to coordinate with each
RDC in order to determine daily requirements with a rolling time window of one week.
The option of collaborating was explored with third parties specializing in transporting refrigerated foods, with an
emphasis on transportation of the raw materials required by the company. This strategic focus was satisfactory, for instance,
lead to the sign of an agreement with the company Bachoco, a large food processing company located in Torreon,
Coahuila. Both companies are to employ the same transportation unit for all the shipments made between Monterrey and
Torreon, which has reduced significantly the transportation cost on this lane.

5. CONCLUSIONS
This paper deals with the application of the lean thinking concept in the field of physical distribution. It contributes with an
approach to identify and eliminate specific wastes associated with the transportation and storing of goods. This scheme is
based upon the suggestion of extending the concept of Operational Equipment Effectiveness (OEE) to each facility of the
supply chain system. Hence, the identification and elimination of waste is geared by the classification according to the three
efficiency factors availability, performance and quality. The process is done sequentially in a stepwise manner, giving the
highest priority to bottleneck facilities or to those with higher contribution to the achievement of the company specific
goals.
The project is successful because of the significant decrease of distribution cost and enhanced satisfaction of customer
demand by the two projects carried out.
Future research efforts are being assigned to the definition of the concept of operational supply chain efficiency (OSCE).
This will be established as a function of the set of corresponding facility and transportation route efficiency factors of the
chain. Additionally, a scheme to prioritize improvement efforts over the chain using these factors is being devised.
Table 2. Summary of transportation waste elimination projects
Route
Overall
Plant to
CDC
CDC to
RDCs
RDC to
Plant

Important wastes
Excess amount of trucks.

Excess waiting times to load and unload

at plant.

Excess waiting time to unload at CDC.

Fill loss at certain routes.

Excess load time at CDC.

Almost empty (with baskets) to plant.
Excess unload time at plant

Projects
Re-assigning trucks to other zones.
Hiring extra personnel and synchronizing
arrivals.
Unloading process improvement at plant.
See warehousing projects.
Temporal order consolidation & routing
RDCs.
See warehousing projects.
Collaboration with other firms.
Unloading process improvement at plant.

6. REFERENCES
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2.
3.
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Villareal et al.

BIOGRAPHICAL SKETCH
Imelda Rosas graduated with honors (Cum Laude) in Industrial Engineering with an
emphasis in Logistics from the Universidad de Monterrey (UDEM). Imelda had started her
MBA in 2011. Imeldas main work and research interest is supply chain management. She
has collaborated in various Supply Chain projects such as Lean Transport Optimization
project at Sigma Alimentos. She is currently working as a Demand Program Coordinator
for BarS Foods in Oklahoma, USA .

David Garca is an industrial engineer graduated with honors from the Universidad de
Monterrey (UDEM). He is currently a graduate student of the MSc program of Industrial
Engineering at UDEM. David main work and research interest is supply chain
management. He has collaborated in Supply Chain projects for different enterprises such
as Lean Transport Optimization project at Sigma Alimentos. At present, he is a senior
Demand Planner for Oxxo, the largest convenience store chain in Mexico. David is also
co-founder of a new soccer textile manufacturer.

Fabiola Garza is a CUM LAUDE Industrial Engineer graduated from Universidad de

Monterrey (UDEM). She is actually a graduate student of the Industrial Engineering MSc
program at UDEM. Her specialty is the operations and logistics improvement. She has
participated on several projects such as The Redesign of the Supply Process of Drugs on a
Medical Center, the Improvement of the Transport System on a Paperboard Manufacturer.
She also applied the Lean Thinking principles for Improving the Productivity of the
northeastern distribution network of Sigma Alimentos, a Mexican Company leader on the
production of Frozen/Refrigerated Food. Nowadays, she works at this company on the
Commercial Efficiency Department, developing strategies for Improving the Productivity
of the Sales Force. Fabiola is a member of the IIE, ASQ and APICS Societies.
Bernardo Villarreal is a full professor of the Department of Engineering of the
Universidad de Monterrey. He holds a PhD and an MSc of Industrial Engineering from
SUNY at Buffalo. He has 20 years of professional experience in strategic planning in
several Mexican companies. He has thaught for 17 years courses on industrial engineering
and logistics in the Universidad de Monterrey, ITESM and Universidad Autnoma de
Nuevo Len. He has made several publications in journals such as Mathematical
Programming, JOTA, JMMA, European Journal of Industrial Engineering, International
Journal of Industrial Engineering and the Transportation Journal. He is currently a member
of the IIE, INFORMS, POMS, and the Council of Logistics Management.

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