Digital Transformation

Lean Warehouse Operations for SMBs to Improve Efficiency

Explore the tried-and-tested methodology for establishing lean warehouse operations, drastically improving your efficiency and productivity.

Blog Post

7 minutes

Apr 08, 2022

Lean warehouse operations should be a key objective for any business in today’s climate.

We recently wrote a blog about how lean manufacturing and associated practices can help you improve your product or service dramatically—the same is also true of your warehouse and logistics, and many of the same principles apply.

Following on from last week, today we’ll be talking about the 5S strategy for establishing lean warehouse operations.

What Is Lean Warehousing?

Lean warehousing is a process for achieving the most efficient level of operations in a warehouse by eliminating seven possible kinds of waste without impacting productivity.

The concept of “lean” was developed by Japanese auto manufacturer Toyota in the 1930s as a way of streamlining their manufacturing processes. It has since been adopted as a model for operations worldwide.

The 7 “wastes” outlined are as follows:

  • Inventory: Excessive, overstocked products
  • Waiting: Labor costs from a lack of productivity
  • Defects: Products that need re-working or scrapping
  • Overproduction: Producing more than the market demands
  • Motion: Unnecessary movement of employees or equipment
  • Transportation: Movement of materials and product
  • Over-processing: Doing additional work that brings no value

While originally intended for manufacturing, removing these wastes has been consistently applied to warehouse management to streamline operations for decades.

Breaking Down Lean Principles in Warehousing

Why Do I Need Lean Warehouse Management?

The short answer is that it saves money and improves productivity.

Warehouse managers have to deal with these wastes every day, so using the lean method to eliminate them and keep your working processes tight is crucial to ensure you’re getting the most out of what you’ve got.

Now, typically when we’re talking about improving operations, we’d look at how digital solutions can improve functions, like an ERP for example.

What’s notable about warehouse operations, however, is that many of the obstacles are completely non-digital. In other words, an organization’s operations can grow increasingly unproductive simply through a buildup of minor processes that aren’t up to standard.

This is where a lean mindset can make great strides; by adopting a number of changes that will change the approach to how the warehouse is organized, and then maintaining those changes for the future.

warehouse operations technology adoption stats graphic

Core Principles for Lean Warehousing

This quick lean warehouse management methodology is implemented by businesses to better their efficiency, improve their organizational methods, and standardize their processes.

There are five aspects of the 5S system: Sort, Set in Order, Shine, Standardize, and Sustain.

Related: Intelligent Process Optimization for Manufacturing, Distribution, and Logistics

Sort Your Lean Warehouse Ideas

The first step is to sort your warehouse—identifying what you need and what you don’t.

What to do:

Eliminate clutter and clear spaces that have unnecessary items in them. Pay close attention to what equipment and materials are in any given area, and ask yourself whether it’s necessary for them to be there.

Some items might need to be put into another area where they’re better suited, and some removed entirely.

If you can’t identify an item or where it needs to go, tag it so that others might be able to.

If it goes unclaimed, sell it, recycle it, or throw it away, unless you’re sure that your operations definitely need it, in which case, store it for later use.

Set Ideas in Order

Set in Order effectively translates as streamlining your physical setup—in other words, allowing for the most efficient use of movement around the building.

What to do:

The goal of this step is to organize your warehouse. Build a floor map to determine where materials and equipment should be kept and design a foot and machinery traffic flow to improve efficiency.

Put frequently used items and equipment in easy-to-access areas, and instructions to reduce retrieval time for employees.

This communication with workers through labeling and signs is vital to getting everything running smoothly—the last thing you want to do is re-arrange your entire warehouse floor and not let the workers know where anything is.

This also makes it easier for new employees to understand how to perform their jobs in the warehouse.

In a fulfillment warehouse, walking is “the enemy of efficient order picking. In fact, it can comprise as much as 50% of the picking process – and up to half of your warehousing labor cost. Without the right system-aided picking process, you’re paying order pickers to walk, not to pick.”

Keep Your Lean Warehouse Organized

It’s important to make sure your warehouse is organized and clean to establish effective lean warehouse principles. This basically comes down to making sure you keep your warehouse tidy, but it’s a lot more than just getting a mop and bucket out or organizing shelving.

What to do:

The key advantage to keeping your warehouse clean is that it gives you an opportunity to effectively perform preventative maintenance, this is especially the case if workers take ownership of their own areas.

They will be able to identify missing items, misplaced items, and issues with machinery that would otherwise go unnoticed; helping you recognize a small problem before it causes a much bigger issue.

Standardize Lean Warehouse Practices

Standards in the workplace are important; standards in a warehouse are even more important when you’re trying to maximize productivity.

62% of respondents reported human error from manual process management as the #1 root cause of inventory fulfillment issues.

What to do:

All processes should be standardized, and employees should have a very clear understanding of what they are expected to do and have the materials available to them that allows the completion of tasks.

These are usually done through checklists and best practices and procedures made visible and accessible to staff. By doing so, you also introduce proper accountability so that the staff knows what is expected of them and understands the means to do so.

No one is left wondering what they’re supposed to do or left guessing how to perform their job.

These standards should be easy to understand and easy to access, whether it’s a poster or an online document. For new employees, use training manuals to get them up to speed as quickly as possible.

Once you’ve established a set of standardized procedures, you may even adopt automation solutions, as many other businesses have already done.

warehouse automation adoption statistics graphic

Introduce Sustainable Lean Solutions

When we talk about improving business processes with our customers, a large emphasis is placed on continuous development—it’s never a case of one-and-done solutions.

In the original Japanese methodology, it directly translates as “discipline”, meaning that once you’ve established your new rules and practices, you must maintain your discipline in upholding them and continually improving them.

More than 3 in 10 warehouses and distribution centers are currently using or considering robotics.

What to do:

In essence, it means that every principle—from steps one to five—of lean warehouse operations should be applied consistently.

For example, if over time the floor plan for movement efficiency isn’t working as intended, then revisit it. If there’s a buildup of equipment in an area, apply the first step again.

To achieve this, ensure that managers are committed to the five steps; without their direction, you may struggle to uphold the practices—and your improved efficiency.

The Bottom Line

  • The “lean” concept is a tried-and-tested methodology that originated with manufacturing but can be applied to many business operations, including the warehouse.
  • Lean warehouse operations are a fundamental aspect of improving productivity and efficiency within an organization.
  • Creating a lean plan for your warehouse and sticking to it is important for maintaining the improvements you’ve made to your processes.

Lean warehouse operations are essential, but efficiency improvements don’t just end with implementing effective lean warehouse practices. Technology solutions, like ERPs, use your data to give you analytics of your warehouse operations with pinpoint accuracy. 

Using analytics, you can reduce overstocking, assess historical trends in your inventory, see the productivity of employees, and get predictions to help you prepare for market fluctuations that you might not have otherwise been aware of.

For more information about how tech solutions can help your SMB, download our free eBook, Fast-Tracking Your Digital Transformation, featuring an entire chapter on Enterprise Resource Management, which helps improve the efficiency of your supply chain and other warehouse processes.


Digital TransformationStreamline ProcessesManufacturingLogistics


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