In March’s edition of the LMJ, we provided an overview of the global lean approach being rolled out at Panalpina. In this article, we share more details on the LogEx pyramid, one of the tools the team has developed to assist with achieving one of its key strategic objectives: Making continuous improvement part of Panalpina’s DNA.

The business need for the assessment

Panalpina has operated logistics operations around the world for many years. Traditionally, these logistics operations were not part of the company’s core business and were there to support its air and ocean freight business.

In 2011, this changed completely. The company decided to refocus its strategy and move away from offering just freight services, and aimed to provide customers with a complete supply chain solution. To do this meant developing and strengthening its warehouse operations and creating a new logistics product.

Mike was hired in 2011 to do this, and recognised that while Panalpina was in a unique position (it had a global network of warehouses already in place and a strong customer portfolio from their freight business), it didn’t have the right skills and expertise to make the best of its existing logistics operations and it didn’t have a clear strategy to transform them into world-class facilities that added value to Panalpina and its customers.

“We wanted to avoid the common pitfalls and, like with many things in Panalpina, we wanted to do things differently.”

He set out to recruit a new team and made a conscious decision to recruit not just from the logistics industry, but also from the manufacturing industry. He looked for people with experience of running and setting up lean operations. He had run Celestica (a multinational electronics manufacturing service provider) in Europe for many years, and therefore knew the power of lean and how it can transform a business. He decided to recruit a team who understood what lean was all about from day one – and he knew that to get true lean experts he would have to look in the manufacturing industry, where there is currently more expertise than in logistics.

The origins of our LogEx/Lean Assessment

When the team sat down and started discussing the best way to assess our existing operations, Andrew (who leads Logex, Panalpina’s lean programme) and his team immediately recognised that Panalpina had a great opportunity to assess its operations in a different way to other logistics providers. The team that had recently been recruited came from different industries and backgrounds. Each one brought new ideas and experiences of the right and wrong ways to set up a lean assessment.

As Andrew explains, “We wanted to avoid the common pitfalls and, like with many things in Panalpina, we wanted to do things differently.”

Introducing the LogEx Pyramid in the US

When LogEx was introduced in 2011, it was just a pyramid with building blocks of tasks to be completed to achieve a green dot… another box to tick on a checklist of tools! However, upon implementation of each of the blocks, new meaning and roles of the warehouse became much clearer. And when “yes” was answered to each of the questions with true
objective evidence, not only was the green button highlighted but a true visual transformation began to take place in
the logistics facilities, and a new spirit of continuous improvement was born in each of the operators.

The biggest visual evidence was when 5S was fully implemented in each of the facilities. In the cleaning out phase of 5S, dumpsters were ordered to haul out the trash and unused items. Floors, walls, windows were cleaned for the first time in years. Painted or taped lines on the floor shows where traffic areas are, where pedestrians can safely walk, and where things belong. Signage indicates where things are to be stored. Desks are clean and tools can be quickly alocated on a shadow board. All of these efforts have brought organised structure and discipline to each of our facilities and has made each warehouse a place of pride and ownership by the operators.

Other blocks on the pyramid encourage us to develop meaningful KPIs and assure the customer requirements are being met and communicated. We have also been cleaning up our finances; and not only managing our costs better but also creating greater transparency on revenue and cost for each account and product in the warehouse. All operators are encouraged to be involved in the process and the ones that choose to stand on the sidelines and “watch” are soon swept into the continuous improvement spirit.

The biggest change we have seen though is in our operators. They have always done a good job and over the past two years we have asked them to go from doing a good job to doing a GREAT job with our slogan “good to GREAT”. With LogEx as a guideline we can now measure our successes and also give the team a common understanding of what GREAT is. This is no longer just a programme, it’s a common challenge. It is who we are. It is also exciting to see what we are becoming: a united logistics team ready to deploy its vision: “Global logistics solutions tailored and delivered with excellence – every shipment, every time.”

Designing the LogEx pyramid

The initial focus was on putting the foundations in place to create a lean business. These foundations are the bronze level” in the LogEx pyramid.

Most companies would look for their best site and assess this first to set the standard. We decided to use an alternative approach. We identified a number of sites across the world that were not running well and sent a team there, mostly to help them improve, but also to identify why they were failing. As part of the improvement process, we asked the team to identify what was missing at these facilities that was causing the failures.

Once the operations were running well again, we re-grouped as a team and drew up a list of the things that had been missing at each of the sites when we had first arrived. We saw that more often than not, one or more “fundamental” elements were missing at the site that was causing the operational failures. For example, roles and responsibilities were not clear, KPIs were not measuring the right things or processes were not clear or being followed. We decided that this “list of fundamental elements” would be the basis for our initial LogEx assessment.

We grouped the list under a number of headings and displayed the headings on a pyramid, with a traffic light that turned green when all the elements were in place. We decided that once all of the traffic lights were green on the bottom two levels of the pyramid, we would award the site with a bronze certification.

With many sites now at bronze, we have started to develop the assessment for silver. Now that everyone knows about bronze and the standard we are looking for, we have started to turn our attention to “what is silver”. If bronze is about getting the fundamentals in place, silver is about the softer sides of lean; a focus on employee engagement, customer value and the development of a culture of continuous improvement. This is not something you can check with a yes/no checklist as we do for the bronze assessment. The only way to see if the business is really starting to focus on these points and truly develop a culture of

continuous improvement is by visiting the site and speaking to a range of people from the team and asking them how they are involved with improving the business.

After a few interviews, it’s easy to see if the team is truly enthused and involved with continuous improvement. What’s not so easy is to measure this or explain to other operations how to achieve it. There is not one right way to create a culture of continuous improvement. What works in Japan may not necessarily work in the States and the only people who can find the right way to create a lean culture are the local management team.

When Andrew visited the sites in Tilburg and Eindhoven, everyone he spoke to, from the senior managers to the team working on the shop floor, was excited to talk about the improvements they were working on and the pride in the work they were doing. This is what silver is all about.

In search of gold

Although we have a gold level on the pyramid, we are still working on the definition of gold. With bronze being about making sure the fundamentals are in place and silver being about creating a culture of continuous improvement, our plan is for gold to be all about delighting the customer. We have some operations that are already doing this: our teams in UK and Brazil, both implementing the LogEx pyramid, were recently awarded with “Supplier of the Year” awards by a global telecoms manufacturer.

We are delighting some of our customers; achieving gold will be about delighting them in every operation we run.