Warehouse Improvement Case Study: RailCo

Let’s explore a warehouse improvement case study employing lean concepts and a holistic overview approach. The results speak for themselves – 55%+ improvement in cycle times, 30% reduction in labor, improve quality by 10x.

How did we do it?


The company, “RailCo”, shipped produce and wine by rail from the west coast to the east coast.

The warehouse I managed would receive two trains weekly, each train consisting of 30-60 railcars to unload. The goal for unloading a “wave” of cars — that is, a batch of 11-14 cars– was 6 hours from start to start. Each wave of cars would be unloaded, then the switching service would pull the empty wave and replace it with a full one.

The warehouse would receive, putaway, stage, and ship. There was some cross-docking in the operation but most goods went into coolers before being staged and shipped.


The problem was that outbound quality and productivity were poor. There were delays and mis-ships, lots of damage, and overs/shorts caused huge problems. The site had added labor to audit outbound loads, but many errors were still getting through.

After checking outbound processes, we found that inventory accuracy was poor. This led to delayed staging and errors as pickers pulled product from incorrect bins to fill orders, which created more inventory problems. When we researched the inventory errors, we found that inbound receiving processes (moving pallets from the dock to the cooler locations) were inefficient and low-quality. We found that the receiving processes were low-quality because the unloading service was being paid to unload as quickly as they could, so they were rewarded strictly on productivity.

As you might imagine, this resulted in entire railcars being unloaded (3.5 truckloads!) to the dock before they could be put away. This led to crowding, broken pallets, constant pallet restacking and product damage, unsafe travel conditions, and other problems.

The dock looked like this in a typical unload:

The solution

How could we fix these issues? We turned to Lean principles to develop and implement solutions.

To address this, we instituted a lean-inspired “supermarket” at the railcar unloading process. Unloaders could unload only up to 5 pallets per railcar to stage for putaway. We designated 5 numbered pallet positions on the side of the dock opposite the railcar to deposit them. And those had to be in pristine condition, ready for putaway–no broken wood, leaning pallets, or burst onion bags! Putaway associates were to inspect and take one at a time. When a pallet was removed from a slot, then the unloaders could replace it with a new pallet.

Here’s what the setup looked like:

At the same time, we told putaway associates, who had been assigned to work a railcar or two, that they could travel the dock and putaway any eligible pallets. We later put andon lights by each railcar dock to signal that the pallet supermarket was full and needed putaway.

Last, we had the outbound load auditors–inventory & quality associates–move from checking outbound loads for errors to walking up and down on the inbound dock, adjusting pallet damages and fixing railcar inventory problems.

Training and Change Management

This was a huge change so we did some change-management measures.

These included training and an operational process pilot.

The training was a Lean classic with airplane assembly. Here is an example [link]. The purpose was to introduce the supervisors and leads to the concepts of Pull production instead of the Push production system they’d been using. The training took about 3 hours and was very successful. There is nothing as convincing as seeing and feeling something work instead of having “management” tell you what to do.

Then we conducted a short pilot to get employee feedback. The team was initially skeptical but saw benefits very quickly. The pilot was supposed to be at one rail dock to start, but after the first day of the process, the team started demanding it be used at other docks more quickly than we’d planned.

This implemented system had several effects.


Once we implemented this system, we saw these changes:

  • No more crowded dock, safer and easier travel for putaway associates – Big safety win!
  • Less time restacking pallets, fewer broken pallets – Big quality win!
  • High quality, high accuracy putaways – Less wasted labor, high accuracy!
  • High quality, high accuracy staging – Less wasted labor hunting for pallets!
  • High accuracy loading & shipping – Faster customer service!
  • Counter-intuitively, faster railcar unloading – Less unload labor, faster throughput!

The metrics showed big changes.

Average railcar wave cycle times went from 7 to 4.5 hours, a 35% reduction in time, or a 55% improvement in throughput.

At the same time, putaway staff headcount could get the job done with 30% less labor hours.

Safety incidents went down. Inventory accuracy went way up, and outbound DPMO went way down – less than 10% of previous issues.

The atmosphere in the building improved considerably. With fewer safety issues and less stress from moving around on the dock and being pushed for time, employee morale got a big boost.

The impact of the transformation hit a salesperson who was walking around with a prospective client in the building. The sales-person commented “it’s pretty empty now, but you should see it when they’re unloading a new train.” We pointed out that we were in the middle of unloading a wave, we had just gotten so efficient that it looked almost like a non-operating building.


All told, the initiative was a huge success. The facility became safer, with fewer errors, and with much higher efficiency.

Why wasn’t this done before?

The focus on unloading speed didn’t account for the impact of crowding and quality problems on the dock. And the focus of the teams on speed made them look past the “slow is smooth, and smooth is fast” mentality. Helping the leads and supervisors buy into a different approach was the hardest part. But once they saw and felt the results themselves, the process sold itself and they spread it much faster than the rollout plan had.

The other big takeaway from this study was that problems at inbound and receiving will impact the performance of the rest of the facility. If product is not received in good condition and accurately, and put away accurately, then it can’t be tracked or picked.

Last, incentives matter: Telling the team members “unload faster” and setting financial incentives for the unloading teams led to many quality errors and poor processes.

We saw that taking care of the people by having a workable process had huge impacts on the facility and the employees lives. We saw that prioritizing quality over speed ended up paying for itself many times over. This was a Lean success as well as a huge learning opportunity.

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