Milk Run

In logistics, a milk run is where a customer has a single vehicle visit a series of suppliers to pick up materials. In traditional shipping, the reverse is true. Vendors deliver to their customers.

The name comes from the dairy industry, in which a single tanker from a processing facility visits a series of dairies and collects their milk for the day. The alternative would be each dairy having to arrange shipping on their own to deliver to the customer.

In a Lean organization, having reliable vendors takes on an increased importance. With little inventory in stock, any disruption can shut down production.

Customers have many options.

They can use standard shipping methods in which they order from a supplier, and the supplier boxes up the materials and send it out via carrier.

They can work with vendors that have their own delivery fleet.

They can do vendor managed inventory, in which the vendor actually comes into the facility and restocks at warehouse locations or even point of use.

They can make things in-house but would still need raw material brought in by one of the other methods.

Or they can choose milk runs. As an example, years ago I worked for a heavy manufacturing company. They needed a variety of steel products and had several local vendors. The company had its own trucks and a system of racking materials.

The trucks would make the rounds to the local vendors twice per day. They would drop off empty racks that acted as the pull signals and pick up the now-full racks. Some held steel plate. Some held tubing. Some held bar stock.

Internal Milk Runs

The same principles used for milk runs to vendors can be done internally. This is most applicable when you have a lot of in-house production facilities. For example, if you make electronic products, you may have an injection molding site, a printed circuit board facility, a facility that produces accessories like power cords that are common to many product lines, and perhaps a warehouse. Each product line might have a van that goes site to site picking up their own materials.

The benefit of this is pull. If the in-house production sites delivered, they would need an ordering system to know what to send.

Pros and Cons of Milk Runs

Milk runs have some clear advantages in specific situations, but also have several drawbacks.

Advantages of Milk Runs:

• Overall lower drive time than single, point-to-point pickups or deliveries
• Allows for custom containers (vendor permitting)
• Supports just-in-time inventory systems
• More reliable because it is self-managed
• Transport vehicles can be loaded/unloaded to suit production needs

Disadvantages of Milk Runs:

• Requires lots of coordination
• Requires flexibility by vendors, including setting up a loading area that does not conflict with the vendors deliveries
• With low inventory, weather can have a big impact, but this is not unique to milk-runs
• Depending on the vendor, demand might need to be fairly stable
• You will likely have to pay to lock up the inventory you need to make sure it is available whenever you arrive to make a pickup.

Conditions for Milk Runs

In the example I gave, the opportunity was very large because of the specific conditions.

The need was for commodity products with many local vendors who could offer competitive pricing. These vendors were also flexible and willing to accommodate…

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