Lean Design, Lean Manufacturing, Lean Inventory/Supply Management – A Sustainability “Trifecta”

Source (Popular Mechanics)

You’d have to be living in a mountain cave or vacationing on the south coast of France to not know that world stock markets are being whipped around these past two weeks.  The USA Today has attributed what’s been happening in the markets here in the U.S. along seven key elements, all of which is related more to external factors such as the European money woes, general investor fear and lack of policy direction from the federal government.

The general market fear and scurrying for shelter reminds me that when hikers are caught in a sudden storm, they often seek shelter in a “lean-to” or other protective cover until the skies clear.

I thought that in light of the economic body slamming that has been going on this past week, it’s worth reflecting on some efficiency-based ways that  businesses can use to overcome (or at least buffer) some of the external factors that are causing such economic uncertainty.  Like the hikers seeking shelter from the storm, there are some “lean-to”-like steps that company’s can take to exert some control and influence — and it all relates to a leaner, greener, smarter enterprise.

The Lean and Green Enterprise

Last winter I wrote about how importance a “lean and green” enterprise was in establishing a smarter, leadership position in a rapidly changing global marketplace.  I noted then that a 2009 study suggested that “lean companies are embracing green objectives and transcending to green manufacturing as a natural extension of their culture of continuous waste reduction, integral to world class Lean programs.”  Lean was more rapidly accomplished with a dedicated corporate commitment to continual improvement, and incorporating ‘triple top line’ strategies to account for environmental, social and financial capital.  I also argued by looking deep into an organizations value chain (upstream suppliers, operations and end of life product opportunities) with a ‘green’ or environmental lens, manufacturers can eliminate even more waste in the manufacturing process, and realize some potentially dramatic savings

So I was reminded this past week that Lean in design, Lean in manufacturing, and Lean in inventory can individually or collectively be key success factors in managing waste in all its many forms.  Collectively, this can have a measurably positive effect on a company’s financial, and hence, business performance.  A couple of recent articles touched on this topic this week while you were watching your 401(K) equity or stock value tank.   But first let’s touch on Lean Design.

Lean Design

I came across an older but very relevant article written in the aftermath of the Internet stock crash in the early 2000’s.  The article described product development as involving “two kinds of waste: that associated with the process of creating a new design (e.g., wasted time, resources, development money), and waste that is embodied in the design itself (e.g., excessive complexity, poor manufacturing process compatibility, many unique and custom parts).”  The article cautioned that because the design process is the cradle of creative thinking, designers needed to carefully watch what they “lean out” or risk cutting off the creative process to reduce waste.  What has happened in the ensuing years has been an incredible emphasis on “green design” that focuses on full product life cycle value, such that “end of life management” considerations have taken on a more relevant and embedded nature in manufacturing.

A Lean Manufacturer Can be a Sustainable Manufacturer

In yet another recent article by manufacturing consultant Tim McMahon (@TimALeanJourney), he notes that “Lean manufacturing practices and sustainability are conceptually similar in that both seek to maximize organizational efficiency. Where they differ is in where the boundaries are drawn, and in how waste is defined”.  He notes, as I have in my past posts, that Lean manufacturing practices, which are at the very core of sustainability, save time and money — an absolutely necessity in today’s competitive global marketplace.

The key areas to control manufacturing waste and resource use during the design and manufacturing cycle, can be broken down  and managed for waste management and efficiency in the following five ways:

Reduce Direct Material Cost – Can be achieved by use of common parts, common raw materials, parts-count reduction, design simplification, reduction   of scrap and quality defects, elimination of batch processes, etc.

Reduce Direct Labor Cost – Can be accomplished through design simplification, design for lean manufacture and assembly, parts count reduction, matching product tolerances to process capabilities, standardizing processes, etc.

Reduce Operational Overhead –  Efficiencies can be captured by minimizing impact on factory layout, capture cross-product-line synergies (e.g. a modular design/ mass-customization strategy), improve utilization of shared capital equipment, etc.

Minimize Non-Recurring Design Cost – Planners and practitioners should focus on platform design strategies to achieve efficiencies, including: parts standardization, lean QFD/voice-of-the-customer, Six-Sigma Methods, Design of Experiment, Value Engineering, Production Preparation (3P) Process, etc.

Minimize Product-Specific Capital Investment through: Production Preparation (3P) Process, matching product tolerances to process capabilities, Value Engineering / design simplification, design for one-piece flow, standardization of parts.

Can a Lean Inventory Management Drive Sustainable Resource Consumption?

Business Colleague Julie Urlaub from Taiga Company  (@TaigaCompany) summarized a post in a recent Harvard Business Review by green sage Andrew Winston (@GreenAdvantage).  The article, Excess Inventory Wastes Carbon and Energy, Not Just Money describes how the global marketplace “ is sitting on $8 trillion worth of ‘for sale’ inventory [the U.S. maintains a quarter of that  inventory].  These idle goods not only represent a tremendous financial burden but an enormous environmental footprint ” that was generated in the manufacturing of those goods.  Mr. Winston maintains that “If we could permanently reduce the amount of product sitting idle, we’d save money, energy, and material.”  The problem is predicting and managing inventory in such fickle times.   Winston went on about new predictive tools being advanced by companies that hold promise in nimbly driving inventory demand response up the supply chain.  For instance, he noted that “ using both demand sensing software and good management practices, P&G has cut 17 days and $2.1 billion out of inventory. All that production avoided saves a lot of money in manufacturing, distribution, and ongoing warehousing. It also saves a lot of carbon, material, and water.”

What Mr. Winston found shocking though (me too!) was that “even with the fastest-selling, most predictable products, the estimates are off by an average of more than 40 percent. Imagine that a CPG company believes that 1 million bottles of a fast-turning laundry detergent will sell this week. With 40 percent average error, half the time sales will actually fall between 600,000 and 1.4 million bottles. And the other half of the time sales will be even further off the mark.”  The process becomes self perpetuating and the inventory racks up along with the parallel environmental footprint, unless somehow the uncertainty can be better predicted.  While companies like to have on hand what Mr. Winston referred to as “safety stock”, I have come to know as reserve inventory driven by “just in time” ordering .  But that process was shown to have its own flaws such as when orders for goods dried up overnight in 2008 and when it came time to ramp up in early 2010, part counts were insufficient to meet the rising demand.

I really pity the supply chain demand planner, who like the weatherman is subject to the fickle nature of an unpredictable force.  Winston wrapped up his article by stating that “ reducing the inventory itself could be the greenest thing [logistics executives] can do”.  I had the chance to speak and attend the 2010 Aberdeen Supply Chain Summit where demand response planning was discussed at length and where green supply chain issues were recognized as one of many key attributes in effective supply chain management.  In such a volatile economy, its vital that companies keep inventory management in mind as a way to leverage its costs and simultaneously look toward environmental improvements that can reduce waste.

Partnering for Progress

A relatively recent pilot program in the State of Wisconsin just shows how partnering to create a lean focused sustainable manufacturing cluster can have enormous dividends.  According to a recent article in BizTimes.com, the Wisconsin Profitable Sustainability Initiative (PSI) was launched in April 2010 by the Wisconsin Department of Commerce and the Wisconsin Manufacturing Extension Partnership (WMEP). The goal according to the article is “to help small and midsize manufacturers reduce costs, gain competitive advantage and minimize environmental impacts”.  Forty-five manufacturers participated in over 87 projects evaluated. These projects focused on “evaluating and implementing a wide range of improvements, including reducing raw materials, solid waste and freight miles, optimizing processes, installing new equipment and launching new products.  The initial results show that the projects with the largest impact do not come from the traditional sustainability areas such as energy or recycling. Instead, outcomes from the initial projects suggest that transportation and operational improvements are places where manufacturers can look to find big savings, quick paybacks and significant environmental benefits.”

The program is projected to generate a five-year $54 million economic impact, including: $26.9 million in savings, $23.5 million in increased/retained sales and $3.6 million in investment.

Lean design,  Lean manufacturing, Lean inventory management – a Waste Containment and Efficiency “Trifecta”

Together, lean design,  lean manufacturing  and effective, lean inventory management offer a “trifecta” approach for industry to identify, reduce or eliminate and track waste.  Effective use of these tools cannot only drive both in how the product is designed and  produced but offers opportunities all the way up the supply chain to manage effective inventory and resource consumption. As the University of Tennessee studied concluded,  the implications of lean strategies are 1)  Lean results in green; and 2) Lean is an essential part of remaining competitive and maintaining a quality image.  Put the two together and a company can virtually be unstoppable…or a least a bit more recession-proof and “shelter from the storm”.

Five Reasons that Sustainability and Supply Chain “Greening” Will Stick in 2011.

Hello, 2011.  Ten days in and already the supply chain chatter is in full force.  In a recent post, I noted how 2010 saw an incredibly marked increase in attention to supply chain ‘greening’ and sustainability (two different things I might add).  2011 looks to carry this trend to greater heights.  Why will there be increased traction in supply chain greening and sustainability?  For the following key reasons:

Economics- Contrary to popular belief, making the business case for making sustainability ‘operational” within an organizational supply chain is becoming easier, not harder.  With the availability of more data from ‘first movers’, procurement managers, environmental directors, design engineers, marketing/communications staff and operations managers (among others) are able now to make strong business cases in favor of looking at operations through a green lens. In addition, barriers to global trade brought on by increasing environmental regulations, more stringent restrictions on hazardous substances, greater emphasis on lean manufacturing, and increased supplier auditing and verification are creating the critical mass toward a new norm in supply chain management and expectations.  Seeking efficiencies in supply chain management and producing products while reducing waste continue to be a vital imperative in a recovering economy.  Those who neglect to critical evaluate their operations from a sustainability point of view this year will be cast to the side.

Climate Action- Supply chain sustainability is affecting shareholder value, company valuations and even due diligence during proposed mergers and acquisitions, the report said. It added that shareholder actions on sustainability performance and transparency were up 40% in 2009.  An article in the Environmental Leader last month described how climate change was playing an integral role in corporate supply chain decisions.  A very insightful report by Ernst and Young note that “As carbon pricing becomes established in various jurisdictions, organizations will face risks from compliance obligations.  This will impact cash management and liquidity, and carbon-intensive sectors may see an increase in the cost of capital.”  Still much work still remains to infuse green thinking in the C-Suite.   Little more than a third of those executives surveyed indicated that they were working directly with suppliers to reduce their carbon footprint, or have just started discussing climate change initiatives with their suppliers.  And now, the World Resources Institute is completing authoritative new supply chain and product lifecycle greenhouse gas protocols that will frame what’s expected to be a burgeoning wave of value chain sustainability accounting and reporting.   Stay tuned!

Disclosure and Accountability- As I’ve previously noted, supply chain management became widely recognized in 2010 as a key factor in measuring the true “sustainability” of an organizations practices and processes, and ultimately its product or service.   Increased attention will be paid this year on conflict minerals (because of the recent passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010), fair labor and other social aspects of sustainability, ongoing management of hazardous substances in toys and other consumer products, and looking at the supply chain to manage risks and liabilities from product recalls and other environmental impacts of products and services.  The concept of “materiality” in corporate social responsibility and product disclosure (FTC Green Guidelines) and SEC financial reporting is taking on new meaning from a supply chain perspective. ‘Materiality’ in terms of supply chain or network management will require more rigorous implementation and oversight of ethical business practices and practicing proactive environmental stewardship through-out a products value chain.  Suppliers play a key external role in managing the environmental, social or financial issues within the product value chain. I will treat the issue of sustainable supply chain management and materiality in an upcoming series. Watch for increased supplier requirements, third party verification (like ISO 14001, GS-GC1 and ULE 880) and more upstream accountability.

Innovation and Collaboration– the emergence of collaborative opportunities among larger manufacturers creates entry points in the market for smaller, intermediate products manufacturers as well.  Larger companies are identifying the critical supply chain partners that have the greatest product impact and begin seeking ways to collaboratively address the environmental and social footprint of their products through the value chain.   A new report even suggests that consumers will play a leading role behind greater supply chain collaboration.  The report, by CapGemini suggests that while suppliers are independently seeking more open, collaborative ways to move goods, consumers may be “… the trigger for an optimized collaborative supply chain flow: this next level of supply chain optimization is based on transparency and collaboration.”  More specifically, “Consumer awareness about sustainability demands a more CO2-friendly supply of products and services”, the report notes.

Life Cycle Design and End-of-Life Product Management– There are increased challenges that the waste management industry is facing, wider attention paid to greener packaging and increased emphasis on financial accountability is being felt in world markets.   Establishing a reverse logistics network that supports life cycle design, Extended Producer Responsibility (EPR), and “demanufacturing” processes will take on higher meaning in 2011.   According to a recent white paper issued by sustainability expert and colleague Gil Friend, EPR is a market-based approach that effectively assigns end-of-life responsibility and product stewardship to producers, requiring them to meet specific targets for material recycling and recovery, relative to the total amount of packaging that they have put into the marketplace. EPR helps to shift the responsibility for collecting packaging and end of life products from financially tapped out local government to producers.  But upstream of the manufacturing process, EPR success can be achieved through incentives for companies to take a closer look at how they design products for better end-of-life management (life cycle design).  Producers are not alone in addressing the social and ecological impacts of their products. Manufacturers must engage their supply networks to help drive EPR upstream; however, downstream customers play a role too. So producers and consumers should strive in 2011 to continue a dialogue about what to do to improve the profile of consumer products in a way that’s a win-win for all affected stakeholders.

So there it is from my view of the world. Five sustainability and supply chain challenges that were framed out in 2010 and look to stick in 2011.

Did I miss any?  Please chime in and share your thoughts.

Lean, Green Manufacturing Intersects with Sustainable Supply Chain Management, Creates Value

An efficient manufacturing process is the essence of sustainability…and is by its very nature, green.  This was the gist of the business case that I posted last year and that is captured in an article published in the MIT Sloan Management Review.   MIT presents two ways of thinking:

• Old Thinking: Companies have long mistakenly thought that adopting environmentally friendly processes adds costs.
• New Thinking: Green practices like recycling, reusing and reducing waste can cut costs because they make a company more efficient.

Recalling Michael Douglas’ character “Gordon Gecko “ in the 1987 film “Wall Street” statement that “Greed is Good”, MIT Sloan’s basic message is a bit of a twist- “Green is Good”.  Manufacturing is showing with increased frequency, that companies incorporating lean practices in manufacturing, are (by design or accident) becoming more “green”.  In fact a 2009 study by a research group suggested that “lean companies are embracing green objectives and transcending to green manufacturing as a natural extension of their culture of continuous waste reduction, integral to world class Lean programs.”  This is especially true for companies that integrate a number of proven methods e.g. ISO quality and environmental management systems, to meet environmental compliance and stakeholder needs.  This is more rapidly accomplished with a dedicated corporate commitment to continual improvement, and incorporating ‘triple top line’ strategies to account for environmental, social and financial capital.

What is “Lean”?

‘Lean’ Manufacturing is a set of continuous improvement activities closely connected with the Toyota Production System (TPS) and Just-In-Time Manufacturing systems.  One emerging working definition of Lean is “The elimination of waste everywhere while adding value for customers”.  This definition is a natural fit with sustainability and the “Lean and Green” business ethic.  Lean manufacturing has demonstrated how companies have saved or avoided enormous operating and maintenance costs and significantly improved the quality of their products.

Lean manufacturing looks at manufacturing from a systems perspective, which includes a thorough evaluation of upstream and downstream process inputs and outputs.  Viewed this way, suppliers and customers play a critical role in successful lean manufacturing.  Heavy emphasis is placed on design and innovation and obtaining  input of from supply chain partners, individuals and organizations through a process called ‘value-stream mapping’ (hey that’s my blog name too- ironic?…not).

The Lean, Green and Supply Chain Intersect

As I have previously said, even without specifically targeting environmental outcomes, lean efforts have been demonstrated to yield substantial environmental benefits (pollution prevention, waste reduction and reuse opportunities etc.). However, because environmental wastes and pollution are not the primary focal points, these gains may not be maximized in the normal course of a lean initiative. This is because lean waste is by its nature not always in sync with typical environmental wastes.[1] I argue that by looking deep into your your value chain (upstream suppliers, operations and end of life product opportunities) with a ‘green’ or environmental lens, manufacturers can eliminate even more waste in the manufacturing process, and realize some potentially dramatic savings

Where ‘lean’ creates a positive view (future state) of a process without waste, ‘green’ creates an alternative view of a sustainable future for organizations that play in the global marketplace or offer a unique disruptive innovation.  Lean and green approaches to manufacturing not only leverages compliance issues but also puts companies on the path to going beyond compliance. The graphic below from the U.S. Environmental Protection Agency applies the key ‘lean waste’ types in an environmental context, and crosswalks how lean waste issues can have direct environmental impact on an organization.

Using an example set by Subaru of Indiana,the MIT study shows how there are many proofs to the axiom that prevention of pollution and continually improving efficiencies with an environmental benefit works even in lean economic times. Subaru found that:

1.      Profits come by increasing efficiency and reducing waste—but they don’t always come immediately.

2.      Management’s leadership is vital in setting goals and getting departments to cooperate.

3.      The front line workers have to be engaged to spot opportunities to reduce, reuse, recycle, and find other ways to create efficiencies.

4.      Sustainability initiatives achieve maximum benefit from involvement of their supply chain.

5.      All waste by-products are potentially new products

6.      Green initiatives foster creativity and can enhance competitive advantage.

 

Source: Green, Lean, and Global Supply Chain Strategies, Univ. of Tennessee

As previously mentioned, becoming a green organization as part of a lean initiative occurs sometimes by design, and sometimes by accident.  A research study from the Sustainable Supply Chain Group at the University of Tennessee, College of Business Administration found some interesting results when evaluating how lean manufacturing, sustainability and supply chain management may at times be complementary.   The study found, among other things that: 1) Firms tend to have more sophisticated lean strategies than green strategies, and because of this awareness of ‘sustainability’ in supply chain management circles is less mature; and 2) Lean and green initiatives overlap, where projects that meet lean objectives often provide unanticipated green benefits.

Extending Lean and Green to the Supply Chain

Establishing initial goals for manufacturing efficiencies include maximizing parts, machine and material utilization, human movement and of course reducing waste. This series of continuous improvement steps offer a cornerstone for reaching both a green and efficient supply chain. But how can manufacturers work beyond the ‘four walls’ of their organizations to green their supply chain?  A green focus in supply chain management requires working with upstream suppliers and downstream customers, performing analyses of internal operations and processes, reviewing environmental considerations in the product development process, and looking at extended stewardship opportunities across the life-cycle of one or more intermediate or final products.

Lean Tools You Can Use

So far, I’ve laid a foundation for Lean Manufacturing and the intersection with supply chain management. This next section presents a couple of widely accepted practices that are used in Lean design and manufacturing, which can be modified to capture supplier network considerations.

Value-Stream Mapping

A strategic approach to mapping  environmental and lean opportunities would be to map the ‘value-stream’  of one or more products as a way to seek where the greatest waste  reduction and environmental impact reduction opportunities are. Value stream mapping arrived on the business process landscape with the emergence of Lean engineering, design and manufacturing.  A process-and systems based methodology, value stream mapping can help organizations to identify major sources of non-value added time and materials resources i.e. waste that flow into the manufacturing of a particular product or (even) service; and to develop an action (or “Kaizen”) plan to implement less wasteful practices and processes.   From an environmental perspective, practitioners can also look at processes from an environmental, health and safety point of view, focusing on processes tending to use great amounts of resource inputs and that generate waste outputs.

To illustrate what I mean, a value-stream map example (presented below) in a report issued by the U.S. EPA on Lean and the Environment depicts how supply chain vendors can interact in the production of a product and the resource waste that can result.  The areas noted in green represent interaction points with environmental, health and safety and related environmental loads associated with intermediate production steps.  Clearly the four vendor points of interaction can carry their own environmental footprints just in the trucking and distribution of raw materials and products (air and waste emissions for instance).

Typical steps in value stream mapping include:

1. Select a product or process(es)
2. Through interviews and work observations, collect data on the ‘current state’ of the value stream (inputs and outputs)
3. Using a cross functional team (CFT) of knowledgeable staff, develop a ‘current state’ value stream map; focus on identifying over consumptive or waste generating activities
4. With the CFT in place, brainstorm ideas to improve resource use, production flow, waste capture and reduction, reuse and off spec material reuse, and labor/time management
5. Create a future state’ value stream map that identifies areas, targets and key performance metrics for continual improvement.
6. Develop a implementation plan, complete with authorizes and responsibilities
7. Develop continual improvement measurement and monitoring program
8. And last but not least…get started!

 

Vendor Survey and Qualification

Manufacturers also supplement their Lean efforts by surveying their supply chain partners and  asking a series of questions designed to identify where the resource consumption and waste management opportunities may lie.  These  questions will help determine if technology, operational practices,  enhanced training and awareness or other tools can make their company  more sustainable and lead them down the path to make the decision that  best meets their business needs. These questions include but are not  limited to:

1. How can I leverage my manufacturing capabilities and processes in a way that optimizes per unit material resource consumption?
2. Can I reduce waste generation through improving material use, scrap/off spec reuse and improved equipment maintenance?
3. Can  I work collaboratively with my intermediate parts or materials  suppliers to use life cycle design practices and manufacture parts with  lowered environmental footprints?
4. How  can I encourage suppliers to increase equipment efficiency, reduce  manufacturing cycle time, reduce inventories, streamline processes or  seek quick returns on investment?
5. Can I improve my sales and operations planning to optimize production runs and reduce resource loads or generated wastes?
6. How  can I work more closely with logistics and transportation partners to  optimize shipment schedules, customer deliveries, warehousing, routing  and order fulfillment?
7. Can  I work with my customers and product designers to improve packaging to  optimize space reduce materials use and improve load management?
8. How can I collaborate more closely with customers to enable reverse logistics and profitable product reusability?
9. What  types of value-added training and development programs can I develop to  promote lean and green opportunities with my suppliers?

Lean-Green Synergies Are Not Without Challenges

The  same University of Tennessee authors who explored the intersect of  lean, green and supply chain also discussed found that some potential  conflicts with certain types of lean strategies leading to changes in  supply change management.  For instance, they noted that  “lean strategies that require just-in-time delivery of small lot sizes  require increased transportation, packaging, and handling that may  contradict a green approach. Introducing global supply chain management into the green and lean equation increases the potential conflict between the green and lean initiatives.”

So  as companies begin to implement lean and green strategies in supply  chains, especially large and complex global supply chains, manufacturers  need to explore the overlaps and synergies between quality-based lean  and environmentally based ‘green’ initiatives, and understand the  various trade-offs required to balance possible points of conflict.  If  your organization been reluctant to engage your supply chain or  implement or maintain environmental initiatives in your product  manufacturing because of the perception that you can’t afford it, then  think again.  It is more likely that you cannot afford to ignore it.

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[1] Typical classifications of environmental ‘waste’ nodes include: Energy, Water, Materials, Garbage, Transportation, Emissions, and Biodiversity

Choose the Right Flavor: Ice-Cream, Sustainability & Business Innovation

Do you like your ice cream soft served or hard scooped?   What is your favorite flavor?  Do you like it straight up or with sprinkles on top?

So I heard on a very hot day recently with the kids at the ice cream “shoppe”.  This made me dwell over how my clients view sustainability.  You see, while a great deal of change has occurred in business over the years, sustainability is to the uninitiated as flavorful as the worst ice creams ever invented (http://bit.ly/aIuKYD).  Ironic that most of those flavors originate in Japan, the home of Lean, Quality Management Systems, Six Sigma, The Toyota Way, and all things continual improvement. Oh, BTW, there really ARE plenty of tasty ice creams and gelatos that are sustainably made (locally sourced materials, organics, community based giving programs http://bit.ly/dfGiaC).

The “look” and “feel” of sustainability then, depends on the level of enlightenment that a company has, the desired “end state” and on the depth of its resources to execute the change (see Joel Makower’s recent post in Two Steps Forward http://bit.ly/aTbzVz ).  So it’s important to note that while the main focus these days is on the environmental part of sustainability (i.e. “green”), that’s not the whole story.  ‘Sustainability’ embraces the legal, financial, economic, industrial, social and behavioral aspects of organizations as well as the environment.

In a new open source book, The Sustainable Business, by Jonathan Scott (http://bit.ly/bGhyu6), he describes seven key elements and criteria needed for organizations to evolve and meet the truest definition of a sustainable organization (the 7-P application model).   Briefly, the 7-P’s of sustainability are:

1. Preparation – setting the stage for change (both physically and psychologically) and understanding what the reformer is up against when trying to implement profitable, long-term business practices while accepting the breadth and depth of this subject (e.g.: the financial implications of sustainability and the fact that it is not about being independent).
2. Preservation – encompasses two areas: internal (collecting and displaying real-time measurement) and external (keeping ahead of laws, pending legislation, trends, and developments).
3. Processes – sustainable belief systems, philosophies, business models, and thought patterns that help match a business with customer demands, core capabilities, and best practices.
4. People – accepting the importance of training and education and working diligently to avoid the wasting of people, specifically: employees (who seek security and motivation), stakeholders (who want a return on their investment), customers (who want safe, value-laden products), and the world community – including the two-thirds of humanity who are currently left out of the global economic loop (who desire jobs and inclusion) and who represent an economic force all their own.
5. Place – the buildings and places where work is performed and/or products are sold.
6. Product – ensuring that goods and services are free from unnecessary waste (‘non-product’) and toxins – and designed so that the materials, energy, and manpower that comprise them (and their packaging) are treated as investments and continuously reused.
7. Production – the physical, mechanical, biological, and chemical processes used to transform raw materials into products or services – and transport them.

Building on his Scotts multi-dimensional perspective on sustainability program development, three principal objectives of a sustainable organization must, at a minimum:

• Minimize Resource Consumption, and
• Avoid Damage to the Environment, while
• Meeting Business Goals, Human Needs and Stakeholder Aspirations

So how does one get to there?  One way is through a systematic framework like an ISO 14001-based Environmental Management System (EMS).  While ‘sustainability’ is a guiding principle to keep organizations on track as an EMS is executed, an EMS is the framework – a set of processes and tools for effective mission accomplishment.

Supposing as Scott and Makower suggest that an organization wants to go beyond the environmental leg of sustainability and include the social and financial aspects as well…all good!  However, without the resources to make the leap and a systematic process to keep on track, the outcomes could be disappointing.  So before you leap, plan ahead.  Build a system to plan, implement, measure and check progress of the initiative.  Look for the quick wins.  Build an innovation-based culture and reward positive outcomes.  Measure, manage, report and build on the early wins.  Build the initiative in manageable chunks.

In summary, the keys to unlocking value through implementing sustainability initiatives require positioning through:

• Identifying marketplace trends that reward innovation toward sustainability
• Optimizing the linkage between sustainability, environmental and business objectives
• Creating a systematic process and  internal champions that can drive the system from the inside out
• Establish a manageable performance measurement system that demonstrates ‘triple bottom line’ results
• Building assurance systems for compliance and credible and transparent public disclosure.

Are you ready for that ice cream cone?   What’s your appetite?   Single or  double scoop?  Sprinkles on top?

Sustainable Sourcing with a “Green” Supply Chain Brings Competitive Advantages

Well, can the economic tides be turning?  In my former home base of San Diego, they had a saying: “It takes a long time to carefully turn an aircraft carrier around”.  Capgemini Consulting’s new study of 300 leading companies across Europe, US, Asia-pacific and Latin America states that economic recovery has surpassed economic downturn in the list of business drivers for 2010.

Some key findings of note from a supply chain perspective:

• Over 58 percent of the supply chain managers say their main business driver for 2010 is “Meeting (changing) customer requirements”.  (Well, I guess that is a no-brainer, as a successful business should be nimble and always responsive to customers’ needs to succeed in the marketplace)
• More than 50 percent of the participating companies indicate they will start up or continue with operational excellence / LEAN.  Another obvious direction – reduces waste, optimize resources.  This should translate into bigger profits and competitive position.
• Sustainability is the second most important business driver for 2010 — up 16 percent over last year. However, the survey results suggest that this has not yet directly translated into a significant increase in supply chain sustainability projects.  Well, remember that aircraft carrier quote that I just mentioned?

These findings really suggest that while the road to recovery is long, that much foundational work remains.  But the trend from survival to revival is in play now.

Perhaps the biggest take-away from this report is the increasing emphasis of supply chain management in creating the proper ingredients of a successful business strategy. And coincidentally, the concept of a Green Supply Chain is gaining interest among operations practitioners as a sustainable and profitable undertaking. A Green Supply Chain can be thought of as a supply chain that has integrated environmental thinking into core operations from material sourcing through product design, manufacturing, distribution, delivery, and end-of-life recycling.

The implementation of Green Supply Chain initiatives has evolved from strictly a compliance issue into a means of generating value. Traditionally, companies incorporating green projects have focused solely on cost avoidance by assuring compliance, minimizing risk, maintaining health, and protecting the environment. In the emerging value-creation model, implementing green initiatives along a company’s supply chain can raise productivity, enhance customer and supplier relations, support innovation, and enable growth. The Green Supply Chain is no longer exclusively about green issues, but also about generating efficiencies and cost containment. As organizations restructure to reduce their company’s environmental footprint, supply chains have increasingly become a key area of focus. Improvements in transportation efficiency, operations, raw material selection and packaging are all topping the list of “green” supply chain initiatives.

Source: Diamond Management & Technology Consultants

Green Supply Chains enable organizations to:

• specialize and concentrate manufacturing efforts in a way that manages environmental risks and costs of compliance with existing or new regulations;
• improve product, process, and supply quality and productivity.
• make innovative decisions that respond to “green economy” requirements;
• gain access to key markets through ISO 14001 registration or other certifications;
• improve or create brand differentiation and customer loyalty by offering unique capabilities to address environmental related requirements and expectations;
• reduce customer pressure and even gain preferred status; and

The ISO 14001 Certification / Supply Chain Nexus

Over the past several years, studies have been performed worldwide comparing ISO 14001-2004 and its value in development of green supply chains.

• One recent study found that more than 75% of manufacturing executives surveyed had ISO 14001 certification or were in process in order to enhance their competitive supply chain position,
• Companies that are already ISO 14001 certified are 40% more likely to assess their suppliers’ environmental performance and 50% more likely to require that their suppliers undertake specific environmental practices,
• Preference in market share is often given to suppliers that have attained ISO 14001-certification,
• Consumer preferences are increasingly important drivers for many companies to improve their supply chain environmental activities,
• Procurement officers increasingly use ISO 14001 certification as a required vendor qualification,
• Suppliers without an environmental management system will feel increasing pressure to modify their practices or risk losing customers, and will be subject to higher costs for licenses, inspections and insurance.

Questions and issues to consider when developing your Supply Chain/Value Network:

• Will the service provider enhance the cause of sustainability both upstream (i.e., primary customer/end customer) and downstream (i.e., all tiers of supply base, including logistics service providers)?
• Will some relationships drive significant redesign of the supply chain, including product innovations and modifications (e.g., collaborative development of decomposable packaging material?
• Is your supply chain implementing progressive environmental management systems to manage their environmental footprint?
• Establish a more cohesive collaborative model in transport, warehousing and distribution that will drive efficiencies up and incremental costs down, while reducing environmental impacts throughout the supply chain.

The Green Economy Post assembled a number of Green Supply Chain studies to assist you in your efforts to understand and address these issues in your business (15 Green Supply Chain Studies You Should Know About http://bit.ly/6X3YDU).

Environmentally responsible procurement, in alignment with your company’s environmental sustainability values, is critical for organizations that desire to manage their environmental risk and maintain a competitive advantage.

Not only does this mean that businesses must choose their suppliers well, they also have to ensure that suppliers comply with the standards they claim to meet.

I will have the honor of conducting a breakout session on this topic on April 13th at the Aberdeen Research’s Supply Chain Management (SCM) Summit in San Francisco, CA (http://summits.aberdeen.com/index.php/Supply-Chain-Management-Summit/2010-scm-summit-overview.html).  Hope to see you there!

What Really Matters in Business Happens at the Edges- Take the Lean and Green Challenge!

Is the economic downtown turning a corner? Well, yes it is…just which corner it’s turning no one really knows…yet. In the meantime, most companies are sitting tight, private capital is hanging on the sidelines, and the “green” natives are getting restless. So it was with great interest that this week an article was published in the MIT Sloan Management Review which echoed the sentiment that I have carried forward with my clients for years. Recalling Michael Douglas’ “Wall Street” character’s statement that “Greed is Good”, MIT Sloan’s basic message is… “Green is Good”.

MIT presents two ways of thinking:

–Old Thinking: Companies have long mistakenly thought that adopting environmentally friendly processes adds costs.

–New Thinking: Green practices like recycling, reusing and reducing waste can cut costs because they make a company more efficient.

Using an example set by Subaru of Indiana, there are many proofs to the axiom that prevention of pollution and continually improving efficiencies …one idea that focuses on environmental improvement, and the other on business economics, works even in lean times. Subaru found that:

1.Profits come by increasing efficiency and reducing waste—but they don’t always come immediately.

2.Management’s leadership is vital in setting goals and getting departments to cooperate.

3.The front line workers have to be engaged to spot opportunities to reduce, reuse, recycle, and find other ways to create efficiencies.

4.Sustainability initiatives achieve maximum benefit from involvement of their supply chain.

5.All waste by-products are potentially new products

6.Green initiatives foster creativity and can enhance competitive advantage.

Let’s all be honest…that last point…competitive advantage is what really motivates business. So company sustainability initiatives cannot and should not be viewed through strictly an environmental lens, but through the balanced “sweet” spot of the Triple Bottom Line.

To paraphrase Guy Kawasaki in his book, Rules for Revolutionaries, what really matters happens at the edges. The action is not in the centers or areas of sameness. Organizations must challenge conventions and change the way products and processes are thought of and delivered.

So take the Lean and Green challenge…do what Subaru has done and get to work innovating and creating.