Tag Archives: Toyota

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

16 Dec

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.


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

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How Walmart & Others Use ‘Best Value’ Approach to Drive Green Supply Chain Management

22 Sep

I recently came across a great research article written a couple of years ago and published in Elsevier Business Horizons.  The article, entitled Best Value Supply Chains: A key competitive weapon for the 21st Century (co-author is no relation, but irony is cool nonetheless), emphasized how leading edge companies have adopted “best value strategic supply chain management” as a strategic approach to stay competitive and drive efficiency.  The authors describe this type of approach as way for companies to “excel across speed, quality, cost, and flexibility, and …require coordination across at least four supply chain elements: strategic sourcing, logistics management, supply chain information systems, and relationship management.”

In one example, the authors refer to “firms such as Wal-Mart, Toyota, and Zara [that have] have used their supply chains as competitive weapons to gain advantages over peers. For example, Wal-Mart excels in terms of speed and cost by locating all domestic stores within one day’s drive of a warehouse while owning a trucking fleet. This creates distribution speed and economies of scale that competitors simply cannot match.”  Exploring this approach by Walmart a bit deeper indicates several positive outcomes from an environmental perspective also.  In the past two years Walmart has committed itself to reducing its carbon footprint by 20 million metric tons by the end of 2015. The most direct manner to do this is to control how it distributes its product.  So fleet management and control, and strategic distribution placement equals lower fuel costs, miles driven and hence carbon emission reductions.  However Walmart will also accomplish its reductions largely by working with its suppliers on their own greenhouse gas emissions.  Looking a little deeper however, shows that Walmart also reported recently that its carbon emissions as a percentage of sales went down. While that is great news using ‘normalized’ performance indicators, the not so good news is that  the company’s ‘absolute’ carbon footprint continued to grow as sales and stores were added.  So this goes to show you that it is valuable to drive value through the supply chain, taking a strategic, whole systems approach to get a handle on your direct spend and indirect environmental costs.  The only way to effectively do so is to look inside the operations of your own four walls, AND explore ways to influence the outside variables that can impact your operations.

The authors also cite three key attributes of a strategic supply chain management process that must be optimized: agility, adaptability (think Darwin?), and alignment (or the Three A’s).  I agree in whole that in order to shape behavior and optimize sustainability goals within a supply chain, that its vital the companies seek to 1) set in place tools that increase flexibility and ability to rapidly respond to changes in customer behavior and preferences (agility) 2) reshape supply chains to new ways of thinking (adaptability) 2) align your organizational goals with those of your upstream and downstream suppliers, vendors and stakeholders through improved collaboration and relationship management (alignment).  Each of these success attributes plays well in the sustainability arena and in managing an organizations triple bottom line.

As I have repeatedly stated in this space, the supply chain and logistics world is changing- expanding from a company vs. company solar system to a supply chain vs. supply chain universe.  Reshaping and reforming your supply chain management practices to reflect changing business norms toward managing to the ‘triple bottom line’ makes for smart business.