Lean, Green Manufacturing Intersects with Sustainable Supply Chain Management, Creates Value (Part 1)
By David Meyer, Senior Consultant, EORM
Published in Priority Press, May 14, 2015
An efficient manufacturing process is the essence of sustainability…and is by its very nature, green. In an article published by the Massachusetts Institute of Technology (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’.
The Lean, Green and Supply Chain Intersect
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. I argue that by looking deep into 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.
Source: Lean Manufacturing and the Environment, EPA100-R-03-005, United States Environmental Protection Agency, October 2003.
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:
- Profits come by increasing efficiency and reducing waste–but they don't always come immediately.
- Management's leadership is vital in setting goals and getting departments to cooperate.
- The front line workers have to be engaged to spot opportunities to reduce, reuse, recycle, and find other ways to create efficiencies.
- Sustainability initiatives achieve maximum benefit from involvement of their supply chain.
- All waste by-products are potentially new products
- 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. Research conducted by 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.
The second part of this Series will explore tools companies can use to manage supplier expectations focused around responsible and sustainable supply chain management.