The Opinion Page
News and comments about the issues facing today's SCM and Inventory Management professionals.
As a quick follow up to my immediately previous posting, here is a very short glossary of terms.
Carbon Footprint: The total set of greenhouse gas (GHG) emissions caused by an organization, event, or product, measured using this formula: carbon footprint = CO2e (GHG released x potency) x volume.
Carbon Dioxide Equivalent: CO2e is a common measure of greenhouse gases which takes into account each gas’ potency relative to carbon dioxide. Methane, for example, is 25 times more potent, nitrous oxide is 300 times more potent, and hydro fluorocarbons are several thousand times more potent than CO2.
The Daly Rules: Three rules of sustainability attributed to Herman E. Daly, former Chief Economist for the World Bank: 1. that renewable resources must not be used at a rate faster than they can regenerate; 2. that non-renewable resources must be used no faster than renewable substitutes can be put into place; 3. pollution and wastes must be emitted no faster than natural systems can absorb them, recycle them, or render them harmless.
Enterprise Carbon Accounting (ECA): A life cycle assessment focused on carbon emissions. A product’s or process’ carbon footprint is aggregated throughout the supply chain.
Greenhouse Gases: The most impactful GHG’s include carbon dioxide, methane, nitrous oxide, and the group which includes hydro chlorofluorocarbon, hydro fluorocarbon, and per fluorocarbon.
Kaizen: The Japanese term for improvement; continuing improvement involving everyone from managers to front-line workers. In manufacturing, kaizen relates to finding and eliminating waste in labour, machinery, materials and production methods.
Lean Manufacturing: A philosophy of production emphasizing the minimization of the amount of all resources used in various activities in an enterprise. Costs are reduced through relentless removal of waste and through simplification of all manufacturing and support processes.
Muda: Muda is waste. In lean manufacturing, there are seven categories of waste: overproduction, waiting, transportation, processing, motion, inventory, and scrap.
Waste Hierarchy: The ranking of various waste management options from most favourable to least favourable vis-à-vis sustainability. The ranked options are as follows: prevention, minimization, reuse, recycling, energy recovery, and disposal.
Often profound answers may be found by examining the simplest of business models.
Hoping to earn some pocket money, siblings Jim and Patty secured a job delivering newspapers to houses in their neighbourhood. Supported by their parents, their new responsibilities educated them about small business management: exposure to customer service, cash management and bookkeeping, logistics, and materials management processes was invaluable. In time, the children gained insight into advanced business virtues such as Lean and Green, learning how a business can benefit by embracing the value of sustainability.
Initially, Jim and Patty worried that newspapers provided an example of poor environmental stewardship. They believed that the industry consumes trees and wastes energy, understanding the emergence of the paperless internet as a key source of newsworthy information. While their parents were pleased with Jim and Patty’s environmental acuity, they wanted the children to know that there were many ways for them to help reduce the noble newsprint industry’s carbon footprint.
The children’s mother, a foreperson in the automotive industry, explained to the children the basics of a new way of thinking in manufacturing called “Lean”: “Lean aims to reduce or eliminate waste,” she said. “Furthermore, it works to reduce the use of resources, lower the space, handling and energy required to do a job, and to increase output per resource used.”
Their father, a developer of solar alternative energy technologies, commented that Lean Thinking is consistent with Green. “The Reduce, Reuse and Recycle mantra is very important and remains relevant. Disposal of materials is a last resort. It is better to prevent waste, rather than handle it once it exists. ‘Lean’ can help us with that.”
Jim and Patty got busy listing ways to assemble and deliver newspapers in a Lean/Green manner.
Lesson 1: Lean/Green processes can please consumers by catering to their unique needs, while reducing waste, saving materials costs, and protecting the environment.
The children surveyed their customers. Does each customer have a mailbox? Does she have a covered porch, protecting newspapers from rain and snow? The analysis helped the children plan their use of assembly materials, such as rubber bands and plastic sleeves. Rubber bands are only needed to wrap papers to protect them from the wind. Customers with covered mailboxes don’t need banded papers. Plastic sleeves are needed only in foul weather, and only for houses with no porch protection. Three flexible assembly processes emerged: flat, banded, and sleeved newspapers.
Lesson 2: A Lean/Green approach saves energy, money, and avoids pollution.
Jim and Patty deliver papers by walking, rather than by car. They therefore avoid using gasoline unnecessarily. Further, sorting papers properly into the delivery wagon according to route and customers needs saves delivery time.
Conflicting goals did arise. Walking the route takes more time than driving. Adding time to a process conflicts with Lean philosophy. The Waste Hierarchy and Daly Rules helped guide the children. They chose to favour pollution prevention over faster delivery time as the predominant objective, appreciating that they had some surplus “slack” time available each day. Opportunity cost of time was minimal. Further, walking introduced no risk of late deliveries.
Lesson 3: Embracing Lean/Green avoids unnecessary production and logistics costs, improves public relations and can have beneficial side effects such as improved safety and security.
Jim and Patty react quickly to customers who ask that deliveries be stopped, either permanently or for vacations. They dislike losing customers, and they do everything they can to retain clients. Sometimes customers’ tastes and needs change for reasons beyond their control. They stop such deliveries promptly to avoid delivering papers unnecessarily. Household security is enhanced for the family on vacation. They avoid delivering or scrapping unwanted papers. Changes are communicated quickly upstream to the front office, and production is adjusted.
Lesson 4: Scrap is often inevitable. Try to eliminate it. If it occurs, re-use it, or recycle it.
Any scrap materials, such as newspapers or flyers that have been damaged by rain or snow and that cannot be re-used, are recycled. Contributions to landfill are virtually zero.
The Ultimate Lesson: Being Lean/Green is a journey, not an end. In the spirit of continuous improvement, enlightened businesses of all shapes and sizes - from sole proprietorships to multinationals - are constantly searching for ways to realize new efficiencies, to affordably improve customer satisfaction, to gain new customers, and to increase profit. Lean/Green facilitates these pursuits, in sustainable ways.
John Skelton is the Principal Consultant and founder of Strategic Inventory Management.