SUSTAINABILITY: A NEW LEAN PRINCIPLE Gene Fliedner Decision and Information Sciences Department School of Business Administration Oakland University Rochester, MI 48309
[email protected] 248-370-4281 ABSTRACT Lean principles are well known with documented savings and productivity enhancements through the elimination of waste. Many organizations have found that a by-product of lean principles is enhanced “green” or environmental performance, even when lean activities were not initiated for environmental reasons. Typically, environmental savings are not often part of the financial justification for lean improvement activities. This paper proposes a new lean principle, “sustainability” and argues that organizations should explicitly consider the environmental impact, savings and even potential revenues of sustainable lean initiatives. INTRODUCTION In the early 1900’s Henry Ford became the first person to integrate an entire production process. Ford married consistently interchangeable parts with standard work and moving conveyance to create what he called flow production. Kiichiro Toyoda and Tai’chi Ohno (4) refined Ford’s approach. Difficult financial circumstances at Toyota led these two to build upon the concepts developed by Ford in order to pioneer the frequently cited seven lean principles shown in Table 1.
Table 1: Lean Principles 1. 2. 3. 4. 5. 6. 7.
Eliminate waste of overproduction Eliminate waste of time on hand (waiting) Eliminate waste in transportation Eliminate waste of processing itself Eliminate waste of stock on hand (inventory) Eliminate waste of movement Eliminate waste of making defective products
Whether implemented in a manufacturing or service environment, Lean is frequently defined as the elimination of waste or “muda.” The seven Lean principles noted in Table 1 promote waste reduction or elimination. Numerous waste reduction examples can be found in the research literature including the production of fewer defects, lower inventories, and less scrap (6). Many organizations have found that following these seven lean principles results in waste reduction. Many organizations have also found that a by-product of these seven lean principles is enhanced “green” or environmental performance, even when lean activities were not initiated for environmental reasons. For example, if a work environment is kept clean using the 5S concepts (sift, sort, sweep, sanitize and sustain), hazardous spills and leaks may be noticed more quickly and can subsequently be addressed more rapidly. Leaner operations typically require less floor space for operations and storage which can translate into decreased energy needs. The production of fewer defects reduces energy and resource needs. Lean initiatives have the ability to promote substantial “green” benefits. Environmental savings are often not part of the “business case” for lean improvement activities. Likewise, organizations implementing lean frequently do not quantify the environmental performance gains associated with their lean initiatives. The purpose of this paper is to suggest that organizations should explicitly consider the environmental impact,
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savings and even potential revenues of lean initiatives. Namely, given the ability to reduce waste and to improve productivity and quality, sustainable “green” initiatives should become an intentional objective and the eighth Lean principle. A LEAN BYPRODUCT IS “GREEN” Firms commonly pursue the seven Lean principles of Table 1 through the application of various Lean methods and tools. Some commonly used methods and tools are identified in Table 2. While Lean improves processes and saves money through waste reduction and elimination, the methods and tools noted in Table 2 have also demonstrated environmental benefits.
Table 2: Lean Methods and Tools with Associated Environmental Benefits Lean Method/Tool Kaizen Events Value Stream Mapping
Examples of Observed Environmental Benefits • Uncovering and eliminating hidden wastes and waste generating activities • Magnification of environmental benefits of lean production (e.g., reduced waste through fewer defects, less scrap, less energy usage, etc.) across the network • Environmental benefits may be more broadly realized by introducing lean to existing suppliers rather than finding new, already lean suppliers
5S
• Clean windows reduce lighting requirements • Spills and leaks noticed more quickly • Reduced consumption of materials and chemicals when equipment, parts, and materials are organized and easy to find
Cellular Manufacturing
• Smaller set-up times reduces energy and resource needs • Fewer product changeovers reduces energy and resource needs • Defects may be noticed earlier, reducing waste
Pull Approach
• Lower in-process and post-process inventory; avoids potential waste from damaged, spoiled, or deteriorated products • Less floor space needed; potential decrease in energy use • Increased longevity of equipment decreases need for replacement equipment and associated environmental impacts • Decreased number and severity of spills, leaks, and upset conditions: less solid and hazardous waste • Fewer defects which reduces energy and resource needs; avoids waste • Focuses attention on reducing the conditions that result in accidents, spills, and malfunctions, thereby reducing solid and hazardous wastes • Improving product durability and reliability can increase product lifespan, reducing environmental impacts • Reduces waste at the product and process design stage, similar to “Design for Environment” methods • Use of right-sized equipment lowers material and energy requirements • Reducing the complexity of the production process (“design for manufacturability”) can eliminate or streamline process steps; environmentally sensitive processes can be targeted for elimination, since they are often time-, resource-, and capital-intensive • Less complex product designs can use fewer parts and fewer types of materials, increasing the ease of disassembly and recycling • Magnification of environmental benefits of lean production (e.g., reduced waste through fewer defects, less scrap, less energy usage, etc.) across the network • Environmental benefits may be more broadly realized by introducing lean to existing suppliers rather than finding new, already lean suppliers
Total Preventive Maintenance
Six Sigma
Pre-production Planning
Lean Supplier Networks
As noted in Table 2, some commonly observed environmental benefits derived from specific Lean method and tool applications include the following. Uncovering and eliminating hidden wastes during kaizen
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events reduces resource requirements. If an improvement undertaking is extended beyond a localized portion of a process to the entire value stream, there can be significant magnification of environmental benefits across the supply chain. The application of a 5S approach within the workplace can identify spills and leaks more quickly and can lead to a reduced consumption of materials and chemicals when equipment, parts, and materials are organized and easy to find. Cellular manufacturing may lead to shorter set-up times, fewer product changeovers, and earlier defect detection, all resulting in reduced energy and resource needs. A pull approach to production may lower inventories resulting in less floor space being needed and a potential decrease in energy use. A total preventive maintenance (TPM) program may increase the longevity of equipment which decreases the need for replacement equipment and associated environmental impacts. A TPM program may also decrease the number and severity of spills and leaks thereby providing less solid and hazardous waste. These are just a few of the environmental benefits that have been observed as a result of Lean implementations. Lately, even the United States Environmental Protection Agency (EPA) has become interested in finding ways to maximize the environmental benefits of Lean. The EPA has a “Case Studies” page on its web site (www.epa.gov/lean/studies/index.htm), which identifies examples of environmental benefits from Lean implementations. Table 3 notes some of the EPA case studies and best practice examples of the types of environmental benefits that result from Lean implementations. Table 3: EPA Case Studies
Company
Apollo Hardwoods Company
Baxter Healthcare Corporation
Environmental Benefits • Designed equipment that can use smaller pieces of wood, which reduces wood scrap and alleviates the need to harvest large-diameter, mature trees • Over a three-day event, an interdepartmental team developed value stream maps (VSM) that detailed the plant’s use of water and identified processes for improvement potential with a byproduct of saving 170,000 gallons of water per day with little or no capital investment
Boeing Company (Everett)
• Eliminated the use of 350 cubic feet of cardboard and bubble wrap packing material per 747 wing panel set • Reduced chemical usage per airplane by 11.6 percent
Columbia Paint & Coatings
• Reduction of 15,000 lbs of paint solids from wash water • Saved 18,000 lbs of shrink wrap • Removed 2,820 lbs of hazardous materials from the waste stream
DuBois-Johnson Diversey and Steelcase
• Energy savings of a 60 percent reduction in the BTUs required • Reduction in water usage by 80 percent • Waste stream was cut by 85 to 95 percent
General Electric (Peebles, Ohio jet engine facility)
General Motors (Saturn)
• Reduced fuel consumption for GE90 engine testing from 17,000 gallons to 9,000 gallons • Produced 5,000 metric tons less of GHG emissions from the GE90 in 2007 compared to 2006 • Reduced GHG emissions from the CFM testing cycle by 1,600 metric tons annually • Saved 17 tons per year in air emissions • Eliminated 258 tons per year of solid waste • Reduced hazardous waste generation from 9.0 pounds per car in 1992 to
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3.2 pounds per car in 1996
General Motors
• Eliminated 7 tons per year of volatile organic compound (VOC) emissions, hazardous wastes, and transportation-related impacts in its supply chain by working with suppliers to eliminate a painting process step
It should be clear from the examples noted in Table 3, that Lean initiatives have the ability to promote substantial “green” benefits. As stated earlier, environmental savings are often not part of the “business case” for lean improvement activities. Likewise, organizations implementing lean frequently do not quantify the environmental performance gains associated with their lean initiatives. Organizations should explicitly consider the environmental impact, savings and even potential revenues of lean initiatives. Namely, given the ability to reduce waste and to improve productivity and quality, “green” initiatives should become an intentional objective and the eighth Lean principle. SUSTAINABILITY: THE EIGHT LEAN PRINCIPLE Many agree that if an activity does not add value, it should be reduced or eliminated if possible. For example, a frequently cited non-value added activity is transportation or movement. The movement of a work piece from one work station to a downstream workstation does not add value, although it may be necessary. The movement may be necessary in order to: (1) increase throughput due to a lower possible cycle time resulting from the division of the workload, or (2) enhance the workload balance, or (3) to reduce the skill set requirements of any one worker, or a variety of additional reasons. Non-value adding activities consume resources and therefore, over the long run are not economically sustainable. Defined, “sustainability” is a characteristic of a process or state that can be maintained at a certain level indefinitely. “Sustainability” addresses how processes and operations can last longer and have less impact on ecological systems, and particularly relates to concern over major global problems relating to climate change and resource depletion. Sustainable processes reduce ecological impacts and may eliminate wasteful depletion of scarce resources. Without waste reduction and elimination, processes and operations are less likely to be sustainable as resources are typically increasingly scarce. In a Lean environment, the word sustainability refers to systems that can be expected to be productive for long periods of time, even with growth in scale and complexity, through the promotion of “green” initiatives which lessen or even eliminate ecological impacts and possibly eliminate the impact of resource consumption. Increasingly, Lean objectives must recognize more than just the elimination of non-value adding activities. Lean objectives must be broadened to recognize the ability to reduce resource or capacity requirements through conservation and reclamation activities and the ability to capture resources for a cost that is less than the value recovered. One significant change in corporate environment over the past few years has been the increasing demand for social responsibility as the result of global warming, resource depletion and other environmental issues. Environmental concerns are increasingly attracting worldwide attention and, as a result, corporate stewardship of the environment is becoming a more important issue. Environmental savings are typically not included in an assessment for undertaking Lean improvement activities. Environmental performance gains associated with Lean initiatives are simply not quantified in the financial justification. Fortunately, organizations are starting to realize the potential for a significant savings and consequently are starting to explicitly consider the environmental impact(s), savings, image benefits, and even potential revenues of Lean initiatives. Given the ability to reduce waste and to improve productivity and quality, sustainable Lean initiatives should be an intentional objective. The eight Lean
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principle gaining importance is the conservation of resources, natural or otherwise, through sustainable activities and processes. Recent literature provides an abundance of sustainable Lean initiatives and their associated benefits. These sustainable Lean initiatives focus on the six broad categories identified in Table 4. Each of these initiatives is discussed below with a few examples as well as some costs and benefits being noted. Table 4: Sustainable Lean Initiatives with Examples 1. Product research, design, & development
• Hybrid automotive engine technology providing CO2 emissions reduction • Improved energy efficiencies of lithium ion batteries over standard batteries
2. Building design and construction
• Incorporation of solar and wind power in building design • Reduced building heights • Incorporation of fly ash in concrete mix • Larger, energy efficient windows to reduce lighting power consumption • Automatic monitoring of lighting, heating, and cooling systems • Real time data collection and monitoring for defect detection and systems failures • Rainwater collection for non-potable indoor use (e.g., toilets and air conditioning) and outdoor irrigation • Remanufacturing of components • Recycling • Reforestation • Reclamation of resources
3. Indoor environmental control 4. Facility and systems maintenance 5. Reclamation of resources
6. Ethical and social considerations
The first sustainable Lean initiative questions how products are being researched, designed, and developed. Increasingly products are being researched, designed, and developed with an eye towards waste elimination and conservation. For example, Toyota believes that hybrid technologies will play a central role in achieving “sustainable mobility.” Toyota has made considerable efforts to promote the use of hybrid vehicles since the launch of the Prius in 1997. As of November 2007, Toyota has achieved global cumulative sales of 1.25 million hybrid vehicles. The estimated resulting reduction in CO2 emissions is 5 million tons. Toyota is also working towards the development and production of lithium-ion batteries. These batteries offer the advantages of greater energy and output densities than nickel-metal hydride batteries in current hybrid vehicles. The second sustainable Lean initiative identified is building design. As one example, Toyota is emphasizing the role of nature in creating production sites that are in harmony with their natural surroundings. The main feature of this concept is facility development following three directives: (1) achieving groundbreaking environmental performance by introducing innovative technology and kaizen (improvement) activities; (2) using renewable energy, including biomass and natural energy sources (solar and wind power); and, (3) contributing to the local community and conserving the environment by planting trees in and around plants. As a second example, Wal-Mart is reducing the height of stores as well as tenant space which reduces facility energy consumption. Wal-Mart is also incorporating environmentally friendly materials such as fly ash in concrete in building construction. A third example, Bank-of America utilizes floorto-ceiling energy efficient windows reducing lighting energy needs by 25 percent (2). The third sustainable Lean initiative utilizes indoor environmental control systems. Currently available environmental control systems have the ability to sense and subsequently automatically regulate a variety of indoor heating, cooling, lighting, and other systems saving labor and energy costs. Wal-Mart is utilizing a variety of technologies in some stores, including natural daylight dimming controls, electricity generating photovoltaic cells in clerestories and skylights, radiant floor heating, and wetland rainwater collection and filtration systems to name a few. At one Wal-Mart store, the skylights alone allowed lights to be turned off in the lawn and garden center for up to 10 hours per day contributing to a $30,000 savings. The 99¢ Store estimates savings of $1,500 for each skylight unit that actively tracks
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the sun and stores sunlight (3). Siemens offers an energy and water management program that it has estimated will provide energy and operational savings of $430,000 annually for the Mississippi Department of Corrections (5). The fourth sustainable Lean initiative is facility and systems maintenance. Recent technological advances enable modern equipment to offer substantial operational and maintenance savings relative to older equipment. ExxonMobil installed Emerson’s facility management system which enables maintenance personnel to identify system failures quickly and accurately with real-time data reducing maintenance costs. The fifth sustainable Lean initiative is reclamation of resources, both natural and man made. For example, the newly constructed Bank of America building in New York collects rainwater to flush toilets, irrigate its green roof, and to run air conditioning (2). State Legislators in North Carolina have approved a plan to build a $120,000 cistern and filtration system for a landscaping irrigation system. The water would otherwise pick up unsafe lawn fertilizers, pesticides, petroleum and other contaminants which are harmful to the environment before entering the state’s waterways. The system is expected to eliminate a $2,500 annual irrigation expense and a $3,000 storm water fee. In addition ot reducing costs through resource reclamation efforts, it may be possible for a firm to reduce capacity requirements through the reclamation of resources too. For example, Caterpillar’s tractor components remanufacturing division has become its fastest-growing unit this decade. Annual revenue tops $1 billion and is estimated to grow 20 percent a year while reclaiming components that might otherwise be discarded (1). Lastly, sustainable Lean initiatives must recognize ethical and social considerations. For example, as landfills close and fewer are constructed, increasingly corporations will need to expand recycling efforts to reduce landfill waste or other environmental problems. Toyota has introduced a social contribution activity through hands-on environmental education. Over the past ten years, approximately 25,000 children having participated. Toyota is also conducting vigorous forestation activities in countries such as China and the Philippines. Some firms are burning used motor oil for fuel as well as utilizing more environmentally friendly freezer and cooler refrigeration units. These efforts reduce landfill waste and freshwater contamination issues. CONCLUSION Future Lean initiatives will continue to focus on the traditional objective of the reduction of non-value adding activities. These efforts emphasize profit improvement through cost reduction efforts. However, future Lean initiatives must also begin to recognize the importance of sustainability. Numerous examples of sustainable Lean initiatives have been identified. As the documented savings of these Lean conservation efforts become increasing clear, future conservation efforts will thrive. Lean initiatives must recognize the environmental savings in an assessment for undertaking Lean improvement activities. Environmental performance gains must be quantified in the financial justification of future Lean initiatives. Fortunately, organizations are starting to realize the potential for a significant savings and consequently are starting to explicitly consider the environmental impact(s), savings, image benefits, and even potential revenues of Lean initiatives. REFERENCES [1] Arndt, Michael. “Cat Sinks Its Claws Into Services,” Business Week, Issue 3962, p. 56, December 5, 2005. [2] Aston, Adam. “Bank of America Tower: The World’s Greenest Skyscraper, Set to Open Early Next Year, is Rising Near Times Square. The $1.3 Billion Building Will be New York’s Second-Tallest,” Business Week, Issue 4025, pg. 22, March 12, 2007. [3] Hisey, Pete. “Frugal Retailers Switch off Lighting Costs,” Discount Store News, Vol. 35, Issue 4, pp. 3-4, 1996. [4] Ohno, T. Toyota Production System: Beyond Large-Scale Production, New York, New York: Productivity Press, 1988. [5] Skaer, Mark. “ ‘Big Boys’ Help Owners Save on Energy,” Air Conditioning, Heating and Refrigeration News, Vol. 226, Issue 4, pp. 20 and 22, 2005. [6] Womack, James P. and Daniel T. Jones. Lean Thinking: Banish Waste and Create Wealthi in Your Corporation, New York, New York, Free Press, 2003.
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