Lean and Green Supply Chain

“Going Green” means we must challenge conventional wisdom and find new and creative ways to become eco-friendly in our businesses.  It seems we are bombarded by requests every day from our customers, employees, governments and the communities we live in to become more environmentally responsible and reduce our carbon footprint.  This potentially impacts everything about what we do – both internally in how we use energy and consumables, and externally in how we offer the products and services we provide to the market.

Many organizations want to do something about being “greener” in everything they do, but where do you start?  Allow me to offer a simple six-phase process that can leverage Lean Six Sigma (LSS) as follows:

1. Green (and Lean) Marketing
2. Green Product and Services Design
3. Green Supply Chain Development
4. Green Operations
5. Green People
6. Continuous Green Improvement Programs

Each of these naturally supports the other in a virtuous cycle of continuous improvement that is a never-ending cycle of ever-improving “green-ness”.  Best of all, each as a stand-alone process offers huge benefits, if starting small makes the most sense.  Each of the process steps can and should leverage best practices in LSS, operational excellence, change management, supply chain and people working in high-performing teams.  Here are some thoughts on how you get started with the process.

Green Marketing

Something to think about before we charter activities to get greener is a simple question:  Should we start with the Voice of the Customer (VOC)?  For most of this, we probably will say “yes – of course.”  Unfortunately, the old practices of having some creative monkeys at the corporate silver tower dreaming up new things to offer and then doing some market testing before taking new things or services to market just won’t get the job done when we are trying to “go green”.

In this context, the “customer” for our supply chain outputs has expanded dramatically to now include local, state and federal governments around the world.  Let’s add to this special interest groups such as animal rights groups, environmentalists, global warming scientists and a long list of other groups with special interests that affect politics and culture.

Here is the next problem we must understand: how can we “get green” – which usually means more costly choices – and still be able to bring goods and services to market in a way we can get paid to be green?  This is where an enlightened approach that leverages some of the tools of LSS can be a big help.  First, I would strongly recommend that a Kaizen structure is put in place that engages a truly cross-functional team of stakeholders who together can give the organization a complete view of the VOC that takes in both the internal constituents I mentioned above and the internal constituents of your organization.  It is this team’s job to use various tools from LSS such as House of Quality, Kano and statistical analysis techniques to tackle the problem.  Not only must we tirelessly and continually scan the marketplace and business environment for dynamically changing inputs, this team is also responsible for making the inevitable trade-off decisions on just how green we can be at a given point in time and remain profitable.  This is and will continue to be a delicate balancing act now and in the future – identifying exactly what we must offer to the world in our products and services to meet and exceed their green expectations and desires profitably.

Green Product and Services Design

Designing products and services to be green up-front is an obvious – and longer-term strategy for most organizations that must be embraced to achieve the levels of effectiveness required.  This puts even more pressure on the entire design team and supply chain partners to find ways to respond to the intelligence the marketing team provides.  I have been encouraging businesses for many years to make a conscious decision to begin integrating design efforts with the suppliers they have on-board up front.  This best practice is becoming increasingly important and critical in the face of the increased demands from the markets and governments they exist in.  Some of the forces already in place and growing in importance include:

• Designed-in use of recycled materials – some governments are setting minimum thresholds for recycled content as guidelines for now and mandates for the not-too-distant future.
• Designed-in reuse and reusability of the products in a direct recycle plan up-front.  For example, an entire industry has emerged to take-in and recycle or reuse cell phones.  Some of the phones simply get refurbished and sent on to third-world countries or another use cycle.  The rest are torn-down and then recycled to recover valuable components and materials.  I am guessing that in the not-too-distant future the producers of cell phones and many other producers of commodity goods will be developing their own programs for this – why leave money on the table – and worse shirk your responsibility for ecological responsibility?
• Product lifecycle management – cradle-to-grave eco-friendly product lifecycle management is quickly becoming a mandate.  Most of the producers of copier and printer toners have already put in place programs to close the reverse logistics cycle so that toners can be either reused or sensibly recycled.
• Green packaging is taking many forms.  Bio-degradable shipping peanuts are an example.  Recently we received a shipment of vitamins and health supplements at my home.  My wife was really unhappy when she dumped the peanuts in the sink to wet them (which cases them to melt and disappear) and was UPSET when the peanuts were actually mixed – some were traditional Styrofoam – which did not give her a happy face.  Recently Wal-Mart mandated that most of their suppliers begin using shipping pallets made from recycled and recyclable paper.  This created some real headaches for some suppliers – as the cost and logistics to get them was problematic ... but that is another story.
• Designed-in “reduced carbon footprint”.  There are many elements to this including sourcing locally to reduce transportation, seeking out raw materials that don’t require oil or coal as the source materials, telecommuting for workers and for many otherwise face-to-face interactions, and going “paperless” in our offices to kill fewer trees.   Some countries are mandating an additional charge for plastic bags used for packing groceries and the search is on for a suitable alternative to the ubiquitous plastic bottles that are filling landfills around the world.

Green Supply Chain Development

A greener supply chain system design for execution must occur at the right point – typically after we have some good answers to the foregoing questions.  As you move into sourcing and supply chain network design there are many considerations and tools we need to consider.  Some of these are:

• Supply Chain Modeling and Optimization Tools to be “greener” – these simulation tools allow us to model the supply chain and then run multiple “what if” scenarios to understand many trade-offs.  These include local versus global sourcing, the cost and environmental impact of those decisions, and working out the speed versus cost options against the green context we have created.
• Logistics optimization – less wasted resources truly does make your supply chain greener immediately.  Anything we can do to move a unit of goods with less polluting resources is a definite move in the right direction.
• Lean, Pull-Based Replenishment Systems are greener from the perspective that having less inventory ultimately means less will end up in obsolescence – and in our land-fills.  Pursuing a Kanban strategy often means a shift to reusable containers and packaging.  The auto industry got on board with this many years ago and I have personally designed reusable containerization systems many times that resulted in reduced packaging waste, costs, land-fill and transportation logistics cost.  It works.
• Lean Procurement Systems that put a premium on sourcing with firms that share your vision for environmental responsibility and embrace the strategy of co-locating value-adding operations where ever possible and participating freely in target and Kaizen costing activities that make “being green” a key input.
• Localization and eco-friendly strategies for sourcing as an overall sourcing strategy – even in “being Lean” – is still a great step any firm can take.

Green Operations

Globally competitive operating systems must be designed to both reduce the carbon footprint of the enterprise and leverage information technology to minimize the impact of the organization’s operations on the environment.  There are many considerations here including:

• Facilities design – leading to reduced energy needs and impact on the environment to operate the facilities.
• Renewable resources in construction materials design up front.
• Maximized use of passive and active non-carbon based energy sources including passive solar heating, photovoltaic (direct from sun-light energy), organic gasses and heat sources, bio-fuels, geothermal, hydroelectric, and chemical reactionary heat sources.  For example, a friend of mine has developed a closed system using a chemical reaction to generate a household heat source internal to a home’s  duct-work.  I need to check up with him to see if I can get that!
• Internal recycle and re-use systems that minimize land-fill and other environmental impacts.
• Leveraging IT technologies to reduce or eliminate use of paper in operations wherever possible.

Green People

In my estimation, 80% of the long-term success of any green effort comes down the organization’s people, and our ability to train, motivate and empower them to achieve our goals.  Here are some things we can do that address this:

• A “Green Code of Honor” that shapes everyone’s daily thinking and thought processes.
• Employee development programs.
• Empowerment around continual innovation to eliminate waste and seek “greener” solutions.

Continuous Green Improvement (CGI)

Make powerful operational excellence techniques part of an overall culture of continuous improvement with “ecological responsibility” at its core.  It’s important to teach people how to maximize the ongoing elimination of the sources of waste and variation as part of their everyday job.  These are some of the operational excellence toolkits a CGI initiative may tap into:

• Lean Six Sigma
• Lean Enterprise
• Six Sigma and Total Quality Management
• The Learning Organization
• Total Employee Involvement
• Change Management Skills

Here is a quick true story of my experience from years ago of how empowering people can really work to reduce environmental impacts.  My automotive interiors supplier plant initiated an on-going CI program to attack all sources of waste.  I was in charge of supply chain and procurement and was the designated project manager for the process.  One of the many things I tackled, with help from others, was to attack the issues we had in handling trimmings and off-fall, and the associated landfill costs.  We had a really bad process of throwing fiberglass and textile trimmings from our automotive headliner process into dumpsters and then moving them via a forklift to a central compactor.  It was a nightmare of traffic and dangerous to boot – lifting those heavy bins over the compactor, climbing to pull stuff out, and the mess.  Worse, we could not do very good compaction with this method – meaning we were spending way too much for landfill costs and using too much space.

After a little innovative research and listening to our material handlers and operators we hit on the idea of putting a bailer right at the trimming stations.  By bailing in this way, we increased the compaction of the trimmings by 50% to 75%.  We cut the number of trips required to remove trimmings by 80%, and the cost of a landfill (and space to hold it) by 70%.  And the whole process was MUCH safer and cleaner.  Just the savings on landfill costs allowed us to pay for the bailers in less than nine months.  The labor and morale improvements were a huge bonus and everyone felt great that we reduced the volume of land-fill needs.