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survival-2-0208.jpgYou’d have to be living in a mountain cave or vacationing on the  south coast of France to not know that world stock markets are being  whipped around these past two weeks.  The USA Today has attributed what’s been happening in the markets here in the U.S. along seven key elements,  all of which is related more to external factors such as the European  money woes, general investor fear and lack of policy direction from the  federal government. The general market fear and scurrying for  shelter reminds me that when hikers are caught in a sudden storm, they  often seek shelter in a “lean-to” or other protective cover until the  skies clear.


I thought that in light of the economic body slamming  that has been going on this past week, it’s worth reflecting on some  efficiency-based ways that  businesses can use to overcome (or at least  buffer) some of the external factors that are causing such economic  uncertainty.  Like the hikers seeking shelter from the storm, there are  some “lean-to”-like steps that company’s can take to exert some control  and influence -- and it all relates to a leaner, greener, smarter enterprise.


The Lean and Green Enterprise


Last winter I wrote about how importance a “lean and green” enterprise was in establishing a smarter, leadership position in a rapidly changing global marketplace.  I noted then that a 2009 study 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.”  Lean was 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.  I also argued by looking deep into an organizations 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


So I was reminded this past week that Lean in design, Lean in manufacturing, and Lean in inventory can individually or collectively be key success factors in managing  waste in all its many forms.  Collectively, this can have a measurably  positive effect on a company’s financial, and hence, business  performance.  A couple of recent articles touched on this topic this  week while you were watching your 401(K) equity or stock value tank.    But first let’s touch on Lean Design.


Lean Design


I came across an older but very relevant article written in the aftermath of the Internet stock crash in the early  2000’s.  The article described product development as involving “two  kinds of waste: that associated with the process of creating a new  design (e.g., wasted time, resources, development money), and waste that  is embodied in the design itself (e.g., excessive complexity, poor  manufacturing process compatibility, many unique and custom parts).”   The article cautioned that because the design process is the cradle of  creative thinking, designers needed to carefully watch what they “lean  out” or risk cutting off the creative process to reduce waste.  What has  happened in the ensuing years has been an incredible emphasis on “green  design” that focuses on full product life cycle value, such that “end  of life management” considerations have taken on a more relevant and  embedded nature in manufacturing.


A Lean Manufacturer Can be a Sustainable Manufacturer


In yet another recent article by manufacturing consultant Tim McMahon (@TimALeanJourney),  he notes that “Lean manufacturing practices and sustainability are  conceptually similar in that both seek to maximize organizational  efficiency. Where they differ is in where the boundaries are drawn, and  in how waste is defined”.  He notes, as I have in my past posts, that  Lean manufacturing practices, which are at the very core of  sustainability, save time and money — an absolutely necessity in today’s  competitive global marketplace.


The key areas to control manufacturing waste and resource use during the design and manufacturing cycle, can be broken down  and managed for waste management and efficiency in the following five ways:


Reduce Direct Material Cost – Can be achieved by use of common parts, common raw materials,  parts-count reduction, design simplification, reduction   of scrap and  quality defects, elimination of batch processes, etc.


Reduce Direct Labor Cost- Can be accomplished through design simplification, design for lean  manufacture and assembly, parts count reduction, matching product  tolerances to process capabilities, standardizing processes, etc.


Reduce Operational Overhead-  Efficiencies can be captured by minimizing impact on factory layout,  capture cross-product-line synergies (e.g. a modular  design/ mass-customization strategy), improve utilization of shared  capital equipment, etc.

 

Minimize Non-Recurring Design Cost– Planners and practitioners should focus on platform design strategies  to achieve efficiencies, including: parts standardization, lean  QFD/voice-of-the-customer, Six-Sigma Methods, Design of Experiment,  Value Engineering, Production Preparation (3P) Process, etc.


Minimize Product-Specific Capital Investment through:  Production Preparation (3P) Process, matching product tolerances to  process capabilities, Value Engineering / design simplification, design  for one-piece flow, standardization of parts.


Can a Lean Inventory Management Drive Sustainable Resource Consumption?


Business  Colleague Julie Urlaub from Taiga Company  (@TaigaCompany) summarized a  post in a recent Harvard Business Review by green sage Andrew Winston  (@GreenAdvantage).  The article, Excess Inventory Wastes Carbon and Energy, Not Just Money describes how the global marketplace “ is sitting on $8 trillion worth  of ‘for sale’ inventory [the U.S. maintains a quarter of that   inventory].  These idle goods not only represent a tremendous financial  burden but an enormous environmental footprint ” that was generated in  the manufacturing of those goods.  Mr. Winston maintains that “If we could permanently reduce the amount of product sitting idle, we'd save money, energy, and material.”   The problem is predicting and managing inventory in such fickle  times.   Winston went on about new predictive tools being advanced by  companies that hold promise in nimbly driving inventory demand response  up the supply chain.  For instance, he noted that “ using both demand  sensing software and good management practices, P&G has cut 17 days  and $2.1 billion out of inventory. All that production avoided saves a  lot of money in manufacturing, distribution, and ongoing warehousing. It  also saves a lot of carbon, material, and water.”

 

What Mr.  Winston found shocking though (me too!) was that “even with the  fastest-selling, most predictable products, the estimates are off by an average of more than 40 percent.  Imagine that a CPG company believes that 1 million bottles of a  fast-turning laundry detergent will sell this week. With 40 percent  average error, half the time sales will actually fall between 600,000  and 1.4 million bottles. And the other half of the time sales will be  even further off the mark.”  The process becomes self  perpetuating and the inventory racks up along with the parallel  environmental footprint, unless somehow the uncertainty can be better  predicted.  While companies like to have on hand what Mr. Winston  referred to as “safety stock”, I have come to know as reserve inventory  driven by “just in time” ordering .  But that process was shown to have  its own flaws such as when orders for goods dried up overnight in 2008  and when it came time to ramp up in early 2010, part counts were  insufficient to meet the rising demand.

 

I really pity the supply  chain demand planner, who like the weatherman is subject to the fickle  nature of an unpredictable force.  Winston wrapped up his article by  stating that “ reducing the inventory itself could be the greenest thing  [logistics executives] can do”.  I had the chance to speak and attend  the 2010 Aberdeen Supply Chain Summit where demand response planning was  discussed at length and where green supply chain issues were recognized  as one of many key attributes in effective supply chain management.  In  such a volatile economy, its vital that companies keep inventory  management in mind as a way to leverage its costs and simultaneously  look toward environmental improvements that can reduce waste.


Partnering for Progress


A  relatively recent pilot program in the State of Wisconsin just shows  how partnering to create a lean focused sustainable manufacturing  cluster can have enormous dividends.  According to a recent article in BizTimes.com,  the Wisconsin Profitable Sustainability Initiative (PSI) was launched  in April 2010 by the Wisconsin Department of Commerce and the Wisconsin  Manufacturing Extension Partnership (WMEP). The goal according to the  article is “to help small and midsize manufacturers reduce costs, gain  competitive advantage and minimize environmental impacts”. 

 

Forty-five  manufacturers participated in over 87 projects evaluated. These projects  focused on “evaluating and implementing a wide range of improvements,  including reducing raw materials, solid waste and freight miles,  optimizing processes, installing new equipment and launching new  products.  The initial results show that the projects with the largest  impact do not come from the traditional sustainability areas such as  energy or recycling. Instead, outcomes from the initial projects suggest  that transportation and operational improvements are places where  manufacturers can look to find big savings, quick paybacks and  significant environmental benefits.”

 

The program is projected to  generate a five-year $54 million economic impact, including: $26.9  million in savings, $23.5 million in increased/retained sales and $3.6  million in investment.

 

Lean design,  Lean manufacturing, Lean inventory management – a Waste Containment and Efficiency “Trifecta”

 

Together,  lean design,  lean manufacturing  and effective, lean inventory  management offer a “trifecta” approach for industry to identify, reduce  or eliminate and track waste.  Effective use of these tools cannot only  drive both in how the product is designed and  produced but offers  opportunities all the way up the supply chain to manage effective  inventory and resource consumption. As the University of Tennessee  studied concluded,  the implications of lean strategies are 1)  Lean  results in green; and 2) Lean is an essential part of remaining  competitive and maintaining a quality image. 

 

Put the two together and a  company can virtually be unstoppable…or a least a bit more  recession-proof and "shelter from the storm".

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