Using Lean To Be Green

March 1, 2009
Whether it was Al Gore, T. Boone Pickens, Greenpeace or your children, you are probably convinced by now that global warming and resource conservation are important global issues.
Recognizing that there is a problem and agreeing that change is needed is not enough. One has to make changes. How do you formulate a rational approach and create a plan that can gain support within your company? Lean Manufacturing has a set of methodologies for eliminating waste. Some of these methods can be re-deployed for becoming green. Lean Manufacturing includes a set of proven methods and practices to continuously improve business performance. The focus starts with the process and involves the people who do the work because they have the most intimate knowledge of the process. They identify waste, determine improvements and implement lasting changes.The core Lean improvement methodology is Value Stream Mapping (VSM). It provides visualization of a process to identify and eliminate non-value-added activities (i.e. waste). A map is drawn to show all the actions that occur for a product. VSM highlights an area for further analysis using the other methodologies. VSM can be applied narrowly, say, to a particular operation performed by an operator. Or, it can be applied to a broader process, from order entry through manufacturing and into accounts payable.What Is Green?Lean avoids inserting non-value-added steps, such as rework, to address an issue. For green initiatives, this applies to the use of carbon offsets to mitigate bad behavior. The preferred approach is to avoid waste and not cover it with non-value-added activities (analogous to “making it right in the first place” rather than “inspecting quality in”).In a Lean program, VSM examines the flow of a product through the manufacturing process. In a green program, use VSM to examine the flow of the inputs as they pass through the business to become outputs. VSM identifies non-value-added uses (waste) that, if eliminated, reduce the amount of the inputs and outputs, thus becoming more green.In many companies, the business costs associated with the inputs and outputs for green manufacturing are accumulated in overhead. The overhead is allocated to the cost centers or products as a percentage of labor or material costs. With this approach, the connection to the particular activities causing the waste is lost, i.e. the polluter is not penalized for bad behavior and has no business incentive to improve. Activity Based Costing is an approach for cost accounting that allocates costs based on activity and not on an overhead allocation, i.e. bad behavior is penalized. Use a rate that reflects the environmental impact.Measurements and metrics are key for monitoring progress. Calculation of each input and output may seem easy on the surface, but is complex due to internal business structure. For example, accumulating all of the fossil fuel inputs involves looking at heat in office buildings, processing in manufacturing, transportation and other uses. It includes natural gas, oil, gasoline and coal. Each of these uses and materials often has separate suppliers and internal cost centers. Capturing the major sources in a consistent manner provides a good balance between completeness and sustainability of the program.Awareness of environmental impact has become broad, with general agreement that something needs to be done. The government can help with incentives that facilitate change in behavior at a macro level. What about the micro level—you? The accumulation of many micro changes (continuous improvement) is the source of real, effective change. Various surveys show that 70 percent of manufacturers use Lean Manufacturing methods to improve their business performance. Apply the proven methods of Lean to becoming green.Ralph Rio, [email protected], is Research Director, Enterprise Software, at ARC Advisory Group Inc., in Dedham, Mass.

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