What are the opportunities and problems for integrating sustainability into lean practices?

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What are the opportunities and problems for

integrating sustainability into lean practices?

A thesis submitted to

the Faculty of Economics and Business In partial fulfillment of

requirements of the degree of Master of Science

in Business Administration

By Wan-Yu Chen

Student name: Wan-Yu Chen Student number: S1939394

Program: MSc Business Administration Specialization: Operations & Supply Chains

Profile: Production and Distribution Supervisor: Prof. Dr. Ir. Jannes Slomp

Co-assessor: Dr. Janita F.J. Vos University: University of Groningen

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Acknowledgement

One-year overseas life in the Netherlands is amazing. As everyone knows, Dutch people are nice and friendly. But, I have to say my supervisor, Professor Slomp, six lean experts I interviewed, Mr. Sander Gorter, Mr. Onno Van Elk, Mr. Henk De Vries, Mr. Menno Visser, Mr. Johan Zaagman, and Mr. Leo Hartman, and the representatives of Eaton, Mr. Han Busschers, Erwin, Roelof and Mr. Danny Redjodiwirjo, they are more than kind!

First of all, I would like to thank Professor Slomp, my respected supervisor. He always guides me to the right direction and gives me valuable comments when I felt so frustrated at the lack of progress and felt so confused about too many thoughts coming to my mind. He is just like the lighthouse at sea, leading me to complete the long journey of writing the thesis. Secondly, I really appreciate the help of six lean experts. I understand they are so busy with their own work every day. However, when they knew they could have a chance to discuss the important issue: Lean and Green, they were perfectly willing to share their knowledge and experience with me. Without their generous help, my thesis cannot be done.

Thirdly, I want to thank Mr. Han Busschers, Erwin, and Roelof, the project team members of “Schakelaarwagen Event”, and the EHS staff, Mr. Danny Redjodiwirjo. Since I started the case study at Eaton, they had to spend their time in explaining the project, answering the questions, and offering the data and information for me. I really appreciate what they have done for me.

At last, I would also thank my families for giving me lots of financial and moral support. In a word, I am so grateful to my families for letting me fulfill the dream I have been pursuing. I would like to present my thesis to all the people who have helped me and the people who care about the triple bottom line: people, profit and planet.

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Abstract

Some researchers and the U.S. Environmental Protection Agency (EPA) argued that the philosophy of Lean Production - waste elimination- coincides with the concept of sustainability. Although lean production could be intrinsically environmentally-friendly, it is widely implemented by organizations without considering the environmental issues and the positive and/or negative impact it can have. Due to the similar underlying logic linking lean and sustainability and the prevalence of lean, we are wondering whether or not lean may serve as the stepping stone to the implementation of sustainability initiatives and whether or not sustainability may make use of the rapid expanse of lean production to spread environmental awareness.

This research finds a complex relationship between lean production and sustainability performance that depends on the measure of sustainability performance being examined. The outcome of interviews with lean experts shows that regarding the amount of energy usage, material consumption, greenhouse gas emission, waste and recycling, most of the lean methods, including (1) Kaizen, (2) Five S, (3) Cellular manufacturing, (4) Total productive maintenance, (5) Six sigma/ TQM, and (6) Pre-production planning, have either directly or indirectly positive impacts on the environmental performance except Just-in-time method. However, the result of analyzing the lean project at the case study company suggests that improvement projects based on the lean methods, such as Kaizen and Pre-production planning for this switchgear-trolley case, can have positive influence on the sustainable indicator of energy usage and scrap volume through reducing the processing time and improving productivity, but also have negative effect on the sustainable indicator of material consumption.

Moreover, lean experts interviewed also pointed out that lean production is capable of achieving better sustainability performance as long as incorporating sustainability considerations into lean practices. And, the result of case study presents when environmental concerns are integrated in the process of Value Stream Mapping, a lean company can both improve the environmental-friendliness of a product or in the production process and reinforce the operational objectives, such as decreasing the cost and increasing the green reputation. Therefore, this research shows there is a reciprocal relationship between lean and sustainability since lean production provides a set of systematic ways to address the wastes and developing sustainability enhances the business results lean has been longing for.

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Content

Acknowledgement... 2 Abstract ... 3 Content ... 4 Content of Figure ... 6 Content of Tables ... 6 Chapter 1 – Introduction ... 7 1.1 Research background ... 7

1.2 Research objective and Research question ... 8

1.3 Conceptual Model... 9

1.4 The organization of this research ... 10

Chapter 2 - Literature Review ... 11

2.1 The Origin and Essence of Lean Production ... 11

2.2 The Origin and Essence of Sustainability ... 12

2.3Lean and Sustainability ... 13

2.3.1 Possess Similar Logic ... 13

2.3.2 Share the Same Critical Success Factors... 14

2.3.3 Benefit Mutually ... 21

2.3.4 Sustainability, a by-product of lean production ... 27

2.3.5 Conflicts ... 27

2.3.6 From Lean toward Sustainability ... 28

Chapter 3 – Methodology ... 30

3.1 Literature Review ... 30

3.2 Lean Expert Interview Method ... 30

3.3 Exploratory case study method ... 31

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4.1 The Positive Impacts on the Environment ... 32

4.2 The Corporate Culture and the well-trained Employees ... 36

4.3 Financial Incentive ... 37

4.4 Suggestions ... 39

Chapter 5 – Exploratory Case Study: Schakelaarwagen Lean Improvement Project ... 42

5.1 Introduction of Eaton Electric ... 42

5.2 The Background of the “Switchgear-trolley Event” ... 42

5.3 The Objectives of the “Switchgear-trolley Event” ... 43

5.4 The Scope of the “Switchgear-trolley Event” ... 43

5.5 The Modifications ... 44

5.6 The Sustainability Assessment of the “Switchgear-trolley Event” ... 45

5.6.1 The comparison of the scrap amount ... 45

5.6.2 The comparison of the amount of material usage ... 46

5.6.3 The comparison of processing time ... 47

5.7 The Missing Chance for Developing Sustainability in “Switchgear-trolleys Event” ... 49

5.8 How to Integrate Sustainability into Lean Events/Practices ... 52

Chapter 6 – Conclusion ... 56

6.1 Conclusion ... 56

6.2 Further research ... 57

Reference ... 58

Appendix I: the List of Lean Experts ... 62

Appendix II: Interview Protocol ... 63

Appendix III: Case Study Protocol ... 66

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Content of Figure

Figure 1: Conceptual Model ... 9

Figure 2 Lean and Sustainability ... 38

Figure 3: the way to make sustainability become main objective of Lean ... 40

Figure 4: The transformation to the expanded filter ... 41

Figure 5 : NEW production process flow of Switchgear-trolley ... 48

Figure 6 : OLD production process flow of Switchgear-trolley ... 48

Figure 7 : VSM with sustainability consideration ... 54

Content of Tables

Table 1: Critical Success Factor for both Lean & Sustainability ... 15

Table 2: Aspects of Business Performance sustainability can help lean to reinforce ... 22

Table 3: a summary of the environmental impacts of lean methods ... 33

Table 4: Benefits of Modifications from both Lean and Environmental Aspects ... 45

Table 5: The comparison of the scrapped amount of sheet metal ... 46

Table 6: the reduction percentage of processing time of each process ... 50

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Chapter 1 – Introduction

In this chapter, an introduction to the research topic will be presented. The background, purpose and the conceptual model of this research are illustrated here.

1.1 Research background

Since environmental problems like global warming, increasing pollution, holes in the ozone layer, and the loss of biodiversity worry the public, since regulations, such as the European Union’s ROHS (Reduction-of-Hazardous-Substances) directive1, continue to tighten, and since international environmental standards, such as ISO140002, become very important to customers, sustainability has become one of the most important issues facing the world. And, many people consider that industry should help to address the environmental problems because the environmental performance or problem is the consequence of its operational system. Indeed, there is no doubt that the way companies organize their manufacturing processes and the characteristics of the products and services they launch have a critical impact on our environment. Gustashaw and Hall (2008) further pointed out that nature has two big problems with industry: extraction of raw material and energy from the environment at rates far exceeding the environment’s ability to regenerate them and assimilation of mass no longer considered useful thrown back into the environment at rates greater than it can absorb. Because it is broadly accepted that businesses cause environmental problems, most people demand companies to play a decisive role in their solutions to these environmental problems. However, integrating the demands of sustainability in a business is a challenge for management since it implies numerous fundamental changes in operation, process design, and product design (Larson and Greenwood, 2004). Whether or not these environmentally friendly changes will be materialized depends on companies’ assessment of their potential benefits and risks. The unclear effects of environmentally-driven investments on the financial future of the company bring great uncertainty for decision-makers.

Fortunately, some researchers and the U.S. Environmental Protection Agency (EPA) argued that the philosophy of Lean Production - waste elimination- coincides with the concept of sustainability. Through fewer resources consumed, less scrap produced and shorter material moves, compacting space, and improving process yields, lean production helps to waste less

1_{The ROHS directive mandates that electronic products that do not comply with the directive’s restrictions,}

calling for the elimination of these six hazardous substances: lead, mercury, cadmium, hexavalent chromium, polybrominated biphenyls, and polybrominated biphenyl ethers, will face removal from the market and their manufacturers will have to pay fines (Conner, 2006).

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raw material and energy. In other words, lean production lends a hand to conserve natural resources. Although lean production could be intrinsically environmentally-friendly, it is widely implemented by organizations without considering the environmental issues and the positive and/or negative impact it can have. Indeed, when it comes to lean production, better quality, less costs, and reduced delivery times it can bring about always outperform the environmental impact it may produce. Compared to sustainability, most companies can much more easily see the desirable business benefits of lean production; therefore it could overwhelmingly prevail among diverse sectors. Due to the similar underlying logic linking lean and sustainability and the prevalence of lean, we are wondering whether or not lean may serve as the stepping stone to the implementation of sustainability initiatives and whether or not sustainability may make use of the rapid expanse of lean production to spread environmental awareness.

1.2 Research objective and Research question

As mentioned above, if it is possible to achieve sustainability through broadening the waste definition of lean production or if it is possible to use the lean production as the platform to implement sustainability, then what comes next would be whether or not any opportunities and problems for integrating sustainability into lean production. As a result, this research aims to:

(1) understand the results of implementing lean production in terms of operational performance and sustainability performance,

(2) identify the potential areas where sustainable considerations can help companies to optimize lean production systems, and

(3) illustrate the possible problems/difficulties occurring during the integration of lean and sustainability.

As a result, the main research question is designed as:

“What are the opportunities and problems for integrating sustainability into lean practices?” In this research, the sustainability performance is divided into three categories, that is, input, process and output. Input sustainability performance concentrates on the usage of raw materials, energy (electricity and gas) and water. Process sustainability performance focuses on the value-added activities with environmental risk, such as painting and coating. Output sustainability performance emphasizes on the product itself and the amount of hazardous and nonhazardous wastes, including the air, liquid and solid wastes. On the basis of these three categories, the sub-questions generated to achieve objective 1 are as follows:

(1) How do the applications of lean methods influence the consumption of inputs, both materials and energy?

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(3) How do the applications of lean methods alter the impacts of outputs, both products and residual products, on the environment?

Moreover, the sub-questions derived to respond to objective 2 and 3 are:

(4) Where is the missing chance that sustainability consideration can complement and enhance lean production?

(5) What are the barriers or difficulties existing while a company integrates sustainability into lean practices?

1.3 Conceptual Model

The conceptual model shown as Figure 1 presents the framework of this research for investigating the relationship between the implementation of lean production and operational and sustainability performance.

Value Stream Input

the consumption of raw materials, energy and

water

Process

the value-added activities with environmental risk

Output the amounts of product itself and both hazardous and nonhazardous wastes Overall Sustainability

Sustainability Consideration Business Performance Business Performance

Operational performance Sustainability performance Lean Production  Kaizen  Five S  TPM  Cellular Manufacturing  Just-in-Time/ Kanban  Six Sigma (TQM)  Pre-Production Planning

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1.4 The organization of this research

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Chapter 2 - Literature Review

In this chapter, the concepts of lean production and sustainability are illustrated separately first. After that, the similarities that make them compatible and the reciprocal benefits between them that may generate synergies are reviewed. In addition, the conflicting areas between lean and sustainability are also discussed.

2.1 The Origin and Essence of Lean Production

Since the publication of The Machine That Changed the World in 1990, lean thinking has been used to describe the overarching philosophy that drove Toyota to develop Toyota Production System (TPS). The key content of this book is that the concept and methods developed by Toyota provide a better way to organize and manage the manufacturing facilities and processes and the interaction of these facilities and processes with customers and suppliers, and give Toyota significant competitive advantage. Meanwhile, the authors coined the term “Lean Production” to represent TPS because it does more with less.

Womack and Jones (2003) indicated that lean production basically consists of five core principles: (1) specify what creates value from the customer’s perspective, (2) identify all steps across the whole value stream, (3) make those steps that create value flow, (4) only make what is pulled by the customer just-in-time, and (5) pursue perfection by continually removing waste. Value is defined by the customer and is the goods and/or services the customer purchases. Anything not directly contributing to the creation of value is considered as waste in the Lean philosophy. The value stream represents all the value-added and non-value-added activities required to bring a specific product/service to flow from concept, development, transformation of raw material, and delivery to payment done by customers. Mapping the value stream helps companies identify value added steps versus steps that are wasteful. Once value added steps are identified in the value stream and wasteful steps are targeted for reduction, the next step is to make the remaining value-added steps flow continuously, that is, to line up the remaining steps in a continuous flow. Pull systems control each stage of production by only allowing preceding operations to produce when the next operation needs parts. Pull enables the value stream to produce and deliver the right materials at the right time in the right amounts within minimal inventory. Perfection is the ideal of eliminating all waste along the value stream to achieve continuous flow. In fact, the last principle “pursuing perfection” implies that lean production incorporates the philosophy of never being content with existing level of performance, waste, cost, and quality, and always strives to improve processes and operations and reduce waste. Similarly, King (2009) concluded that lean production is a company-wide continuous improvement approach to eliminate non-value-added activities (waste) while adding value for customers.

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needed at the right time and right location, and utilizes a specific set of factory practices that facilitate small lot production with minimal buffers and a rapid feedback process when there are problems during production. However, JIT manufacturing is only one dimension of lean production. Apart from offering a more flexible manufacturing system through the minimization of buffers, lean production also consists of work systems that can expand human capabilities (Maxwell et al., 1998). In lean thinking, human resource (HR) policies are as important as the technical systems to the operation of lean production. Lean work systems could be characterized by multi-skilled workers, multi-skilled teams and close supplier relations. The HR policies in lean organizations always encourage creative problem-solving and high levels of organizational commitment.

Based on the simultaneous deployment of both pillars - continuous improvement and respects for people (Liker, 2004), lean provides a systematic way to eliminate non-value added activities and wastes from the production processes.

2.2 The Origin and Essence of Sustainability

The book The Limits to Growth (Meadows et al., 1972) uses computer modeling to predict the consequences of a rapidly growing world population and finite resource supplies, and publicized the concept of outer limits, that is, development could be limited by the finite size of the Earth’s resources. One key idea of this book is that if the rate of resource use is increasing, the amount of reserves cannot be calculated by simply taking the current known reserves and dividing by the current yearly usage; experience shows that growth tends to be exponential. Nevertheless, Meadows et al. also showed that if the long-term exponential growth trends in the world’s population, industrial output, agricultural and natural resource consumption and the pollution produced could be properly altered, the world still could establish a condition of “ecological stability” that would be sustainable far into the future. It is the publication of The Limits to Growth that raised the awareness that the supply of the natural resources is not always inexhaustible and sustainable.

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Because sustainability is about operating a business in a way that cause minimal harm to living creatures and that does not deplete but rather restores and enriches the environment, it is closely tied to Triple Bottom Line (TBL): People, Planet, and Profit. Triple Bottom Line (or 3Ps) was coined by John Elkington in his 1998 book Cannibals with Forks: the Triple Bottom

Line of 21st Century Business. The concept of triple bottom line is that businesses need to

measure their success not only by the traditional bottom line of financial performance (profit), but also by their impact on the environment (planet) and on the society (people) in which they operate. Indeed, when running a business, the company uses not only financial resources (investment dollars, sales revenues), but also environmental resources (water, energy, raw materials) and social resources (employee’s time and talents, infrastructure provided by government agencies). Traditional accounting models are all about profit and more profit, whereas triple bottom line recognizes that: without healthy people to run a business and the natural environment to sustain those people and resources, the business is simply unsustainable in the long term. As a result, triple bottom line means expanding the traditional reporting framework to take into account environmental and social factors as well as financial performance. Furthermore, the triple bottom line concept is important because it is not just about commerce; it is an ongoing process that helps a company to run a more sustainable and greener business and demonstrates to the community that the company is working not just for profit but also for the members of the community.

2.3 Lean and Sustainability 2.3.1 Possess Similar Logic

Compared with Lean, sustainability has similar but broader concept.

As the name suggested, lean production exploits less of everything compared with traditional mass production. In manufacturing, product development, and parts supply processes, less human effort, less capital investment, less raw material, less energy and less time are used to produce the goods/services. Kidwell (2006) stated that aside from the obvious saving on production costs, the more efficient use means not only less energy and raw materials consumed, but also less material emitted to air and water and less solid/hazardous waste generated. Also, according to Taiichi Ohno, who developed the TPS and wrote the book Toyota Production System, “The basis of the Toyota production system is the absolute elimination of waste.” The emphasis of lean production on eliminating waste is exactly consistent with the focal idea of sustainability centered on minimizing waste/environmental impacts.

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the Brundtland Report implies that companies should strive for the reduction of environmental impact through more efficient use of materials and natural resources in manufacturing. Therefore, pursuing sustainability could be viewed as continuing to gain resource efficiency. And, this is also in line with the overall goal of lean production continually improving production efficiency. Beside, Florida (1996) argued that lean and sustainability both draw upon the same underlying principles: a dedication to productivity improvement, quality, cost reduction, continuous improvement and technological innovation. Since both lean and sustainability aim for eliminating waste and increasing productivity, lean and sustainability are conceptually similar.

Although the lean mantra of eliminating waste fits sustainability initiatives perfectly, sustainability should be thought of as lean extended to a much broader objective. The difference lies in where the focus is, where the system boundary is drawn and how waste is defined. Lean focuses on the economic customer, whereas sustainability focuses on triple bottom line- profit, people, and the planet (Langenwalter, 2006). The lean boundary is generally defined by a value stream map. It may be short, or it may trace a value-added trail across the total supply chain. However, sustainability goes beyond industrial system boundary to include environmental impact. Moreover, lean production sees wastes as non-value-added activities to the customers, while sustainability views wastes as extraction and consequential disposal of resources at rate or in forms beyond that nature can absorb (Gustashaw and Hall, 2008). As a result, compared with lean, sustainability has similar but broader concept.

To sum up, the strong coherences between lean and sustainability has been shown in a number of studies (Gustashaw and Hall, 2008; Hanna and Newman, 1994; Hart, 1997; Herrmann, 2008; Kidwell, 2006; King and Lenox, 2001; Langenwalter, 2006; Larson and Greenwood, 2004; Maxwell et al., 1998; Porter and Van Der Linde, 1995).

2.3.2 Share the Same Critical Success Factors

Sustainability relies on the same essential prerequisites as Lean does.

Some researchers believe that both lean and sustainability should minimally include some elements to guarantee their success.

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improvement. Moreover, the survey results derived by Florida (1996) reinforce that employee involvement is a cost-effective way to improve environmental outcomes and reduce costs, involving incremental changes in existing processes and products as opposed to major changes in technology and large capital expenditures. Therefore, Florida (1996) concluded that production workers are an important component of pollution prevention efforts. Besides, Hanna et al. (2000) found that employee involvement is one approach that makes operational improvement and excellence possible, and it also can result in environmental performance improvements. Top management commitment to the environment is necessary to build a culture of environmental consideration and to empower employees to take actions to prevent negative environmental impacts from company operations (Bergmiller and McCright, 2009). Like lean, sustainability requires “continuous improvement”, “employee involvement” and “management commitment” as well.

In addition to what mentioned above, Florida (1996) highlighted that close relationships between end-users and suppliers facilitates the adoption of advanced manufacturing practices, creating new opportunities for joint improvement in productivity and environmental outcomes. Hart (1997) also maintained that a clear and fully integrated environmental strategy should not only guide competency development, it should also shape the company’s relationship to customers, suppliers, other companies, policy makers and all it stakeholders. Therefore, the relationships between customers and suppliers are also essential for achieving better operational and environmental performance. Furthermore, Maxwell et al. (1998) reported that one of the critical features of lean production is the recording and posting of key variables in order to disseminate crucial information to all workers and further facilitate the continuous improvement. This type of recording and posting also could be critical and used to achieve environmental goals. Similarly, King and Lenox (2001) also stated that most environmental management systems (EMS) emphasize formal pollution monitoring over and data tracking on the facility waste streams. Also, enhancing environmental performance involves root-cause analysis, data tracking efforts, and structured reporting and information evaluation systems analogous to those used to enhance quality and efficiency (Pil and Rothenberg, 2003). On the basis of literature review, the essential elements for both lean and sustainability that are also necessary to successfully achieve their goals are summarized in Table 1.

Table 1: Critical Success Factor for both Lean & Sustainability

Critical Success Factor for Both

Lean and Sustainability Authors Citation/Arguments Continuous Improvement on Waste Reduction Hanna and Newman (1995)

[F]irms cannot view environmental costs as being optimized through selection of the appropriate static balance between environmental damage prevention and potential fines and remedy. Rather, firms must seek a more proactive approach to continuous improvement.

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Management) concepts of reduced process variation, continuous process improvement, cross-functional integration and improved supplier/customer relationships to bring about the elimination of waste.

Hart (1997) Pollution control means cleaning up waste after it has been created. Pollution prevention focuses on minimizing or eliminating waste before it is created, Much like total quality management, pollution prevention strategies depend on continuous improvement efforts to reduce wastes and energy use.

Florida (1996) [A]doption of advanced manufacturing systems create substantial opportunity for adoption of green design and production strategies since both draw upon the same underlying principles- a dedication to productivity improvement, quality, cost reduction, continuous improvement, and technological innovation.

Maxwell et al. (1998)

[A] lean production system was characterized by its focus on efficiency. … Continual improvement in striving to eliminate waste was facilitated by tracking and analyzing production data…Lean manufacturing facilities were dedicated to a waste reduction philosophy that could be readily extended to achieve the goal of environmental protection.

U.S. EPA (2000) The Boeing case studies indicate that the drive to Lean Manufacturing produces (and in fact requires for its success) a highly robust waste elimination culture. Boeing’s approach to Lean implementation mirrors closely, and expands substantially on, the pollution prevention cultural elements long advocated by public environmental management agencies.

King and Lenox (2001)

Like lean production system, they (Environmental Management Systems) often include opportunities for collaborative problem solving and continuous improvement.

Pil and Rothenberg (2003)

Part of the appeal of TQM lies in its emphasis on getting things right from the start, elimination of waste, as well as its focus on continuous improvement. These same principles hold with respect to environmental matters, leading to the term Total Quality Environmental Management (TQEM).

U.S. EPA (2003) Lean produces an operational and cultural environment highly conducive to waste minimization and pollution prevention.

[T]o make sustained environmental improvement progress that moves beyond the “low-hanging fruit,” an organization must create a continual improvement-focused waste elimination culture. Common elements of this organizational culture, as identified by public agency EMS and pollution prevention guidance, include: a systemic approach to continual improvement; a systemic and on-going effort to identify, evaluate, and eliminate waste and environmental impacts that is embraced and implemented by operations personnel; environmental and pollution prevention metrics that provide performance feedback; and engagement with the supply chain to improve enterprise-wide performance.

Larson and Greenwood (2004)

[T]hese [eco-sustainability] initiatives share a variety of common themes: a belief that pollution prevention pays and an interest in encouraging a fundamental change toward a continual waste reduction/ elimination corporate culture, including leveraging product value-chain relationships through substantial employee, supplier, and customer involvement in identifying improvement opportunities and formulating solutions…

Langenwalter (2006)

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substantial increase in creativity by employees at all levels…Like lean, sustainability starts with educating people at all levels to see with different eyes, ask questions, and make decisions based on sustainable criteria.

Bergmiller and McCright (2009), “Are lean and green programs synergistic?”

Since Lean and Green Programs each requires management commitment and employee involvement, identification and reduction of organizational wastes, and continuously improving organizations, intuition suggests implementing one program may actually make implementing the second program less arduous.

[E]nvironmental wastes caused by operations must be identified and appropriate techniques applied to reduce or eliminated the generation of such wastes.

Bergmiller and McCright (2009), “Parallel models for Lean and Green operations”

Models for both Lean and Green systems all include management systems, waste identification, and implementation of waste reducing techniques (WRT) to achieve desire business results.

Top-Down System: Management Commitment

Porter and Van Der Linde (1995)

[M]anagers must start to recognize environmental improvement as an economic and competitive opportunity, not as an annoying cost or an inevitable threat.

Florida (1996) Responding firms indicated that only two other groups - top management (81.1 percent) and engineers (75.0 percent) - were more important than production workers to their pollution prevention efforts.

[In figure 7: Key Actors in Pollution Prevention Efforts, top management is at the first place.]

Pujari et al. (2003)

Successful ENPD (environmental new product development) is unlikely without top management support, involvement, and resource commitment.

This reflects Johne and Snelson’s (1988) view that clear messages from the top about the importance of ENPD can become a critical success factor.

Langenwalter (2006)

Sustainability depends on the creativity of people at all level and rewards from the management.

Simpson and Samson (2008)

Firms that are highly proactive in their support of the environment at the strategic level of the organization have also been found to demonstrate high levels of environmental performance.

[T]op management commitment to the environment is essential to build a culture of environmental consideration and to empower employees to take actions to prevent negative environmental impacts from company operations.

Figure 3 provides a comprehensive Lean/Green comparative model. [It is clear to observe from figure 3 that Management system, defining the policies and procedures that create the environment/culture that commits the organization toward waste reduction, includes leadership and empowerment.]

Bottom-Up System: Employee Involvement

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Florida (1996) [T]he magnitude of the difference between these three groups [top management, engineers, and production workers] is sufficiently small, reinforcing the conjecture that production workers are an important component of pollution prevention efforts.

Detailed selection criteria for new employees, employee development through training and job rotation, and outlets for creativity such as quality circles and suggestion systems served to enhance mutual respect among workers and motivated them to strive for continuous improvement. The benefits of these human resource policies were evident in the environmental arena.

Hanna et al. (2000)

[T]his paper suggests that the continuous improvement efforts of operations mangers, including EI (Employee Involvement) team projects, can be a key source of environmental improvements.

Our research does not prove such causality, but it does support the findings of Bunge et al. (1995) that suggest EI programs play a significant role in environmental performance improvement efforts. Rothenberg et al.

(2001)

[W]orker participation in continuous improvement serves to improve environmental efficiency.

Key to both successful quality and environmental initiatives was inter-functional coordination…. Both rely, for example, on bottom-up systems for capturing process information, insight, and opportunities for innovation

A higher degree of integration of environmental coordinator in ENPD (environmental new product development) process positively influences the level of eco-performance of ENPD.

Langenwalter (2006)

Sustainability aligns efforts at all levels toward an easily-understood goal.

Gustashaw and Hall (2008)

Everyone who has tried lean knows that is doesn’t work without engaging the workforce, which may be its real number one goal. Simpson and

Samson (2008)

The involvement of employees has been found to be highly important to waste reduction.

Tonkin (2008) There are costs for participation in GSN (Green Suppliers Network). Employee time and commitment is needed.

Since Lean and Green Programs each requires management commitment and employee involvement, identification and reduction of organizational wastes, and continuously improving organizations…

Figure 3 provides a comprehensive Lean/Green comparative model. [It is clear to observe from figure 3 that Management system, defining the policies and procedures that create the environment/culture that commits the organization toward waste reduction, includes leadership and empowerment.] Leveraging Customer Relationship Hanna and Newman (1995)

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relationships… and the ultimate disposal of the product.

Florida (1996) Increasing co-involvement in product development between end-users and suppliers provides opportunities for the design of new products and process that are both more efficient and environmentally benign. The emergence of mutually dependent relationships between end-users and their suppliers have opened up new pathways for the diffusion of innovative approaches to waste reduction, pollution prevention, and productivity enhancement- particularly as end-user firms actively assist their suppliers in the adoption of mew methods. Hart (1997) A clear and fully integrated environmental strategy should also shape

the company’s relationship to customers, suppliers, other companies, policymakers, and all its stakeholders. Companies must become educators rather than mere marketers of products.

The importance of effective groundwork within ENPD (environmental new product development) is underlined by high degree of uncertainty surrounding the extent and nature of consumer’s environmental concerns and their impact on behavior, and by relatively high rate of failure among recent green products in meeting customer needs. A higher degree of effective groundwork positively influences market performance and eco-performance of ENPD.

Simpson and Power(2005)

A relational customer-supplier relationship is positively related to both lean performance of a supplier firm and the environmental management practices of the supplier firm.

Sustainability also analyzes the upstream and downstream system boundaries in the product life cycle, starting with the raw materials suppliers and the customer shown in Figure 3.

Tonkin (2008) [Y]our work with customers and suppliers can lead to long-term environmental improvements.

Leveraging Supplier Relationship

Hanna and Newman (1995)

Such prevention of waste may come from changes in the design of the product and process, operation of the manufacturing process and consumption of the product. Analysis of potential changes in wasteful practices from “cradle to grave” encompasses supplier relationships, actual manufacturing methods, distribution and customer relationships… and the ultimate disposal of the product.

Florida (1996) Supplier relations and supply chain management can affect industrial and environmental performance in different ways. On the one hand, manufacturers have a t times used their suppliers as a vehicle for improving their own environmental records by out-sourcing toxic elements of the production processes….On the other hand, new models of supplier relationship and supply chain management create opportunities for joint approached to improve productivity and prevent pollution.

Hart (1997) A clear and fully integrated environmental strategy should also shape the company’s relationship to customers, suppliers, other companies, policymakers, and all its stakeholders.

A manufacturer’s eco-performance is largely determined by “upstream” environmental impact.

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Greenwood (2004)

Simpson and Power(2005)

A relational customer-supplier relationship is positively related to both lean performance of a supplier firm and the environmental management practices of the supplier firm.

Sustainability also analyzes the upstream and downstream system boundaries in the product life cycle, starting with the raw materials suppliers and the customer shown in Figure 3.

Tonkin (2008) [Y]our work with customers and suppliers can lead to long-term environmental improvements is the most powerful draw.

Developing Practical and Quantitatively

Based Measures

First, they can measure their direct and indirect environmental impacts. … Our research indicates that the act of measurement alone leads to enormous opportunities to improve productivity.

[T]hese [eco-sustainability] initiatives share a variety of common themes: a belief that pollution prevention pay… and a focus on developing practical, quantitatively based measures for objectives, targets, and performance.

Langenwalter (2006)

Metrics make a vision become real in practice. Besides the metrics that usually guide lean operations, a few others are often associated with sustainability…

For employees to identify and solve environmental problems in the workplace, it was essential that the appropriate information be readily available. … One of the critical features of lean production was the recording and posting of key variables in order to disseminate crucial information to all workers, including production workers. This type of recording and posting also could be used to achieve environmental goals.

Environmental management systems (EMS) share many characteristics with lean production. Most EMSs emphasize formal monitoring and improvement of facility waste streams. Like lean production system, they often include opportunities for collaborative problem solving and continuous improvement. Therefore, we expect that firms that practice lean production will be more likely to adopt formal environmental management systems.

Enhancing environmental performance involves root-cause analyses, data tracking efforts, and structured reporting and information evaluation systems analogous to those used to enhance quality, and may result in a shift in management orientation toward the tools and systems associated with TQM.

…the need to develop dynamic systems linked to overall corporate planning and control systems that address: developing environmental product objectives and responses, developing consistent performance measures, emphasizing measurable quantifiable metrics…These measures of environmental product performance may be oriented towards: (1) regulatory compliance, (2) risks, and (3) upstream impacts for virgin-resource use.

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to continual improvement; a systemic and on-going effort to identify, evaluate, and eliminate waste and environmental impacts that is embraced and implemented by operations personnel; environmental and pollution prevention metrics that provide performance feedback; and engagement with the supply chain to improve enterprise-wide performance.

Dakov and Novkov (2007)

[T]he use of set of indicators for measuring the progress in the road to sustainability can be a kind of solution to these problems. Thus, it is possible to keep the accent on economic progress together with environmental and social performance improvements.

2.3.3 Benefit Mutually

Implementing sustainability initiatives can enhance the business performance lean longing for.

Lean is fundamentally a competitiveness initiative deployed by companies to increase responsiveness to customer, reduce capital and operating costs, and improve product quality (Larson and Greenwood, 2004). These business results, which are also used by the Shingo Prize for Excellence in Manufacturing as the criteria for assessing a company’s “Leanness”, are always the objectives of each manufacturing systems. Bergmiller and McCright (2009) presented that business results that have been sought by lean are quality, cost, delivery, customer satisfaction, and profitability. Furthermore, the study done by U.S. EPA (2003) illustrated that the outcomes that stem from implementing lean methods include: reduced inventory level, decreased material usage, optimized equipment, reduced need for factory facilities, increased production velocity, and enhanced production flexibility. All the improvements achieved by lean could be related to the operations performance objectives suggested by Slack et al. (2004). Slack et al. indicates five specific aspects of performance on which the operations function is judged, that is, quality, speed, dependability, flexibility, and cost. In other words, companies employ lean production to achieve these five operational performance objectives.

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position in green market segments, reducing pollution and other environmental impacts can improve the overall image of a company and thus increase customers’ loyalty. The study by Klassen (2000) centered on the furniture industry shows that increasing the allocation of investment in environmental initiatives to pollution prevention improves delivery performance. Klassen (2000) further argued that the improvement in delivery performance came from production and environmental managers rethinking their approach to manufacturing as they worked to prevent pollution.

Table 2 summarizes to which aspect of business performance sustainability can contribute. Table 2: Aspects of Business Performance sustainability can help lean to reinforce

Business

Performance Literature Citation/Arguments

Quality

[M]any manufacturers using TQEM (total quality environmental management) are producing higher quality, more environmentally sound products with more environmentally-friendly process, while simultaneously improving productivity.

The net result is not only dramatically lower environmental impact but also lower costs, better product quality, and enhanced global competitiveness.

Reducing pollution in the process rather than treating it at the end-of–the-pipe has a similar logic to building quality into the product rather than inspecting it in at the end-of-the-line.

We find strong support for the hypothesis that superior environmental performance is associated with better quality.

Simpson et al.,(2004) For example, a manufacturer of hand tools replaced a trichloroethylene degreasing plant with a new, expensive, automated water based solution system and achieved a better product quality, less expense on degreasing solutions and an increase in productivity.

Rao and Holt (2005) The manifest variables considered in this study to investigate competiveness are: improved efficiency, quality improvement, productivity improvement, and cost saving.

The second contribution [of this research] is that it establishes with a sound theoretical foundation and prior empirical analysis that the green supply chain does lead to increased competitiveness and better economic performance.

Bergmiller and McCright (2009), “Are lean and green programs

synergistic?”

Table 2 summarizes the elements of a green operations system. Business results include costs, lead times, quality, market position, reputation, product design, process waste, equipment, benefits and international sales.

[W]e developed an advanced model of Green Systems, shown in Figures 2. [It is clear to see from figure 2 that Green Business Results include costs, lead times, quality, market position, reputation, product design, process waste, equipment, benefits and international sales.]

Cost

Improvements in the management of operations resulting from such progressive viewpoint have lead to millions of dollars of documented annualized saving through proactive environmental excellence in several progressive companies.

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improving environmental impact and ending the stalemate. Ultimately, this enhanced resource productivity makes companies more competitive, not less.

Klassen and McLaughlin (1996)

[F]irms that invest heavily in environmental management systems and safeguards can potentially avoid future environmental spills, crises, and liabilities. Costs resulting from materials waste and inefficient processes also are minimized.

Simpson et al.,(2004) The results of our study showed that waste reduction was related to cost savings…

Langenwalter (2006) Why go for sustainability? Reducing operating costs: When done by eliminating waste, environmental improvement should also reduce cost unless the anomalies of the cost system mask the effect.

Ambec and Lanoie (2008)

[B]etter environmental performance can lead to reductions in cost in four categories: (a) risk management and relations with external stakeholders; (b) cost of material, energy, and services; (c) coast of capital; and (d) cost of labor.

Sustainable analysis generally begins where lean leaves off. Suppose that conservation cuts the business’s energy use in half. That cost reduction is very helpful, but sustainability doesn’t stop there.

Tonkin (2008) [C]ompanies may find cost savings, new markets, and more efficiency by using alternative materials and energy resources.

Cost savings from environmental opportunities reported by GSN [Green Suppliers Network] participants are significant...

synergistic?”

Returnable packaging [, one of waste reduction techniques mentioned in this article,] is highly related to improved cost performance.

[W]e developed an advanced model of Green Systems, shown in Figures 2. [It is clear to see from figure 2 that Green Business Results include costs, lead times, quality, market position, reputation, product design, process waste, equipment, benefits and international sales.]

Delivery

Klassen (2000) Increasing the allocation of investment in environmental initiatives to pollution prevention, instead of pollution controls or management systems, improved delivery performance. Some of the improvement in delivery performance may come have come from production and environmental managers rethinking their approach to manufacturing as they worked to prevent pollution.

synergistic?”

Creating new markets for firm’s products/services [, one of waste reduction techniques mentioned in this article,] is significantly correlated to improved cost performance, improved on-time deliveries, and improved customer satisfaction and profitability.

Customer Satisfaction

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24 products.

Pujari et al. (2003) [E]xternal benefits that arise from environmental improvement include: increased sales, improved customer feedback, closeness to customers, enhanced competitiveness, and improved corporate image.

Simpson et al.,(2004) Customer satisfaction was thought to be a good indicator of the potential competitive advantage to be obtained from adopting environmental responsibility and environmental improvements. ... Those companies that had first-hand experience of this issue definitely supported the causal effect of environmental good practice and improved customer satisfaction.

Reducing pollution and other environmental impacts may improve the overall image or prestige of a company, and thus increase customers’ loyalty or support sales efforts.

synergistic?”

Substitution of less toxic, more recyclable, or more easily processed materials [, one of waste reduction techniques mentioned in this article,] is significantly correlated to customer satisfaction and profitability as well as total Lean Results.

Profitability

Although such product innovations have been prompted by regulators instead of by customers, world demand is putting a higher value on resource-efficient products. Many companies are using innovations to command price premiums for “green” products and to open up new market segments.

[F]irm-specific events related to strong environmental performance affect the market valuation of the firm. Environmental awards, denoting public recognition of strong environmental performance, resulted in a significant, positive change in the market value.

Significant positive abnormal stock returns were documented following positive environmental events, high-lighting the perceived value of strong environmental performance.

Hart (1997) By reducing materials and energy consumption, design for environment (DFE) can be highly profitable.

We therefore corroborate Hart and Ahuja’s (1996) finding that reduced emissions are correlated with future financial performance…

We find evidence that reducing pollution by preventing waste is profitable...

Rao and Holt (2005) To investigate the link between green supply chain management and economic performance a number of manifest variables constitute the construct measuring economic performance: new market, product price increase, profit margin, sales, and market share.

[B]etter environmental performance can lead to an increase in revenues through three channels: (a) better access to certain markets; (b) differentiating products; (c) selling pollution control technology.

synergistic?”

Wastes segregation [, one of waste reduction techniques mentioned in this article,] is significantly correlated to customer satisfaction and profitability as well as to total Lean Results and highly related to an improved cost performance for the company.

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25 McCright (2009),

“Parallel models for Lean and Green operations”

2. [It is clear to see from figure 2 that Green Business Results include costs, lead times, quality, market position, reputation, product design, process waste, equipment, benefits and international sales.]

Emerging Market Position

Although such product innovations have been prompted by regulators instead of by customers, world demand is putting a higher value on resource-efficient products. Many companies are using innovations to command price premiums for “green” products and to open up new market segments.

Florida (1996) The survey asked firms to identify the factor in the broad economic and policy environment that affect their environmental manufacturing strategies. These included: environmental regulations, corporate citizenship, improving technology, productivity improvement, pressure from competitors, serving key customers, and markets for green products.

Manufacturers who demonstrate efforts to minimize the negative environmental impacts of their products and processes, recycle post-consumer waste, and establish environmental management systems are poised to expand their markets or displace competitors that fail to promote strong environmental performance.

Hart (1997) The achievement of sustainability will mean billions of dollars in products, services, and technologies that barely exist today. Whereas yesterday’s businesses were often oblivious to their negative impact in the environment and today’s responsible businesses strive for zero impact, tomorrow’s businesses must learn to make a positive impact. Increasingly, companies will be selling solutions to the world’s environmental problems.

Rao and Holt (2005) To investigate the link between green supply chain management and economic performance a number of manifest variables constitute the construct measuring economic performance: new market, product price increase, profit margin, sales, and market share.

Langenwalter (2006) Why go for sustainability? Attracting and retaining “better” customers: In global markets, U.S. companies can no longer assume that the United States sets environmental standards. Europe has become the leader, passing tough laws for a wide range of products, including chemicals, automobiles, electronics, tools, and cosmetics….How long will U.S. consumers willingly lag the protections afforded Europeans?

[B]etter environmental performance can lead to an increase in revenues through three channels: (a) better access to certain markets; (b) differentiating products; (c) selling pollution control technology.

Tonkin (2008) [C]ompanies may find cost savings, new markets, and more efficiency by using alternative materials and energy resources.

synergistic?”

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In addition to those companies which have made overt attempts at the corporate level to address environmental concern and presents a “green image” through TQEM (total quality environmental management), there are many companies which have inadvertently improved their environmental performance through the elimination of specific operational waste targeted by their TQ(total quality) programs.

Langenwalter (2006) The less quantifiable, but perhaps even more important, aspects of implementing sustainability include: reputation management, investor relations and access to capital, learning and innovation, and license to operate.

Reducing pollution and other environmental impacts may improve the overall image or prestige of a company, and thus increase customers’ loyalty or support sales efforts.

synergistic?”

The resulting “Green” Systems have sometimes created amazing reductions in energy consumption, waste generation, and hazardous materials used while also building the companies’ images as socially responsible organizations.

Productivity

[U]sing QFD (quality function deployment) to identify the underlying causes for environmental waste is one way to set the agenda for productivity gains through improvement of environmental quality. [M]any manufacturers using TQEM (total quality environmental management) are producing higher quality, more environmentally sound products with more environmentally-friendly process, while simultaneously improving productivity.

Policy makers, business leaders, and environmentalist have focused on the static cost impacts of environmental regulation and have ignored the more important offsetting productivity benefits from [environmental] innovation.

Florida (1996) The survey asked firms to identify the factor in the broad economic and policy environment that affect their environmental manufacturing strategies. These included: environmental regulations, corporate citizenship, improving technology, productivity improvement, pressure from competitors, serving key customers, and markets for green products.

Explicit costs of environmental management are minimal and generate other management benefits, such as higher morale or increased productivity.

Simpson et al.,(2004) For example, a manufacturer of hand tools replaced a trichloroethylene degreasing plant with a new, expensive, automated water based solution system and achieved a better product quality, less expense on degreasing solutions and an increase in productivity.

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Kidwell (2006) It [sustainability] means less material resources are used per unit produced, and materials (and energy, for that matter) are used or reused more efficiently…this more efficient use means not only less energy and raw materials consumed, but also less material emitted to air and water, and less solid/hazardous waste generated.

Through fewer and shorter material moves, compacting space, improving process yields, and so on. They [many companies] waste less material or energy doing things that really didn’t need to be done. If they concentrated on waste as seen by the environment as well as that seen by the customer they could do much more.

Tonkin (2008) The benefits go far beyond cost avoidance (reducing raw material costs, etc.). We've seen higher throughput, greater flexibility, optimization of assets, scrap reduction, better employee morale, etc.

2.3.4 Sustainability, a by-product of lean production

Improved environmental performance may be a byproduct of lean production.

The relationship between business performance and environmental improvement has two dimensions. On the one hand, organizations may adopt environmental innovations as a way to reduce costs through improved or more efficient production processes. On the other hand, environmental improvement may also be a byproduct of changes accomplished to reduce other costs, to improve productivity, and to improve plant performance (Florida and Davison, 2001). Similarly, Hanna and Newman (1994) stated that in addition to those companies which have made overt attempts at the corporate level to address environmental concerns and present a “green image” through Total Quality Environmental management (TQEM), there are many companies which have inadvertently improved their environmental performance through the elimination of specific operational wastes targeted by their total quality program, which is one of facets of lean. Many practical examples of environmental improvements as the side effect of implementing lean production have been documented (Hanna and Newman, 1995; Klassen, 2000; U.S. EPA, 2000; U.S. EPA 2003; Kidwell, 2006; Franchetti et al., 2009). These kind of environmental improvements achieved through implementing lean operations would be classified to the latter category, which is a byproduct of changes accomplished to reduce other costs, to improve productivity, and to improve plant performance. Hanna et al. (2000) and Kidwell (2006) explicitly asserted that lean helps the environment without really intending to do so.

2.3.5 Conflicts

Some contradictory areas still exist between lean and sustainability.