Leaning Toward Green: Green Your Supply Chain with Lean Practices

Consumer pressure to be green. Street pressure to improve shareholder value. Regulatory pressure to maintain quality. Customer pressure to provide the right product at the right cost to the right place at the right time. In these challenging economic times for manufacturers, lean principles are the glue that holds this new paradigm together.

Lean manufacturing drives more effective and efficient resource utilization, reduces waste and energy consumption, optimizes direct and indirect resources and helps ensure a better product at less cost. The lean philosophy, eliminating waste, essentially comes down to taking many small actions to create big results. The old green adage, “think global, act local” is no different. More and more manufacturers are extending lean practices beyond the shop floor to enable green initiatives and meet sustainability mandates.

In a ”Perfect Lean Market” information flows unhindered to drive maximum efficiency throughout supply and demand networks. This vision for “The Perfect Lean Market” provides the framework for how manufacturers can expand lean philosophies and best practices into their sustainability initiatives. While the cost reductions and revenue potential are highly attractive, the potential upside for sustainability has barely been tapped.

Wal-Mart CEO Lee Scott has said, “Being a good steward of the environment and in our communities, and being an efficient and profitable business, are not mutually exclusive. In fact they are one in the same.” What Wal-Mart and other retailers have recognized and driven into the manufacturing sector is that aligning green with lean across the entire supply chain drives both top line growth and margin improvements while gaining respect from customers and consumers.

Driving Lean throughout the Retail Supply and Demand Network

So what do we mean by sustainability? Sustainability is generally defined as, “The continued improvement of business operations to ensure long-term resource availability through environmental, socially sensitive, and transparent performance as it relates to consumers, business partners and the community.”

Wal-Mart, with its 50,000-plus suppliers, is taking a key role in building sustainability into its core strategies. We see similar efforts in other leading global retailers including Lowe's, Target, Metro, Home Depot, Carrefour, and leading global manufacturers like Coca Cola, Kraft, Black and Decker, Hormel and Culligan.

However, according to a recent Grocery Manufacturers Association (GMA) report, many consumer manufacturing companies are adopting sustainability initiatives in response to internal drivers such as cost reduction, commodity risk management, and upholding corporate culture. The report also identified collaboration and operational integration as two of the four enablers (strategic alignment and governance being the other two) for a successful sustainability program. Closeknit collaboration between retailers, distributors and manufacturers appears to be the driver of success for sustainability initiatives.

Driving Sustainability with Lean Principles

Manufacturing companies can proactively enable sustainability across all key business processes in their organization by implementing the principles of lean. The underlying principles build efficiency within the enterprise and across the entire supply chain, helping companies maintain success through continued process improvement.

A lean solution for manufacturing ensures that plants, lines and machines run at peak efficiency — a key component of enabling sustainability. It also ensures necessary spare parts for maintenance are aligned with production requirements ensuring minimum down time and optimizing runs.

In the extended supply chain, lean solutions help align demand to capacity to optimize production lines, and maximize energy and raw product utilization. For example, consumer companies can apply lean principles to tightly align packaging material to specific production events, resulting in more efficient use of materials, reduced waste and improved line and machine utilization.

Lean market solutions provide tools that support enhanced supplier and retailer collaboration, ensuring making the right product at the right place and the right time. Capabilities that reduce short run times and production cycles improve natural resource utilization and reduce expenses. The ability to fulfill many while shipping once can significantly improve truck utilization and reduce fuel and other transportation costs.

Lean market solutions provide tools that support enhanced supplier and retailer collaboration, ensuring making the right product at the right place and the right time. Capabilities that reduce short run times and production cycles improve natural resource utilization and reduce expenses. The ability to fulfill many while shipping once can significantly improve truck utilization and reduce fuel and other transportation costs.

Packaging producers, to global beverage and food manufacturers, to furniture suppliers have all adopted lean solutions and best practices to drive business success. These manufacturers have leveraged lean principles in their manufacturing sites, and into their upstream and downstream supply chains. A supplier visualization solution fosters supply chain collaboration and gives suppliers and manufacturers the ability to reduce inventory while getting the right material into the plant line when needed. Track-and-trace and capabilities in ERP applications help customers that adhere to ISO 14000 and 14001 sustainability standards document compliance. From a world leader in high-end fashion jewelry to manufacturers of medical devices, these companies have implemented tighter integration and real-time collaboration with key suppliers to ensure that customer delivery commitments are made on time every time.

Sustainability Starts at the Top

Successful sustainability programs require the full commitment of company leadership and a top-down approach. Companies that do not begin to implement sustainability initiatives on their own will soon find it being required of them by shareholders, customers, federal and state agencies and most importantly the consumers of their products.

Consider the potential effects of applying lean manufacturing principles to sustainability initiatives: gallons of water saved, gallons of diesel saved, shipping costs saved, plastic, resin and other toxic waste reduction, fewer out-of-stocks, labor dollars slashed. Could manufacturers improve margins? Could retailers improve selling space and same store sales? Could sustainability drive the next paradigm shift in collaboration?

While the issue of sustainability continues to mature and evolve, companies looking to take a leadership position and enhance their business advantages can get started by implementing and expanding lean manufacturing solutions across the entire supply chain to address the many aspects of meeting their sustainability — and revenue — targets. When lean goes green, everybody wins.

Phil Friedman is Vice President, Consumer Products, QAD, a global enterprise software firm. Friedman has more than 30 years of experience in consumer industry manufacturing, sales, marketing, consulting and business management.

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