Look to LEAN to reduce waste, cut costs and increase sustainability

19 Aprilie 2011

ACCENTURE CENTRAL EUROPE B.V AMSTERDAM, OLANDA-SUCURSALA BUCURESTI

Increasingly, companies are striving to create value by using their assets and capabilities to drive innovation and prof­itable growth while striving for a posi­tive economic, environmental and social impact. To become, in other words, sus­tainable enterprises that can use growing public support for more environmentally-friendly production to build good will and brand equity. The sheer breadth of the mission can appear daunting. Until, that is, you consider that Lean improvement tools and methodologies that have been used by many organizations for nearly 30 years to help cut waste and costs—and boost profits—also can provide a marked advantage in achieving sustainability objectives.

With Lean improvement methodologies, of which Lean Six Sigma is one, business efficiency outcomes and sustainability outcomes are synergistic.

Lean improvement methodologies include identifying and reducing seven "wastes" and maximizing the value an organization can deliver. For instance:

• Transportation: Is the movement of material or information from one loca­tion to another necessary?
• Inventory: Are processing and inven­tory aligned to avoid unnecessary ware­house expenditures for materials?
• Motion: Have employee actions that support the business operations been streamlined to avoid unnecessary steps in processes?
• Waiting: Are processes synchronized to avoid delays?
• Over-processing: Is the value created by a product costing more than custom­ers will be willing to pay?
• Over-production: Is production in line with supply?
• Defects/Rework: Are design and pro­duction resulting in quality products or are recalls or customer complaints, for example, on the rise?

Such wastes correspond to seven aspects of sustainability identified by the World Business Council for Sustainable Development (WBCSD), a coalition of 200 of the world's largest companies:

• A reduction in the material intensity of goods or services
• A reduction in the energy intensity of goods or services
• Reduced dispersion of toxic materials
• Improved recyclability
• Maximum use of renewable resources
• Greater durability of products
• Increased service intensity of goods and services.

The original motivation for Lean improve­ment initiatives may have been cost reduction, but growing numbers of com­panies now realize they can also enhance what the WBCSD calls eco-efficiency—the creation of more goods and services while using fewer resources and creating less waste and pollution. In essence, organiza­tions can achieve "lean sustainability".

For each of Lean improvement's waste tar­gets, there is at least one lever of eco-effi­ciency and often more. For example, reduc­ing transportation "waste" targets three of the eco-efficiency levers: use less energy, reduce toxic emissions and use fewer mate­rials due to the shorter supply chain.

Reducing any waste can significantly improve a company's eco-efficiency, while driving down costs. What's more, if an organization uses Lean tools during product development (Design for Lean Six Sigma), these new products can have a much higher level of sustainability.

 

A strong alignment

Alignment between the WBCSD’s eco-efficiency and Lean

 

Profiting from doing the right thing

With Lean improvement methodologies, business outcomes and sustainability out­comes are highly compatible, and organiza­tions can also benefit financially. Accenture recently analyzed the performance data of 275 global Fortune 1000 companies, examining the effects of sustainability strat­egies and initiatives on business success. Specifically, the three-year total return to shareholders of the 50 top companies—those ranked highest in sustainability leadership—was 16 percentage points greater than the shareholder return of the bottom or "least sustainable" 50 companies. The analysis found that those top-performing companies drive value four primary ways, one of which is reducing costs through efficiency gains.*

This analysis reinforces our experience help­ing companies save millions of dollars by reducing energy and raw material costs, as well as cutting emissions and increasing product life. Doing the right thing with Lean improvement can also mean doing the prof­itable thing.

For example, one large cabinetmaker in North Carolina saved more than $1.2 mil­lion annually in reduced energy and mis­sions by using elements of Lean improve­ment, including value stream mapping, to identify exactly where waste is occur­ring, and Kaizen events, which are rapid improvement initiatives to determine and implement the proposed solution. Likewise, a jet engine manufacturer saved $2 mil­lion annually by streamlining the testing process for new engines. As a result of a commercial bank streamlining its courier and security deliveries, the bank has saved more than $1 million annually.

It's a similar story with other levers of eco-efficiency. A large glass manufacturer, for example, improved the robustness of its manufacturing process by using fewer materials and cutting the costs of shipping waste and landfill use. An auto­maker used lean techniques like cause and effect analysis and process capability analysis to achieve zero landfill for one of its assembly plants, saving millions of dollars from reduced waste and better recycling. Additionally, a pharmaceutical company is using Lean Six Sigma tools to improve process yield, eliminate batch failures and cut waste—saving more than $750,000 annually.

With its core focus on waste reduction, Lean improvement is not only philosophi­cally aligned with the strategic levers of sustainable development; it also provides a tested methodology to effect the trans­formation to a sustainable culture. From upfront activities like project selection, organizational readiness and deployment planning to use of the Define, Measure, Analyze, Improve and Control (DMAIC) methodology for implementation, Lean improvement provides the infrastructure to deliver both solid results and the cul­tural transformation required for an ongo­ing sustainability program.

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