Waste Not! Steps to Leaner and Greener Manufacturing

By Gil Friend


What if furniture packages were a centimeter smaller? That’s what IKEA executives asked when looking for opportunities to improve efficiency and decrease costs in its supply chain.

The question led to IKEA’s signature flat packaging and big financial savings because more product could be shipped with the same number of trucks. This initiative, motivated by material cost savings, resulted in decreased fuel costs and greenhouse gas emissions. In addition, one of Wal-Mart’s many eco-efficiency initiatives—shrinking the box for just one SKU by a half an inch—has saved more than $3 million a year and eliminated tons of trash.

Eco-efficiency is one of many places where business logic and environmental logic connect. It’s about improving environmental quality, efficiency and profitability by reducing unnecessary inputs and outputs in production and operations—what architect/inventor Buckminster Fuller called “doing more with less.” It can include energy efficiency, water conservation, waste minimization, process re-engineering, product redesign—and the systematic integration of all of these.

While eco-efficiency in manufacturing is not a direct requirement of the USDA organic regulations, it is part of the foundation the organic movement was built on—to be a good steward of the earth. While you may be doing great things by keeping petrochemicals out of the soil, what kind of unnecessary trash are you adding to the heaps of landfills? What about that carbon footprint? And, and how can being lean and green help your bottom line as well?

Eco-efficiency has many dimensions, all of which are very important for green businesses to consider. The World Business Council on Sustainable Development offers a great guide on where to look for process improvement opportunities:

• Reduce the material intensity of goods or services

• Reduce the energy intensity of goods or services

• Reduce dispersion of toxic materials

• Improve recyclability (and closed-loop processes)

• Maximum use of renewable resources

• Greater durability of products

Waste: The Opposite of Eco-Efficiency
Humans and the business world could learn a lot from a chicken. When a chicken makes a chicken, the only “wastes” are manure, carbon dioxide, water vapor, methane and eggshell. But these are all food for soil, plants and chickens. Zero waste. Can’t industrial society get that smart?

Your business, regardless of size or sector, uses energy and materials, and produces product and “non-product” (waste, emissions, effluent and pollution). The business logic for eliminating, not just reducing “waste,” is clear: don’t pay for more resources than you need; get the greatest yield from those resources that you can; and stop making product you can’t sell.

“Waste” has no intrinsic meaning. Just as a “weed” isn’t a particular type of plant, but a plant out of place, “waste” isn’t a particular kind of material, but a material out of place. (That’s why the word is in quotes—it’s a reminder that “there ain’t no such thing!”)

The Value of Zero
“Waste” might be a concept without meaning, but it’s a concept with a huge cost. A “throughput pie” can be used to graphically represent the ratio of product to non-product output (NPO)—and if a picture is worth a thousand words, this picture is often worth millions of dollars. Studies show that the ratio for the U.S. economy as a whole is 6 percent product and 94 percent non-product. Your mileage may vary, but you can bet the ratio is far worse than you might expect.

When Natural Logic, a consultancy specializing in sustainable operations, assessed Odwalla’s then-new Dinuba, CA, plant in the mid-1990s, it was a well-run, high-purpose organization—profitable, fully in compliance, using Good Manufacturing Practices—that produced about 20 percent product, about 5 percent recycled non-product (pulp and peel and “everything else they could”) and 75 percent non-product. Three-fourths of their physical output literally poured down the drain as wastewater, machine washdown and small amounts of sanitizing chemicals.

Though the cost of wastewater treatment wasn’t even a rounding error on anyone’s management report, the reaction from then-CEO Greg Steptenpohl and then-COO Michael Young—once they picked themselves up off the floor—was clear and powerful: “That makes no sense!” Within two weeks Odwalla decided to pursue the only goal that did made sense—zero waste. After a few months, Odwalla was able to boost profits by 20 percent with a series of agricultural, horticultural and aquacultural businesses feeding off that “waste” stream. All this from an expense that was negligible and invisible on any financial management report.

So what’s your Total Cost of Waste (TCOW)? The direct costs of disposing your waste may be relatively minor (hauler fees), but the indirect costs of waste can pile up, including the money spent on raw materials and utilities; storage (rent); time and labor; wear and tear on machinery, etc. The typical total of this indirect waste is 4 to 25 times the disposal fees. What’s your acceptable level of waste? Why?

Reducing and Eliminating Non-Product Output (NPO)
There are two main strategies to staunch the flow of NPO: stop making it through efficiency and design innovation; or turn your non-product into product, by finding customers for whom your “waste” is their “food.” Who can turn your non-product output into their valued input? How?

1. Look for It! “If you can’t see the waste, you can’t get rid of it,” says Tony Manos, a lean enterprise consultant. He suggests taking teams on “Waste Walks” to look for material wastes and process waste. “Never settle for the ‘we have to do it this way’ answer,” he says. “There is always room for improvement.”

2. Reduce Waste Through Process Efficiency. Whether through pollution prevention, waste minimization, business process re-engineering, design for environment (incorporating environmental considerations into products and services before they enter the production phase), or any of a dozen other approaches, most businesses can discover significant opportunities to improve production efficiencies.

This can be done through redesign and re-specification of products, processes and equipment. For example, with the assistance of StopWaste.org, Ghirardelli Chocolate found that it could reduce waste and save money—$2.6 million over the last five years—just by replacing the cardboard boxes used to transfer product internally with reusable plastic totes.

3. Use Waste as Feedstock. Cascades that flow the “waste” of one process into the inputs of another can increase net yields. Internal cascades include cycling scraps back into the product stream, or cogeneration systems cascading waste heat from electrical generation to heat water. External cascades may start as simple recycling efforts and mature into regional waste exchanges, industrial clusters with symbiotic material and energy needs, and even eco-industrial parks.

4. Design Your Non-product! Make it something more “digestible” by hungry industrial mouths down the food chain, and—lo and behold—it’s become a product. If no one wants it enough to pay for it or take it off your hands, at least design your non-product to be edible, without harm, by Earth’s living systems.

5. Use Less “Stuff.” It might go against the economistic tradition of “more stuff means more money,” but the value equation of the future will be “produce more value with less physical throughput.” Redesign products to get more done with less stuff, or in other words, dematerialization. For example, Interface Global shifted from selling carpet tiles to leasing floor coverings, which will then be turned in at the end of use to be recycled back into product, enabling the company to satisfy customers, reduce waste and make more money—with one-sixth the energy and resources required in the first place.

6. Pay Attention: Measure What Matters. Use business performance metrics to aim toward the right goal; track resource efficiency (resource use or waste generation per unit of product) and throughput efficiency.

EcoAudits Can Guide Your Course
An EcoAudit is a systematic assessment of your organization’s operations—an integrated analysis of resource use that identifies opportunities to improve performance, reduce impact and save money.

After an EcoAudit, fair trade pioneers Equal Exchange found out that their largest contributors to carbon emissions were roasting, shipping and electricity. Recommendations ranged from more complex and expensive changes, such as improving roaster efficiency and installing heat exchangers (a good option for many food processors), to simple, inexpensive changes like reducing lighting in infrequently used warehouse space and maintaining door seals on refrigerators.

WhiteWave is another great example. Through an EcoAudit of its facility, WhiteWave discovered that 10 percent of its facility footprint could be eliminated through use of variable-frequency drives, expanded heat recovery/cogeneration, and other efficiency measures.

You can conduct an EcoAudit with internal staff, or hire an outside firm to do it for you. Here are the steps, in either case.

1. Collect Baseline Data. Gather basic information about the facilities—the departments or functions performed, the square footage, number of employees and duty cycles for the building (time/day of use). Collect a year or two of energy, water and wastewater, solid waste and recycling bills, to provide a baseline for comparison. Identify or estimate the activities and locations that generate the major costs and impacts.

2. Perform a Walk-through Examination. Evaluate at least one example of each major use-type (e.g., offices, production lines, warehouses, lavatories and laboratories) and walk through your basic business process, following the flow from receiving inputs to shipping products.

Observe actions, equipment and decisions. For example, at what point does a “material” become a “waste”? Engage employees along the way. Ask people about what they do, and why they do it that way. The people who do the work will often have ideas on how to improve it—and their buy-in will be critical for getting recommendations adopted.

During this walk through you will want to examine both equipment and processes, including:

Equipment
• Climate control: Examine efficiency and function of HVAC, and the building envelope and load management strategies.

Is insulation in roof and walls adequate? Are seals and weatherstripping for doors and windows—including refrigerator door seals—adequate and in good shape? Record capacity (hp, W, Btuh, cfm, tons cooling, etc).

• Lighting: Create a lighting census. How many lamps, of what type and wattage, in which locations?

• Motors and appliances: Record faceplate data and approximate duty cycles for motors, electrical equipment, and appliances, and compare efficiency with current models.

• Load management: Check load shifting practices, such as use of occupancy sensors and set-back thermostats, doing laundry in off-peak hours or watering the landscaping in the early morning.

• Water: Check faucets and toilets for leaks and flow rates (and dishwashers for temperature settings); ensure they are at or below current efficiency standards of 1.6 gallons-per-flush toilets, 1.5 gallon-per-minute faucets.

Processes
• Equipment use: Even efficient equipment has to be operated correctly. Ensure that lights aren’t on where not needed, low-flow faucets don’t run unnecessarily and that HVAC systems deliver proper temperatures.

• Waste and recycling: Are recycling and compost bins present? If so, do occupants use them? Estimate percentage of waste by type (metals, plastics, paper, organics, etc.) and let employees know how much they throw away.

• Materials: Are paper, equipment and cleaning supplies eco-efficient, with a high percentage of recycled, non-toxic material? Buy smart, since your purchases determine your “wastes.”

3. Put the Data to Work
• List opportunities. Your observations will generate numerous ideas for efficiency improvement, such as lighting upgrades, new equipment, better insulation and waste-reducing practices. Some common opportunities are listed in “Bright (and Easy) Ideas to Improve Your Eco-Efficiency” below.

• Evaluate opportunities. Estimate cost, impacts and benefits for each opportunity. Use life-cycle costing, considering costs and benefits over the lifetime of the measure, not just first costs. Use percentage return on investment (ROI), not years to payback, which often leaves profitable projects on the back burner.

• Prioritize opportunities. Prioritize options based on ROI, ease of implementation, scale of impact, or a combination. Engage decision makers before you start the process, and plan with their needs in mind; ROI rankings typically speak to managers with budget responsibility while ease of implementation may be critical to floor managers.

• Communicate your recommendations. Many of your findings will depend on behavior change, so present them in a way that suits the audience. This can be done through formal reports, lunchtime presentations and even signage—such as labeling trash bins “landfill.”

• Train workers and stakeholders in the new practices. If the changes are inconvenient, they’re unlikely to stick. On the other hand, workers often readily adopt additional tasks when they’re recognized for their efforts. Recognition can even go farther than financial incentives.

• Track your results. Calculate the percentage change against baselines, in dollars, kWh, tons, and gallons.

• Follow up. Check in with managers a few weeks or months later to see which recommendations are working and what needs further adjustment.

Running Lean and Green
The next step is the marriage of lean and green. “Green” provides a vision and goals, while “lean” provides the system for effective implementation.

“Lean”—whether lean manufacturing, lean accounting or lean anything—is more than cost cutting through efficiency; it’s about creating a culture that consistently finds new opportunities to improve efficiency and environmental performance, and feedback systems that streamline and improve business operations and reduce your company’s impact on the environment.

Leaders at Toyota Motor Corporation developed a philosophy and method for building cars that has become a legendary model for lean production systems. By eliminating stress on the system, the company was able to reduce inconsistencies in production, therefore eliminating waste. The resulting “Toyota Production System” (TPS) was wildly successful and has been emulated and studied all over the world.

A key reason for Toyota’s success is that it embeds continuous improvement into the company’s culture and practices.

In developing the TPS, Toyota executive Taiichi Ohno identified seven essential types of waste, or “muda”:

• Defects: errors in production

• Over-production: making more than is needed

• Conveyance: excess transportation

• Waiting: delays in production and delivery of product

• Inventory: excess materials or product not being used or sold

• Motion: unnecessary actions in the production process

• Overprocessing: training for tasks not performed, developing unnecessary features

To which also could be added:

• Energy and water use

• Non-product (pollution)

• Untapped human potential

• Inappropriate systems

Design Waste Out of Your Business with Lean Methods
Lean operations are built on a foundation of continual improvement, or what is called “kaizen” in Japanese, with the intent that teams will not only improve efficiency once, but continue to systematically find opportunities to do so. Here are some tools for embedding kaizen into your company.

• Use “jidoka,” or “automation with a human touch.” When a problem occurs, the process stops immediately, preventing defective products from being produced, and the issue is communicated on a central problem display board. Feedback is key—lean systems run on information provided throughout the production chain, not a traditional “one-way” command and control signal. The “voice of the customer” guides members of your supply chain to continue producing, stop, speed up, or slow down. Proceeding without the authority of this signal can result in waste from stockpiling supplies downstream from your own operation.

• Consider “just in time” operations. Make only what is needed, when it is needed, and in the amount needed. This is also called “pull production” because products and materials are produced when the downstream party requests it, instead of being pushed by the producer. It can improve utilization and flow, and cut waste and inventory. In traditional accounting, inventory is usually an asset; in TPS and lean management it is a liability.

• Level out the workload to avoid stress on workers and the production system, which can lead to sub-optimal performance and lapses in quality. One way to do this is to make products in smaller batches using “cellular manufacturing”(where adaptable) instead of the traditional approach of creating of large batches for “economy of scale” and waiting for orders.

Lean is more than knowledge about the above methods. People are the key to success and they need to be united in their awareness of, acceptance of and participation in a lean production culture. Innovation is more likely when you integrate teams and solicit every worker’s input. For example, manufacturing employees hold process knowledge that the environmental health and safety team needs to improve conditions by removing hazards and other wastes. The lean process doesn’t end. Strive for continuous improvement (kaizen). Measure your progress so you know what’s working and what needs adjusting.

In Summary
How high do you aim in your quest to “be green”? Match your competitors? Go beyond them? Aim for carbon-neutral? Carbon-negative? Zero waste? Which goal is the right goal? How good is good enough?

“Traditional” environmental management is focused on reducing harm—gradually, in a public policy framework of advocacy and compromise; finding “acceptable” levels of damage that could be reached at an “affordable” price.

But for a truly sustainable business, “good enough” means operating in a way that helps both the economy and earth’s living systems continue to function long into the future. “Do less harm” simply isn’t good enough—not when you could thrive by regenerating and enriching the living systems on which our economy depends.

The real challenge isn’t just to be less bad or to slow the rate of deterioration, but to actually build the regenerative capacity of the living systems that sustain the human experience—and to make that a normal consequence of doing business.

How much “waste” do you think is acceptable? How much environmental damage? How much safety risk to your employees or community? Compare the answer in your gut with the answer on your balance sheet. Your job: bring them into harmony. Here’s a clue: you’ve got to ask the right questions. Not “Can we?” but “How can we?”

This article is adapted from “The Truth About Green Business” (0-7897-3940-2 FT Press, May 2009) by Gil Friend. Reprinted by permission of the publisher. © 2009 Gil Friend

Gil Friend is founder, president and CEO of Natural Logic Inc, (www.natlogic.com), providing advisory services in strategy, design, operations and information systems to help build economic advantage through exceptional environmental performance. Clients include Dean Foods, Equal Exchange, General Mills, Green Mountain Energy, Hewlett Packard, Levi Strauss & Co, Nike, Odwalla, Coca-Cola, WhiteWave, Sun Microsystems and many others. Friend lectures widely on business strategy and sustainability issues and has co-authored several books on sustainable agriculture and sustainable business and is author of the just-published book The Truth About Green Business. You can contact him at gfriend@natlogic.com and follow him at www.blogs.natlogic.com/friend and www.twitter.com/gfriend.