© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 15-1 Operations Management Sustainability.

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Presentation transcript:

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J Operations Management Sustainability

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J There are over 100 definitions of sustainability and sustainable development. The best known is that of the World Commission on Environment and Development: Development is sustainable where “it meets the needs of the present without compromising the ability of future generations to meet their own needs.” Sustainability

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J If the goal of the organization is to make money, why do we care?  Marketing  Positive effects  Negative effects  Accounting / Finance / Legal  Cost  Regulatory  Liability  Human Resources  Ability to attract and retain people

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J If the goal of the organization is to make money, why do we care?  Operations / Green Manufacturing  ERM – Environmentally Responsible Manufacturing is a system which integrates product and process design issues with manufacturing issues to minimize environmental impacts  Note that environmental impacts are generally waste  Remember TQM and JIT

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J Sustainability – Focus on minimizing waste  Less  Material  Energy  Waste / pollution  Disposal hazards / cost  Packaging

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J Sustainability – What can companies do  Product and process redesign to use less  Material  Energy  Longer product life span  Substitution  Using inputs that do not create waste / disposal hazards / costs  Recycle / Rebuild / Remanufacture / Reuse

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J Sustainability – ERM approach  Reduce the environmental impacts of their products and processes NOT  A clean-up approach

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J ERM – Results  Compared to companies that do not consider the environment, ERM companies have:  16.7% higher operating income growth  13.3% higher sales to assets ratio  9.3% higher sales growth  3.9% higher ROI  2.2% higher ROA  In other words, ERM can make money through the elimination of waste

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J  Established January 5, 1973  Based in Portland, Oregon  One of the largest building products producers in North America  Operates manufacturing facilities in:  United States  5 Canadian Provinces  Chile  Manage nearly 10 million acres of timberland  2002 net sales: $2 billion About LP...

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J Pre-1993: “The Environmental Dark Ages”  Strong “production” orientation  Described ourselves as environmental leaders  no systematic approach  no clearly articulated vision  Government actions  Clean Air Act Consent Decree (16 Facilities)  Suspension and Debarment Compliance Agreement  District of Colorado Plea Agreement  Significant fines and pollution control requirements

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J Post-1993: “The Age of Enlightenment”  LP leadership overhaul  Environmental improvement - a management priority  Formation of Corporate Environmental Department (1993)  Development of Policy on Protection of the Environment (1994)  Changing culture and expectations  EMS implementation and integration  Environmental awareness  Enforcing high standards  EMS teams and involvement of all employees

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J Cost Savings 2003

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J Cost Savings 2003

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J ERM – Conclusions  Most managers view regulation and the environment as a cost – and it can be a major cost  However, some firms have realized that waste is waste – and that rather than fight regulation, they need to avoid the need for it  They may also get to set the legislative agenda, which is another way to create competitive advantage  ERM, like all forms of waste elimination, tends to improve organizational performance