© 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