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

2. © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 15-2 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

3. © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 15-3 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

4. © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 15-4 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

5. © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 15-5 Sustainability – Focus on minimizing waste  Less  Material  Energy  Waste / pollution  Disposal hazards / cost  Packaging

6. © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 15-6 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

7. © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 15-7 Sustainability – ERM approach  Reduce the environmental impacts of their products and processes NOT  A clean-up approach

8. © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 15-8 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

9. © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 15-9

10. © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 15-10  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...

11. © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 15-11 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

12. © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 15-12 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

13. © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 15-13

14. © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 15-14 Cost Savings 2003

15. © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 15-15 Cost Savings 2003

16. © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 15-16 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