“Sustainability is the possibility that human and other forms of life will flourish on the Earth forever” John Ehrenfeld, 2005

1. “A Day of Lean”
Embracing the Toyota Production System (TPS) and
the Triple Bottom Line Philosophies of Sustainability
Dennis M. Gawlik
March 28, 2006

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Agenda
• The Need for Sustainable Business Practices
• Tools for Supply Management (Lean, etc.)
• “FedEx Short”
• Toyota Production System (TPS)
• Triple Bottom Line
• “Sourcing Local”

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Human Population:
Fundamentals of Growth
20052005

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Digging Deeper

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What
the
Future
Might
Bring?

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The Living Company:
Habits for Surviving in a Turbulent Business Environment
Studied companies around the world:
• Older than Royal Dutch/Shell (200 years old)
• Had successfully weathered some fundamental
change in the world around them - such
that they still existed today with their
corporate identity intact
40 Corporations met this criteria40 Corporations met this criteria
(Dupont, Sumitomo, Uniliver…)(Dupont, Sumitomo, Uniliver…)
The Living Company, Arie de Geus, Harvard Business School Press, 2002

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The Living Company:
Habits for Surviving in a Turbulent Business Environment
Long Lived Companies were (learning org):
• Sensitive to their EnvironmentSensitive to their Environment
(i.e. surroundings, it’s environment, etc.)(i.e. surroundings, it’s environment, etc.)
• Cohesive – Strong Sense of Identity
• Tolerant & Decentralized
• Conservative in Financing
“…an organization’s true nature is that of a
community of humans…”, Arie de Geus
The Living Company, Arie de Geus, Harvard Business School Press, 2002

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• The Top 3 Most Sustainable
Corporations in the World
• ToyotaToyota
• AlcoaAlcoa
• BPBP

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A New (Long-Term) Vision
“ In my mind I have a dream vehicle – it is ‘a vehicle that
makes the air cleaner the more one drives it,’ ‘a safe
vehicle that does not harm people in any way,’ ‘a
vehicle that serves as a base for sending and receiving
information,’ ‘and a vehicle that actually improves one’s
health.’”
Katsuake Watanabe, President, Toyota Motor Corporation

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• Rankings by Country
• 3232 Great BritainGreat Britain
• 2020 United StatesUnited States
• 99 GermanyGermany
• 7 Sweden
• 6 Canada
• 5 Japan
• 21 Other

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ISM Principles of Social
Responsibility
• Community
• Diversity
• Environment
• Ethics
• Financial Responsibility
• Human Rights
• Safety
ISM Principles - 2004

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Supply Management Effects Many
Areas:
• Design
• R&D
• Sourcing & Securing
Materials/Sub-Assemblies/Services
• Assembly
• Packaging
• Logistics/Transportation
• Disposal - Reuse/Recycle/Refuse

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“Revitalization the Supplier Diversity Value Proposition Through Supply Chain Effectiveness”,
SBC Knowledge Ventures, L.P., 2003., pg. 232.
SM Input
SM Input SM Input SM Input
SM Input
SM Input
SM Input

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Different Approaches/Tools
for Sustainable
Procurement
Industrial Ecology
Life Cycle Assessment (LCA)
Waste – TPS, Lean, Six Sigma,
Natural Step, Local Supply,
ISO14001 Certification, etc.
Triple Bottom Line & Balanced Scorecard

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Triple Bottom Line Approach

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Supply Management Benefits

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Balanced Scorecard
The Balanced Scorecard; Translating Strategy into Action,
Robert Kaplan and David Norton , Harvard Business School Press, 1996.

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A New Field: Industrial Ecology
• The means by which humanity can deliberately approach and maintain
sustainability, given continued economic, cultural, and technological
evolution.
• An industrial system needs to be viewed not in isolation from its
surrounding systems, but in concert with them.
• This is a systems view. One seeks to optimize the total materials cycle
from virgin material, to finished material, to component, to product, to
obsolete product, and to ultimate disposal. Factors to be optimized
include resources, energy, and capital.
• Principles: (1) Close material loops, (2) Don’t discard waste that has
energy content, (3) Eliminate materials (e.g., heavy metals) that upset
system, and (4) Deliver function with fewer materials.*
* Industrial Ecology; Graedel, Thomas, and Brad Allenby, Second Edition, 2003.

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New Performance Measurement
Concept:
The Life Cycle Assessment (LCA)
• An objective process to evaluate the environmental burdens
associated with a product, process, or activity by identifying and
quantifying energy, material usage, and environmental releases, to
assess the impact of those uses and releases on the environment,
and to evaluate and implement opportunities to effect
environmental improvements.
• The assessment includes the entire life cycle of the product, process
or activity, encompassing extracting and processing raw materials;
manufacturing, transportation, and distribution;
use/reuse/maintenance; recycling; and final disposal.
The Society of Environmental Toxicology and Chemistry

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“Introduction to LCA for Purchasing Agents”, City of Seattle, 10 May 2001, Rita Schenck, IERE.

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Purchasing Power: Harnessing Institutional Procurement for People and the Planet
Lisa Mastny, World Watch Paper 166, July 2003.
3. Recycle
2. Reuse
1. Redesign
4. Refuse

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“ FedEx Short”

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Waste
• Any activity or action that adversely affects the
value equation, i.e., reduces value
• Waste is a symptom of problems with a process
(continuous improvement addresses)
• Waste is
• Paradigm shift -Some Tools:
TPS, Lean, Kaizen, JIT, TQM, Six Sigma,
Natural Step, ISO14001 Certification, Local
Supply…
lost profit!

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• Savings From:
• Materials and Energy Substitutions
• Reducing the Materials, Energy, and Water Used Per
Product
• Redesign
• Reducing, Reusing, and Recycling Scrap Material
• Reusing and Recycling Returned Products
• Packaging, Transportation, and Approval Cycles
The Sustainable Advantage; Bob Willard,
New Society Publishers, 2005
Reduction of Waste Creates Reduced
Expenses in Manufacturing *

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History of Lean
• Henry Ford was one of the first CEO that target the
“elimination of waste” and use of flow. He used the
concepts and principles in his automotive, mining, hospital
and farming industries that he controlled.
• Toyota, under the leadership of Taiichi Ohno used these
same Lean ideas of “eliminating waste”, flow, pull systems,
etc. recorded by Henry Ford
• Toyota has become the champion of Lean.
• Toyota became the largest automotive company in the world
in 2006
Brief History of Lean

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LEAN

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LEAN vs. TRADITIONAL

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Delivery
0
5
10
15
1st Qtr 2nd
Qtr
3rd
Qtr
4th
Qtr
Months
Us
Them
Others
The Toyota
Production
System (TPS)
• Goal: The absolute elimination of waste
• Lowest cost
• Highest quality
• Shortest time
85 90 95 100
Quality
Yield
Others
Them
Us
0
5
10
15
20
25
30
35
40
Costs
Us
Them
Others

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Define Value
Value
Stream
Flow Pull
Perfection
Womack & Jones’s Five Steps
Lean Solutions; How Companies and Customers Can Create Value and
Wealth Together; James P. Womack and Daniel T. Jones, Free Press,
2005

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Lean at Alaska Airlines
Current
Suppliers
New
Suppliers
Select
Supplier
s
RFP
Process
Selection
of
Suppliers
Continuous
Benchmarking
Alaska has just started it’s journey

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Waste Definition
Waste is…
Any action, process or product that adds cost,
without adding value as perceived by our
customer.

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Typical Symptoms of Waste
• Excessive Cycle, Lead or Flow Time
• Excessive costs
• Poor quality
• Inflexible production systems
• Late deliveries
• Excessive inventories
• Dependency on work-around production
• Reactive fire-fighting
• Daily management by exception

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Capacity = (Available run time) x (Production rate)
Increased available run time = More capacity
Decreased set up time = Increased available run time
Before: Available Run TimeSet up
Time
Available Run Time
Set up
Time
After:
Create More
Capacity

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BoeingBoeing
(LEAN)(LEAN)
AirbusAirbus

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Waste Reduction at Alaska
Airlines
• Focuses on the thorough and systematic
elimination of waste throughout the value
chain
Purchase
Tickets
Boarding
Pass
&
Baggage
check
Security Board Travel
Baggage
&
Depart
Deplane

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• 14 Principles14 Principles
• Long Term View
• Continuous Flow
• Pull Systems
• Level Workload
• Get Quality Right
• Visual Controls
• Standardize Tasks
• Use Reliable Tech
• Leaders Understand Work
• Develop People/Teams
• Respect Suppliers
• See for Yourself
• Decisions by Consensus
• Learning Organization
The Toyota Way; 14 Management Principles
from the World’s Greatest Manufacturer; J. Liker, 2004
The Toyota Production System (TPS)The Toyota Production System (TPS)

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• “Seeing Ahead” – Commitment to Hybrid
• Harmonized Objective’s with Society
• Socio Tech – Customer Ready/
No Performance Compromise
• Hybrid as Core Competency
• “Own” Customer Perception of Leadership
• Innovation
• Sustainable Mobility
Toyota – Proactive & Forward
Thinking
Lorinda Rowledge, Bainbridge Graduate Institute, 2005

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Purchasing Power: Harnessing Institutional Procurement for People and the Planet,
Lisa Mastny, World Watch Paper 166, July 2003.
My Eye Opener

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Mapping the Territory I
Mark Milstein
Copyright, Mark Milstein, 2005.

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Mapping the Territory II
Mark Milstein
Today
Tomorrow
Internal External
Innovate &
Reposition
Establish
Reputation &
Right to
Operate
Set Shared
Vision of the
Future
Eco-effectiveness
Systems thinking
Cradle-to-cradle
Closed loops
Biomimicry
Technological innovation
Eco-Efficiency
EMS
ISO 14001
Waste reduction
Risk management
Pollution prevention
Sustainable development
Community capitalism
Base of the pyramid
Inclusive capitalism
Brownfield redevelopment
Take-back legislation
Green design (DfE)
Industrial ecology
Life cycle management
Full cost accounting
Stakeholder management
Corporate social
responsibility
Based on Mark Milstein, 2005.
Reduce Cost
& Risk

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Purchasing Program
…an effort to purchase products and
services with a reduced effect on the
environment and human health. In addition
to improved environmental performance,
many environmentally preferable products
work as well or better than traditional
products and
.Institutional Purchasing Program; New American Dream Web Site; http://www.newdream.org/procure/index.php
can even save money…

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Implementing Industrial Ecology
Principles
• Xerox Europe
• Waste-free products through product
stewardship throughout whole life cycle
• End-of-life equipment take-back
• Quality manufacturing process
• Design for Environment (DFE) supports product recovery
• Reprocessed reusable components & reused as virgin parts
• 2000 parts reduced to 250 [simplify disassembly/re-use]
• Bonus – hired and additional 400 people
• 1997 Net Savings of over $80M
• Potential disposal cost converted to revenue stream
• Improved environmental performance, customer satisfaction, and financial
performance

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“Large Plant - Profitable
Sustainability”
• International Paper Androscoggin Mill:
Highly polluting mill cleaned up through
extensive use of stakeholder engagement,
closing of materials loops, taking new
approaches to waste reduction, and toxics
use reduction

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Logs
CHIPPER
CHP
CHP
OCC
PULPER
DIGESTER
Fiber
Paper
Machine
“Finished
Goods
Box
Plants
Exchange
Sales
Direct
Domestic
Export
Sales
Digester converts chip solution to fiber
Paper Mill
Pulping Facility
At the Androscoggin Mill,
wastes became raw materials
for new production processes
Customers
LQR
CHM
Legend
OCC - Old Corrugated Cartons
CHM - Chemicals
LQR - Black liquor
CHP - Wood chips
FBR - Fiber
CO 2
ASH
Steam
Specialty Minerals
Produces Precipitated
Calcium Carbonate
Contractor
produces AshCrete
Androscoggin
Energy generates
electricity with
high temp steam

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“Innovation - Profitable
Sustainability”
• S.C. Johnson Landfill Gas Plant (Johnson’s
Wax, Windex, Pledge)
• Built gas turbine plant supplied by fuel from
nearby landfill instead of consuming energy
from new coal fired plants built by local electric
utility

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The Vancouver, WA facility (Matsushita Kotobuki
Electronics Industries of America, Inc. (MKA)) receives
television components from an overseas supplier in
durable plastic trays. The trays also eliminate the need
for wooden pallets. Empty trays are nested and shipped
back to the supplier in intermodal containers. Annual
savings exceed $65,000.
http://www.deq.state.or.us/wmc/packaging/bp/bpreusablecontainers.pdf

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Profitable Sustainability at Matsushita Kotobuki Electronics Industries of America, Inc. (MKA);
Case Study for BGI Sustainable Operations, Dwight Collins, Dennis Gawlik and Karl Ostrom; 2005.
Other Savings for MKA
Figure 2:Waste Reduction Record
(1998 – 2003)
Solid
waste
1998 235 tons
2003 84 tons
Recycled
Cardboard
1998 210 tons
2003 840 tons
Recycled
Wood
pallets
1998 89 tons
2003 480 tons

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Giving, Stewardship
and Sustainability
• More than $2.4 million given in 2005 for conservation,
recreation and stewardship causes
• In 2004, engaged 124,000 people in donating a more than
324,000 hours of volunteer service to the outdoors
• Presently finalizing a company strategy to build on long
standing commitments to sustainability. For example:
• Continuing as a leader in Green Building design and development
• Implementing purchasing standards requiring paper products to come from
responsibly managed forests
• Seeking to reduce waste and expand recycling ability through a new waste
management contract
• Working with vendors to assure responsible disposal and recycling of
electronic waste – specifically computer monitors

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Is ‘Sustainability’ Supply Management good enough?
Is a ‘Sustainable’ and ‘Lean’ Business model
good enough?
“Next Steps for
Sustainable
Supply Management”
Where is the next Paradigm shift in
sustainable supply management
likely to occur?

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Antony Burgmans,
Chairman – Unilever N. V.
“The solutions of the past are often not
robust enough under the conditions of
global change and need to be re-thought
and re-implemented.”

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Transformation Requires a New,
Modern Mind, Paradigm &
Strategy
• “Sustainable” development won’t work (in
the long-term)
• Eco-efficiency as the dominant norm
• CSR as an emergent norm
• Triple bottom line as an operational metric
• Sustainability reports as legitimizing
• Technology solving the problems it creates
“’Radical Sustainabiity’ A Call for Fundamental Change”, John R. Ehrenfeld;
Bainbridge Graduate Institute, Intensive, MGT 566, March 2005, pg. 4.

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John Ehrenfeld, 2005
“Sustainability is the possibility
that human and other forms of life
will flourish on the Earth forever”

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Current Sustainable Development
• Phase 1: • Adam Smith and
The Industrial Age
Phase 2:
Phase 3: Holistic System View
Controlled Consumption
Local * & No-Growth
Triple Bottom Line
Life Cycle
Assessment/Analysis
TPS/Lean / Reduce Waste/
Continuous Improvement
* Dr. H. Thomas Johnson, Portland State University /Bainbridge Graduate Institute.

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Value Creation at the Nexus
New Worldview for A Sustainable/Economic System
NATURAL
CAPITAL
Integrative &
Restorative
Interaction
with Natural
Eco-System
Constraints &
Resources
HUMAN
PROSPERITY
Optimal
Contribution to
Employees,
Customers,
Community,
Global Society
MANUFACTURED CAPITAL
World Class Level of Organizational Excellence,
Superb Business Design, Product & Service Design,
Production Capability, Core Competence Development
Jill Bamburg and Lorinda Rowledge.; Bainbridge Graduate Institute, 2005

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Purchasing Power: Harnessing Institutional Procurement for People and the Planet
Lisa Mastny, World Watch Paper 166, July 2003.
• Ultimately, “green” purchasing shouldn’t simply be
about buying environmentally preferable products.
It should also be about consuming less in
general. Institutions should find ways to meet
their needs without buying new products – for
instance, by eliminating unnecessary purchases and
extending the lives of products currently in use.

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Strategic Rationale:
Sustainable Supply Management
• Risk Management
• License to Operate
• Customer Demand & Market
Pressure
• Regulatory Requirements
• Eco-Efficiencies
• Resource Availability
• Stakeholder Pressure &
Expectations
• Product/Service
Differentiation
• Competitive Advantage
• Reduced Cost of Capital
• Innovation & Technology
Development
• Growth Opportunities: New
Products, New Markets, New
Businesses
• Employee Recruitment &
Retention
• Engagement Mechanism
• Ideology, Ultimate Purpose

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• Professionalism – Enlightened Approach
• Systems Focused – Process Involvement
• Results/Profit Driven
• Individual Focus (Mgnt Support)
• Continuous Improvement
• Waste Reduction – TPS, LEAN & LCA focus
and
• Controlled Business Consumption
• Think Globally, Act Locally; No-Growth
Summary of Sustainable
Supply Management Practices

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Thank you
“When one tugs at a single thing in nature, he
finds it attached to the rest of the world.”
John Muhr