Environmental Leader

Anyone who has parents who lived through the great depression (the one in the 30s, that is) will have observed their behavior with respect to resources. My dad, who was a just out of high school during the depression, set a high standard for use, reuse, repair, life extension – the whole package. One of his remarks, when observing something that, to me, had little use was “it will come in handy even if we never use it.” He was a tool and die maker, then department supervisor for John Deere Horicon Works in Wisconsin. He got me interested in manufacturing as a kid by taking my brother and I to “the shop” on Saturday morning so he could see what the second shift on Friday night had accomplished in the tool room. They certainly subscribed to Henry’s philosophy and he’d be very upset today to see the throwaway society we’ve evolved into.

I suspect that Henry Ford’s observation was less motivated by his concern for the environment (I won’t touch that one) than with his concern for wasting money. There is nothing wrong with that. In fact, if you review the major leaps forward in manufacturing over the last several hundred years they were prompted by, first, a realization of the cost of something that had been considered “free” or of insignificant value, second, of a way to modify or fix the procedures or system to remove that cost and realize the savings (meaning – convert to money) and, third, reduce the price of the product/increase the quality or functionality of the product manufactured reflecting this savings.

In the case of folks building things off shore, and subject to the whims of exchange rates, etc., they would use this new found savings to insure themselves against currency swings or other export related challenges.

What am I speaking of? Let’s review some of these big leaps.

The evolution of manufacturing in terms of productivity, flexibility, response time, work philosophy or business model and market responsiveness/customer “pull” shows the evidence of tremendous changes from the earliest organized industry or manufacturing in the 1800s up to today. These changes correspond to distinct periods of production. These periods can be characterized as the craft period, mass production period, flexible production period and lean manufacturing period as follows:

• Craft production: In the early days of industry, skilled workers, or artisans, worked on a variety of machines to create specially built products with high labor input. Very little mechanization was available, and these artisans were completely on their own in terms of process planning, timing, and techniques used.

• Mass production: The late 1800s to early 1900s saw the development of mass production (for example Eli Whitney’s cotton gin, or Henry Ford and the assembly line). Mass production yielded a dramatic reduction in direct labor (at the expense of the craftsman), higher production rates, more control of the process, ability to satisfy larger customer demand, interchangeable parts, and the first elements of automation. The cost per piece dropped substantially as a result. F. W. Taylor was a driver of this also.

• Flexible production: In the 1980s, thanks to visionaries like Eugene Merchant in the United States, and Japanese manufacturers like Taiichi Ono and the Toyota Production System (among others) the efficiency of these production systems increased tremendously. Unnecessary operations are done apart from the manufacturing process on the machine, resulting in high levels of machine availability and utilization. This is due, in part, to computers and clever methods of preparing workpieces and tooling for the machine offline, while assuring quality and accuracy.

• Lean Manufacturing and “Mass Personalization”: The late 1990s and early 2000s saw the introduction of true response to customer demands. This came because of the ability to manufacture customized products in small quantities with mass production efficiency and short lead times (that is, the time from when an order is placed to when the product is delivered). Strict quality methods ensure the “first part correct,” built on Ohno’s ideas and the quality control methodology taught by W. Edwards Deming and others. These methods eliminated backup stock, inventory, and the cost associated with keeping mounds of parts and products available to cover manufacturing faults or an inability to plan for or respond to customer demand. That is, make it right – don’t stock extras to cover mistakes or out of control processes.

Each of these changes noted above occurred because of a realization that an improved system of manufacturing could be attained if the system was “designed and optimized” based on an understanding of some new criteria. These criteria included more control of the process and standardization introduced by Henry Ford, better use of manufacturing machinery and increased productivity introduced by Taiichi Ohno, and reduced inventory and buffer stocks for quality production, the ideas of Edwards Deming and Taiichi Ohno. And, they all had a monetary value that could be assigned to do the required “cost-benefit” analysis.

What is the next big change? I believe it will be a move to account for the “embedded costs” associated with energy, carbon footprint, re-use and re-manufacturing leading closer to sustainable production. But, how will this be accomplished?

The motivation for this change is the need to include the true cost of producing goods, from the point of resource extraction to the end of life and reuse or recycling, in the cost of the products. This true cost is more than the “value added” through these stages (which one might argue is already included, according to the best of capitalism).

The environmental and social costs associated with the lifecycle need to be added as well. This will not be easy; we don’t purport that all the information or tools needed to do this exist today. We need to incorporate costs for all the embedded energy, materials and other resources, labor, impacts on the environment, and accompanying social requirements and impacts (among others) in the price of the product. Then, when consumers purchase a new computer, automobile, airplane ticket, machine tool, or other goods, they will “see” the true impact of that product reflected in the price. Just like the Ford website listing grams of CO2/km traveled of a vehicle.

Furthermore, on that basis, they can shop around. Today, the cost of recycling or disposal, often covered by local governments or whoever is paid to pick up the trash at the curb every week, is not reflected in the cost of the product. Tomorrow it most likely will be. We better anticipate all of these costs – just as Ohno did when thinking about lean manufacturing.

Those that incorporate “environmental economics” in the design and production of their products are likely to be ahead of their competition.