Improving Resilience and Performance in Operations through Sustainability

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Professor Peter Ball, Chair of Operations Management and Director of Business & Community Engagement at York University discusses how sustainability ambitions can translate into business results.

The challenge

With the globalisation and rise of digital, customers are ever more informed about the choices they can make and who they purchase from. Customers are increasingly expecting companies to take care of the complexities of ethical responsibility and will shun those that fail to live up to the standards that they, the customers, set. There are pressures on productivity to be cost competitive and the necessity to address resilience is coming to the fore. It is interesting that companies are considering the competition for material supply and how they secure it. So too have companies’ Brexit preparations resulted in their workforce being trained to be more flexible and resilient to operational challenges. As well as companies openly talking about climate change and the threats to both their operations, customers and communities.

Operations has evolved. The relentless focus on improvement means we have higher quality, more productive staff, automation, less directs, less indirects. The lean philosophy has transformed operations globally. At times it was only associated with the negative language of less waste but now accepted to include the positive language of more value. The environmental debate has also moved on, some companies are starting to use net positive language, i.e. improving the environment around them. Moving onto the third, social pillar of sustainability, we are increasingly discussing improving employees wellbeing and communities away from avoiding harm and accidents. By analogy, our fire and rescue services spend more time preventing fires than putting them out. Overall, the message can be positive: greater company wealth, environmental health and community health.

Lean and Sustainability

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Lean thinking and the pervasive 5S method are core to supporting productivity in an organisation. Making processes efficient is an essential precursor to any further advance through automation, be it hardware or digital. Tackling visible wastes are well practiced in most organisations to examine the best use of our people and the products they handle.

Leading organisations have for some time been tackling less visible resources to improve wider resource productivity, not just labour and material productivity. Companies such as Toyota who are held as one of the leaders in efficiency have reduced their energy consumption by over 30% in the last 10 years by looking at operations differently and are using smart technologies to progress further. Others such as Unilever not only publish similarly impressive achievements for energy, water and waste, they publish the progress towards their targets.

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Eco-efficiency practices could be as ‘basic’ as more energy efficient lightbulbs. The leaders don’t just see this as simply cost savings, it’s a way to engage employees, improve health and safety, product quality and productivity. Changing lightbulbs is similar to the nudges of the supermarket 10p carrier bag charge and Blue Planet putting rubber ducks in the ocean. They are good nudges but must be part of a journey of genuine sustained fundamental change.

Other on-site practices could be to capture waste heat to use elsewhere or capture and sell unavoidable waste materials. Working with the supply chain in the broadest sense brings significant business advantages. For example, using circular economy thinking, eurocell capture post-consumer waste uPVC window frames. The recycling process avoids trade customer landfill charges and provides a material supply stream for new windows giving them resilience to material price and availability fluctuations.

Being eco-efficient allows organisations to be more efficient at running their business on the same model. But efficiency improvements become harder and harder to make and performance will plateau. Step changes are required to improve performance further. In addressing the challenge of operating in a less unsustainable way, some leaders are thinking radically about how they coordinate their value chain.

From Products to Services

Perhaps we should return used products in exchange for new. We take this for granted in car buying, but want about the clothes we wear? Getting credit for old clothes before buying new has been pioneered by Marks & Spencer. This is a radical change for clothing currently. Now combine this with Zozo digital body modelling, ASOS try before you buy, Next overnight forward logistics and the accepted high fashion return rates then the value proposition and resource utilisation changes dramatically.

Image Credit Rolls Royce

Image Credit Rolls Royce

The model of selling a service rather than a product is pervasive for higher value assets. Rolls-Royce ‘power by the hour’ where they sell power for aircraft flight rather than gas turbine engines. Xerox charge us not for the physical digital copier but the copies we make. Consumers don’t care if their HP Instant Ink cartridges are new or reused, it’s the printed page they want. What if we hire a car with free fuel and only charged by the distance travelled? Riversimple do just that. These companies use extensive digital monitoring of their assets for maximising availability to customers and minimising cost and resource use for themselves.

Black Friday has become a shopping binge globally. A day that marked the point in the year of transition to profit has become a day (or fortnight) to boost sales. Not a day to close your doors to business perhaps? Unless you are Vitsoe. They sell their products to customers who need their products, not just want them. Their view is that people should live better, with less, that last longer.

Companies are considering how to utilise all resources they have available to them. They are behaving more as custodians of resources rather than having a take-use-dispose mindset. All these examples are about resource utilisation and minimising waste that can lead to customer intimacy by offering value, brand responsibility and such simplicity it is an effort to switch to a different brand.

We can move from environmental sustainability to social sustainability. Global statistics show that societies that are more equal are happier, have better health, better education, lower crime, etc. What about equality in our organisations? Gender pay equality is in the headlines currently. How about paying everyone the same basic wage irrespective of age? How about everyone in the organisation has a vote on whether a probationary employee gets to become permanent? Suma is one such organisation that does just that. In 40 years it has grown to be a £50m business.

Looking to the future

Operations will be more flexible, agile, collaborative and in doing so become more productive. Flexibility will come from being able to make one of a kind on mass. Car makers have created production systems to make unique configurations of cars and clothing companies have the ability to run make-to-order clothes on production lines indistinguishable from off-the-shelf production lines.

Agility comes from moving and configuring operations to suit the location of demand. Just as combine harvesters move from farm to farm, mobile canning factories move from brewery to brewery. The US military move their workshops to the theatre of war in shipping containers and Ocado has the patent for modular shipping container-built complexes to morph on demand. The Factory in a Box (FIAB) concept has been developed further by the Manufacturing Technology Centre as a rapidly deployable, remotely managed, modular manufacturing supply chain network enabled by industrial digital technologies.

Openness comes from sharing your physical assets with others to maximise utilisation and therefore income. Sony’s UK Technology Centre has many independent companies residing in its manufacturing facility and Vitsoe has a dance company. Such “industrial AirBnB” is extended further in the brewing industry with gypsy brewing (an independent company pays to use your idle brewery at weekends) commonplace. Digital marketplaces of the future could enable idle capital to be offered up and utilised by others.

Collaboration comes from companies, even competitors, working together to help one another. The mutual benefits range from informal peer-to-peer networking to share best practice to competitors formally co-developing and sharing common assets. An everyday example of this is the brown bread baskets seen in supermarket aisles are controlled by Bakers BASCO that provides an industry standard common solution to minimise product loss and maximise logistics efficiency.

These visions are a reality for niche operators currently. They all offer insights on how productivity of people and physical resources can be maximised, minimising waste and providing resilience to changes and disruptions.

Moving forward

Watching what the leading organisations in different sectors offers fascinating insights to how operations could evolve in the years ahead. In today’s lean organisations, the leaders within them can be ‘lonely’ crusaders who increasingly work at the boundaries of their organisations to learn from others and initiate collaborative relationships. The "better together" mindset is becoming more common in wealth generation activities.

Increasingly customers will reward responsible business with loyalty. Productivity is evolving to be seen in the widest sense beyond direct labour and material productivity to resource productivity and productivity of the value creation process. The way that businesses look after their own employees as well as those in the supply chain will be subject to increasing scrutiny. By creating new offerings for customers whilst at the same time addressing agility, collaboration and effective resource then companies have the opportunity to be more productive and more resilient.

About the Author:

Professor Peter Ball

Chair of Operations Management, Director of Business & Community Engagement University of York

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Daniel Camara