Environmental Performance

Abstract

Throughout this paper it will present the benefits of the latest trends in sustainable manufacturing, relating them to the managerial practices and the standards proposed by the World Class Manufacturing methodology. A special emphasis will be given to Environment and Logistics pillars, focusing on how to improve the environmental performance of logistics processes. The ultimate purpose would be to suggest a catalog of measures to implement on manufacturing industry that could be easily adopted in the area of Supply Chain generating added value for the companies and their environmental and social surroundings. 

Introduction

In the present global market, society and government have increased their attention to companies’ environmental and social impacts. This demand has resulted in Cleaner Production broadening, defined by the United Nations Environment Programme in 1990 as the continuous application of an integrated environmental strategy to processes, products and services to increase efficiency and reduce risks to humans and the environment [1].

Simultaneously, the rising global competitiveness has forced a high number of manufacturing organizations to implement World Class Manufacturing (WCM) approaches in order to improve their performance [2], not just in terms of profitability, but also in terms of sustainability in order to respond to social demands. Since Richard J. Schonberger adapted the Japanese continuous improvement (Kaizen) standpoint to the occidental framework [3], companies from different industries such as Unilever, Tetra Pak, ArcelorMittal, among others, have adopted the WCM improving their global performances. The automotive sector is one of the most noteworthy, represented by companies as the Fiat Chrysler Automobiles (FCA Group) that systematically applies WCM enabling the improvement of all the activities related to its products manufacture.

In this framework, this paper will focus on strengthening the Environment WCM pillar by means of the newest trends on Logistics that allow companies to boost their economic and environmental results. The aim will be to provide instruments to establish a Green Logistics Management (GLM) that will present an opportunity to competently respond to the escalating expectation of the international community for resources conservation and to achieve environmental performance profitably [4].

Methodology

In this paper, it will bring up the benefits of the latest trends in Green Logistics (GL) relating them to the managerial practices and the standards proposed by the WCM. A special emphasis will be given to Environment and Logistics pillars, focusing on how to improve the environmental performance of logistics processes.

Firstly, it would introduce the WCM concept, described as a structured and integrated production system that encompasses all the processes of the plant, from safety to the environment, from maintenance to logistics and quality. The goal is to continuously improve production performance seeking a progressive elimination of waste, in order to ensure product quality and maximum flexibility responding to customer requests [5].

Bearing in mind this goal, the new clean manufacturing trends perfectly match with the scope of WCM methodology. The clean manufacturing principles are highly oriented towards the WCM target of zero waste that could be correspondingly understanding under the 3Rs principle: Reduce, Reuse and Recycle. In a manufacturing environment, for example reducing the use of raw materials, reusing the scraps from the manufacturing processes (likewise the energy) or recycling the wastes generate would mean a path towards the zero waste encouraged by the WCM principles.

The WCM methodology works in two different fronts, one technical and other managerial, each one of these lines of action are implemented through 10 different pillars focusing in its case on the 10 technical pillars that include the Logistics and the Environment ones. The process to achieve a continuous improvement is based on a 7 Steps approach for each of these pillars and the steps are divided in three phases: reactive, preventive and proactive. The more the company progress in its performances, the more it rises in these 7 Steps, looking forward striving to reach the World Class Level.

In accordance with the scope of this paper, the following pages will demonstrate how recent Green Logistics trends in the industry help to achieve this target by pursuing the improvement of the environmental performance. In this sense, regarding the Environment pillar, GL could be a key factor in assuming a proactive attitude to grow towards the World Class Level, contributing to accomplish the targets proposed for the Steps 6 and 7.

In that way, Step 6 in Environment pillar pursues a complete synchronization between the sales and manufacturing areas, defining the role of Logistics. The efforts concerning this step should be directed to improve a full supply chain (from the suppliers to the consumer) and to identify and remove waste and losses throughout the system. Companiespay their attention to the advanced use of Just in Time (JIT) techniques, using their responsiveness to meet market needs rather than relying on large inventories of either finished goods or raw materials [6]. The Step 6 analyzes waste along the full supply chain, trying to reduce it and decreasing in the meantime the environmental impact of the entire supply chain. For this reason, some of the activities that could be carried on for the Step 6 in the Environment pillar are to reduce environment impact in logistics and to follow a green procurement policy.

The Step 6 for Environment pillar should also harmonize with the processes followed for the Logistics pillar. As it will be outlined in the next section of this paper, most of the measures adopted to reach a GL model are aligned with the scope of the 7 Steps approach to Logistics. For example, the logistic flow optimization and the implementation of milk run logistics contribute to create a synchronized and full controlled flow that represents a proactive approach in Logistics. Moreover, the Step 6 of Logistics pillar promotes a bigger integration of processes (sale, distribution and purchase) in order to create effective and full controlled flow, while the Step 7 looks for a full synchronization of all logistic and production processes [7].

Even if this paper brings up the improvement of the environmental performance, generally the activities that reduce wastes entail also a cost reduction. These economic benefits for the companies contribute also to the Cost Deployment pillar in WCM, that is focused on reporting and reduction of losses [8]. When a company decides to implement clean manufacturing methods, to emphasize the benefits in three spheres of sustainable development is crucial, that is, on Environment, Social and Economic results. For this reason, highlighting cost reduction that arises from the improvement of environmental performance makes crucial to understand how Environment pillar in WCM lead to the companies to reach a higher profitability and support customer needs as well as society expectations in terms of sustainability.

Results and discussion

This section summarizes the present trends on GL subject, discussing them and widely explaining after an in-depth review of main studies on this field. Firstly, it is important to define the Green Logistics concept, that is, logistics that aim to prevent an environmental degradation by reducing resources consumption and the emission of pollutants being at the meantime economically functional. GL describes the efforts to measure and minimize the ecological impact of logistics activities. To reach this goal, GL uses advanced logistics methodologies to create logistics flows, selecting the best modal transport, warehousing choice and packaging type. Therefore, GL should be an effective and efficient flow of goods that connects the supplier with the customer demand.

Integrated logistics management

To reach a sustainable Supply Chain it is necessary to implement an integrated logistics management, incorporating the whole Supply Chain activities in a full-controlled flow. The Sustainable Supply Chain Management (SSCM) has been defined by many authors, representing the voluntary integration of economical, environmental, and social considerations with key inter-organizational business systems designed to efficiently and effectively manage the material, information, and capital flows associated with the procurement, production, and distribution of products orservices in order to meet stakeholder requirements and improve the profitability, competitiveness, and resilience of the organization [9]. The SSCM combines the profit in terms of economic, environmental and social values, integrating activities as sourcing management, procurement and manufacturing. Moreover, it includes also the WCM concept of Total Quality Management (TQM) that pursues the improvement of the performance in terms of quality, productivity, customer satisfaction, and profitability, internalizing the financial, social and ecological risks.

The full-controlled flow should integrate all the activities involved in the Supply Chain, that is, procurement (inbound logistics), production (internal logistics flows) and sales (outbound logistics). Even if it focuses on overall logistic processes, procurement and sales activities are out of the scope of this paper; however it would emphasize the importance of a full-integrated supply chain management highlighting that these fields are also moving towards a more sustainable management. To clarify the concepts, it is necessary to define that Green Procurement is here understood as the combination of activities that pursue a more sustainable purchasing system, focusing on eco-friendly and certified materials or products and creating business networks with suppliers that share a high level of commitment in their environmental and social governance policies. Recently, companies are focusing not just in tier-1 suppliers, but also in multi-tier suppliers in order to enlarge their sustainable supply chain network. On the other hand, Ethical Sales makes reference to a conscious marketing strategy that provides the customer all the relevant information about company’s performance and policies related to the environment and the society, allowing customers to make informed decisions about their products.

In WCM the continuous improvement is the basis to drive the performances towards the World Class Level. For this reason, an Integrated Logistics Management should pursue this target by means of Kaizen application in all the logistics activities. Kaizen is a Japanese term that means improvement and a gradual and continuous progress that allows increasing the added value of all company’s activities. Other important concept in WCM methodology, as it has already underlined, is the zero waste. An Integrated Logistics System should follow the principle of waste reduction that increases added value for the customer by eliminating the activities that does not add value along the product value flow. Similarly, zero waste is a key element for environmental sustainability through the reduction and prevention of environmental pollution, as well as the reduction of waste at its point of origin, using efficiently the resources and preventing and reducing the environmental impact of the logistics activities [10].

Finally, the monitoring and auditing systems are the unique way to maintain the continuous improvement that WCM promotes. Audit, assessment and standardization are the key tools for continuous improvement, which help organizations to quantify the performance and to continuously strive for better sustainability performance [11]. For this reason, the use of Key Performance Indicator (KPI) to measure the environmental performance is necessary in order to continuous improve the sustainability of the entire Supply Chain. Measurement is a key to quantify problems and prioritize them and to determine the effectiveness of improvement activities [6]. When measures and evaluations determine that an activity is more worthwhile than the previous one, this new process or activity should be implemented in a model area and then expanded to the overall plant or organization. That is, once the evaluation cycle is completed, the last step will be the standardization applying the same method to manage that process.

Logistic flows optimization

The logistics network optimization is the best option to reduce the environmental impacts that logistic activities produce. This is based in an optimized modeling that analyzes the hierarchy and inter-related transportation flows bringing a considerable cost and carbon reduction in the logistics processes [12]. In the following paragraphs it will focus on different logistics flow schemes to maximize the consolidation of cargo in order to optimize each one of the freights. For all the schemes, it is important to underline that the full collaboration between procurement, manufacturing and sales is essential in order to improve the logistics flows. The consolidation means that small- medium shipments are combined in a unique transport solution in order to fill the full load capacity of the transport. These solutions contribute to getting the higher profit of each one of the freights, in terms of environmental impact as well as for cost reduction.

• Milk Run Logistics: Logistics procurement method that uses routing to consolidate goods by the buyer. It is a method of goods collection in which the customer dispatches one truck at a specified time period to visit various suppliers following a predefined route to collect parts or products, and deliver them to the factory [13]. It can be used when suppliers are in the proximities of the customer plant, contributing to reduce costs and fuel consumption per shipped In addition, Milk Run Logistics is a smart logistics strategy to reduce the Work-In-Process (WIP) inventory, increasing the capital flows and reducing investment risks.
• Consolidation at departure facility: The consolidation is taking on by a vendor that supplies different plants belonging to the same Customer could request to supplier to consolidate the cargo in a single freight that then could be shipped to different plants following a pre-established shipping sequence [14]. This method could be used for diverse types of logistics networks, not just for suppliers located close to their customer.
• Consolidation at transfer facility: When suppliers are located distant to their customer, it is usual to resort to a third party to act as a transfer warehouse. This warehouse could be either a part of the customer’s company or a separate entity. The consolidation using a transfer facility is a method of goods delivery in which parts are transported fully- loaded from suppliers in remote areas to the transfer facility, sorted according to the destination plant, and then transported to their final destination [14].

As it has highlighted in this section, fulfill the cargo capacity in each freight could sensibly reduce the carbon foot- print associated to each shipped unit. However, this is not ever easy to do, especially when the company should follow stringent delivery plans and want to respect the JIT principle. Companies should focus their efforts on establishing scheduled flows supplier-customer in order to improve their JIT shipments and to consolidate cargo allowing the fulfillment of each transport. Just in this way could be possible to significantly improve the environmental performance of logistics and to reduce the cost associated to transport activities.

Modal transport switch and transport load adjustment

Freight transport has been growing rapidly last years, even more than passenger transport, and is expected to continue this trend in the future. The type of transport differs depending on distance, for example, urban freight movements are predominantly by truck, while international freight is dominated by ocean shipping. Similarly, the modal distribution for cargo transportation contrasts greatly across the regions, being the road transport the extended one in Europe and having a higher market share compared to other modes of transport. However, freight transport is considerably more conscious of energy efficiency considerations than passengers transport because of pressure on shippers to cut costs, even if it is true that this can be offset by pressure to increase speeds and reliability and provide smaller JIT shipments [15].

Bearing in mind that transport is an important contributor to the emissions of pollutants, to improve this key-part of logistics means an important benefit in terms of sustainability. Hence, a well-though strategy for transportation mode, route and load results on a reduction of Logistics’ environmental impact and contributes also to decrease the total transportation cost (Cost Deployment Pillar). Starting from the modal selection, to shift from the usual road transport to alternative freight for regional transportation could help to reduce the CO2 emission to the atmosphere. In order to decrease transport emissions, the modal transport should switch from airplane and trucks to ship and railway transportation. This is because transporting goods by railway and ship emits less CO₂ and generates less environmental load than truck transport. For example, the amount of CO₂ emitted when one ton of cargo is carried one kilometer by ship is equivalent to about one fourth of that emitted by a truck [16]. However, sea freight emits huge amounts in terms of NO_x pollutants and, if no new measures are taking in this field, ship emissions will surpass total emissions generated by all land-based mobile, stationary and other sources by 2020 [17]. Obviously, it is true that switch to modes of transport like railway could prolong the transit time, being difficult to apply in some occasions if the company wants to respect JIT deliveries to its customers. For this reason, it is really important to implement an accurate management system aligning the suppliers’ Lead Time (LT) with production and customer requirements.

On the other hand, using the total capacity load of each transport freight is essential to reduce the environmental footprint per freight. The amount of useless space worsens the environmental performance for transport since increase the emissions and the fuel consumption per unit shipped. Focusing in the same mode of transport, it can note that the bigger the transport unit is, the fewer the CO2 emissions [17].

Summarizing, different alternatives are available related to the transport environmental impact, targeted to reduce the emissions to the atmosphere and the fossil-energy consumption. Firstly, it is important to stress the key-role that the model of transport has to minimize the environmental impact of each freight, but also it would to point out the necessity to decrease the transport requirement throughout the inventory and production optimization, establishing and accurate management that decrease the use of urgent transport. These measures will means also a cost reduction and the achievement of the zero stock WCM target.

Eco-efficient Warehousing

Concerning the eco-efficient warehousing, it will focus on two ways to minimize the environmental impact of internal logistics, first one will be the new trends in forklifts propulsion systems and the second one will be the reduction of traveling distances for picking activities in the warehouses. Both measures could help to decrease the overall consumption of resource for warehousing activities as well as to reduce the emissions related to them. However, there are also other key activities that could be carried out in order to improve the warehouse environmental performance [18]:

• Implementation of paperless Warehouse Management System (WMS) could reduce environmental impact and the overall warehouse costs too, providing even higher possibilities for more efficient operations (WCM Cost Deployment).
• Use of renewable energy sources to reduce energy consumption and pollutants
• Switching to more efficient lighting technologies as LED and use the sunlight as much as
• Use of sensors in doors for automatically close and in lighting to turn on only when the area is in
• Placing better insulation material on warehouse’s building structure in order to reduce energy

The decrease of emissions depends on the type of forklifts used even though it is true that anyway improving the internal logistics flows it can reduce also the emissions and the energy consumption related to warehousing activities. Focusing on the forklifts types, some suppliers are working hard to improve forklifts’ environmental performances. For example, Toyota Industries Corporation launched the world’s first internal combustion hybrid forklift in 2009; they are working on a line of environmentally friendly and recyclable vehicles, including the industry’s first fuel cell forklift [19]. The prototype Toyota FCHV-F use hydrogen as its main power source producing electricity without combustion and generating zero carbon dioxide emissions. Nonetheless, even if the impacts of fuel cell forklifts is generally lower than forklifts powered by internal combustion engines, the impacts of fuel cell forklifts using hydrogen from natural gas are similar to those from battery-powered forklifts using electricity from the best natural-gas-fired power plants [20]. In this case, to identify the source of the grid energy is important in order to evaluate the real benefit obtained from the use of fuel cell forklifts, even if generally they have considerably lower impacts than those using electricity from the average grid.

On the other hand, focusing on the optimization of internal logistics, the remodeling of the internal flows could clearly improve the warehouse’s environmental performances in terms of energy intake and air emissions. In that way, a review of the warehouse layout and the storage and picking methods could help to highlight inefficiencies and to develop more accurate methodologies in order to improve the internal flows. For example, keeping the high runner items aggregated in a specific warehouse location close to the production area could reduce the traveling distances. Likewise, using methodologies as First In First Out (FIFO), that is in addition the best way to manage inventory and stock (zero stock goal in WCM), it can decrease also the unnecessary consume of resources by avoiding the expiration of materials as resins or adhesives.

In conclusion, using material handling best practices and applying the usual rules to improve building’s environmental impact; companies can reduce the costs in terms of money and environment for their warehousing activities. Additionally, in the next years the developing forklifts technologies will represent also an opportunity to improve the eco-efficiency in the warehouses.

Green packaging

In Logistics, one of the most important wastes is the packaging that consumes a big amount of resources, either in the production processes or in the waste management and disposal. Presently, there are about 10 million tons of solid waste annual in the world and packaging waste represent about one-third of the total [21]. This waste means also a loss for the companies; therefore by reducing packaging volumes it could increase also companies’ profit.

The consume of resources to respond to the large demand of worldwide logistics is the main environmental problem stem from the packaging production. For this reason, some of the key activities to deploy in order to reduce this waste are related to the 3Rs principle, that is, Reduce, Reuse and Recycle. First of all, companies should reduce their necessities of packaging, finding the balance between the quantity of packaging used in logistics and the feasibility of withstand the transport while protect items from shipping damage. In addition, the use of large-scale packages and containers contribute also to reduce the consume of resources dedicated for packaging. After reduce packaging as much as possible, the second step should be to reuse the packages. For this purpose, companies could use reusable containers although it is true that this activity should be agreed with suppliers and / or customers. Consequently, this point should be shared between Logistics and Purchasing / Sales departments that can support Logistics in this type of activities by negotiating the conditions for the packages return. It is important to note that package disposal cost is an important concern for the companies; hence, a proactive attitude that reduces and reuses packages is the best way not to commit to costs that not provide added value to the companies.

On the other hand, the use of materials that could be easily recycled or disposed is essential in order to reduce packaging environmental impact. For instance, some innovative packages, such as high density polyethylene pallets, moisture absorbing desiccant packets, hydraulic pressured compact film, and regenerated cellulose film can escalate package material cost, but increase durability, recyclability, reusability, and biodegradability [22]. If it was previously clear that reduce and reuse have direct benefits to costs (Cost Deployment technical pillar) and waste reduction (zero waste target on WCM), when it speaks about new materials on packaging generally the unit price growth. However, this fact does not mean that the total cost rise also for the companies. For example, the change from traditional wood pallets to plastic pallets means an increase in the unit price that could be returned thanks to the durability and a longer life cycle of plastic pallets. In addition, plastic pallets are lighter than their wood equivalent and this produces a reduction in the consumption of fossil fuels during transport, as well as lower CO2 emissions, but also a transport cost reduction due to their lower weight. The plastic pallets have also a high residual value, allowing the owner to recover part of their investment at the end of the life cycle [23].

Conclusions

The literature review has pointed out the lack of specific works that shows the connection between WCM practices and environmental and logistic performance. However, it can find several papers related to the Logistics pillar in WCM likewise to the improvement of logistics environmental impact. There is a great number of literary resources that bring to light best practices and recommendations about how to deploy a more sustainable Supply Chain and how to implement greener logistics flows. For this reason, the original contribution of this paper is the interconnection between both fields, trying to demonstrate the importance of including the environmental aspect in each and every one of the pillars that sustain the WCM management.

It has explained how the latest clean trends in manufacturing and logistics could improve the overall WCM performance, contributing to achieve objectives as the zero waste and the zero stocks by applying methods like TQM or JIT. In the same way, it has shown the correlation between Environment and Logistics pillars, demonstrating that the implementation of the proactive steps on Logistics pillar, throughout a synchronized and full controlled, drives also the growth of Environment pillar towards the World Class level. In terms of environmental performance, all the measures described in this paper help also to improve companies’ environmental results, offering the opportunity to implement a business strategy that take care of the sustainable development, providing the companies benefits like cost reduction, increasing benefits and donating a better corporate image to the society.