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Lean Manufacturing: Addressing Climate Change Through Reductions In Waste

Posted on 4 January 2013 by Rob Honeycutt

This post has also been published on Climate Progress, and the PR Newswire press release has been published by Yahoo Finance, The Sacramento Bee, and The Herald, along with articles in Core77 and VentureBeat.

Climate scientists are in the unfortunate position of being the messengers of bad news. So in a way, climate change denial is a massive attempt to shoot the messenger.

There are so many existing technologies to address climate change that are positive messages that too often get lost in the noise.  I want to share what I see coming from my industry, which is manufacturing.

Specifically, I want to address how things are manufactured rather than technological solutions.

The Big Picture

As we all know, over the past 30 years vast portions of the world’s manufacturing base has moved to Asia, primarily China.  What you find there is a spider web network of small factories supplying parts to each other forming a distribution chain of goods.  Those goods are all being delivered by many tens of thousands of these little blue diesel trucks, each belching out heavy particulates, CO2 and any number of unhealthy substances.  None of the factories are located in any rational proximity to each other; it’s fairly random.  The surface streets they travel are generally choked with traffic.  Then each of those factories is running on the Chinese grid, fueled by a lot of dirty coal.  Most factories also keep back up diesel generators running since the Chinese grid is often unreliable.  I’ve even seen small, clearly unregulated, coal fired generators tucked away back in various coves and backstreets putting out very heavy smoke.

Then, of course, all the finished goods are trucked to port, loaded onto an unending train of container ships crossing the Pacific and heading out to all corners of the world.  Each of those is burning bunker fuel, which is something akin to asphalt.  And on top of that you have designers, engineers and execs flying back and forth to Asia numerous times each year to manage their projects.  I have one friend who does 8 to 10 trips a year to China as a product designer, and that’s pretty normal.

Taiichi Ohno and Toyota

Some 70 years ago a man named Taiichi Ohno pioneered Toyota’s incessant quest to ferret out waste from their production systems.  His work heralded in a new wave of manufacturing efficiency.  You may perhaps remember how the Japanese were crushing the U.S. auto industry in the 1970s and 80s.  This was primarily due to systems developed by Ohno.

Taiichi Ohno identified what he termed the “seven forms of waste” or “muda,” as it’s referred to in Japanese.  One of the primary forms of muda is “transportation waste.”  Moving product was always to be kept at its barest minimum since it adds no value to the end product.  There are reams of research on this, and yet, over the past 30 years transportation waste has exploded to epic proportions.  None of it adding value.  All of it putting vast quantities of CO2 into the atmosphere.

Not even thinking of CO2, and only being focused on efficiency, what Toyota did to minimize this was to work in Keiretsu’s.  They were “families” of suppliers who maintained their facilities in near proximity to the main Toyota assembly plants and they operated their supply chain on hourly delivery schedules.  Over half a century ago Toyota and Taiichi Ohno showed us that operations should always be located as close together as possible.  This got lost in the mad rush to move production to China.

Efficiency Improves Quality

The work of Taiichi Ohno and Toyota eventually lead to the “Lean manufacturing” movement.   Hand-in-hand with elimination of transportation waste came the reduction of in-process inventory levels.  One of the first things a company learns, and often why companies will abandon Lean, is that reducing inventory exposes problems.  With high inventory levels and extensive transportation, problems get hidden and passed along down stream.  With Lean, problems can’t hide and have to be fixed or the entire factory shuts down.  What this promotes (demands, actually) is a process of continual improvement.


The Present Opportunity

There is a new movement emerging to start bringing manufacturing back to the U.S., partially evidenced by Apple’s recent comments that they would be bringing some of their production back to the US.  But I see a much larger opportunity here.

My background is in manufacturing, with 23 years experience in both domestic and off-shore production across a wide range of products.  I am launching a new product on the Kickstarter website to set up a domestic factory in the SF bay area producing a simple consumer electronics product; a set of bluetooth earbuds.

Though initially I’ll be just looking to set up final assembly, the long term plan with this business is to create a vertically integrated process where, in house, we run a large portion of the creation of the product.  We will look to bring in printed circuit board assembly, injection molding for the outer case and earbud parts, and the extrusion process for creating the earbud cords.  We will eventually even bring in the printing processes for creating the product packaging.  All this so that no process is anything more than a few yards from the next step in assembly.  Then the cherry on top will be to have a solar PV installation powering the whole thing.

In this, we would eliminate huge inefficiencies and remove nearly all the middle supply chain CO2 emissions related to the product by removing nearly all the transportation waste, and at the same time creating a more profitable domestic manufacturing business.

One of the goals of this business will be to show other businesses what the opportunity is.  Too often people get the idea that addressing climate change will involve higher priced goods.  I believe that’s wrong.  These methods can give people reason to want to give the messenger a great big hug because, yes, we can mitigate CO2 emissions and actually have a stronger economy for it.

If you’d like to support this project, click here.

Rob Honeycutt is the founder of the bag company, Timbuk2.  He was the first to implement an online “build-your-own” mass customization, which became the inspiration for the NIKE iD program. He also has extensive experience with off shore production, having worked with over 100 different factories in China.

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Comments 1 to 17:

  1. Good luck to you, Rob. I hope it turns out well for you.

    As a comment to the general points you raise, in every case I've come across, improved efficiency results in reduced reliability. As an example, if you eliminate redundancy in a system, the system becomes more efficient, but subject to the failure of a single component shutting down the entire system. Just in time manufacturing has the same problem - it's very efficient and reduces cost a great deal, right up until the point when a tsunami, a tropical storm, or a longshoreman strike prevents delivery of critical manufacturing components.

    Every method I know about that improves the reliability of a system also reduces its efficiency, and vice versa. Ideally, following continuous improvement processes should enable you to develop the optimal level of efficiency and reliability - keep inventory of critical raw materials to absorb reasonable supply disruptions, but don't spend the money for a completely redundant manufacturing line, for example.

    In every business I've worked for, that process is a lot harder to do than it sounds. You have to have very smart people tracking weather, political upheaval, possible disruptions to your supplier's suppliers, daily inventory level tracking, good market information. Too few small companies have the management foresight or monetary resources for the startup costs, and too many large companies are unwilling to attempt implementing such dramatic changes to their corporate culture.

    If you can pull it off with a startup, more power to you. That you're going into the project planning on it means you have a better chance than most. Again, good luck to you.
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  2. angliss... I hear what you're saying but I believe what you're addressing is why companies abandon Lean. I can tell you from first hand experience what an excruciating experience it is to lean out a company. But if you visualize it in terms of the fact that you're exposing problems then you begin to realize how much inefficiency there is in your processes.

    Think about Toyota, though. They are consistently rated as some of the most reliable vehicles on the market, and their manufacturing methods are the most efficient in the world.

    Clearly it's impossible to foresee every possible problem that can shut down your factory. But the big difference is... or should I say, the mindset change that has to occur is... you have to view those shut downs as golden opportunities. At Toyota when they ran into such problems, no one would freak out. In fact, their response was to make tea. Let the factory shut down, that's okay. But from there you must understand the problem and hopefully create a deep solution that will keep the problem from ever occurring again.

    It's a process that never stops.
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  3. Since part of lean manufacturing involves reducing stock levels, this often means increasing the number of smaller loads. Of course road transport is far better suited to this than rail freight. Isn't this a severe environmental disadvantage of so called low stock or 'Just-in time' logistical methods? The move away from large industries to much flexible smaller businesses, and lower stock levels, have led to the demise of rail freight in some countries.
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  4. perseus... One of the most important aspects of Lean is to "right size" processes. If you're shipping massive quantities of goods in a single load then your upstream process is out of balance with the downstream process and needs to be "right sized" to bring the processes into flow.

    As well, if you're using rail transport that would suggest that your supplier is too far from your facility. Again, you'd need to right size the process and move the process into a closer proximity to the following processes.
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  5. Taiichi Ohno used to chastise engineers for doing what he called "catalog engineering." It's such a natural inclination to try to spec the largest "most efficient" machine for a task without looking at product flow. Whereas this actually is a less efficient method when it comes to the overall process. When a machine produces too much, too fast, then it creates excess inventory. This is actually another form of waste that Ohno termed "Mura" - Unevenness or inconsistent.
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  6. I'm sure that you're correct, Rob, that what I describe is part of why some companies abandon Lean. And I'll admit that I don't know a ton about it besides what I learned from my dad (he used to run businesses for a living before he retired, where as I'm an engineer) via osmosis.

    But I think my point is a little different. Reliability and efficiency are fundamental tradeoffs - increase one and the other necessarily goes down. There are smart ways to trade them off and there are stupid ways, and I suspect that Lean is an attempt to do it intelligently instead of stupidly, but it's still a tradeoff.

    It's like the fundamental tradeoff among the triad of cost, schedule, and performance - you can choose any two of those priorities, but the third will always suffer. NASA learned that the hard way when "faster better cheaper" resulted in very expensive failures because the "better" part of the equation was deprioritized relative to faster and cheaper.
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  7. angliss... It's interesting. One of the other land mines inherent in the implementation of Lean, I believe, is that people think a new initiative or program is going to somehow fix their problems. There was a lot of TQM and JIT that was sold as a panacea to all that ails your business. And that's not what it is. Very often Lean systems were attempted with a CEO that was dubious. It just can't work without total buy-in from the top.

    Toyota is famous in how they change over a supplier to their systems. Basically, if you are selected at a Toyota supplier you have to give total control of your business over to Toyota. You'll have business owners saying, "WTF! I've been in business 30 years, I know how to make my products." But with Toyota it's their way or the highway.

    Then after Toyota gets in and restructures the supplier, a couple years later, they're generally saying, "Wow. I had no idea how much I didn't understand." You either have to have absolute buy in and commitment from the top, or you have to completely isolate the top from the transition until they finally come in line.
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  8. Nice article Rob, thanks.

    There are other reasons that manufacturing is returning to the US: rising labour costs in China, along with concerns over problems like corruption and intellectual property theft there are part of the story, but the big reason seems to be the rising importance of robots and devices like 3D printers.

    I suppose that all of this new technology can be harnessed to improve leanness and reduce waste even more. Combined with renewable energy sources, these kinds of advances give me hope that we can transition to a cleaner and smarter economy.
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  9. Thanks Andy!

    Whooboy, I'll tell you, I've only barely touched on the inefficiencies embedded in Chinese production. I have a friend who is a manufacturing manager at Apple and he says that Apple has a veritable army of auditors on the ground at all times in China. They're all just making sure that none of their product is back-doored and that each supplier in the supply chain is paying the agree upon price for the goods. They're constantly just trying to make sure that no one is getting under-the-table payoffs. I mean, talk about non-value added activity!
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  10. Rob - Good luck with your Kickstarter project!

    I'd like to point you and others to a super-interesting episode of This American Life on National Public Radio (NPR) called "Nummi". It's the story of a collaboration between Toyota and GM where Toyota tried to teach GM not only their lessons about efficiency and quality-first, but also how Toyota fosters excellent rather than adversarial worker relations. Here's a blurp about the episode from the website:

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  11. LarryM... I actually toured NUMMI some years back. It was actually a very successful project. That Fremont CA plant was, at one point, GM's most inefficient factory before they shut it down.

    Then Toyota proposed a joint venture to reopen the plant and structure it using Toyota production systems. They fired all the management and retained all the same workers. The plant went from being GM's worst to becoming their very best, and rivaled Toyota's very best plant in Japan for most efficient.

    GM ended up pulling out of the joint venture and Toyota could not justify the facility on their own, so the plant closed.

    That same plant is now reopened as the TESLA factory, again in partnership with Toyota.
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  12. Interesting and somehow fitting that the Nummi facility now houses Tesla. May they fare better than GM has.

    I can't help wondering whether things at GM might have gone very differently (better) had they taken the proven successful methods of Toyota to Detroit, rather than letting that promise die on the vine.
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  13. I think all the car companies have had to adopt much of what Toyota does (and actually Honda is now very much a leader in manufacturing). But again, there is so much about leadership that is lacking. Do the CEO's of any of the US car companies have the leadership to really drive cutting edge efficient manufacturing? I sincerely doubt it. Not one of them is going to get down on the production floor and put his hands on a wrench and discover what they actually make and what his people know.

    It's really quite sad.
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  14. Since I think, that we (rich or relatively rich people in the west and elsewhere) will not only have to make the industry greener, but also reduce consumption to achieve acceptable and fair share levels of ecological footprint, it cost me a little frowning and thinking before I supported the project (after all it's a gadget and my personal goal is to reduce gadgets).

    According to a talk by a business professor (Niko Paech) given in Munich, efficiency from specialization is increasing up to a certain scale of savings and then negative feedback problems of too long supply chains kick in, at least ecologically. This also means, that we not only have to manage these problems via waste reduction in a lean/intelligent way, but we need to look at the general ecological optimization equation (when will more complex and specialized products values be overcompensated by ecological loss) and constraints (ecological footprint): if we manage to stop the "social arms race" for ever more hyped ("me too" and not "me need") complex soon outdated and to be wasted products and if we manage to develop more robust and less failure prone products (e.g. an exchangeable battery for the Elroy), we avoid waste on the demand side and also can produce more products locally or at least repair them locally (replace the battery for the Elroy, headset plug and usb plug easily accessible for repair: that's where all these gadgets break, ...). Here is one document (german+english) from Niko Paech ( ).
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  15. I definitely hear you, Jonas. On one hand I'm trying to tap into rampant consumerism to launch the project. On the other hand I'm trying to solve problems that are a direct result of rampant consumerism.

    There are so many problems to solve that I think it just can't be done in conjunction with launching a product. As it is I have an extremely broad vision related to a simple product launch. But I believe the vision I'm laying out eventually will begin to encompass more and more of the aspects that you're bringing up.

    A key element is just the act of bringing products in-house. So many industries have "externalized" all their problems by doing outsourcing to Asia. Send it to Asia and you don't have to worry about labor problems, ecological problems, regulatory problems, etc., etc. Those problems clearly don't disappear; they're just externalized. Out of sight, out of mind.

    When companies start to become "makers" again, they have to address all those issues again. They have to start solving real problems. That's a big part of what I'm trying to advocate with Elroy. Don't sweep problems under the rug of Asian production. Face problems and solve them.
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  16. With regards to the tradeoff between resilience and efficiency, I agree the curve exists, but I rather suspect that most economic activity is well below the curve. That is, they could get more resilient and more efficient, both. Eventually you get to being forced to make tradeoffs.

    With regards to manufacturing in the US: why is that necessarily any better? You could build a PV-powered vertically-integrated plant in China or India or whatever, near a port. You'd get the cheap labour and the efficiency, and cheaper transport to consumers in all countries that aren't the US. It's probably comparable also to ship to the US East coast by boat across the Indian and Atlantic oceans than by rail or truck across the US. For transport cost, assess it either in dollars or CO2.
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  17. numerobis... The advantages are going to vary from industry to industry, but ultimately I think people put far too much emphasis on labor costs. I was able to compete with a high labor cost product (sewn shoulder bags) and still produce that product domestically and cost effectively. The other benefits, that aren't nearly as apparent, can tip the advantage toward domestic production. In my case one big factor was that I could produce product on demand. That meant I was never out of stock on any product. That meant no close outs and no stock-outs. Close outs and stock-outs can have a tremendous impact on the resulting profitability of a company. It also leads to a high level of uncertainty in the standard business model from season to season. Fundamentally, the success of a business can hang on how well they forecast. And at some point, regardless of how well anyone does their forecasting, they will get their forecast dramatically wrong.

    Regarding shipping to the east coast, what a business should endeavor to do is open production facilities close to their customers. That's hard for a small company, but for larger companies, if you can properly scale your operations to your regional markets, they should be managing multiple production facilities close to their markets.
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