© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 0745815-1

Operations Operations ManagementManagement

SustainabilitySustainability

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 0745815-2

There are over 100 definitions of sustainability and sustainable development. The best known is that of the World Commission on Environment and Development:

Development is sustainable where “it meets the needs of the present without compromising the ability of future generations to meet their own needs.”

SustainabilitySustainability

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 0745815-3

If the goal of the organization is to If the goal of the organization is to make money, why do we care?make money, why do we care?

Marketing Positive effects Negative effects

Accounting / Finance / Legal Cost Regulatory Liability

Human Resources Ability to attract and retain people

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 0745815-4

If the goal of the organization is to If the goal of the organization is to make money, why do we care?make money, why do we care?

Operations / Green Manufacturing ERM – Environmentally Responsible Manufacturing is

a system which integrates product and process design issues with manufacturing issues to minimize environmental impacts

Note that environmental impacts are generally waste Remember TQM and JIT

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 0745815-5

Sustainability – Sustainability – Focus on minimizing wasteFocus on minimizing waste

Less Material Energy Waste / pollution Disposal hazards / cost Packaging

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 0745815-6

Sustainability – Sustainability – What can companies doWhat can companies do

Product and process redesign to use less Material Energy

Longer product life span Substitution

Using inputs that do not create waste / disposal hazards / costs

Recycle / Rebuild / Remanufacture / Reuse

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 0745815-7

Sustainability – ERM approachSustainability – ERM approach

Reduce the environmental impacts of their products and processes

NOT

A clean-up approach

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 0745815-8

ERM – ResultsERM – Results

Compared to companies that do not consider the environment, ERM companies have: 16.7% higher operating income growth 13.3% higher sales to assets ratio 9.3% higher sales growth 3.9% higher ROI 2.2% higher ROA

In other words, ERM can make money through the elimination of waste

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 0745815-9

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 0745815-10

Established January 5, 1973 Based in Portland, Oregon One of the largest building products producers in North America Operates manufacturing facilities in:

United States 5 Canadian Provinces Chile

Manage nearly 10 million acres of timberland

2002 net sales: $2 billion

About LP...About LP...

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 0745815-11

Pre-1993: “The Environmental Dark Ages”Pre-1993: “The Environmental Dark Ages”

Strong “production” orientation Described ourselves as environmental leaders

no systematic approach no clearly articulated vision

Government actions Clean Air Act Consent Decree (16 Facilities) Suspension and Debarment Compliance Agreement District of Colorado Plea Agreement

Significant fines and pollution control requirements

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 0745815-12

Post-1993: “The Age of Enlightenment”Post-1993: “The Age of Enlightenment”

LP leadership overhaul Environmental improvement - a management priority Formation of Corporate Environmental Department (1993) Development of Policy on Protection of the Environment (1994) Changing culture and expectations EMS implementation and integration Environmental awareness Enforcing high standards EMS teams and involvement of all employees

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 0745815-13

EnvironmentalMetrics and Goals

RawData

InterpretedData

Status

1. Hours of Environmental Training

Goal = 2 hours per employee per year

20,314 personhours

2.26 hours per employee Exceeded goal

2. Notices of Violation

Goal = <10 (preferably 0)

9 9 Exceeded goal

3. Disposal to Landfill

Goal = 5% reduction per employee hours worked

190.2 millionpounds

49% reduction(11.10 lbs. per employee

hours worked)Exceeded goal

4. Environmentally-Related Cost Savings

Goal = As much as possible

$21.5 million$1.25

per employee hoursworked

Exceeded goal

5. Corrective Action Plans Completed

Goal = 80% completion of CAPs initiated byOctober 31st

23 open144 closed 86% completion Exceeded goal

6. Waste Minimization Projects Implemented

Goal = 15 projects started

64 64 Exceeded goal

Corporate-Wide Environmental Metrics and Goals Jan-Dec 2002

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 0745815-14

Site Description US$ AmountCarthage OSB

The maintenance dept. had installed a flexi-hose to the CP003 screener line to transfer and collect fine pile created from unplugging the raw fuel baghouse back into the same baghouse. This task has reduced the cost of labor and saved on fuel cost.

$12,000

A mechanical shaker has been installed inside the raw fuel bin to eliminate plugging, which also eliminates baghouse excursions on the raw fuel baghouse.

$16,500

Dawson Creek OSB Selling waste flake/fines for $50 CDN/truckload to oil and gas industry for use in well site reclamation. Reduces fugitive dust sources on plant site.

$1,000

Hanceville OSB Made changes in purchasing to a new vendor that supplies our wooden cross outs. Not only did we reduce the cost in purchasing from the new vendor but made an arrangement so that the vendor would take back unusable boards and replace them rather than putting them in the waste dumpsters. This will help to reduce the volume to the dumpster by about 300 units a week.

$9,945

Began recycling plastic banding with a local vendor rather than placing in the waste dumpsters. $161Hayward OSB

By getting the State to agree to 2 rounds of ground water testing instead of 4, in Hayward's groundwater remediation project, significant savings were realized. The deviation from our originally submitted plan is rare in the State of Wisconsin.

$8,000

Jasper OSB Total wood fuel burned in place of natural gas saves approximately $4.3 million per year. The average gas cost over the past 14 months was used to calculate this amount.

$4,300,000

Maniwaki OSB We changed analytical lab for our tests. The new lab offers better service at a lesser cost. $700 $8,400

Use ash as pH amendment for farm land, potential to use approximately 4000 t/y, since 1000 t/year is already used to mix with compost. Assumes 1000 t/y cannot be sent to fields due to thaw season and heavy fall rains.

$36,000

St. Michel OSB We had a problem with the Fugi debarker during a very cold period. This caused us to have to store - shorts log - outside the mill on a concrete pad. This unusual by-product was processed (crushed) by a contractor at the mill and sent to an MDF facility.

$15,800

To use the 10,000 cu. M of screening for the landscaping at the old wood yard. (For this project, we can transfer funds from OSB Chambord to do it.) 78,000$ are available.

$78,000

PM signed a new deal with Tafisa to sell sawdust. Tafisa will pay 12$ CND more then the previous contract with Smurffit-Stone. This contract is effective for 2003.

$80,640

Swan Valley OSB Swan Valley Scrap Metal agreed to assume ownership of aerosol can crushing and disposal - savings based on $18/hr @ two hours/wk @

52 weeks=$1872.00 $1,872

Cost Savings 2003Cost Savings 2003

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 0745815-15

Site Description US$ AmountToledo Coating

Sale of CTS Offal vs. Landfill $8,000 Reduction in Energy Costs due to conversion to waterbased Class I eliminated the necessity to run #3 Groundcoat HVHA Dryer which is

one third of our dryer capacity. Annualized Savings. $35,000

Recipe Control via Review Line Optimization $15,000Rogue River Veneer

Started Recycling wood waste material from onsite landfill $53,608 Ash to Copeland Sand and Gravel. $1,266Newberry Siding

RTO media washout – no demonstrated gas savings, electrical savings for two months $3,110 WESP / RTO improvement project shows a gas reduction of 6,000 ft3 / day $18,467Two Harbors Siding

Burned waste oil mixed with fines/wafers avoiding hazardous waste disposal fees. $1,600 Diverted paint waste from landfill (burned in Konus as per permit). $1,737 Reduced landfill cost due to donation of dunnage. $616 Land applied wood ash avoiding landfill disposal fees. $3,565 Reduced landfill cost due to donation of tub ground bark material. $4,491Middlebury

· Use bucket liners for coatings containers to eliminate need for rinsing buckets with water that must then be collected and treated as non- hazardous wastewater.

$2,000

· Rework (in future ink batches) ink that has been retinted to save off-color material (previously this ink would have been sent out as hazardous waste for reclaim)

$5,000

Holly Springs Vinyl · Began having glue delivered in reusable totes, improving housekeeping, eliminating glue waste, and eliminating glue barrel disposal $2,500

Bonners Ferry Sawmill · Firewood donations $170

Deer Lodge Sawmill · Hired Cleanup leadman and worked extensively on separating wood waste from refuse. Currently Mountain West Bark will use tub grinder to grind wood waste into hog fuel.

$12,000

· Constructing infeed hopper to allow feeding wood waste to sawmill chipper. $6,000

Cost Savings 2003Cost Savings 2003

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 0745815-16

ERM – ConclusionsERM – Conclusions

Most managers view regulation and the environment as a cost – and it can be a major cost

However, some firms have realized that waste is waste – and that rather than fight regulation, they need to avoid the need for it They may also get to set the legislative agenda, which is

another way to create competitive advantage

ERM, like all forms of waste elimination, tends to improve organizational performance