Sustainable Manufacturing

BITS Pilani
Pilani Campus
 BITS Pilani
Pilani Campus

Evaluation of manufacturing systems based on

environmental aspects using a multi criteria decision model
Introduction
The single largest problem in implementing SM as a system is
the lack of performance measures. There are many aspects
associated with updating a corporate sustainability
performance measurement system that have not been
adequately addressed .
At present, managers have difficulty in assessing the impact of
SM because of the lack of appropriate performance
measures . Without such measures, it is difficult to justify
SM as an alternative option. As a result judgments about
SM become costs in ethical or moral terms.
The traditional performance measures such as return on
investment, profit and cash flow are invalid for the
measurement of SM practices as they are based on
outdated traditional cost management systems and do not
necessarily reflect the organisation’s core competency.
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Introduction

Therefore, proper performance measures, derived from

corporate strategies and capabilities, are a prerequisite for the
implementation of advanced manufacturing systems like
environmentally conscious manufacturing to survive in today’s
competitive environment.
In recent years, performance measures have gained importance
as they are the prerequisite for continuous improvement. They
are mainly used to compare the performance of different
organisations, plants, departments, teams or individuals.
Organisations use performance measures to evaluate, control
and improve production processes. Many organisations have
spent considerable time and resources to implement balanced
performance measurement systems.

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PERFORMANCE MEASURES

Top management commitment (TMC).

Middle management commitment (MMC).
Employee involvement (EIM).
Employee training (ETG).
Human and technological resources (HTR).
Product design/product characteristics (PPC).
Process design/process characteristics (PDC).
Logistics design (LDN).
Vendor management (VMM).
Costs (CST). and
Benefits (BTS).

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Reliability and Validity

Reliability refers to the degree of dependability and stability

of a performance measure . It reflects the performance
measure’s ability to consistently yield the same response.
Reliable measure will produce the same results each time
it is administered to the same person in the same setting.
Validity refers to the degree to which items truly measure
the factors which they intend to measure.

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 Validity
Content validity and construct validity are generally considered for validity assessment.

Content validity
A performance measure has content validity if there is general agreement that the
measure has items that covers all aspects of the variable being measured. Content validity
is not evaluated numerically, it is subjectively judged by the researchers. Content validity
depends on how well the researchers created the measurement items to cover the content
domain of the variable being measured. Since the 11 measures of environmentally
conscious manufacturing are developed based on exhaustive review of
literature and detailed evaluation by the practitioners, these are considered to have
content validity.

Construct validity
A measure has construct validity if it measures the theoretical construct that it is designed
to measure. Muttar (1985) stated three methods of determining construct validity – multitrait
multi-method analysis, factor analysis, and correlational and partial correlational
analyses. Out of these three methods, factor analysis is usually used to identify items,
which should be included in a consistent measuring instrument.

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Empirical study
11 performance measures and along with their 89 reliable
and validated variables provide the managers an exhaustive
measurement tool related to strategic, tactical and operational
details along the life cycle of the products.
These non-financial and easy to understand measures will lead
to unproblematic acceptability at all levels of hierarchy.
These measures will equip the managers, who wish to
implement environmentally conscious manufacturing systems
in their organization, to gauge the weak areas in the
organization and the consequent improvement for successful
implementation of ECM.
The cost and benefit measures along the life cycle of the product
will enhance the justification of ECM to the top management
in economical sense.

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Performance Measures

1. Top Management Commitment

2. Middle Management Commitment
3. Employee Involvement
4. Employee Training
5. Human and Technological Resources
6. Product Design/Product Characteristics
7. Process Design/Process Characteristics
8. Logistics Design
9. Vendor Management
10. Costs
11. Benefits

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Top management commitment

• Top management commitment to environment

consciousness in manufacturing should be visible to all
employees and be announced in board of governors
through an explicit environment policy/vision and a written
strategy should be made available to achieve the
environmental vision.
• Top management should see that regular funds are
available to implement SM, monitors its progress and get
the regular environmental audits done. Another aspect of
top management commitment is to integrate environmental
issues with core business issues otherwise the
environmental issues will always be addressed as
constraints instead of objectives.
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TMC variables

1.1 Top management commitment for ECM is visible to all

employees
1.2 Organization has an explicit environment policy/vision
1.3 Environmental issues are addressed as business
issues
1.4 Written strategy to guide organization to achieve its
environmental vision
1.5 Top management monitors the progress in ECM
1.6 Regular financial resources are allocated for ECM
development
1.7 Periodic environmental audits are done

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Middle management commitment

• It is easier to get top management commitment to SM then middle

management commitment as tough environmental rules and
regulations generally put the responsibility on the top management.
• Middle management is responsible to see that quality products are
produced in time. Therefore, unless the SM implementation leads to
improvements in quality and productivity, middle management
commitment is difficult to achieve.
• Middle management should not only be actively involved in
environmental policy development but a documented SM
implementation methodology with environmental goals/targets to be
achieved should be made available to it for action and percolation to
the lower hierarchy of the company.
• Further, environmental awareness, training and competency
programmes should be conducted regularly for the middle
management to make them capable of understanding and
synthesizing the environmental issues

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MMC variables

2.1 Middle management is involved in environmental policy

development
2.2 Environmental goals/targets to be achieved are clearly
conveyed to the middle management
2.3 There is a documented ECM implementation
methodology
2.4 ECM implementation improves productivity
2.5 ECM implementation improves quality
2.6 Environmental awareness/training/competence
programs conducted for middle management

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Employee involvement

• SM affects all the employees of a company in many

ways, therefore, organizations should try to involve all
employees of the company in ECM implementation. The
formation of multi-hierarchy, multi-disciplinary teams of
pyramid structure is one way to involve from front level
worker to top management.
• Employees should also be involved in the process of
determining environmental goals/targets, encouraged to
give suggestions on environmental performance
improvement, empowered to handle environmental
problems and recognized for their contribution to
environmental performance improvement. A framework
to evaluate quality of employee participation helps in
continuous improvement.

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EMI variables

3.1 There are teams to tackle environmental issues

3.2 Employees are empowered to handle environmental
problems
3.3 Employees are actively involved in the process of
determining environmental goals/targets
3.4 Employees are encouraged to give suggestions on
environmental performance improvement
3.5 Employees are recognized for their contribution to
environmental
performance improvement
3.6 Organization has a framework to evaluate quality of
employee participation in SM

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Employee Training
• Theoretically, this criterion is closely related to the previous
criterion but practitioners consider it important enough to be
measured separately.
• SM training needs should be identified carefully otherwise
training programmes will not only be ineffective but
unnecessary time, effort and energy be wasted which also
demotivate the employees.
• Environmental awareness, training and competence
programmes should be conducted regularly based on periodic
reviews of these programmes for better results particularly in
initial stages of implementation.
• Availability of literature and continuous update of literature on
environmental issues in conjunction with availability of
documented lessons learned from previous products or
technology makes training more valuable. Percentage of total
training expenditure on environmental issues is another
simple measure of employee training.
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ETI variables
4.1 SM needs are properly identified
4.2 Environmental awareness programmes are conducted regularly
4.3 Environmental training programmes are conducted regularly
4.4 Environmental competence programmes are conducted regularly
4.5 Percentage of total workforce trained on environmental issues
4.6 Percentage of total expenditure on environmental training
4.7 Availability of literature on environmental issues
4.8 Continuous update of environmental literature
4.9 Documentation of environmental lessons learned from previous
products/technology, etc.
4.10 Review of environmental training/retraining needs is done
periodically

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Human and Technological Resources

• A separate environmental department in any

organization reflects the human resources available in
the organization as well the commitment of the company
to environmental issues.
• The success of the SM implementation depends to a
large extend on the human resources available within
the organization or outside the organization if the
company has the financial resources and willing to pay
for external experts.
• Moreover, environmental experts should be
consulted/involved during the technology procurement
and not afterward. The use of energy efficient and
environment friendly technologies is another measure of
environmental technological resources.
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HTR variables

5.1 Organization has a separate environmental department

5.2 Organization has enough internal environmental experts
5.3 Organization has the requisite knowledge for SM
implementation
5.4 Organisation employs external environmental experts
5.5 Environmentally benign/clean technology is used
5.6 Energy efficient technologies are used
5.7 Environmental experts are involved during technology
development/procurement
5.8 Environmental experts are consulted before using new
technology

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Product Design/Product Characteristics

• Design of a product has a major influence on the

environment friendliness of the product during its life
cycle and end of life. Generally, products are designed to
maximize the profit and minimize the cost. A paradigm
shift is required to design the products to evaluate
environmental affect of the product during raw material
selection, manufacturing, transportation, storage,
packaging, use, service and disposal in conjunction with
economical and social aspects.

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(cont..)
• Focus should be on development of characteristics which
enhance the performance of the product and make it
appealing to the customer to purchase. Remember, in first
place, customers buy a product to satisfy their needs and not
to improve the environment.
• The use of recycled, remanufactured and reused material;
non-polluting/non-toxic and non-regulated materials enhance
the environment friendliness. Low energy consumption during
processing and possibility of eliminating secondary processes
are some other criteria on which different SM systems can be
evaluated.
• Consideration of waste reduction during the life cycle of the
product and ease of disposal also makes a system more
environment friendly. The reduction of non-value adding parts
reduces the number of parts as well as all activities in all
facets of a company, like store, drawing, purchase,
manufacturing, assembly, service, etc.

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PDC variables
6.1 Possibility of use of recycled material considered in the design of products
6.2 Possibility of reducing regulated material considered
6.3 Use of non-toxic/non-polluting material considered
6.4 Use of low energy consuming manufacturing process evaluated during the
design of products
6.5 Low energy consumption during operation/use considered
6.6 Low energy consumption during maintenance/service considered
6.7 Reducing toxic/hazardous waste (solid/liquid/gaseous) during
manufacturing/operation/ service/disposal considered
6.8 Possibility of using used parts considered
6.9 Possibility of using remanufactured parts considered (eliminated)
6.10 Possibility of recycling considered
6.11 Increasing product durability is evaluated
6.12 Ease of disassembly considered
6.13 Product disposal in environment friendly manner considered
6.14 Possibility of eliminating secondary processes (polishing/painting/buffing,
etc.) considered
6.15 Value engineering/analysis is used in design of products

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Process Design/ Process Characteristics

• Various environmental aspects of a process design like

the capability of the process to produce near-net-shape,
amount of scrap produced, type and amount of coolant
required, secondary processes required and auxiliary
material required are to be considered during the
selection of manufacturing process(es).
• The use of renewable sources and reduction of natural
resources improve environmental aspects of a process.
Care must also be taken to have versatile processes
which improve the production planning and control of the
manufacturing system.

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PRC variables

7.1 Environmental issues considered in the selection of

manufacturing processes
7.2 Reducing natural resources during manufacturing is
considered
7.3 Use of renewable resources considered in
manufacturing process
7.4 Environmental issues considered in the process of
production planning and control

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Logistics Design

• Reduction and use of recycled material in the packaging

makes a manufacturing system environmentally benign.
Careful planning of recollection centre location,
packaging material disposal, reverse logistics network
design and imbibing reverse logistics in stock planning
improves environmental aspects of a manufacturing
system.

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LOD vaiables
8.1 Reducing the use of packaging considered
8.2 Packaging material recollection planned
8.3 Packaging material disposal planned
8.4 Possibility of the use of recycled material for packaging
material considered
8.5 Possibility and ease of consumer/end user accessibility to
the recycling centre considered
8.6 Collection and distribution of products/parts that will be
recycled,
remanufactured or reused considered
8.7 Reverse logistics considered in stock planning
8.8 Environmental issues considered in the design of logistics
management

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Vendor Management

• More and more organizations are outsourcing more work to

vendors to keep focus on core competencies. This requires
integration of vendors from environmental perspective to
assess or evaluate a manufacturing system in total.
• Involvement of vendors in environmental
awareness/training/competence programmes, information
sharing with vendors on environmental issues, environmental
certification/audits of vendors improve environmental
performance of a manufacturing system.
• Environmental expectations should be communicated to the
vendors in writing and the environmental performance should
be one of the criteria for vendor selection.

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VEM variables

9.1 Environmental performance is one of the criteria in

vendor selection
9.2 Environmental expectations communicated to the
vendors in writing
9.3 Vendors are involved in environmental
awareness/training/competency programmes
9.4 Environmental audits/certification of vendors
considered
9.5 Participation of vendors in information sharing on
environmental issues

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Costs

• Newer manufacturing systems like SM to succeed

require consideration of all types of costs to the
organization. One of the drawbacks of most of the
existing life cycle assessment methods is their limited
ability to consider the costs to the organization. Many of
the indirect costs are left out and only costs to the
product are considered.
• Costs related to waste and life cycle of the product are
gaining importance in the industry. Various costs to be
included in manufacturing system evaluation are: waste
handling, categorization, treatment, storage, and
disposal; transportation, production, use (operation),
maintenance, packaging, and overall cost of the product.

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CST variables
10.1 Consideration of environmental issues reduces waste handling cost
(eliminated)
10.2 Consideration of environmental issues reduces waste categorization cost
10.3 Consideration of environmental issues reduces waste treatment cost
10.4 Consideration of environmental issues reduces waste disposal cost
10.5 Consideration of environmental issues reduces waste storage cost
10.6 Consideration of environmental issues reduces transportation cost
10.7 Consideration of environmental issues reduces packaging cost
10.8 Consideration of environmental issues reduces overall cost of the product
10.9 Consideration of environmental issues reduces cost of production
10.10 Consideration of environmental issues reduces user operation/use cost
10.11 Consideration of environmental issues reduces maintenance/service cost
10.12 Consideration of environmental issues reduces overall cost of the
organization

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Benefits

• Maximum importance has been given to the benefits

achieved or achievable from the implementation of SM
systems by the practitioners. Various benefits of SM
implementation are: improvement in working conditions,
public image, staff morale, customer loyalty, brand value,
profit, sales turnover, product performance; reduction in
waste generation, regulatory concerns, liabilities; and
enhancement of market opportunities.

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BFT variables
11.1 Consideration of environmental issues improves customer loyalty/satisfaction
(eliminated)
11.2 Consideration of environmental issues improves product performance
11.3 Consideration of environmental issues improves organization profit
11.4 Consideration of environmental issues improves sales turnover
11.5 Consideration of environmental issues improves organization image in public
11.6 Consideration of environmental issues improves staff morale
11.7 Consideration of environmental issues improves organization working
conditions (eliminated)
11.8 Consideration of environmental issues reduces waste generation
11.9 Consideration of environmental issues reduces regulatory concerns
11.10 Consideration of environmental issues reduces liabilities
11.11 Consideration of environmental issues enhances market opportunities
11.12 Consideration of environmental issues helps in establishing/improving brand
value

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Justification Of Advanced
Manufacturing Systems
• One school of thought concerning justification of
advanced manufacturing systems states that if
manufacturing is to be a competitive tool, justification
has to become more of a policy decision rather than an
accounting or financial procedure.

• Another school of thought concerning justification of

advanced manufacturing systems states that advanced
manufacturing systems can be ‘sold’ to top-level
management only if all relevant costs and benefits are
quantified and presented in an easy-to-understand
format. It is true for environmentally conscious
manufacturing systems also.

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Limitation Of Traditional Investment
Evaluation Procedures
• Today, most major organizations are struggling with their
traditional investment evaluation procedures because they are
either misapplied or the information included in the calculations is
inadequate for the multifaceted problems being tackled.
• The evaluations based on ISO 14000 systems and life cycle
assessment tools require in-depth analysis of the system. This
may be easy for matures systems to get the perfect data with
less efforts but for SM systems the precise data is hard to
acquire.
• For emerging economies, where government and business has
just started to make their manufacturing environment friendly,
keeping intact their rapid growth, it is difficult to evaluate and
justify SM implementation through life cycle assessment tools or
ISO 14000 systems.
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Multi-criteria Decision Analysis
Techniques
The complex, multi-criteria nature of environmentally
conscious manufacturing systems may tend to be
overwhelming to analysis and decision making. Some
multi-criteria decision analysis techniques are called
upon to consider multi hierarchical and multi faceted
data to lead one to the best decision under the
circumstances.

MCDM is capable of evaluating the direct/indirect criteria

and quantitative/qualitative criteria simultaneously. By,
utilizing this model, it is expected that managers/decision
makers will gain sufficient confidence for the justification
of SM implementation.

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Multi Criteria Decision Model
(MCDM)
• MCDM is capable of evaluating the direct/indirect criteria
and quantitative/qualitative criteria simultaneously. By,
utilizing this model, it is expected that managers/decision
makers will gain sufficient confidence for the justification
of ECM implementation

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Multi Criteria Decision Model for Evaluation

• The multi criteria decision model, performance value

analysis, used for the evaluation of manufacturing
systems based on the criteria catalogue developed in the
previous section is presented here. The performance
value analysis (PVA) model, a multi-criteria technique
that aggregates the multiple-criteria, is well received in
literature.

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PVA Steps

The various steps of the model are:

Step 1. Identify the alternatives (ai) to be evaluated.

Step 2. Determine the criteria and the sub-criteria (cj)

measuring the environmental aspects.

Step 3. Classify the sub-criteria into direct (performance

grows while measure increases) and indirect categories
(performance grows while measure decreases).

Step 4. Obtain absolute weight/importance (wj) for each

sub-criteria.

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Cont..

Step 5. Obtain the relative weight for each sub-criteria (cj) from absolute
importance wj as:

Step 6. Form the performance matrix, i.e., co-efficient eij related to the sub-
criteria cj (j = 1, 2, …J) and the alternative ai (i=1, 2, …I)
Step 7. Form the normalized performance matrix. It is transforming the initial
performance measure in a score/weight for easier interpretatin based on
the value function for each performance variable (cj) as follows:

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Cont..

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Cont..

Step 10. Rank the alternatives (ai) in accordance with

decreasing value of Ni

Step 11. Perform the critical criteria analysis. The results of

this analysis are obtained by setting to zero the
importance of all criteria different from the criterion being
considered and repeating step 8 to step 10. Repeat the
step 11 for all criteria.

Step 12. Take the decision based on above aggregated

partial performance measures and the aggregated
performance measures of criteria

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Case Study
India is increasingly being recognized as a manufacturing hub of future by
many multi-national giants for supplies to Asian market, e.g., Siemens,
plans to make India the global hub for manufacturing its key steel plant
equipments. This is largely because of India’s talent pool of researchers
and engineers, together with its English speaking workforce and
democratic regime. India ranked second in terms of manufacturing
competence, in 2010 Global Manufacturing Competitiveness Index, by
Deloitte Touche Tohmatsu and the US Council on Competitiveness.
Annual growth of the Indian manufacturing sector during 2010-2011 has
been a robust 8.1 per cent. This highly optimistic future of the Indian
manufacturing sector provided motivation to carry out this study. An
evaluation of three Indian manufacturing companies is done using the PVA
model and the criteria catalogue developed in the previous sections.
These three companies are named ECM1, ECM2 and ECM3 to maintain
their confidentiality. Next, the data was obtained from the 285 Indian
manufacturing industries by using a questionnaire. Respondents were
asked to rate each sub-criteria on 5 point Likert scale (1- Completely
disagree, 2-Rarely agree, 3- Partly agree, 4-Rather agree, 5-Completely
agree) to indicate the extent of practice on these sub-criteria in their
respective organizations.

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Criteria weight

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Decision Matrix

The data received from the three companies by

questionnaire on a Lickert scale is presented in column 7
of table 1. These performance measures were converted
into normalized performance measures as discussed in
step 7 of PVA model in the last section and further into
partial performance measures as discussed in step 8
(given in columns 8 and 9 respectively).

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Results and Discussion

• According to the weight/importance obtained from the

ratings of the sub-criteria by practitioners, the various
sub-criteria were classified into five categories – Very
important (0.8<Ix< 1.0), Important (0.6<Ix<0.8), Preferred
(0.4<Ix<0.6), Less important (0.2<Ix< 0.4) and Not
important (0<Ix<0.2).
• As shown in table 1, most of the sub-criteria (75) are
found important. Only 6 sub-criteria are found to be very
important and 12 are found to be preferred. None of the
sub-criteria are less important or not important. It reflects
that the criteria catalogue developed in section 3 from
literature and limited discussion with practitioners is valid
from industry perspective also.

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Cont..
• It is observed that all the six very important factors (sub-criteria) are for
benefits of ECM implementation. It implies that the Indian organizations
are confident of ECM benefits. The three most important factors for
ECM implementation as perceived by the Indian companies are
improved working conditions, staff morale and image in public.
• Improvement in sales turnover and profits are the least important
benefits. It may be because the Indian companies have started the
implementation of environmental conscious manufacturing systems
after the opening of Indian market to world in early 1990’s and have not
yet achieved the financial benefits yet they are confident of achievable
benefits.
• Most of the preferred factors are related to employee training, employee
involvement, environmental experts and vendor management which
reflects that Indian companies have not started to invest in employees
and other human resources in the field.
• The high importance to benefits and cost factors clearly implies that
Indian business has a perception that implementation of ECM will lead
to improved benefits and reduced costs.

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 Cont..

• The partial performance measures for the three alternatives are

also visually presented in figure 1 for quick evaluation of
alternatives based on all sub-criteria.
• The aggregated values for the three alternatives are 0.9104,
0.8347 and 0.7246 as shown in last row of table 1, which shows
that the alternative ECM1 provides overall best performance
from environmental aspects followed by alternatives ECM2 and
ECM3.
• However, alternative ECM1 is not the best alternative for sub-
criteria MMC6 (Environmental awareness/ training/competence
programs conducted for middle management), EMI1, EMI5,
EMT6, EMT8, EMT9, PDC8, PDC9, PDC14, etc. (see figure 1).

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• Table 2 and figure 2 show the performance of each alternative based on each
criterion. It shows that from top management commitment perspective ECM1 is
the best alternative and its performance is best in all sub-criteria of top
management commitment. ECM1 is also best alternative from middle
management commitment.
• However, from employee involvement perspective, ECM2 is the best. It is
partially because ECM2 has formed teams to tackle environmental issues and
has a framework to evaluate quality of employee participation in environmentally
conscious manufacturing. ECM2 alternative has a separate environmental
department also.
• Alternative 2 is better than ECM1 from logistics design point of view also as it
gives more importance to the use of recycled material for packaging and has
proper plans for disposal of packaging material. ECM2 is also best from vendor
management perspective as it communicates the environmental expectations in
writing and involves the vendors in various programmes better than the other
alternative organizations.
• ECM2 and ECM3 are better than ECM1 from environmental cost perspective
(aggregated partial performance value for both ECM2 and ECM3 is 0.1277) as
shown in table 2 and figure 2. This critical criteria analysis, which views each
criterion independent of other criteria, gives flexibility to the decision makers to
view the alternatives for each criterion and depending upon the stakeholder’s
perspective better decisions can be taken.

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Conclusions

The PDC (Product design/characteristics), CST (Costs) and

BFT (Benefits) are three criteria with high importance.
These figures, at a quick glance, provide an overall
perspective of the organization to the decision makers.
The decision makers get an opportunity to focus on the
areas where improvements are required for continuous
improvement. The huge data generated by the PVA
model when presented to decision makers provides
information to them on all the environmental aspects of
the company for better and innovative decision making.

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