Chapter 3

Sustainability in
Operations
 Business Organizations
Governing Paradigms for Prosperity
• The Consumption Engine Must Run
– That is the measure of prosperity, growth and
improvement for business entities
• The World is a Machine
– We human beings exist outside of this and need to
control and run this machine to suit our
requirement
• Nature is bounty, available endlessly
– Our job is to exploit it to maximize short-term ROI
requirements of running business
Consequences of Current Paradigm
Impact on Sustainability
• Resources required for sustaining the current levels
of consumption fast depleting
• Industrial activity generates enormous amounts of
toxic industrial wastes which threaten to harm the
atmosphere
• The increased level of consumption leads to greater
levels of disposal of solid wastes.
• Increased consumption of natural resources also lead
to more atmospheric pollution that it may soon
threaten our health
 Sustainability
Definitions
• Development that meets the needs of the present
without compromising the ability of future
generations to meet their needs
– Economic sustainability: Ability of business organizations
to deliver products and services which fetches revenues in
excess of the cost
– Environmental sustainability: Ability of organizations to
deliver products and services without compromising the
balance between natural systems and living beings
– Social sustainability: Choices made by business
organizations that will enable the current and future
generations to live a healthy life.
 Sustainability Perceptions
Transition path

Natural
System
Natural System Zone of Constraints
Constraints Sustainability
Social
System
Demands

Business Social
Growth System Business
Aspirations Demands Growth
Aspirations

Dominant Perspective Realistic Perspective

 Video Insight 3.1
GRIHA: Green Building Standards

Right click on the URL below to open the hyperlink in the web browser…

https://www.youtube.com/watch?v=DRO_rIkywxQ
Sustainable Operations Management
A Framework

Avoidance

Reduction
Reuse
in Usage

Extended Renewable
Use Resources
 Avoidance
Role of the NPD Process
• New Product Development process makes
importance changes in the design of the product or
service offered so that resources are not used in the
first place.
• Design of a new service may ensure that paper work
is minimized by capturing data directly in digital form
(Indian Railways e-Tickets)
• In the design of a public library, innovative design of
building, windows and reliefs can result in minimum
use of lights during day time as natural daylight can
be harvested very well
 Reduction in Usage
OM Initiatives
• Requires closer coordination and better planning
among different entities in the supply chain
– Logistics operations can be redesigned for fewer trips
between supply points and demand points by pooling
requirements either by origin or destination
• Implementation of sensor based mechanisms to
cutoff the use of resources automatically when not
needed
• Value engineering efforts in design will have the
dimension of reduction of critical resources for
manufacture, maintenance and use of scarce
resources
 Switching to renewable sources
Changes required in OM Practices
• Passive cooling systems and innovative air circulation design
in the shop floor
• Use of special material for the roof to harvest natural lighting
for the factory
• Exploiting the vast area of roofing and terrace to harvest solar
energy through heating and photovoltaic systems
• Greater investments in water harvesting methods
• Service design with use of digital resources instead of physical
resources.
– Music, travel, entertainment, publishing and education banking and
financial services to use electronic market infrastructure to replace
non-renewable resources in the chain with digital resources
 Extended Use
New Challenges for NPD
• A major departure in the design philosophy
while new generation of products and services
are developed
– The current dominant paradigm in business is to
promote throw-away culture and use it as a basis
for running the consumption engine
– Designing for planned obsolescence and perceived
obsolescence assumes that the world has
unlimited resources and it will be possible to keep
tapping them endlessly.
 Reuse of Products
Reverse Supply Chain Management
• As consumption levels increase, it will be impossible to
dispose of used and unwanted items
• Steps required to take back used material and discover
economic value out of them
• Governmental regulations are forcing business
organizations to take this approach to manage operations
– Product take-back laws in Germany
– Emission norms all over the world
– End-of-life-vehicle legislation …
• Reverse supply chains will be as important as forward
supply chains
 Reverse Supply Chain
Implications for Business
• What happens when we take back the used
products?
– Steps will be required to discover economic value
out of them
– Dis-assembly of used products will be as important
as assembly of new products in a manufacturing
system
– Remanufacturing, Refurbishing and Recycling will
become important elements in an operations
system
 A Generic Reverse Supply Chain Framework
Raw Sales & Customer use
Manufacturing
Material Distribution & Discard

Used product
Refurbish/ Repair/ retrieval
Remanufacture Reuse

Logistics
Cannibalization
Product Product Take-back
Liquidation Network

Recycle
Reprocessing

Disposal
Landfill

Forward flow
Product Recovery Network Reverse flow
 Reverse Supply Chain
Entities & Their Roles
• Multiple entities are involved in a reverse logistics network
• They have multiple goals and motivation to participate
– The customer and the regulatory agencies are important
entities in reverse logistics
– In the Product Recovery Network, players have different roles
to play
– The OEMs may take part in all of the product recovery activities
such as repair, refurbish, remanufacture, and recycle
– Alternatively, they may contract these activities to other
players
– If there are enough economic incentives, third-party agencies
may collect and recover used products and sell them to
secondary markets
On account of these, reverse supply chain planning is far more complex than the forward supply chain
 Reverse Supply Chain
Issues & Challenges
• Complexity in assessing the inflow of used products and
the divergent spread of the end use customers
– How are organizations likely to handle this?
• Two streams for raw material – one the new component
from the forward supply chain and the other used
component recovered from a discarded final product
– How are we to handle the associated inventory control
problems?
• Since there are multiple players and multiple
arrangements among these players possible, how are the
product recovery activities ultimately organized among
various entities
 A Remanufacturing System
Schematic representation

Returned
Products Inventory

Lm = Manfg. Lead Time

Re-manufacturing Manufacturing
Facility Facility

Lr = Remanfg. Lead Time

Finished Goods Customer
Inventory Use
Periodic Review Inventory Control for
Remanufacturing
Order up to level
Sm Qm
Lr
Qr
Inventory Level

Qr Lm
Qm

Qr
Qr

R 2R Time Inventory Position

Physical Inventory
 Design for Sustainability
• Modular approach to design so that components of a product
can be easily remanufactured or refurbished.
• Use of universal components, which reduces the number of
components in a product. Fewer components would mean
quicker dis-assembly, fewer toxic substances, lesser recovery
and recycling costs.
• Use of recycled material thereby improving the material
recovery and reduction in use of scarce resources
• Newer assembly methods such as snap-fit assembly which will
reduce disassembly and recycling costs
• Promoting recyclability by avoiding the use of coatings & paints
• Choice of clean technologies for manufacture and maintenance
 Design For Environment (DFE)
• A structured set of methodologies to create products and
services that are easier to recover, reuse, or recycle.
• The DFE approach forces the designer to examine the
effects of a product and service on the environment and
provide for necessary changes in the design.
• Will balance the manufacturing considerations with ease
of use, post-use disposal, ease of remanufacturing and
consumption of precious resources during the entire life
time of the product
• Single use products (such as a camera) will be suitably
redesigned such that it is possible to remanufacture the
returned products
 Video Insight 3.2
Grundfos Sustainability Efforts

Right click on the URL below to open the hyperlink in the web browser…

https://www.youtube.com/watch?v=tEEm6gUscgE
Creating Sustainable Understanding the
value of sustainability
Organizations for the
Future Top Management
Vision & Commitment

New Investments for

creating sustainable
organizations

• Strategies for meeting • Reverse Logistics

regulatory requirements • Product Take back &
• Training and Recovery Networks
Development • Clean Technology
• New systems for • Cradle to Grave Design
regulatory compliance & • Remanufacturing/Dis-
reporting assembly Operations

Strategic Benefits
Improved competitive
advantage
Creating Sustainable Organizations
Challenges
• Lack of Regulatory Framework
• Mind-set Inertia
• Lack of Top Management Vision
• Inability to see the Big Picture
• Need for Substantive Investments
• Benefit Notional (Not Obvious)
• Crisis Yet to Blow Over!
 Sustainability in Operations
Chapter Highlights
• The economic viability of organizations may be threatened if
the issue of sustainability is not factored into organizations
• Sustainability pertains to development that meets the needs
of the present without compromising the ability of future
generations to meet their needs’.
• Sustainability will encompass three dimensions: Social,
Environmental and Economic.
• Implementing a sustainable operations management system
may involve newer systems, skills, alternative philosophy
• Design for environment (DFE) is a structured set of
methodologies that enable an organization create products
and services that are easier to recover, reuse, or recycle.
 Sustainability in Operations
Chapter Highlights
• Reverse logistics consists of a product take-back network and
a product recovery network. There are several entities
involved in reverse logistics.
• Remanufacturing is the process of restoring end-of-life
products (cores), components, modules, and parts to an
almost new condition in a manufacturing environment.
• The remanufacturing production process could be controlled
by a periodic review, push policy of inventory control.
• Despite the mounting importance of sustainability
organizations are still making scanty efforts to inculcate a
culture of sustainability.