What I learned this week … came from a conversation with Jeremy Johnson from IHS. Jeremy opened my eyes to a new way to make manufacturing more sustainable and ecologically friendly. I have written in the past about how companies are making their products compliant in Product Compliance – Hidden Tax on Innovation and Making Product Compliance Sustainable. One way this is different is because it is not about the products, but the plant. But here’s the catch that makes this the most interesting to me. While product compliance helps to protect top-line revenue and market access across the globe, it is an activity that costs manufacturers money. As Jeremy explained, getting in control of the chemicals in the plant helps reduce environmental impact and increase employee health and safety – and also helps reduce cost at the same time. Now that sounds like something most executives would sign up for, regardless of whether their “green” philosophy focuses more attention on a greener planet or a greener wallet.
NOTE: Graphic from IHS White Paper, “IHS Chemical Inventory Greening”
Chemicals for MRO (Maintenance, Repair, and Overhaul)
Manufacturers use a lot of chemicals. Most plants are filled with greases, solvents, and cleaners to name a few. These “indirect” materials frequently fall under lower levels of purchasing rigor, and companies tend to have a large number of similar products. This duplication offers a pretty straight-forward inventory reuse/consolidation opportunity. By gaining visibility and control over what chemicals a company uses (particularly if they are running multiple plants), companies can reduce procurement and handling costs. Simply consolidating from twenty hand cleaning products to a few could offer savings through bulk procurement contracts, reduction of duplicate inventory, and reducing other inventory handling costs including disposal.
Beyond cost savings, IHS acquired technology from a company called Dolphin Software. The Dolphin solution goes beyond part reduction to address employee health and safety and toxicity concerns. By using publicly available data, they pull together a “hazard profile” that indicates whether products contain known dangerous or environmentally unfriendly ingredients. When looking for opportunities to eliminate items, the decision can be made on cost, sustainability, and safety perspectives. By reviewing objective rankings of hazards in combination with spend, manufacturers can “green” up their operations while saving money.
Implications for Manufacturers
The opportunity for manufacturers is clear. Save money, and help save the planet. Most manufacturers I speak with would love to be more eco-friendly, but find themselves as cross purposes with making a profit. This initiative helps them operate in a more sustainable way without a big price tag. In fact, it comes with money back! Of course Jeremy points out that chemicals can’t be rationalized blindly, they have to meet the operational needs they are currently being purchased for. The approach is sound, and IHS has a number of case studies they shared with me that back up the approach.
So companies can go green without having to sacrifice profits, I hope you found it interesting. It’s a pretty compelling opportunity. Who knew? I didn’t, if you did let us know about it.