There are long-term economic, environmental, productivity, and health benefits that companies envision when they contemplate going green, but getting to green is another matter. The journey involves revisions of major operations, business practices, and technologies that have already been firmly rooted into the business over a period of years. These long-held practices cannot easily be replaced in a matter of weeks or even months. Among facilities managers, there is also a general lack of knowledge of new practices and technologies:  and on the other side of the enterprise, the CFO is keeping track of investments in older, non-green technology that the company has already made and that has yet to fully depreciate and arrive at the end of its useful life.

“There is a lack of focus by management in being proactive about adopting newer practices and technologies that could have mid- to long-term impact on business performance,” says Rajiv Saxena, who heads up APL Logistics’ engineering division.

Part of the problem is that there is only limited empirical information in how green practices and technology deliver quantifiable business results. “We can immediately tell when a new facility or data center is coming online because we see a spike in energy utilization,” says Michael Wehling, a manager at Puget Sound Energy (PSE).

Cognizant of industry demands for power, PSE is one of many gas and electric utilities across the nation that now assists business customers in their energy consumption and management strategies. PSE offers companies a Resource Conservation Manager (RCM) Program in which individuals are trained to track and analyze utility use (e.g., electricity, gas, water, and waste) and implement savings opportunities. “The key is education and also being able to measure results and track these into cost savings,” says Wehling.

Raymond Corporation’s national accounts manager Jim Hess adds to this thought. “There is a mix of reasons why companies get engaged with lean and green initiatives,” he says. “On the one hand, there is a growing sense of social responsibility that makes companies want to be involved in conserving energy and resources. On the other hand, they also see lean and green initiatives as a way to reduce high ticket items, like the cost of workers’ compensation, since some of these initiatives can also reduce the incidence of injuries on the job.”

The primary benefits

Businesses begin to reap benefits from lean and green strategies when they actively measure them and then see the returns in dollars and cents. “This process starts with an understanding that costs can be reduced by going lean and green,” says Hess. “To this end, companies are changing out lights in the warehouse to save costs, and I know of one of our customers that is going off the power grid entirely, and instead will be running the warehouse on solar.”

Hess says that in the final analysis, everything businesses do with their lean and green strategies is based on investment. “In our industry, for example, seven percent of the costs of a lift truck over its lifetime is energy utilization and labor. This is why it’s important for companies to measure everything that they’re doing in the warehouse, and it’s also why we’re working with our customers to show them the financial returns that are possible with a seven percent labor and electricity savings.”

Financial returns are individualized for businesses and are also dependent on the applications that companies use. For instance, there are many types of machines used in the warehouse. Depending upon the type of machine and the physical and operational makeup of the warehouse, the amount of investment return will vary. Nevertheless, what Hess says is that he sees overall that a majority of companies can realize as much as a 20 percent reduction in energy utilization and a ten to 15 percent savings in labor. “Taken over the life of the average truck, the investment pays for itself in about six years,” says Hess.

As a logistics provider, APL’s engineering team began addressing green issues several years ago and was pleased to discover that there’s an especially strong connection between environmental sensitivity and cost efficiency.  “Saving money or going green is not the ‘either-or’ proposition that people think it is,” says Saxena. “When you become lean and green, you create operational efficiencies that have both environmental benefits (like carbon footprint reduction) and cost reductions.”

Saxena points to the following examples:

•  APL’s OceanGuaranteed service is typically used by shippers as a substitute for air transportation for sending international shipments from select major port locations in Asia to most locations in the U.S. A typical OceanGuaranteed shipment costs only about one-fourth of an equivalent air shipment, so shippers can save money. But they also save the environment, because the carbon footprint created by using OceanGuaranteed instead of air is more than 90 percent less than the air shipment.

•  A relighting project in one of APL’s customer warehouses recently replaced all-metal halide lamps with energy-efficient T5 and T8 lighting fixtures in the warehouse. This project not only resulted in annual cost savings of over $114,000 after accounting for all costs, but it also improved lighting quality in the facility.

Choosing the best strategies and practices

Creating and executing lean and green strategies that produce results vary according to the business that you’re in. They also depend on whether you are trying to retrofit an existing facility with new lean and green technologies and practices or if you are building a facility from the ground up and have the ability to install lean and green solutions from the very onset.

“If you’re working with an existing facility, it typically helps to first go after low-hanging fruit for developing a lean and green warehouse,” says Saxena. 

Examples include:

•  Optimizing your warehouse layout and product slotting to reduce the travel distances of personnel and material handling equipment.

•  Reducing waste by recycling more of your packaging material. One of APL’s warehouses has actually gotten a baling machine on site to deal with plastic waste, and a polymer company now comes and takes the bales away for free; it has saved the company the cost of disposing of the plastic, and it’s better for the environment.

•  Changing lighting from traditional metal halide to energy-efficient fluorescent lighting, and installing sensor switches so that lights will automatically turn off if someone hasn’t been present and working there for a while.

•  Replacing existing material handling equipment with more efficient units at regular intervals.

•  Using energy-efficient office equipment and kitchen appliances, etc.

If it’s a new facility, there are many additional best practices that can be considered.  Some examples are:

•  Locating the facility in an area with a low carbon emission electric power grid.

•  Locating the facility in an area that has weather conditions that require less energy consumption for heating and cooling.

•  Selecting a building built with construction material and design requiring less energy consumption during operations or equipped with power sources like solar energy, etc. (even a lighter-colored roof can make a difference).

The next step: convincing the CFO

These days, CFOs demand hard cost benefits for justifying investments, and they want to see it in two ways:

•  An upfront cost/benefit study that extrapolates the savings that a particular lean and green business practice or technology is projected to deliver—and the date in time that the initial lean and green investment will have paid for itself.

•  Hopefully, a successful track record with lean and green projects that you have already implemented that has achieved the target gains you originally had projected.

It goes without saying that a solid business case should also accompany any recommendation that requires investment.

This is why utility companies have engaged in pilot programs with their industrial customers to assist them in establishing metrics and measurement procedures for energy usage along with ways to cut energy consumption. It is also why vendors of various products for the warehouse arrive with their own return on investment and cost/benefit formulas. In the end, however, it is up to the executive in charge of the warehouse to sell the rest of management on the benefits of a lean and green investment. The best way to do this is by fueling the enthusiasm of executive management with some easy wins in smaller, pilot projects that are built around lean and green technologies and practices.

“You can look at a very simple element, such as battery life,” says Raymond’s Hess. “We include a highly efficient microprocessor in our trucks that is very efficient in how it manages the battery. Consequently, batteries last longer and the truck can do more work because it doesn’t have to be down as often for servicing the battery—or absorbing  manpower at the rate of fifteen minutes for every battery change.”

Impact on systems, staff, and operations

Lean and green technologies and practices have the ability to make warehouse systems, staff, and operations more efficient and effective as well as more environmentally friendly. This typically improves the operational and financial performance of the warehouse, and improved performance of the warehouse has a positive impact on the morale of the people associated with it. 

“Initially, a warehouse can face cultural opposition when anything new is introduced,” says Hess. “But then employees realize that they are already using recycling, energy conservation, and other green practices at home. When they get the chance to transfer these practices into the company, it has the effect of developing a greater sense of pride in the workplace, and it becomes a team effort. People then start looking for new ways to apply lean and green for sustainability and for saving money.”

Company adoption of lean and green varies, but the tendency is for companies controlling and managing more supply chain activities to more aggressively adopt lean and green practices and technologies. “In general, the higher the depth and breadth of stake a company has in different supply chain activities, the higher its interest in adoption of lean and green practices and technologies,” says Saxena. “For example, automotive OEMs seem more serious and advanced in adopting these practices and technologies than, say, retailers. Similarly, companies in certain regions like Europe are further along in their adoption than their counterparts based in other regions.”

Businesses pursuing lean and green strategies already have access to best practices and technologies in areas like building construction, lighting, heating and cooling, materials handling equipment, waste reduction/recycling, layout design, product slotting, labor management, etc. This saves time that, in turn, can be reserved for calculating returns on investment and for making significant improvements to the business that will benefit it in the long haul.

There are also several emerging technologies to keep an eye on. They include fast charge and hydrogen fuel cells for powering material handling equipment and LED lighting.

“Becoming green isn’t really an option for most companies anymore,” says Saxena, “It’s a necessity… businesses can’t just afford to sit back and watch other companies do the work for them, and they can’t simply pay lip service to the cause—especially in an industry that has such a large carbon footprint. Although there has been more talk about sustainability and green practices and technologies in recent times, the focus on coming up with efficient supply chain solutions has existed for many years. And since there’s a strong connection between sustainability and efficiency, you could say that some companies may have been striving to be green for longer than they realize. As a result, formally embracing green may not be the stretch that they think it is.” wt