OPERATIONS MANAGEMENT

CHAPTER 3 : SUSTAINABILITY IN OPERATIONS

SUMMARY

SUBMITTED TO : SIR SHEIKH NASEER UL HAQ

SUBMITTED BY : NABILA RIAZ
REGISTERATION NO: 4892-FMS/BBA/S17
SUBMISSION DATE: APRIL 8, 2019
Over the recent past, there has been growing concern on the impact of business on environment.
These arise on account of depletion of natural resources, waste generated from production and
service systems and at the end-of-life of products.
SUSTAINABILITY: A KEY BUSINESS REQUIREMENT
The approach to just business productivity resulted in certain outcomes:
 The resources required for sustaining the current levels of consumption may be fast
depleting.
 The increased level of industrial activity generates enormous amounts of toxic industrial
wastes that threaten to harms the atmosphere.
 The increased level of consumption leads to greater levels of disposal of solid wastes.
 Increased consumption of natural resources also lead to atmospheric pollution.
Sustainability is important for business because:
The external environment is changing fast. Customer needs are rapidly evolving. Regulatory and
investor requirements are changing. For any business, material risks might include energy prices,
migration, climate change impacts. A managed approach to sustainable business can help to
manage an organization’s biggest risks and more.
But it’s not just about managing risks. By understanding long-term trends, companies can
respond and realize new opportunities. Meeting future customer needs, responding to regulation
faster than competitors, building reputation can help create a fascinating business.
NOTION OF SUSTAINABILITY
Sustainability focuses on meeting the needs of the present without compromising the ability of
future generations to meet their needs. The concept of sustainability is composed of three pillars:
economic, environmental and social - also known informally as profits, planet and people.
Sustainability emerged as a component of corporate ethics in response to perceived public
discontent over the long-term damage caused by a focus on short-term profits.

Fig: Alternative perspectives on sustainability

Economic sustainability: Ability of business organizations to deliver products and services that
makes revenues in excess of the cost. It’s goal is to support long-term economic growth without
negatively impacting social, environmental ,and cultural aspects of the community. Aspects of
economic sustainability includes productivity enhancing initiatives, choice of design, material
and technology.

Environmental sustainability: Ability of organizations to deliver products and services without

compromising the balance between natural system and living beings. Only with such a balance ,
natural resources will be available over a longer period of time. It is often related to waste
reduction, pollution reduction, energy efficiency, emission reduction, decrease in consumption of
hazardous or harmful toxic materials, decrease in frequency of environmental accidents.

Social sustainability: Process that promotes wellbeing within an organization’s own members
while also supporting the ability of future generations to maintain a healthy community.

Sustainability cannot be achieved by pursuing three dimensions independently.

Sustainable OM: The set of planning and execution methodologies that allow a company to
structure its business processes to achieve sustainable performance.

FRAMEWORK FOR SUSTAINABLE OPERATIONS MANAGEMENT

Implementing a sustainable operations management (OM) system may involve newer systems,
skills, alternative philosophy, and approach to several OM practices in an organization.

Fig: A framework for sustainable operations management

Avoidance: It is the first strategy in developing sustainable operations that is avoid use of
resources while delivering produce and services. This requires that the new product development
process makes important changes in the design of the product or service offered so that resources
are not used in the first place. This strategy puts an organization on a sound footing on matters
relating to sustainability.

Reduction in usage: At this step avoidance of resource usage is not possible and its
implementation in operations requires closer coordination and better planning among different
entities in the supply chain.

Renewable resources: Another strategy for sustainability. Features relating to the design of
factories in the context of sustainability are 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, and greater investments in water harvesting methods .Since
most part of service is about handling information service design will emphasize use of digital
resources than physical resources.

Extended use of products and services: The consumption of more and more resources are
creating newer challenges arising out of depletion of resources and problem of disposal wastes
therefore, a logical direction for sustainable operations is to extend the use of resources that can
be cost-effective strategy in future.
Reuse: Another dimension in creating sustainable operations. As consumption level increases, it
will be impossible to dispose of used and unwanted items therefore, steps will be required to
take-back used material and discover economic value out of them.OM needs major changes to
practice this strategy. Reverse supply chains will be as important as forward supply chains.
Important elements in operations system will be remanufacturing, refurbishing and recycling.

One possibility to address avoidance and reduction of use of resources is to extend the concept of
total quality management to the area of pollution.

REVERSE LOGISTICS: A FRAMEWORK

Reverse logistics is the set of activities that is conducted after the sale of a product to recapture
value and end the products lifecycle. It typically involves returning a product to the manufacturer
or distributor or forwarding it on for servicing, refurbishment or recycling. Three-dimensional
classification to describe various aspects of revesre logistics:

Fig: A generic reverse supply chain framework

Networks in reverse logistics: The entire reverse supply chain can be segmented broadly in two
parts:

a) Product take-back network (PTN):It pertains to collecting the product from the
customer at the end of its use. Product acquisition, transportation, and distribution of used
 products from consumer to one or more of the product recovery facilities are major
activities of this part of network.
b) Product recovery network (PRN):In it several players perform one or more of the
several recovery activities such as reuse, repair, refurbishing, recycling, remanufacturing,
and disposal(landfill).

Decision options in reverse logistics: Critical decisions interface the two networks and provide
overall directions as to how the product collected using the take-back network is eventually
recovered and/or disposed in an environmentally safe manner. The network and decision options
dimensions of the reverse logistics framework suggests that the activities in PRN are merely an
operational deployment of the choices exercised under decision options and follows the activities
of PTN.

Entities in reverse logistics: Multiple entities are involved in a reverse logistics network and
have multiple goals and motivation to participate. The customer and the regulatory agencies are
important entities in reverse logistics. The reverse logistics problem from a perspective of
entities requires that the following issues are addressed: the ownership structure (who are the
players involved and in which product recovery activities), factors governing the behavior of the
players (the incentives of players to participate in product recovery activities), impact of
regulation, and strategic and economic advantages of making these choices.

DESIGN FOR SUSTAINABILITY

In an organization promoting sustainability as a key value, the design efforts must focus
on minimizing not only pollution from manufacturing but also all environmental impacts
associated with the full lifecycle of a product. Specific changes in the design philosophy will
include the following:

a) Modular approach to design so that components of a product can be easily

remanufactured or refurbished. Modular upgradability is an enabler of sustainable
products by allowing single components (rather than entire units) to be up graded and
hence disposed of.
b) Use of universal components reduces the number of components in a product. Fewer
components would mean quicker disassembly, fewer toxic substances, lesser recovery,
and recycling costs.
c) Use of recycled material improves the material recovery and reduction in use of scarce
resources.
d) Newer assembly methods such as snap-fit assembly will reduce disassembly and
recycling costs.
e) Promoting recyclability avoids the use of coatings and paints.
f) Choice of clean technologies for manufacture and maintenance.

Design for environment is a structured set of methodologies that enable an organization

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. Such an approach 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 from concept
stage to final disposal.

REMANUFACTURING

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 restoration or
recovery process is probably to be energy saving, less material consuming, and often have a
lower impact on the environment than traditional manufacturing, which makes brand-new
products from virgin materials. The basis of a recoverable manufacturing system is
remanufacturing. Several items are remanufactured now-a-days. The most frequent examples are
rechargeable batteries for automobiles and printer ink cartridges and many more.For a
remanufacturing operation to function effectively, an organization must be concerned not only
with the planning for the traditional forward flows of goods to the customer but also the reverse
flow of returned products from end users.

Fig: A schematic representation of a remanufacturing facility

PERIODIC REVIEW INVENTORY CONTROL FOR REMANUFACTURING

The remanufacturing production process could be controlled by a periodic review, push policy of
inventory control.
 Fig: Periodic review inventory control system for remanufacturing

The total relevant cost (TC) for the plan is the sum of inventory carrying costs for returned
products and finished goods and backorder costs. The decision variables S and R determine the
overall performance of the system.

CHALLENGES IN CREATING SUSTAINABLE OPERATIONS

Lack of Regulatory Framework: Regulatory frameworks are important tools for businesses
that are about to launch because these frameworks outline the measures of burden new
businesses must be aware of when they begin to establish their enterprises. Businesses need
regulatory frameworks for disposal of waste and product take-back regulations.

Mindset Inertia: The new changes demanded by sustainability norms will force operations
managers and design engineers to change their mindset with respect to many activities that they
perform.

Lack of Top Management Vision: Top management must play a significant role in the change
management process. If the top management suffers from a lack of clarity and vision, then it will
pose greater challenges in creating a sustainable organization.
Inability to See the Big Picture: In the future, only organizations with a clear vision and
strategy of honoring the overall principle of sustainability are probably to survive. If this idea is
not well understood, then the top management will not be able to see the big picture ahead.
Failure to see the big picture introduces several problems in the organization’s journey towards
creating a sustainable organization.

Need for Substantive Investments: Creating a sustainable enterprise requires substantial new
investments. A traditional pay-back and quick ROI methods of investment justification will fail
miserably and block introduction of the proposed changes.

Benefits are Notional, not Obvious: In the current state of affairs, the benefits arising out of
creating sustainable organizations are notional. We are yet to reach a situation that the
consequences of not being sustainable are costly operations and shrinking market share. On the
other hand, customers are not yet ready to pay a premium for products and services that are
responsible towards nature and environment. Therefore, organizations need to get motivated by
other reasons to create sustainable operations.

Fig: A framework for creating sustainable organizations

Crises is yet to blow over: The most important impediment in creating sustainable organizations
is that there is no imminent threat to the operations of the organization. Even though we pollute
and exploit natural systems by and large, the market seems not to punish organizations for their
unsustainable acts. Nor are there strict regulations and enforcement by governmental
organizations. In the absence of strict regulations, these organizations will have no motivation to
create sustainable operations. They will merely pay lip service and act in a slow manner. For
these reasons, organizations really need prior thinking and careful planning to create sustainable
operations.