Lean Manufacturing and Environment
- Rejuvenation and Its Three P’s
- The Natural Step
- Introduction of Lean Manufacturing
- Mass Customization
- Correct Use of 5S
- Small Changes, Big Results
- Regulators: Partners & Valued Experts
Sustainability as Basic Corporate Value
Rejuvenation remakes history. Committed to historic preservation and renovation, the Portland, Oregon company manufactures and sells custom, period-authentic reproduction lighting and hardware for use in older homes and buildings. The company is guided by a philosophy that the reuse and improvement of old properties is desirable to encourage, which has clear environmental sustainability benefits. Last year, Rejuvenation generated nearly 35 million dollars in sales, primarily through direct marketing and two retail stores in the Pacific Northwest, with sales growth averaging about ten percent annually. The company was founded in 1977, and had approximately 240 employees in July 2006. Through its incorporation of an environmental management system (EMS) based on The Natural Step (TNS) and use of Lean manufacturing practices, Rejuvenation has been able to reduce its footprint, increase quality and profit, and stay true to its core corporate values.
Rejuvenation’s goal is efficient, high value-added use of resources with minimal environmental impact. Jim Kelly, founder and CEO, has always placed a high value on socially responsible business practices. From their environmental footprint to employee treatment to customer relations, he wants everything to work well. Therefore, it is not surprising that the company has made sustainability one of its core values. Indeed, the company’s philosophy can be summed up by what it calls the “three P’s: people, profit, planet.”
In 1997, Jim Kelly and John Klosterman, Vice President of Operations, attended a conference about The Natural Step (TNS). TNS is a framework that uses the natural sciences to guide businesses toward more sustainable—and profitable—practices by intelligently integrating the environment into decision-making and operations. Soon after the conference, Rejuvenation volunteered for an innovative pilot project sponsored by the Oregon Department of Environmental Quality (DEQ), the City of Portland Bureau of Environmental Services, and the Oregon Natural Step Network that integrated The Natural Step with an environmental management system (EMS) based on ISO 14001. This system would allow Rejuvenation to analyze and mitigate the environmental impact of its manufacturing practices.
Now, Rejuvenation performs an annual “aspects analysis” screening to score every facet of all its product lines and manufacturing practices on their adherence to the company’s core principles, always considering the scale of any environmental impact. Case in point, they examine the entire life-cycle of each of their products, from suppliers’ fabrication of parts through to the customer’s ultimate disposal of the product. Through these scores, they identify opportunities and create a prioritized list of changes for the company. For example, through this analysis, they saw that the largest impact on their carbon footprint came from customers’ use of Rejuvenation incandescent light fixtures. Lumen for lumen, incandescent lighting is less efficient than other lighting sources and thus, requires more electricity, which in turn, leads to more emissions from power plants. To mitigate this, Rejuvenation increased its selection of period-authentic lighting fixtures that accommodate more efficient, and therefore less polluting, compact fluorescent (CFL) bulbs. Rejuvenation has also focused on product durability, striving to manufacture products that will last for a long time.
Due to growing demand, Rejuvenation moved to a new factory in 1998. Around the same time, it dropped its craftsman-based production methods because of the need for more consistent quality and greater manufacturing efficiency. Having learned the benefits of flow manufacturing at a training, Klosterman and his managers began to experiment with Lean methods. To facilitate the introduction of Lean practices to Rejuvenation, Klosterman hired a manager with Lean experience and offered him a “blank slate” (i.e., the new factory). Today, Rejuvenation commonly uses Lean tools like Kaizen, VSM, 5S, waste minimization, and root cause analysis. Rejuvenation has pursued what they refer to as a “hybrid approach” to Lean that adapts Lean methods to their low volume, high variety manufacturing system. In addition, they are willing to reexamine the same operation year after year, thus allowing fresh eyes to analyze the process and identify opportunities for further improvement. Because the changes made have been continuous and gradual (Kaizen events notwithstanding), it has taken some time for everyone to recognize the full potential of Lean. In fact, Klosterman believes that most employees have only fully absorbed Lean thinking and principles in the last year or two. He contends they are now able to do things that he could have never dreamed of just a few years ago.
As a “mass customization shop,” Rejuvenation produces a small volume at unit-level of a large variety of products. They strive to produce a product that meets a customer’s precise needs. Prior to the introduction of Lean, they sent finished products to a quality control department for inspection. Therefore, if an operator accidentally used a part or finish that did not exactly match the customer’s preference, the mistake would not be caught until the end of the line. The result was a twelve to fifteen percent failure rate requiring a lot of expensive rework. Through Lean, Rejuvenation dissolved the department and made quality control everyone’s job. Now, customization errors can be identified and corrected before the next process begins. In addition, under the theory that quality improves if workers can see and value the whole process and not just a few narrow tasks, they dismantled an individual productivity system that had prevented employee flow across departments and teams. By building quality control into the entire manufacturing line and instilling the value of quality in every employee, Rejuvenation was able to broaden its catalog and offer “tinker-toy” customization that allows customers to choose novel assemblies of a host of styles, finishes, and accessories.
A customer order provides the initial pull. Upon receipt of an order, a kit containing the required parts and materials is assembled and then pulled through the manufacturing line using traditional Lean pull signals at each step. Whereas it promises customers a fourteen day lead time, but its overseas suppliers can require a three to four month lead time, Rejuvenation does maintain a significant inventory of raw materials and parts. Their inventory of parts gets completely turned over only about once a year. However, they believe this works for them. Nevertheless, through Lean, work-in-progress (WIP) has significantly reduced. Although as a customization shop, Rejuvenation has never considered WIP as much of a problem, over the last five years it has been cut from seven to eight days to about one and a half days. Interestingly, it took floor operators a while to get used to this improvement; they had been using the WIP as a signal to gauge their work speed.
Rejuvenation uses 5S constantly in the shop. As a result, the factory floor is much cleaner and better organized than it was eight years ago. However, workers are allowed to vary their routines to prevent monotony and allow some limited individualization of practice. Klosterman believes that workers need some level of personalization to be fully committed to continuous improvement. He warns that 5S can sometimes become an unhealthy obsession or end unto itself, rather than a means towards improving efficiency and reducing costs. Like all Lean tools, it must be applied carefully, practically, and appropriately.
Although they make no formal connections between their Lean practices and sustainability efforts, they recognize that the two are connected and complement each other well. Nevertheless, they rarely make an effort to calculate the exact environmental or financial benefits from a single, small change. Instead, they view their practices as a holistic approach with aggregate outcomes (requiring aggregate measures). More precisely, they believe that a small change can trigger a chain of positive effects. They ask “What are we doing?” on an everyday basis, and then look for possibilities there. For example, they recognized an opportunity to confine a hazardous material, antiquing waste water, by changing the antiquing process. Confining that waste stream reduced the overall discharge, which allowed the creation of a closed-loop zero waste system in that area. This new system gave them greater control over the process and quality, which then allowed them to switch from a flocculation process to a resin bed system. This resin bed system reduced the cost of regulatory compliance and reduced water usage through recycling, which lowered their sewer charges. They believe that the cumulative positive effects of these changes could be missed if the company were too focused on measuring the relative merits of a change in one small subprocess alone.
Interestingly, Rejuvenation does not have any staff members solely dedicated exclusively to regulatory compliance. As with quality control, they believe that compliance is everyone’s job. In fact, they tend to view regulatory agencies as partners rather than “cops on the beat.” For example, the company has excellent relations with Oregon DEQ and the City of Portland, both of which were integral in the implementation of the TNS-EMS. The company believes that regulatory agencies, like EPA, often have valuable expertise that can help them improve their operations and environmental performance.
Ultimately, Rejuvenation wants its investments in time and money to improve quality, reduce costs, and improve marketability — recognizing that environmental benefits often make good marketing — while adhering to the core values of the three P’s. Through its use of Lean practices and an EMS based on the Natural Step, Rejuvenation has a strong foundation to continue growing and improving sustainably.