Rule 1
Life is not fair; get used to it
Rule 2
The world won't care baout your self esteem. The world will expect you to accomplish something before you feel good about yourself.
Rule 3
you will NOT make 40 thousand dollars a year right out of high school. you won;t be a vice president with a car phone, until you earn both.
Rule 4
If you think your teacher is tough, wait until you get a boss. He doesn't have tenure.
Rule 5
Flipping buger is not beneath your dignity. Your grandparents had a different word for buger flipping; they called it opportunity.
Rule 6
If you mess up, it's not your parents' fault, so don't whine about your mistakes, learn from them.
Rule 7
Before you were born, your parents weren't as boring as they are now. they got that way from paying your bills, cleaning your clothes, and listening to you talk about how cool you are. So before you save the rainforest from the parasites of your parents' generation, try "delousing" the clost in your own room.
Rule 8
Your school may have done away with winners and losers, but life has not. In some schools they have abolished failing grades; they'll give you as many times as you want to get the right answer. this doesn;t bear the slightest resemblance to ANYTHING in real life.
RUle 9
LIfe is not divided into semesters. You don;t get summers off and very few employers are interested in helping you find yourself. Do that on your own time.
Rule 10
Television is NOT real life. In real life, people actually have to leave the coffee shop and go to job.
Rule 11
Be nice to nerds. Chances are you'll end up working for one.
Monday, May 11, 2009
Sunday, May 10, 2009
Friday, May 8, 2009
Communicating via Blog
i strongly believe that the blog component of this course is very interesting and unique. it definitely should remain as a component of this course. it not only helps us to review what we did in the class actives, but also gives us a chance to know other students' though. like many English as second language students, i don't feel comfortable to share my ideas in such a large classroom. For others, they may don't have the chances to share their views, since we have so many students. By writing those blog entries, i think we really find a place to share our points of view. After read and reply others' blog, i feel that i am really a part of the class, not someone just sit there and listen to prof talks. furthermore, i also learn a lot from others' idea. The blog assignments push us really to think about what happened in the class active and how it relates to the theory we learned in the class. i believe it also helps us to prepare for the exam, because some of the exam questions were related to the blog assignments.
Write some blog entries and we can earn a 20% of the final grades is truly a great idea. if the midterm and final cover all of our grades, i feel really anxieties for the exam since it is very important. By just simply write several blogs, we can improve our overall grade.
i will continue post my thought or ideas thought blogger. Blogging is a easy way to share my ideas.
Write some blog entries and we can earn a 20% of the final grades is truly a great idea. if the midterm and final cover all of our grades, i feel really anxieties for the exam since it is very important. By just simply write several blogs, we can improve our overall grade.
i will continue post my thought or ideas thought blogger. Blogging is a easy way to share my ideas.
Tuesday, April 7, 2009
The ABCs of DISC
My main Leadership/managerment type is conscientiousness. My second type is s, which stand for steadiness. i was fascinating about the personal profile system's accuracy. Based on the system, my major "emphasis is on working conscientiously within existing circumstances to ensure quality and accuracy". that is the way i do things. i like to focus detail and perform well if i have a specific goal. just as prof said, we are the great manger type who can organize things well and carefully.
sometimes we change because we want to. sometimes we change because we have no choice. if i can choose the way i do things, i like to stay as a cs person. But if i must change, i want to have some trait of Dominance. the reason is that often times we have to make quick decisions and the Dominance persons have this tendency.
i think this type of test definitely help us in other personal interactions. by knowing other's personality, we can know the proper way to interact with other.
In the survival exercise, i think a D type leader would be the best since we need someone who can make quick decisions and not be influenced by others. In this kind of dangerous situation, a group's decision division is very dangerous. rather can let everyone have the freedom to discuss, i think we must have some one act as a Dominance leader to act quickly and let everyone follow him.
sometimes we change because we want to. sometimes we change because we have no choice. if i can choose the way i do things, i like to stay as a cs person. But if i must change, i want to have some trait of Dominance. the reason is that often times we have to make quick decisions and the Dominance persons have this tendency.
i think this type of test definitely help us in other personal interactions. by knowing other's personality, we can know the proper way to interact with other.
In the survival exercise, i think a D type leader would be the best since we need someone who can make quick decisions and not be influenced by others. In this kind of dangerous situation, a group's decision division is very dangerous. rather can let everyone have the freedom to discuss, i think we must have some one act as a Dominance leader to act quickly and let everyone follow him.
Wednesday, April 1, 2009
A Vision for My Life & Career
As we learn from our management class, most of the companies has their own mission or vision statement. Much like a business, we, as human beings also have a view for what we want to be in the future. We dream about it and think about it, but most of us never make it clear.A personal vision statement is the framework for creating a powerful life.It guides us in the decisions we make and the directions we take. As the "Power of the vision" stated, "Vision without action is just a dream.Action without vision merely wastes time.Vision coupled with action can make things happen"! My personal vision plan of the future is the follows:
1. be a Certified Public Accountant and landing a right job
In order to be a CPA, i have to work hard to maintain a good GPA. i will spend at least five evening hours a week studying instead of watching TV or computer gaming.Moreover, i will read more books and articles about accounting. I also want to keep tack with the accounting industry. I will join and participate in our school's professional club and go to those professional presentation about the industry. In additional to those school activities, i will also try to get a part time or intern job in the filed. By getting a job relate with the accounting, i can earn more experience and get familiar with the job. By doing so, i think at least i can have a job that relate to what i have learned from school.
2.traveling the world to experience its richness
The fist thing i have to do is saving money. i have been speeding too much on things that aren't necessary. so from now on, i will save 20% of my pay check for my future traveling. In addition, i will also try to get more information about traveling--such as countries' culture, tradition and most importantly their food!!!
3. Buy my own house
This one is a little bit hard to archive within three year, specially it conflict with my second goal. however, just as prof said,Vision coupled with action, everything is possible. i think in order to achieve this goal, i have to save more. Moreover, i also have to allocate my money rightfully to let both dreams come true.
1. be a Certified Public Accountant and landing a right job
In order to be a CPA, i have to work hard to maintain a good GPA. i will spend at least five evening hours a week studying instead of watching TV or computer gaming.Moreover, i will read more books and articles about accounting. I also want to keep tack with the accounting industry. I will join and participate in our school's professional club and go to those professional presentation about the industry. In additional to those school activities, i will also try to get a part time or intern job in the filed. By getting a job relate with the accounting, i can earn more experience and get familiar with the job. By doing so, i think at least i can have a job that relate to what i have learned from school.
2.traveling the world to experience its richness
The fist thing i have to do is saving money. i have been speeding too much on things that aren't necessary. so from now on, i will save 20% of my pay check for my future traveling. In addition, i will also try to get more information about traveling--such as countries' culture, tradition and most importantly their food!!!
3. Buy my own house
This one is a little bit hard to archive within three year, specially it conflict with my second goal. however, just as prof said,Vision coupled with action, everything is possible. i think in order to achieve this goal, i have to save more. Moreover, i also have to allocate my money rightfully to let both dreams come true.
Monday, March 23, 2009
Understanding Our Blind Spots
Financial crisis underscores need to transform our view of risk
For many business executives, the extent of last fall's financial meltdown came as a shock. Economist Andrew W. Lo was less surprised.
A professor at MIT's Sloan School of Management, Dr. Lo has studied the connections between financial decision making, neuroscience and evolutionary psychology. In particular, he believes that "behavioral blind spots" -- evolutionarily hard-wired reactions to perceived risks and rewards -- are particularly dangerous during periods of economic extremes, such as bubbles and crashes.
Testifying before the House Oversight Committee in November, Dr. Lo discussed how credit crises have been regular occurrences over the past 35 years.
The Journal Report
"Financial crises are an unfortunate but necessary consequence of modern capitalism," he said. Financial losses, he added, are a byproduct of innovation, "but disruptions and dislocations are greatly magnified when risks have been incorrectly assessed and incorrectly assigned."
Michael S. Hopkins, Editor in Chief of MIT Sloan Management Review, and Bruce G. Posner, a contributing editor at MIT Sloan Management Review, spoke with Dr. Lo for Business Insight.
Reassess Governance
BUSINESS INSIGHT: What's the most important implication of the financial crisis?
DR. LO: For CEOs and other corporate leaders, the single most important implication is about the current state of corporate governance. Many corporations did a terrible job in assessing and managing their risk exposures, with some of the most sophisticated companies reporting tens of billions of dollars in losses in a single quarter. How do you lose $40 billion in a quarter and then argue that you've properly assessed your risk exposures?
I don't think it's credible to say it was just bad luck. If troubled companies want to explain away 2008 as a "black swan," then someone should take responsibility for creating the oil slick that seems to have tarred the entire flock! The current crisis is a major wake-up call that we need to change corporate governance to be more risk-sensitive.
BUSINESS INSIGHT: What allowed this crisis to happen? How could so many seemingly smart people be so blindsided?
DR LO: The very fact that so many smart and experienced corporate leaders were all led astray suggests that the crisis can't be blamed on the mistakes of a few greedy CEOs. In my view, there's something fundamentally wrong with current corporate-governance structures and the language of corporate management. We just don't have the proper lexicon to have a meaningful discussion about the kinds of risks that typical corporations face today, and we need to create a new field of "risk accounting" to address this gap in GAAP.
BUSINESS INSIGHT: Now that the financial landscape has been rearranged, are there things that corporate managers can do to capitalize on the current environment?
DR. LO: One of the things companies are surely going to have to deal with over the next year or two is greatly reduced liquidity in the capital markets. Borrowing costs are going to go up, and it's going to be much harder to finance new ventures, so companies will have to be much more creative about rebalancing their pension-fund obligations and raising capital to fund operations. Managers should be prepared for some tough times.
At the same time, there's going to be tremendous interest on the part of, say, pension funds in finding new ventures. My guess is that starting this summer, pension funds will begin increasing their allocations to private equity, hedge funds and other alternative investments -- assets will be flowing back into risky ventures with a vengeance. The money that's currently in T-bills has got to go somewhere -- and anybody who has cash is going to be in a great position. Companies are going to have to find creative ways to tap into these nontraditional sources of financing.
New Opportunities
BUSINESS INSIGHT: What kinds of new market opportunities do you see emerging -- things that aren't typical?
DR. LO: Well, if you think about the kind of dislocation that's affected financial markets, you'll see that much of the current crisis stems from the fact that it's very difficult to get information about the value of certain mortgage-backed securities because they're so heterogeneous.
What if there was a service like eBay Inc. that provided a price-discovery mechanism for these mortgage pools? An electronic market for mortgages or mortgage-backed securities -- something that's easy to use and that allows users to value these illiquid securities quickly -- could be an extraordinarily valuable service, particularly if it gains any kind of market share, like eBay.
It would allow holders of mortgage-related instruments to post their securities online and allow investors to bid on them. It would show prices on a historical basis so bidders could see how a portfolio of mortgages from a particular region of the country traded four months ago. Like eBay, it would provide a wealth of information and, ultimately, liquidity -- that's the key.
Printed in The Wall Street Journal, page R2
Financial crisis underscores need to transform our view of risk
For many business executives, the extent of last fall's financial meltdown came as a shock. Economist Andrew W. Lo was less surprised.
A professor at MIT's Sloan School of Management, Dr. Lo has studied the connections between financial decision making, neuroscience and evolutionary psychology. In particular, he believes that "behavioral blind spots" -- evolutionarily hard-wired reactions to perceived risks and rewards -- are particularly dangerous during periods of economic extremes, such as bubbles and crashes.
Testifying before the House Oversight Committee in November, Dr. Lo discussed how credit crises have been regular occurrences over the past 35 years.
The Journal Report
"Financial crises are an unfortunate but necessary consequence of modern capitalism," he said. Financial losses, he added, are a byproduct of innovation, "but disruptions and dislocations are greatly magnified when risks have been incorrectly assessed and incorrectly assigned."
Michael S. Hopkins, Editor in Chief of MIT Sloan Management Review, and Bruce G. Posner, a contributing editor at MIT Sloan Management Review, spoke with Dr. Lo for Business Insight.
Reassess Governance
BUSINESS INSIGHT: What's the most important implication of the financial crisis?
DR. LO: For CEOs and other corporate leaders, the single most important implication is about the current state of corporate governance. Many corporations did a terrible job in assessing and managing their risk exposures, with some of the most sophisticated companies reporting tens of billions of dollars in losses in a single quarter. How do you lose $40 billion in a quarter and then argue that you've properly assessed your risk exposures?
I don't think it's credible to say it was just bad luck. If troubled companies want to explain away 2008 as a "black swan," then someone should take responsibility for creating the oil slick that seems to have tarred the entire flock! The current crisis is a major wake-up call that we need to change corporate governance to be more risk-sensitive.
BUSINESS INSIGHT: What allowed this crisis to happen? How could so many seemingly smart people be so blindsided?
DR LO: The very fact that so many smart and experienced corporate leaders were all led astray suggests that the crisis can't be blamed on the mistakes of a few greedy CEOs. In my view, there's something fundamentally wrong with current corporate-governance structures and the language of corporate management. We just don't have the proper lexicon to have a meaningful discussion about the kinds of risks that typical corporations face today, and we need to create a new field of "risk accounting" to address this gap in GAAP.
BUSINESS INSIGHT: Now that the financial landscape has been rearranged, are there things that corporate managers can do to capitalize on the current environment?
DR. LO: One of the things companies are surely going to have to deal with over the next year or two is greatly reduced liquidity in the capital markets. Borrowing costs are going to go up, and it's going to be much harder to finance new ventures, so companies will have to be much more creative about rebalancing their pension-fund obligations and raising capital to fund operations. Managers should be prepared for some tough times.
At the same time, there's going to be tremendous interest on the part of, say, pension funds in finding new ventures. My guess is that starting this summer, pension funds will begin increasing their allocations to private equity, hedge funds and other alternative investments -- assets will be flowing back into risky ventures with a vengeance. The money that's currently in T-bills has got to go somewhere -- and anybody who has cash is going to be in a great position. Companies are going to have to find creative ways to tap into these nontraditional sources of financing.
New Opportunities
BUSINESS INSIGHT: What kinds of new market opportunities do you see emerging -- things that aren't typical?
DR. LO: Well, if you think about the kind of dislocation that's affected financial markets, you'll see that much of the current crisis stems from the fact that it's very difficult to get information about the value of certain mortgage-backed securities because they're so heterogeneous.
What if there was a service like eBay Inc. that provided a price-discovery mechanism for these mortgage pools? An electronic market for mortgages or mortgage-backed securities -- something that's easy to use and that allows users to value these illiquid securities quickly -- could be an extraordinarily valuable service, particularly if it gains any kind of market share, like eBay.
It would allow holders of mortgage-related instruments to post their securities online and allow investors to bid on them. It would show prices on a historical basis so bidders could see how a portfolio of mortgages from a particular region of the country traded four months ago. Like eBay, it would provide a wealth of information and, ultimately, liquidity -- that's the key.
Printed in The Wall Street Journal, page R2
Greener and Cheaper ( An Interesting Article from WSJ)
Greener and Cheaper
The conventional wisdom is that a company's costs rise as its environmental impact falls. Think again.
By ALAN G. ROBINSON and DEAN M. SCHROEDER
For years, it was the conventional wisdom: If you improved quality, costs would also rise. But then companies discovered the opposite was true. By redesigning processes -- reducing mistakes, doing things right the first time -- companies could provide better products and services and cut their costs.
Now it's time to learn this lesson all over again, as it applies to going green.
The Journal Report
Despite what many companies think -- that reducing their environmental impact is a nice idea, but impractical because of the cost -- businesses can go green and lower costs at the same time. No one disputes that it's expensive to cap smokestacks and process hazardous waste. But as the earlier lesson suggests, the focus shouldn't be on cleaning up and its costs -- the focus should be on creating less mess to begin with.
The experience of an auto plant in Indiana helps illustrate how re-engineering processes with green principles and greater efficiency in mind can not only improve a company's standing with nature, but increase its profits and give it competitive
Subaru of Indiana Automotive Inc., a factory of more than 3,000 workers who make roughly 800 automobiles a day, has pursued green initiatives since its launch 20 years ago in Lafayette, Ind., by Japan's Fuji Heavy Industries Ltd. With employees at every level of the plant looking for ways to save energy, reduce waste and generally make processes more efficient, one measure of its success is a 14% reduction in electricity consumption on a per-car basis since 2000. An even bigger achievement: It has not shipped any waste to a landfill since May 2004.
The authors, skeptical themselves at first, have confirmed the company's claims with their own detailed research. How did Subaru do it? By redesigning numerous plant processes, thus producing less waste and requiring less material as inputs. Since 2000, the company says, it has reduced the amount of waste it generates per vehicle by about 47%. Of the solid waste that the factory still generates, 99.9% is recycled or used by other companies as manufacturing inputs or as raw materials that they process to resell. The remaining 0.1% is hazardous waste that must by law be incinerated by a licensed facility.
Committing the plant to reducing its overall environmental impact has required a mix of solutions over the years, some simpler than others. Subaru's engineers continuously look for ways to improve the plant's green performance, increase efficiency and lower costs.
Here's what Subaru of Indiana has learned on its way to reducing its environmental impact, and how other organizations, too, can work on green initiatives -- and their bottom lines -- at the same time.
Levels of Commitment
1. Profits come by increasing efficiency and reducing waste -- but they don't always come immediately.
Many of the Subaru plant's early green initiatives delivered quick paybacks and required little effort: dimming assembly-line lights automatically when the workers took breaks, for example, or plugging leaks in compressed-air lines, or recycling more materials.
Redesigning whole processes, though, requires more effort. Recycling, for example, was expanded to include returning packaging materials to suppliers for reuse. This saves Subaru and its suppliers money, but it also requires significant changes in the way both parties handle the associated tasks.
Some green projects increase costs, at least initially. Having trash hauled away to a dump, for example, was less expensive than the plant's current practice of paying to have trash incinerated as fuel at a nearby energy plant. But Subaru officials say they constantly re-evaluate each process to meet green goals in the most cost-efficient way.
Indeed, some that started out increasing costs eventually led to savings or break-even status thanks to continual re-evaluation. For example, in its drive to achieve zero-landfill status, Subaru re-examined how it disposed of a toxic solvent used to flush painting systems between color changes. The used solvent was formerly shipped off site for specialized -- and costly -- disposal. Now an elaborate in-house distilling process removes impurities from the used solvent, making it reusable. Solvent consumption was slashed to one tanker-truckload every three months from four to six tankers per week. (Some solvent still has to be replaced due to evaporation.) Impurities that come out in the distillation, meanwhile, are sent to a company that uses the residue to make coating material for ladles in the steel industry. Subaru pays that company to take the impurities off its hands. But despite these additional costs, Subaru officials say they expect the solvent operation to break even -- including design and construction costs -- in about five years when balanced against its savings in solvent costs.
In another case, a series of process redesigns that first increased costs ultimately produced lower costs, less waste -- and better quality work. The plant used to weld its steel auto frames in a way that produced lots of sparks, which, in turn, left lots of a waste-metal byproduct known as slag on the floor. Subaru started looking for a company that might want the slag for the base metals it contained. It found a company in Spain that wanted to recover copper from the slag. So, Subaru started shipping the slag to Spain -- and paying the Spanish company to take the material. Thus, for a while, Subaru was reducing its environmental impact, but at increased cost.
This led it to consider a previously unrecognized waste: excess sparks. The plant devised a new welding process that produced fewer sparks and less slag, lowering electricity and materials costs. Its consumption of copper welding tips plunged 75%. Subaru still ships some slag to Spain, but not as much. The new welding process also shows how attention to the minutest environmental details can lead to savings that a purely cost-driven organization might miss.
2. Management's leadership is vital in setting goals and getting departments to cooperate.
Management must define goals for reducing environmental impact, and make clear to all departments that such goals are just as important as metrics on productivity, quality and safety.
Green Is Economical
A crucial step by the managers at Subaru of Indiana was a decision in the mid-1990s to adopt internationally recognized standards for measuring and managing environmental impact. These standards, created by the Geneva-based International Organization for Standardization, are designed to help companies see from top to bottom how much waste they are producing and where improvements can be made.
Collaboration among departments is essential -- another reason why top management must lead. Consider an idea that originated with a worker in engine assembly at the Subaru plant. The idea: to return packaging material to a supplier for reuse. Engine assembly couldn't do this on its own. Engineering needed to certify that the material could be reused. Purchasing had to renegotiate with the supplier. Transportation and logistics dealt with how the materials would be returned, and accounting looked at budget and control ramifications.
Without clear signals from above pushing for such cooperation, progress will quickly bog down.
3. The front lines have to be engaged.
Front-line workers are ideally positioned to spot ways to reduce, reuse and recycle -- a discipline commonly referred to as the three R's. Subaru has made the three R's part of worker training, along with a system of thinking known in environmental circles as the "waste hierarchy." This is a ranking of possible environmental actions in increasing order of environmental benefit:
1. To burn material for energy is better than sending it to a landfill.
2. To recycle it is better than burning it.
3. To reuse material is better than recycling it.
4. To reduce the amount needed is better than reusing it.
5. To eliminate the need for material is better than reducing it.
One way work teams spotted opportunities to do more with the three R's was by dumpster-diving. If nothing was to be thrown away, everything being put into the dumpsters had to be eliminated, reused or recycled. The dumpsters themselves had to go (though many are now used as recycling bins). Teams began by spilling the contents of bins in their own areas onto the floor, then sifting sorting and grouping the material by source and type. Then the teams came up with ideas to eliminate each type of waste -- either at the source, or by devising ways to capture and recycle it.
One of the biggest challenges and costs in recycling is the sorting of items into the various waste streams for further processing. If this can be done at the source, by the people who first touch it, costs are substantially reduced (or even eliminated). Even more three R's ideas emerge this way. Front-line input is also necessary to ensure that such sorting is smoothly incorporated into the work flow.
4. Green initiatives achieve lots more when companies involve their suppliers.
Subaru of Indiana has made willingness to work on green initiatives a major criterion for selecting suppliers. Its steel suppliers, for example, agreed to provide rolls of steel in exactly the needed widths and lengths for each part being stamped, allowing the plant to reduce steel scrap by more than 100 pounds per vehicle since 2000.
A Japanese supplier sends the plant engine parts in seagoing containers packed tightly in specially contoured Styrofoam blocks. Formerly, most of the Styrofoam stayed in Indiana and went to recycling. But since the containers go back to the supplier, now the Styrofoam does as well. In all, some 80 kinds of plastic caps, metal clips, cardboard spacers and other packing materials are returned to Japan in this way. The suppliers assess whether the materials are reusable; if they aren't, the suppliers recycle them for making new packaging materials.
5. All wastes are potential products.
As Henry Ford once observed, everything coming out of a manufacturing process, including waste, is a potential raw material for another process.
Subaru located companies that could use its solvent residue and slag. Its cafeteria waste, too, currently goes to an outside party: a waste-to-energy power plant near Indianapolis that burns the material. In each case, Subaru pays these companies to take the materials off its hands. But just as it eventually found ways to improve its industrial processes that lowered costs and yielded other gains, it is now considering how to turn its food waste into a cost-effective product.
Industrial-scale composting is one possibility, using a circular track and a special breed of worm. The idea is to dump the food waste each day next to the previous day's waste, leading the worms to eat their way continuously around the track, leaving behind high-grade fertilized soil. Research by Allegiant Global, an Indianapolis waste-logistics company that has worked closely with Subaru on its environmental goals, identified the Canadian red wriggler as the "thoroughbred champion" of composting worms because of its voracious appetite. Subaru could also use the fertilized soil on the factory's grounds, give it to employees for home use, and sell it to local garden shops and plant nurseries. As for the plates and utensils, the company is looking into items made of materials digestible to the worms, like starch.
Another kind of waste with profit potential: unharnessed energy. In the factory's second-floor spray-painting operation, paint that misses an auto body is captured in water that falls in a torrent into tanks below ground. There the paint is skimmed off and the water is pumped back upstairs for reuse. The plant is considering installing a small hydroelectric generator to tap the enormous energy in the 10,000 gallons per minute of falling water.
6. Green leadership creates competitive advantages.
Drives to reduce environmental impact force companies to study their operations and material flows from a fresh perspective and in great detail. Innovations that result can give them competitive advantages.
Subaru says it has saved millions of dollars by combining green thinking with in-depth studies of its processes, suppliers and equipment. Where the biggest savings have been achieved, in descending order: reducing waste by revising processes; conserving energy; and working with suppliers.
In the future, should government and the marketplace put increasing pressure on companies to improve their environmental performance, Subaru of Indiana should be well-positioned compared with its rivals. While its competitors may be caught in reactive modes, forced to divert cash and resources in a scramble to comply with new rules and customer demands, Subaru will be able to focus on creating its next competitive advantage.
Pity the competitor who is forced to do in 18 months what Subaru of Indiana took two decades to get right.
—Dr. Robinson is a professor at the Isenberg School of Management, University of Massachusetts, Amherst. Dr. Schroeder is the Herbert and Agnes Schulz professor of management at the College of Business Administration, Valparaiso University, Valparaiso, Ind. They can be reached at reports@wsj.com.Printed in The Wall Street Journal, page R4
The conventional wisdom is that a company's costs rise as its environmental impact falls. Think again.
By ALAN G. ROBINSON and DEAN M. SCHROEDER
For years, it was the conventional wisdom: If you improved quality, costs would also rise. But then companies discovered the opposite was true. By redesigning processes -- reducing mistakes, doing things right the first time -- companies could provide better products and services and cut their costs.
Now it's time to learn this lesson all over again, as it applies to going green.
The Journal Report
Despite what many companies think -- that reducing their environmental impact is a nice idea, but impractical because of the cost -- businesses can go green and lower costs at the same time. No one disputes that it's expensive to cap smokestacks and process hazardous waste. But as the earlier lesson suggests, the focus shouldn't be on cleaning up and its costs -- the focus should be on creating less mess to begin with.
The experience of an auto plant in Indiana helps illustrate how re-engineering processes with green principles and greater efficiency in mind can not only improve a company's standing with nature, but increase its profits and give it competitive
Subaru of Indiana Automotive Inc., a factory of more than 3,000 workers who make roughly 800 automobiles a day, has pursued green initiatives since its launch 20 years ago in Lafayette, Ind., by Japan's Fuji Heavy Industries Ltd. With employees at every level of the plant looking for ways to save energy, reduce waste and generally make processes more efficient, one measure of its success is a 14% reduction in electricity consumption on a per-car basis since 2000. An even bigger achievement: It has not shipped any waste to a landfill since May 2004.
The authors, skeptical themselves at first, have confirmed the company's claims with their own detailed research. How did Subaru do it? By redesigning numerous plant processes, thus producing less waste and requiring less material as inputs. Since 2000, the company says, it has reduced the amount of waste it generates per vehicle by about 47%. Of the solid waste that the factory still generates, 99.9% is recycled or used by other companies as manufacturing inputs or as raw materials that they process to resell. The remaining 0.1% is hazardous waste that must by law be incinerated by a licensed facility.
Committing the plant to reducing its overall environmental impact has required a mix of solutions over the years, some simpler than others. Subaru's engineers continuously look for ways to improve the plant's green performance, increase efficiency and lower costs.
Here's what Subaru of Indiana has learned on its way to reducing its environmental impact, and how other organizations, too, can work on green initiatives -- and their bottom lines -- at the same time.
Levels of Commitment
1. Profits come by increasing efficiency and reducing waste -- but they don't always come immediately.
Many of the Subaru plant's early green initiatives delivered quick paybacks and required little effort: dimming assembly-line lights automatically when the workers took breaks, for example, or plugging leaks in compressed-air lines, or recycling more materials.
Redesigning whole processes, though, requires more effort. Recycling, for example, was expanded to include returning packaging materials to suppliers for reuse. This saves Subaru and its suppliers money, but it also requires significant changes in the way both parties handle the associated tasks.
Some green projects increase costs, at least initially. Having trash hauled away to a dump, for example, was less expensive than the plant's current practice of paying to have trash incinerated as fuel at a nearby energy plant. But Subaru officials say they constantly re-evaluate each process to meet green goals in the most cost-efficient way.
Indeed, some that started out increasing costs eventually led to savings or break-even status thanks to continual re-evaluation. For example, in its drive to achieve zero-landfill status, Subaru re-examined how it disposed of a toxic solvent used to flush painting systems between color changes. The used solvent was formerly shipped off site for specialized -- and costly -- disposal. Now an elaborate in-house distilling process removes impurities from the used solvent, making it reusable. Solvent consumption was slashed to one tanker-truckload every three months from four to six tankers per week. (Some solvent still has to be replaced due to evaporation.) Impurities that come out in the distillation, meanwhile, are sent to a company that uses the residue to make coating material for ladles in the steel industry. Subaru pays that company to take the impurities off its hands. But despite these additional costs, Subaru officials say they expect the solvent operation to break even -- including design and construction costs -- in about five years when balanced against its savings in solvent costs.
In another case, a series of process redesigns that first increased costs ultimately produced lower costs, less waste -- and better quality work. The plant used to weld its steel auto frames in a way that produced lots of sparks, which, in turn, left lots of a waste-metal byproduct known as slag on the floor. Subaru started looking for a company that might want the slag for the base metals it contained. It found a company in Spain that wanted to recover copper from the slag. So, Subaru started shipping the slag to Spain -- and paying the Spanish company to take the material. Thus, for a while, Subaru was reducing its environmental impact, but at increased cost.
This led it to consider a previously unrecognized waste: excess sparks. The plant devised a new welding process that produced fewer sparks and less slag, lowering electricity and materials costs. Its consumption of copper welding tips plunged 75%. Subaru still ships some slag to Spain, but not as much. The new welding process also shows how attention to the minutest environmental details can lead to savings that a purely cost-driven organization might miss.
2. Management's leadership is vital in setting goals and getting departments to cooperate.
Management must define goals for reducing environmental impact, and make clear to all departments that such goals are just as important as metrics on productivity, quality and safety.
Green Is Economical
A crucial step by the managers at Subaru of Indiana was a decision in the mid-1990s to adopt internationally recognized standards for measuring and managing environmental impact. These standards, created by the Geneva-based International Organization for Standardization, are designed to help companies see from top to bottom how much waste they are producing and where improvements can be made.
Collaboration among departments is essential -- another reason why top management must lead. Consider an idea that originated with a worker in engine assembly at the Subaru plant. The idea: to return packaging material to a supplier for reuse. Engine assembly couldn't do this on its own. Engineering needed to certify that the material could be reused. Purchasing had to renegotiate with the supplier. Transportation and logistics dealt with how the materials would be returned, and accounting looked at budget and control ramifications.
Without clear signals from above pushing for such cooperation, progress will quickly bog down.
3. The front lines have to be engaged.
Front-line workers are ideally positioned to spot ways to reduce, reuse and recycle -- a discipline commonly referred to as the three R's. Subaru has made the three R's part of worker training, along with a system of thinking known in environmental circles as the "waste hierarchy." This is a ranking of possible environmental actions in increasing order of environmental benefit:
1. To burn material for energy is better than sending it to a landfill.
2. To recycle it is better than burning it.
3. To reuse material is better than recycling it.
4. To reduce the amount needed is better than reusing it.
5. To eliminate the need for material is better than reducing it.
One way work teams spotted opportunities to do more with the three R's was by dumpster-diving. If nothing was to be thrown away, everything being put into the dumpsters had to be eliminated, reused or recycled. The dumpsters themselves had to go (though many are now used as recycling bins). Teams began by spilling the contents of bins in their own areas onto the floor, then sifting sorting and grouping the material by source and type. Then the teams came up with ideas to eliminate each type of waste -- either at the source, or by devising ways to capture and recycle it.
One of the biggest challenges and costs in recycling is the sorting of items into the various waste streams for further processing. If this can be done at the source, by the people who first touch it, costs are substantially reduced (or even eliminated). Even more three R's ideas emerge this way. Front-line input is also necessary to ensure that such sorting is smoothly incorporated into the work flow.
4. Green initiatives achieve lots more when companies involve their suppliers.
Subaru of Indiana has made willingness to work on green initiatives a major criterion for selecting suppliers. Its steel suppliers, for example, agreed to provide rolls of steel in exactly the needed widths and lengths for each part being stamped, allowing the plant to reduce steel scrap by more than 100 pounds per vehicle since 2000.
A Japanese supplier sends the plant engine parts in seagoing containers packed tightly in specially contoured Styrofoam blocks. Formerly, most of the Styrofoam stayed in Indiana and went to recycling. But since the containers go back to the supplier, now the Styrofoam does as well. In all, some 80 kinds of plastic caps, metal clips, cardboard spacers and other packing materials are returned to Japan in this way. The suppliers assess whether the materials are reusable; if they aren't, the suppliers recycle them for making new packaging materials.
5. All wastes are potential products.
As Henry Ford once observed, everything coming out of a manufacturing process, including waste, is a potential raw material for another process.
Subaru located companies that could use its solvent residue and slag. Its cafeteria waste, too, currently goes to an outside party: a waste-to-energy power plant near Indianapolis that burns the material. In each case, Subaru pays these companies to take the materials off its hands. But just as it eventually found ways to improve its industrial processes that lowered costs and yielded other gains, it is now considering how to turn its food waste into a cost-effective product.
Industrial-scale composting is one possibility, using a circular track and a special breed of worm. The idea is to dump the food waste each day next to the previous day's waste, leading the worms to eat their way continuously around the track, leaving behind high-grade fertilized soil. Research by Allegiant Global, an Indianapolis waste-logistics company that has worked closely with Subaru on its environmental goals, identified the Canadian red wriggler as the "thoroughbred champion" of composting worms because of its voracious appetite. Subaru could also use the fertilized soil on the factory's grounds, give it to employees for home use, and sell it to local garden shops and plant nurseries. As for the plates and utensils, the company is looking into items made of materials digestible to the worms, like starch.
Another kind of waste with profit potential: unharnessed energy. In the factory's second-floor spray-painting operation, paint that misses an auto body is captured in water that falls in a torrent into tanks below ground. There the paint is skimmed off and the water is pumped back upstairs for reuse. The plant is considering installing a small hydroelectric generator to tap the enormous energy in the 10,000 gallons per minute of falling water.
6. Green leadership creates competitive advantages.
Drives to reduce environmental impact force companies to study their operations and material flows from a fresh perspective and in great detail. Innovations that result can give them competitive advantages.
Subaru says it has saved millions of dollars by combining green thinking with in-depth studies of its processes, suppliers and equipment. Where the biggest savings have been achieved, in descending order: reducing waste by revising processes; conserving energy; and working with suppliers.
In the future, should government and the marketplace put increasing pressure on companies to improve their environmental performance, Subaru of Indiana should be well-positioned compared with its rivals. While its competitors may be caught in reactive modes, forced to divert cash and resources in a scramble to comply with new rules and customer demands, Subaru will be able to focus on creating its next competitive advantage.
Pity the competitor who is forced to do in 18 months what Subaru of Indiana took two decades to get right.
—Dr. Robinson is a professor at the Isenberg School of Management, University of Massachusetts, Amherst. Dr. Schroeder is the Herbert and Agnes Schulz professor of management at the College of Business Administration, Valparaiso University, Valparaiso, Ind. They can be reached at reports@wsj.com.Printed in The Wall Street Journal, page R4
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