Tuesday, January 21, 2014

The Efficiency of Zero

In the abstract sense, a traditional supply chain can only become so efficient in each of its component stages before the system has become essentially lossless in the sense of time and costless in the sense of wasted material.  Obviously this would be impossible to do in practice, but it sets up an interesting question. In what ways can the traditional models be broken so that some of these components can be removed or changed entirely?

The readings this week deal with a number of ways that the traditional stages in a supply chain have been changed or thrown out entirely to the great benefit of the companies that have devised the new system. Ikea greatly decreases its overall costs, in part, by eliminating assembly.[1] Tata and Gordon Murray have broken through to a new level of fuel and cost efficiency in vehicles by moving away from using stamped and tube steel in their construction.[2][3] 

Cradles to Cradle principles take this kind of thinking to the next level.  Not only is waste from production eliminated as much as possible, but the impacts of the eventual disposal of the product itself are minimized as well.  With Herman Miller products, building a sustainable supply chain and reducing ecological impacts proved to be highly beneficial in terms of their long-term resource costs.[4]

Perhaps the most extreme application of Cradle to Cradle are companies that reorganize the paradigms of their industry into supplying their physical product as a service, rather than just an object. Interface Carpets are an elegant example of this. Their business model is simple.  They rent carpet to consumers in small, modular squares at a low price.  As highly trafficked squares wear out, the company will come and replace the worn pieces with new ones.  The old squares are then taken to be reprocessed and made into new carpet with around 85% of the material retained.[5] They and companies like them are finding that the most efficient way to operate a business with inputs and outputs is to close the loop, taking a linear materials stream and directing it back to become new inputs.

[1] http://karlulrich.pbworks.com/f/IKEA-cost-article.pdf
[2] http://www.theengineer.co.uk/in-depth/interviews/automotive-engineer-gordon-murray/1010726.article
[3] http://www.businessweek.com/stories/2008-02-27/learning-from-tatas-nanobusinessweek-business-news-stock-market-and-financial-advice
[4] http://www.c2cproducts.com/images/JIndustrialEcology_Herman_Miller_17mar06.pdf
[5] http://www.interface.com/US/en-US/about/index

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