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Implementation of environmental management system in automotive industry

This study begins with a historical background of the environmental management system in automotive industry. This is followed by a detailed literature review of environmental management system in automotive industry and its implementation. Then, six case studies of automobile manufacturing companies of varying sizes are analyzed and compared; following are the chosen companies and their selection criteria. Toyota, General Motors and Ford, were chosen because they are the current market leaders. Hyundai and Fiat were chosen because of their status as stable international companies who have been in the automobile business for many years. Maruti Udyog Ltd, based in India, was chosen based on its growth potential and its status as relatively new to the industry.

These six companies have been analyzed in terms of their adoption of environmental management system. The examination of the industry as a whole and of some of the major players in the industry provides a good framework within which insightful conclusions can be derived about the current state and future of the automotive industry.

In the conclusions and recommendation section, we identify and describe attributes of successful companies who are dedicated to achieve the goals of environmental management system.

New challenges, the report concludes with the recommendation section, which provides a prediction of the near-future success of each of the analyzed companies, different companies considered in this report: Toyota, Ford, General Motors, Hyundai, Fiat and Maruti. Of these companies, we conclude that Toyota seems to be holding up the best. Toyota stands out as being best positioned for success in the near future and dedicates itself fully for environmental management system, while GM, Ford and Hyundai will most likely continue to be successful. And although currently successful, it is much more difficult to predict the future success of Maruti Udyog.

CHAPTER 4

WORLD CLASS ENVIRONMENTAL MANAGEMENT SYSTEM

4.1 Introduction

Environmental management system provides a framework for the organizations to manage their environmental affairs effectively. It can be described as a program of continuous environmental improvement that follows a defined sequence of steps drawn from established project management practice and routinely applied in business management. (Cary C. & Jennifer N., 2001, p-1-5)

An Environmental Management system help to make environmental practices more transparent, so the organization can streamline their customer’ auditing processes and communicate to employees, management and stakeholders, which is the practice of sound environmental management. (Gil Friend, 2009)

Writer further stated that the quality of products produced and delivered to the customer and evaluation of influence, both of these products and of activity carried out on the environment play a key role in the world free-market economy. To satisfy the customer requirements in a continuous way, achieving good quality regularly and care of the environment give good economical results. This is not only a single achievement but continuous repetitions of earlier set quality levels show that the company is technically competent.

From the last few decades work has been carried out to bring the business practices in accordance with environmental regulations and other green ideas. To achieve the goals the management has to review the manufacturing strategies and to optimise their uses of tools and resources. There are different management philosophies which could be implement in the manufacturing company to reduce wastes. (John Cammell: 1992)

World Class manufacturing has been defined as blend of Just in time (JIT), total quality management (TQM), employee involvement, preventive maintenance practices, computer integrated manufacturing, strategic management and other approaches. (Flynn, Salakibara and Schroeder 1995)

Like Just-in-Time, this has its origins in the Toyota Company in Japan. Originally it was referred to the production of goods to meet customer demands, exactly in time, quality and quantity. But now it is closer to mean production with minimum waste. Here “Waste” is taken in its most general sense which includes time and resources as well as material. JIT manufacturing has the capacity, if adapted properly by the organization, to strengthen the organisation’s competitiveness in the marketplace significantly by reducing wastes and improving product quality and efficiency of production. (Yasuhiro Monden, 1993)

In the beginning, many companies put together their own system to meet the needs of a continually changing environment. As time passed, alarms began to sound around the issue of trade. In response to that The International Organisation for standardization (ISO) start work with large number of experts to create the 14000 series of ISO standards for Environmental management. These standards are the continuity of ISO 9000 series for quality management, released in September 1996.

The objective of ISO 14001 was to provide companies with a way to integrate planning, processes, operations, resources and responsibilities in order to achieve specified environmental objectives.

EMS starts with a commitment by senior management to develop a system which will manage the company’s impact on the environment. These could be negative aspects, such as emissions, raw material consumption, energy consumption and land use, as well as beneficial aspects, such as energy production, environmentally friendly products, and recycling. These senior management should have the proper understanding of the EMS, if they have the proper understanding then the workers who work under them should be well trained to know their responsibility in their areas and there should be appropriate communication mechanisms to provide the necessary EMS information to the appropriate employee. (Wilson and Sasseville p-64-75)

Environmental management system documentation are the most important part, it gives awareness to the employee about the requirement of the system, how to achieve the business environmental targets and objectives and to enable the evaluation of the system and environmental performance. The EMS documents should include the environmental policy, objectives, and targets, the way by which environmental objectives and targets can be achieved, description of key roles, responsibilities, and procedures, the location of and means to retrieve documentation and other relevant elements of the business’s environmental management system. The documents system will require periodic review, any required revision and approval from the authorized authority prior to issue. Keeping record and good documentation certifies company’s evidence of fulfilment and its commitment to environmental merit. (Voorhees, john 1998 p-219)

ISO 14001 also require some emergency plans and procedure to unexpected or accidental incidents. And also companies should create some procedure, to prevent or minimize the environmental impacts which rise from those incidents. After these incidents or emergency situations, should keep the record of each and every incident which will help to prevent those kinds of incidents.

There is no packaged EMS exist for companies. It is the process to manage the environmentally related elements of business. It must be adopted according to companies needs and must be develop and implement in that manner that it works for company’s business and the management approach towards it.

For understanding the Environmental management system, one should know the principles of ISO14001, An organization should:

Define its environmental policy and ensure commitment to its EMS

Formulate a plan to fulfil its environmental policy

Develop the capabilities and support mechanism necessary to achieve its environmental policy, objective and targets.

Measure, monitor and evaluate its environmental performance.

Review and continually improve its EMS, with the objectives of improving its overall environmental performance

4.2 The benefits of an EMS

Environmental management system (EMS) is a systematic approach to the management of all of the environmental aspects of operating a business, organization or any entity that has impact on the environment. Setting up and running an environmental management system (EMS) can provide significant benefits across a number of areas in business. By economic point of view energy conservation and waste reductions are obvious. While business point of view, by implementation of an EMS not only improve environmental performance but also tends to have an impact on product quality, risk reduction, employee satisfaction, safety and health and other performance factors that make a company stronger and more competitive. Tracking various parts of the EMS is the most important part of the EMS, which enable management to make correction and take necessary action to prevent future problems, Gary W. and Dennis (1996: 66-67)

CHAPTER 5

CASE STUDY ANALYSIS

5.1 TOYOTA

5.1.1 History

Toyota Motor Corporation or Toyota in short, is a Japanese automaker. Toyota is the world's second largest automaker following General Motors; however Toyota ranking is first according to its net worth, revenue and profit. It is also the only car manufacturer to appear in the top 10 of the BrandZ ranking. Toyota was founded in 1937 by Kiichiro Toyoda as a spinoff from his father (Sakichi Toyoda)'s company Toyota Industries to make automobiles. In 1934, while still a branch of Toyota Industries, it produced its first product Type-A engine and its first passenger car (the Toyota AA) in 1936. It is headquartered in Toyota, Aichi and Bunkyo Tokyo, Japan. Toyota has the Financial Service division which provides financial services and also creates robots besides automobiles. The company along with the original Toyota Industries form bulk of the Toyota Group. Toyota owns and operates Toyota, Lexus, and Scion, has a majority shareholding in Daihatsu Motors, and has minority shareholdings in Fuji Heavy Industries, Isuzu Motors, and the engine, motor cycle and marine craft manufacturer Yamaha Motors. The company includes 522 subsidiaries. Toyota Motor Corporation operates in the automotive industry worldwide. (Matthias Holweg, 2006)

Figure 5.1: U.S. market shares – May 2008

5.1.2 Trends in Toyota

The incredible consistent of Toyota’s performance is a direct result of operational excellence. Toyota has adopted operational as a strategic weapon. This operational excellence is based in part on tools and quality improvement methods made famous by Toyota in the manufacturing world, such as lean manufacturing (elimination of waste in every area of production including customer relations, product design, supplier network and factory management), Just in time (it is a method of waste elimination by which the inventory levels are minimized), Kaizen (continuous improvement in manufacturing process), one piece flow, Jidoka (“automation with a human touch” it’s a quality control process) and Heijumka. These techniques helped spawn the “lean manufacturing” revolution. But tools and techniques are no secret weapon for putting into practice these tools, it is the business strategy based on its surroundings of people and human inspiration, David M. (2007:163-170)

Toyota adopted different philosophies in its manufacturing system to reduce the wastes. Taiichi Ohno founder of Toyota Production System (TPS) said it even more precisely. “All we are doing is looking at the time line from the moment the customer gives an order to the point when we collect the cash. And we are reducing that time by removing the non value added wastes (Ohno, 1988)”. (Jeffery K. Liker, 2006, p 54)

Writer further stated that Ohno regarded waste as a general term including time and resources as well as material. He identified a numbers of sources of waste which he felt should be eliminated:

Overproduction

Time spent waiting

Transportation/movement

Processing time

Inventory

Defects

“Just-In-Time” being initially known as the “Toyota Production System”. Toyota developed the TPS after World War II at a time when it faced very difficult business conditions then FORD and GM. While Ford and GM used mass production, economics of scale and big equipment to produce as many parts as possible, as cheaply as possible. The Toyota Production system is a unique and unparalleled. The Toyota Production system is a series of activities that promote cost reduction through the elimination of waste to achieve enhanced productivity. (David J. Lu, 1989, p-31)

TPS explained to the managers in many environment how to improve their business dramatically by

Eliminating wasted item and resources

Building quality into workplace systems

Finding low cost but reliable alternatives to expensive new technology

Perfectly business process

Building a learning culture for continuous improvement

According to Ohno each decision should be based on these principles “Can the cost really be lowered?” and “Can this action help the company’s overall performance” (David J. Lu, 1989, p-32)

The two pillars needed to support the system are:

Just In Time

Jidoka/Autonomation , or automation with human touch

Just –in-time means that in a flow process the right parts needed in assembly reach the assembly line at the time they are needed and only the amount needed, and by achieving this flow throughout can approach zero inventories.

Jidoka/ autonomation idea was originated with the invention of an auto- activated weaving machine by Toyoda Sakichi (1867-1930), founder of the Toyota motor company. At Toyota, a machine automated with human touch is one that is attached to an automatic stopping device. Most machines in Toyota plants are equipped with these devices as well as different safety devices, fixed position stopping, the full work system, and Baka-Yoke fool proofing systems to prevent defective products. In this system no operator is needed while the machine is working unless the machine stops working because of abnormal situation, which needs human attention. This will result in reducing the operators and increase production efficiency. (Taiichi Ohno, 1988, p-4-5)

Automobiles are playing an important role in the development of today’s and future society; it has also imposed a certain impact on the environment. Toyota is fully aware that the automobile is the valuable tool in 21st century, that’s why more concentration is paying to those areas which affect the environment and those succeed in this area will be acceptable to society. Toyota is working on priority basis through environmental management in all areas and wants to become a leader of global regeneration through its effort in environmental technologies to ensure that its products are accepted and well received around the world.(Toyota Report: 2004)

Toyota also started its own system of assessment that it calls Eco-VAS (Eco- Vehicle Assessment System). Under this assessment the process start at the beginning of the planning. The designer of the vehicle should have to prove first that this project would fall under environmental impact reduction targets. This system consider fuel efficiency, emissions, and noise control during use, the disposal recovery rate, the reductions of substances which are dangerous to environment and carbon dioxide emission throughout the entire life cycle of the vehicle from production to disposal, Eco-VAS has been introduced on all new vehicle models and redesign since 2007.Toyota also applies life cycle assessment to its packaging design. In 2007, it co-developed and began using the Environmental Packaging Impact Calculator (EPIC) to quantify and assess the environmental impacts and financial costs of packaging systems used at logistics sites. (Brian Black, 2006 p-177)

Toyota manufacturing sites have taken their EMS one step ahead by enhancing EMS (eEMS). It is the first global initiative taken by Toyota (Japan).

Toyota’s manufacturing operations have minimized impact on the environment through action plans, enhanced environmental management systems and eco-plant plans. This model plant in North America will start operating in 2010. This cutting edge plant will operate an innovative assembly line. The plant’s eco-plant plan has been completed, and includes measure to reduce CO2 and VOC emissions, reduce water consumption, achieve zero waste to landfill, and manage waste by introducing recyclable products.

5.1.3 Employee Training:

A common expression heard around Toyota is “We do not just build cars; we build people”

Toyota give training to all its employees in EMS awareness and in some functional topics like hazardous waste disposal is critical to the continued success of the EMS, and ability to achieve leading levels of environmental performance. And this is all because of strong EMS that promotes continual improvement. To understand the training and development strategy in the Toyota culture, we have to distinguish the roles and functions of each layer of the organization. There are four levels: Team member, team leader/group leader, manager, and general manger/vice president. (Jeffrey/Michael 2008 p-137-138)

If any variation comes into standardize work, the team leader come into action and by using their problem solving skill to solve the problem and bring the process into standard. For the improvement of this kind of skill for the team member, team leader focuses primarily on work place organization, standardized work, problem solving and more problem solving. Training at Toyota builds upon itself layer by layer. The team leader learns the basic organization foundational tools. Adding the Toyota Job Instruction as a tool by the team leader, it begins to instruct the problem solving process. Teamwork skills and communication are also added to into learning of these tools in order for the values and trust to be reinforced during the improvement process. If there is mutual respect and trust is established the problem solving improved.

Figure 5.3: Toyota Training and Development Strategy: Roles, Focus & Tools source: Toyota culture, the heart and soul of Toyota way

There are some training institute which are developed by Toyota in January 2002, at Toyota’s headquarters. It runs two programs – one for developing global leaders and other for the developing global trainers capable of instructing other associates in Toyota way basis like problem solving, on the job training and policy deployment. Other institutes are Global Knowledge centre, Global production centre, University of Toyota. These all institutes provide training and education both at managerial as well as lower levels. Emi O., Norihiko S., Hirotaka T. 2008, p 35-37

5.1.4 Action guidelines

Toyota has a strong action plan regarding the environment. It is the basic requirement for Toyota plants that they must follow to get the expected corporate image. Toyota identified four main issues which are expected in 2020-2030. The topics are: Global/Energy warming, Recycling of resources, substances of concern, Atmospheric quality. Solutions have been adopted and implemented for each topic in its all areas of activities. Key points can be identified for those solutions: CO2 emissions management, elimination of substances of concern, reinforcement of environmental management by business partner, and to develop a recycling based culture. (De Craecker F. De Wulf L., 2009)

Toyota also made amendments in the “Toyota Green Purchasing Guidelines”. This is a detail document which comments on green values, rules, expectations regarding to its supply chain. This document is circulated to all suppliers who must comply with what is written.

Toyota always concerned about the environment Challenge achieving zero emission at all stages i.e. production, utilization and disposal. Implement thoroughly preventive measures i.e. Prior-assessment systems.

Toyota give training to all its employees about environmental awareness and other environmental related topics like, waste disposal, hazardous materials handling, emergency response. Toyota also installed within company an Eco-point system. This is a system in which employees make suggestions about how the company could reduce the energy needed, conserve the environment and the company reward good ideas/suggestions with points

5.1.5 Guiding Principles and 2010 Global Vision

Toyota Motor Corporation’s Guiding Principles and the 2010 Global Vision provide a framework for setting long-term business goals and policy. The Guiding Principles include providing clean and safe products and developing advanced technologies. The Global Vision is a set of long-term policies with the theme of innovation into the future, anticipating a transition to a recycle-oriented society on a global scale.

5.1.6 The Earth Charter and Environmental policy

In January 1992, Shoichiro Toyoda presented his basic Toyoda principles, and in 1997 slightly revised edition published. Toyota for the very first time clarifies its relationship to customers, employees, business associates and other stakeholders. These Basic principles formed a long term vision, a medium and long term business plan and long and short term corporate policies. (Jeffrey K. Liker: p-55)

In the same month and year, January 1992, Toyota also published Toyota action plan for Global Environment, commonly known as the Toyota Global Earth Charter. This Earth Charter specifies how environmental policy would be reflected in company activities. (OECD: 2002, p-207)

The key policies of the Charter and action Plan are the followings:

• To contribute to a wealthy society in the 21st century society

• To develop environmental technologies

• Take action voluntarily

• Work in co-operation with society

Figure 5.4: Toyota’s earth chart (source: book; How Toyota became #1)

After publication of basic principles in 1992, the Toyota’s safety and environmental initiatives has been impressive. In December 1997 Toyota unveil Prius, the world first hybrid passenger car (combination of gasoline engine and electric motor) was the result of 1992 basic principles, this car proves Toyota commitment to environment. (Jeffery K. Liker, p-55)

5.1.7 Climate change

Toyota supports the aims of the Kyoto Protocol and will support agreement. Toyota is well aware of the Global warming. The company consider it as a priority management issue and implement this in all stages of vehicle development to reduce the energy consumption and CO2 emissions. The production line uses lot of energy resources, to reduce the problem Toyota build an eco-friendly buildings by using alternative sources of energy such as wind, solar panels etc. It is the goal of Toyota to get sustainable plants in near future. In other words plants will be fully equipped with natural resources. (De Craecker F. De Wulf L., 2009)

Writers further stated that Toyota improves the resource productivity by recycling and reuse of waste. To achieve zero landfill waste in its production plants, Toyota recycles the entire volume of fly ashes generated by its incineration furnace into raw material for cement manufacturing. Toyota also expanded the use of returnable containers. It helped the company to reduce the total usage volume of packaging by over 90 percent. Toyota also reduces substance of concern like lead. Mercury, Cadmium. Different measures have been taken to eliminate these substances from the vehicles.

The transportation system of goods and products was also the initiative of Toyota toward become environmental friendly. Toyota switched most of its transportation to rail, and uses high efficiency ships of bigger size to reduce their amount.

.

5.1.13 Supplier environmental management policy

Toyota works closely with business partners like suppliers and dealers. Toyota’s Green Supplier Guidelines were originally formed in 2000, and updated in January 2007.The guidelines set are basically emphasis on applicable laws, regulations and social norms from the suppliers. Toyota advice their supplier even goes beyond social and legal requirements and to undertake activities that support Toyota’s environmental goals.

Toyota is working closely with its suppliers to improve environmental performance. For example, Toyota recently began facilitating treasure hunt with its suppliers to encourage energy conservation awareness throughout its supply chain. Treasure hunts are energy saving or reduction events that Toyota is conducting in its manufacturing plants for years. A total of $1.3 of saving has been identified during 12 supplier hunts conducted in fiscal year 2008 by using Toyota’s saving calculation tool. One supplier in California replaced their bulbs with high bay fluorescent lightening and reduced electricity demands by 126 Kilowatts with an annual savings of approximately $115,000.

Toyota divided suppliers into three categories, according to their scale of environmental impact - low, medium or high - and specifies the timeframe for reaching each of the five levels of the policy (figure 3).

Figure 5.5 Toyota time frame-five levels of policy (Sourcebook: How Toyota became #1)

Toyota has over 1800 Toyota, Lexus and scion dealership in U.S., Canada and Mexico. As a key business partners, Toyota provide them with resources to help manage service-related waste streams and comply with environmental and safety regulatory requirements. Toyota provides them with number of tools, including web based Environmental assistance Network (EAN) and an online HazMat compliance training course, HazMat U.

5.1.14 Recycling

Toyota has facility of recycling of scrap metal, it scrap 99 percent what it generate. In addition to this Toyota recycle waste materials like paint solvents, plastics wraps, packaging and used oil as well. By introducing new processes Toyota has the ability to recycle copper glass, urethane foam and plastic made bumpers.

While on the other hand Toyota find alternate ways to produce less waste, for example, roller being used for anti chip paint instead of sprayer. By applying this application Toyota save paint, fewer emissions, stop utilizing the plastic masking and lower the cleaning costs. This process reduces wastes by 40%

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