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Greening the Supply Chain

Greening the Supply Chain. WEC Asia-Pacific Roundtable October 18-19, 2005 Karl F. Schmidt VP, WW Process Excellence. Agenda. J&J background Supply Chain areas of focus Case studies/Examples Benefits. Overview / Strategic Principles. Most broadly- based Human Health Care Company

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Greening the Supply Chain

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  1. Greening the Supply Chain WEC Asia-Pacific Roundtable October 18-19, 2005 Karl F. Schmidt VP, WW Process Excellence

  2. Agenda • J&J background • Supply Chain areas of focus • Case studies/Examples • Benefits

  3. Overview / Strategic Principles • Most broadly- based Human Health Care Company • 114,000 employees, 3 major segments • Decentralized Management • 200 companies, 57 countries • Manage for the Long Term • 72 consecutive years of sales increases • 43 consecutive years of dividend increases • Credo-based values • Customers, employees, community, shareholders

  4. Supply Chain Areas of Focus • J&J WW Environmental Program • Vision, Goals, policy • Initial focus: risk reduction • Current: includes operational efficiencies • WEC Cleaner Production Project • Mexico, Brazil • EPA / Green Supplier Network • Specific projects applying Lean production

  5. Environmental Vision “We are committed to environmental leadership, instilling the highest environmental values in all employees, utilizing the best environmental practices in all we do, and focusing on global sustainable growth.”

  6. Site Remediation Non-Hazardous Waste Handling and Storage PCB’s Chemical Emergency Preparedness Storage Tanks Commitment & Policy Air Environmental Planning Drinking Water Wastewater Checking & Review Implement & Operate Hazardous NPO 2001-2005Global Standards & Goals Key Business Benefits: • Enhances Reputation • Reduces Regulatory & Market Risks • Builds Credibility in our Communities • Reduces Cost & Improves Operational Efficiency External Manufacturers Supplier Responsibility

  7. Supply Chain - Why does it matter? • Increasing Volume and Dollar ($) spend on Suppliers and External Manufacturers (EM) • Knowledge / control of suppliers and EMs can be limited: • Compliance , safety and regulatory risks • Labor concerns • Business Continuity Planning issues • Public expectations and risk to reputation

  8. External Manufacturer (EM) Metrics Dashboard Criteria

  9. “Win – Win” for Risk Reduction 2004 EM Assessment Status* • Over 300 EMs audited since 1999 • Now <2% Repeat Marginal ratings • No Repeat Unacceptable ratings • Janssen’s Success with Hanjiang Pharmaceutical • McNeil’s Success with Cardinal Healthcare * N = 1250 EM in database

  10. Increasing volume by external 3rd party Product Development Distribution Use Manufacturing Before Supply Chain-Scope of Environmental, Health & Safety Involvement Now and future

  11. WEC: Capacity Building for Environment “Greening the Supply Chain Project” Focus: drive environment and sustainable development among SMEs in the developing world What: leverage influence of MNEs to promote Cleaner Production and Energy Efficiency improvements among the thousands of supplier SMEs Who: partnership with WEC, USAID, MNE (both Corp and in country), local technical partner, supplier SME How: 2 day training workshops, technical visit/assessment of opportunity, action plan and follow-up report Benefits for Supplier SME • Increased competitiveness (less waste, increased efficiency, lower cost) • Market responsiveness (more attractive for other MNE to use) • Promotes sustainable development (social/economic/environment gain)

  12. J&J/ Supplier Examples in Mexico and Brazil • J&J Mexico and J&J Brazil hosted 2 supplier sessions with World Environment Council (WEC) in • Pueblo, Mexico, 12 suppliers • Sao Jose dos Campos, Brazil 13 suppliers • Typical Pilot Impacts: • Printing Co: $26,500/yr in recycling/avoided disposal • Packaging Co: 100,000 gal/yr water savings • Chemical Co: add’l $8,000/yr revenue for cleaned drums 13 key suppliers are participating in Lean Manufacturing Assessment project in Brazil - Kick-off meeting held in April, 2004

  13. Green Suppliers Network (GSN) An Innovative Industry-Government Collaboration including • EPA/GSN/ Dept of Commerce, OEMs • Green Suppliers provides “Lean & Clean” technical assistance to small and mid-sized manufacturers yielding improved competitiveness through environmental and economic benefits • Lean & Clean approach expands the traditional Lean definition of waste from eliminating non-value added time, labor, money to include environmental wastes (energy, emissions) • Since 2004, over $9.7MM in savings from just 20 projects

  14. Lean & Clean Approach Lean Eliminates... • Defects • Overproduction • Waiting • Non-utilized People • Transportation • Inventory • Motion • Extra processing Clean Strives For... • Nature-friendly Substitutes • Optimized Material And Energy Efficiency • Waste Elimination • Air/Water Emission Reductions • Solid/ Haz Waste Reduction • Toxic Material Reduction Or Substitution • Efficient Packaging

  15. How Green Suppliers Network Works Step 1. EPA engages one or multiple OEMs Step 2. Facilitate Supplier Engagement Step 3. EPA engages Tech.Consultant to provide Lean and Clean assistance to supplier Step 4. Tech. Consultant works with supplier facility to identify, prioritize and implement solutions that achieve business and environmental results Step 5. Consultant aggregates data for EPA and OEM Step 6. All cost savings and company sensitive data remain with supplier

  16. Lean Thinking and Continuous Improvement • Lean Thinking is a Systematic Approach of Identifying and Eliminating Waste (non-value-added activities) Through Continuous Improvement • Green Suppliers Network Reviews Focus On The First Three Steps • Use of Six Sigma and Lean tools: • Process maps • Root cause analysis • Value Stream maps Understand the Current State Standardize Processes Analyze System Conditions ContinuousImprovement Generate Options for Improvement Evaluate Performance Implement

  17. Benefits to J&J US EPA ,US Department of Commerce , Green Supplier Network partnering with J&J local company suppliers in Puerto Rico • Suppliers trained in Lean, at minimal cost to J&J • Suppliers reduce waste, save money, improve cost • Collaboration with government agencies enhance reputation Typical supplier savings (1st project with bottle supplier) • $180,000/yr from “leaned” changeover process • Now able to replicate on other internal processes

  18. Summary “Greening the Supply Chain” Benefits: • Enhances Reputation • Reduces Regulatory & Market Risks • Builds Credibility in our Communities • Reduces Cost & Improves Operational Efficiency • Promotes Sustainable Development

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