NC State of Business

Industries have a history of “wrestling” with Legal regulatory requirements for environmental areas such as air quality, water quality, storage of hazardous materials and others. These mandates come from a variety of agencies ranging from Federal (US EPA) to State (NC DENR) to local (municipalities such as the City of Raleigh). When new rules are proposed, drafted, promulgated, and finalized – there is much debate, negotiations, and discussions on the rule itself as well as costs to be incurred for companies complying with the new rule.

Now there is a different scenario. Consumer based demands for Green Companies. It looks like we (consumers) are getting more environmentally savvy – and want out products to be manufactured in a “green” manner. We want
- High rates of recycling and reuse of materials
- Low levels of toxic pollutants discharged to the environment
- Small quantities of solid waste (packaging, cardboard, etc)
- High energy efficiencies
- Product design to minimize environmental impacts from usage and disposal
- Small carbon footprints
- Others

Of course the most well known example of this is Walmart’s request to suppliers – to supply information on 15 questions ranging from - What is your Green House Gas emissions (Carbon Footprint)? -To- What is your total amount of waste generated? If the federal government mandated these requirements to companies – you could bet there would be an outcry of “unfair burden to manufactures” – or – another “unfunded government mandate”. However, if the request is coming from a company’s “customer” – most suppliers will quickly comply – in order to maintain existing contracts.

The world is changing. Information availability is incredible. And Environmental Footprints for most companies – will be available on-line. Walmart Senior VP of Sustainability Matt Kistler envisions labeling all products sold at Walmart with a Sustainability Product Index (SPI) – akin to the nutritional label used for foods. Perhaps one can of tennis balls would have 5 stars on the SPI to indicate excellence in Environmental Sustainability, where as another can may only have 4 stars. Will the average Walmart shopper incorporate this information into their decision to purchase? That is left to be told – but we can expect the answer - soon.

The famous “Golden Arches” indicate the McDonald’s restaurant, regardless of the country in which you are located. The universal symbol of a cigarette with an X marked through it indicates that smoking is not allowed, regardless of the country. For chemical classification, the symbol for a toxic or flammable chemical may be different in the US than in other countries where chemicals are imported or exported. In fact, within the US we currently are charged with understanding the classification and labeling of hazardous chemicals between various regulatory agencies: Department of Transportation (DOT), Environmental Protection Agency (EPA), Occupational Safety and Health Administration (OSHA), and others.

Enter the Global Harmonization System (GHS), an internationally harmonized approach to classification and labeling of chemicals. This voluntary system provides the foundation for all countries to develop comprehensive national programs to ensure the safe use of chemicals. In other words, a chemical labeled with the words “Highly Flammable”, and a symbol of a flame, has the same meaning in the US as in Italy.

GHS introduces standard elements for chemicals:

• Hazard statement- phrases assigned to hazard categories; e.g. “Harmful if swallowed”
• Pictograms – symbol inside a diamond with a red border; e.g. a skull and crossbone
• Precautionary statement - phrases describing measures to minimize or prevent adverse effects
• Product identifier - Names or numbers used on a hazardous product label or in a safety data sheet
• Signal word - One word used to indicate the relative severity of hazard; e.g. “Warning” or “Danger”
• Supplier Identification - name, address and telephone number of the manufacturer or supplier of the substance

Keep in mind that this system is voluntary, and the US has yet to fully embrace the implementation of GHS. However, in the past week OSHA issued a proposed rule to adopt the Globally Harmonized Hazard Communication System. This is a tremendous step in aligning the OSHA Hazard Communication standard, 29 CFR 1910.1200, with the elements of GHS.

The EPA presents methods for implementation of GHS within their organization.

How does this affect you? If you manufacture, import, and/or export chemicals, you will be classifying and labeling your products according to this international system. Employees that handle or store chemicals will need updated training on the identification of hazardous chemicals in the workplace. And perhaps in the US we can enjoy regulatory agencies that align their definitions of hazardous chemicals.

In my last blog post, I highlighted the strength of manufacturing output and exports. These statistics may appear contradictory to the prominent attention given to manufacturing job loss. Yet, did you know that the decline in manufacturing employment has been taking place since an employment peak in 1979?

Let me suggest the contradiction in strong manufacturing output and job loss is related to several factors. Indeed, these factors help explain the paradox between the strength of manufacturing output in the face of manufacturing employment decline. It is important to understand these factors and recognize the important role we have to keep manufacturing strong. I will focus on two factors.

First, competitiveness in any industry relies partially on being productive. Simply stated, this means producing more outputs with less inputs. Therefore manufacturing outputs can remain strong while fewer inputs, such as labor, are needed. As technology has been integrated into manufacturing processes less labor, particularly low skill/ low wage jobs, are needed. While manufacturing output remains the greatest contributor to North Carolina’s Gross State Product, the number of people needed to produce these outputs has declined. This is good for us as consumers as we watch product costs decline and as citizens while we witness an increase in high skill/high wage jobs. Furthermore, increased outputs can be exported bringing new money into the local economy.

Second, the outsourcing trend has gained tremendous momentum in recent decades. Manufacturers have focused on outsourcing “non-core” processes in order to devote resources to enhancing productivity and performance of their core processes. In other words, logistics and transportation, attorneys, and many other professions that were once on a manufacturer’s payroll are no longer. Consequently, positions that used to be counted in manufacturing employment numbers are now counted in other occupational categories even though their primary customers may be manufacturers.

These two factors, productivity and outsourcing, should offer you optimism that we can affect more than we may realize with respect to the success of North Carolina’s manufacturing. This optimism should be a call for action to support this vital economic sector. Here are a few of my ideas for supporting manufacturing success in our state:

1) Advocate and educate about manufacturing’s role as a vital economic engine.

2) Market manufacturing as a viable career choice. Over twenty manufacturing occupations are expected to have “average” to “much faster than average” growth nationally. Yet, this message does not appear to be getting out.

3) Align education and skills development with the growing high technology jobs needed for manufacturing productivity.

4) Support manufacturers in their development of innovation. For innovation, I mean both new approaches and products for customers as well as continuous improvement of processes within the organization.

These are just a few ideas….....what are yours?

Over the Labor Day weekend, one of my closest friends completed her first half marathon. It was a great accomplishment mostly due to the fact that she used to be overweight. A little over 3 years ago, she decided to get healthy and joined a gym.

As she told her story, I could not help comparing her experience with some of my clients that have made a decision to become a world class organization. I know it is an odd comparison, but let’s try to match the principles behind the continual improvement process in both cases.

My friend started by setting goals and deadlines to accomplish them. It was important that she knew where she wanted to go. Companies striving for world class status must also set such a goal.

My friend looked for experts in the health area to help her to create a plan and to coach her along the way. When she saw the plans, she got discouraged as they covered a long period of time. However her coach explained to her that they had to be realistic and that she should start focusing on small pieces of the plan at one time… “try to achieve the milestones, don’t look at what you have left, but look at your accomplishments, and how you will move forward”. I thought wow! That is the same type of response I give my clients when I explain that their process to become a world class organization may take them several years.

During the first year of my friend’s journey, she took small but steady steps. She started walking and doing some weight training. She could hardly see improvement until her coach told her that she was ready to run. Actually, running was something that she never thought would be possible. So she started running short distances first until it became easier. Just being able to run was a great accomplishment. We see the same with clients. When they start, they have to handle small steps at a time. Early programs sometimes do not seem like much progress, but those small steps are necessary to lead us to reach our goals.

At the end of the second year, my friend was running her first 5K race. Then a year later… a half marathon. She couldn’t believe she actually did it, and now she is thinking of her next challenge. Looking back, the long term plan she drafted with her coach has been completed and even exceeded. The same happens to organizations when they achieve their early goals. They quickly forget as they raise the bar about how differently they feel about the challenge. What once seemed so far away has been reached and in some cases exceeded.

“Champions do not become champions when they win the event, but in the hours, weeks, months, and years they spend preparing for it. The victorious performance itself is merely the demonstration of their championship character” ~T. Alan Armstrong

So often in the past, I have seen companies devote huge amounts of cash, personnel, materials, and other valuable resources on initiatives and strategies without putting forth the upfront work to make sure that all of the effort will yield a bountiful harvest. While I am sure the reasons vary and all appear to be justified, I have always been amazed that so much hinged on so little actual sustenance. I am starting to see a change in this type thinking.

My clients have been much more focused on: what type results they should expect, how they will get the results, what commitment level will be required, and so on. I have always gotten these type questions; but, now I see significantly more focus on the details. This may be one of the few pluses of the current slow economy. Maybe now, leadership is more cost conscience? Maybe it is lack of funds? Whatever it is, folks are asking the right questions.

On your core initiatives, make sure you are asking the right questions. Here are a few that I think need answers:

(1). How and to what extent will this help you? Dig down into the weeds here. Do not just accept that you will benefit. Will this benefit your customers? Your company finances? Your associates?

(2). How much will you have to commit? Time, money, materials, organizational involvement, supplier involvement, customer involvement, etc…

(3). Do you have the expertise to execute the initiative? Can you draw help from other sources in your company? Do you need outside assistance?

(4). Do you have time to make this happen? Most changes do not happen in short periods of time. Avoid running out of gas before you get a successful implementation by making sure you are robust in PDCA.

(5). Will your culture support the initiative in both the short and long term? If not, this will have to be addressed or failure is certainly a likely outcome.

I believe you have to have these and other core questions answered in detail as part of your upfront work. If you do not know where to start or what questions to ask, please call us at IES. We know the questions to ask and can provide real examples and data to support your efforts.