Isao Yoshino, known for Learning to Lead, Leading to Learn, once told us, "There's no secret at Toyota - we're just serious, that's all." With all the noise about the environment, it's hard to think through this important topic and set your mind to it. Let's try to think seriously.

The paradox of our time

Let's face it, we live in times of profound paradox. On the one hand, to save the planet, we must consider de-growth, reduce overall consumption and stop pulling so hard on natural resources, and reduce the greenhouse gases we produce in the process. On the other hand, you cannot step outside without being invited to consume, consume and then consume even more. We still measure national economic strength in GDP growth and business success in terms of growth and profitability.

So...how can this work?

From customer to production

Instead of starting with the extraction and production part of the process - where we agree the waste is huge - let's find our way by thinking from the customer end. I was perfectly happy with my Internet router until my provider harassed me (with endless phone calls)to upgrade - only to have the expected installation problems. Now the router gives me email, where I receive endless supersaver offers to buy or do things I wouldn't think of in a million years. When I go for a walk, every store window has a "sale" sign on it. Now our brains are wired to spot a "good deal" and jump on it. As researchers on influence have shown, people have no defense against "new" or "cheap" other than steel self-control.

But why are so many things on sale or offered at reduced prices? Surely they are not designed that way? Are margins really calculated so that everything can be offered at half price? It seems unlikely unless you have stock to unload. Once the goods are there, you have to sell them, even if it means losing money per item. Old stock just has to go away until it becomes worthless - the real price of each item drops every day it goes unsold. There is an obvious loss function.

Why do stores have so much stock to unload?

Because the warehouse received a huge load of freight - that was decided months and months ago, long before anyone knew what the real demand would be. Why the overproduction? Well, because the actual production is probably several boat and train rides away and shipping takes weeks at best, so this has to be planned. In any case, manufacturers discount prices for volume to keep their machines running.

So why are machines so poorly utilized when you visit factories? This is getting a little nerdy, so follow my reasoning here. With large batches, you can only plan so much production in a day:

If the batch build time is large, you can only fit one in a day and lose the rest of the time. If the batch build time is larger than the day, you need overtime or consume part of tomorrow. Any way you look at it, big batches just don't fit. But if you halve your batches and produce in sequence, you can now better utilize your machines on more available time.

This is not perfect: you'll still have some lost production time and inventory, but of course you can resize batches and schedule higher-demand products more frequently, and so on, until you get closer and closer to one-piece flow.

The closer your batch size gets to replenishing real demand in "sell one, make one" just-in-time style, the better use you will make of your available time and the less inventory you will end up having to sell at a discount. There's another way this dynamic will affect you: you'll stop distorting demand by tricking customers into buying items they don't need, simply because they're so GOODLY!

The impact of long supply chains

Moreover, the argument for making things far away and expanding supply chains around the world is that you get a better price per kilo -the bigger the batch, the lower the price. As we know from Seeing the Whole, demand variation (also called the Forrester effect, small variations in end-customer demand are amplified by the supply chain) gets worse at each step in a supply chain - and quality deteriorates. Basically, the longer the supply chain, the larger the batches and the more numerous the quality and delivery errors. It's just crazy.

Sure, accountants will lead you to believe that this all makes sense because they assume that switching costs and poor utilization are fixed - they've never heard of kaizen or SMED - but their assumptions are simply wrong. Accounting logic is:

Find the cheapest largest batch supplier. Negotiate volume price discounts. Overproduce according to demand on the ERP. Offer discounts to customers to unload inventory. Now this logic is full of holes, from unhealthy assumptions:

1. Find the cheapest largest batch supplier. This always means moving production to the "lowest cost" country, which involves huge transfer costs.
2. Negotiate volume price discounts. Price discounts offset by non-quality and non-delivery underutilization costs.
3. Overproduction based on demand in the ERP system. Customer demand is always approximate because no one has a crystal ball to anticipate demand that far in advance. But also because delays in the flow of information skew any prediction.
4. Offer discounts to customers to unload inventory. Push the customer things they don't really need, at a reduced margin, instead of letting them make real choices at real prices and make a fair profit.

Overconsumption at the customer end is actually driven by an addiction to massification on the supply side.

We just don't have to live this way. By leaning supply chains, we can reduce both overconsumption and its environmental impacts while maintaining our lifestyle by using the same products and services as we need them (we would probably be better off without so many messages fighting for our attention and telling us to buy more now because it's cheap, anyway). Staying closer to customer demand would also make for more meaningful innovation because we could see more quickly what sells and what doesn't and suggest new offerings(products/services) accordingly.

Buying something you don't need, no longer using an object, not maintaining or refurbishing what you have and making poor use of capital ... these are the real culprits. An idle machine is still sitting in a heated, lit hallway.

Politicians try to influence our choices by forcing us to buy "greener" products - like the reckless push for all-electric cars, even though no one knows exactly what their carbon impact really is. At the same time, mass marketers keep bombarding us with "buy" messages for stuff we don't need right away - doing their best to make it hard for us to resist our instincts to go out savannah (i.e., main street) and not come back empty-handed. However, the root cause of all this is the producer's poor understanding of their supply chains and delegation of everything to machines, ERPs and accountants.

Clearly, the fight against climate change, consumption and emissions cannot be reduced to ... SMED. Yet we must understand the logic that makes the whole system run on systematic overproduction. It is not even that deliberate, not a matter of "why" but of being driven by the "how" - the how of how we do things, not the intelligence of studying waste and its causes. Instead of choosing to apply human intelligence and economy to their production patterns, most large companies have chosen to automate the absurd thinking of predict-and-stock rather than sell-one-make-one. I have highlighted one mechanism here, but there are many other forms of mura(variation) that lead to muri(overload) and thus muda(waste) that, collectively, have a significant impact on our results.

As Yoshino-san tells us: let's be serious. Lean Thinking is green thinking. By seeing the whole value stream and looking at the huge wastes caused by obvious misconceptions, we can also see how flawed the logic is around resource consumption and emissions. I doubt we will be able to change collective patterns of behavior without first changing the thinking and incentives that drive them. The colibri strategy of one day-one action sounds appealing simply because we don't know how or where else to act ... except that we do! Look for waste, solve problems. Be serious about green.

^Author