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Case study: Using ISO 14001 KPIs to reduce waste in manufacturing

Constructing key performance indicators for your EMS is critical, if you do it correctly you can also save money by reducing waste. Here’s how.

Recently, I have been working with an organization in the manufacturing sector that produces decorative glass product for new and old residences alike – whether in your kitchen, bathroom, or just plain or sandblasted glass doors with logos and designs added – glass is all around us in our domestic and commercial environments. Recently, this organization has felt pressure from commercial customers and project managers, as ISO 14001 and also regional environmental compliance standards are becoming very important to the United Kingdom housebuilding industry. The organization itself used only basic financial KPIs (key performance indicators), so as part of the establishment of the new EMS (Environmental Management System) a whole new set of performance indicators had to be discussed and implemented. But, as with most ISO 14001 projects, establishing new KPIs also gave this organization huge opportunities to eliminate waste, save money, and improve processes. Let’s take a look at how this happened.

Developing KPIs to meet your manufacturing business’s needs

Developing a new set of KPIs that were in line with the ISO 14001:2015 standard presented this manufacturing organization with a huge opportunity. The discussions between team members really highlighted that for an element to become a KPI, it really had to be very meaningful for overall environmental and business performance; therefore, as well as becoming a KPI, continual improvement to this measurement would need to be planned for and undertaken. So, what were these new KPIs and how did the team come to decide on them?

  • Cost of waste per employee: Waste is a constant drain on financial resources, process time, and also a huge environmental negative in most manufacturing organizations. Analysis of processes and methodologies within a manufacturing organization can normally eliminate waste, though in the case of this organization a great deal of employee input, negotiation, and training was necessary to achieve the end improvement. The result was a 74% reduction in waste over a 12-month period, which not only signifies a huge improvement in environmental performance and raw material consumption, but a huge cost savings, which will appeal hugely to most manufacturing organizations. Accurately measure total waste, divide by employee, and you will have a meaningful KPI to drive improvement from.
  • Percentage of employee time used on “re-manufacture”: This is closely related to the KPI above, but measuring the time used in remaking pieces after process or operator error is a very useful KPI. When something needs to be remanufactured, environmental resources are required (potentially unnecessarily) to do this – utilities as well as raw materials have a huge cumulative effect on the environment where heavy machine operation and use of water jets are required. Measuring the time used on “remaking” pieces collectively for the process and using a root cause analysis process to minimize this will not only provide your manufacturing business with a meaningful KPI, but will allow you to improve your environmental performance in line with the ISO 14001 ethos.
  • Implement a realistic preventive maintenance program and measure parts spend: This is overlooked by many manufacturing organizations, but unnecessary inefficiency of machinery can have a major impact on process failures, which normally lead to mistakes, remakes, and extra utility consumption as described above. Effective preventive maintenance can also limit the amount of spare parts required, thereby reducing costs and environmental impact at the same time. Implement your program and measure its effectiveness in terms of machine downtime and cost. Analyze and adjust this as required, but remember that this KPI can fulfill the joint target of increasing profitability and reducing cost within your manufacturing organization.

Feeling the benefits in your manufacturing organization

In the article Driving your supply chain to ISO 14001 compliance we looked at the environmental benefits you can facilitate and encourage in your suppliers, and elements such as that and identification of your environmental aspects and legislation tracking remain critical to your ISO 14001 compliance. However, consider the KPIs above, and consider carefully how specifically constructed KPIs can not only reduce your organization’s environmental impact, but make your process more efficient and reduce costs.

The manufacturing organization used in this study reduced costs greatly, increased efficiency, and continues to improve its environmental impact with the improved knowledge it now has. Allied to that, the organization now complies with client requests to provide environmentally qualified product into new developments, and meets international and regional environmental requirements for tender and bidding processes. Is your manufacturing organization happy to miss out on these benefits?

Why not use our free  ISO 14001:2015 Foundation course to improve your knowledge?

Advisera John Nolan
John Nolan
John Nolan is a Fellow of the Institute of Leaders and Managers in the United Kingdom, and Prince 2 accredited with a background in Engineering and Electronics and Data Storage and Transfer. Having studied and qualified as both a Mechanical and Electronic Engineer, he has spent the last 15 years designing and delivering Quality Systems and projects across many sectors in the UK, including both national and local government.