Many companies focus on production, sales, marketing, and efficiency. The companies that do certainly have potential to earn revenue, but what about production costs, or the one part those companies are not concentrated on, waste disposal costs. Companies that produce items, also produce waste. Waste is created from every part of the production process. Even daily business activities produce some form of trash or waste.
Operations managers who are worried about costs could find solace in environmentally friendly practices. Costs can be reduced by the use of By-product Synergy (BPS). By-product Synergy is reusing wastes from products to create other products. For example, a steel company can use steel waste to produce concrete.
HBS Assistant Professor Deishin Lee conducted research to see how beneficial BPS can be. Lee’s research focused on industrial processes and Lee used an analytical model to prove her point. The results of her research were companies that use BPS have a potential advantage, reduced costs, and successfully found a new source of revenue.
Instead of throwing things out, people find new ways to use waste. This gives those companies a way to look at their own products in a different light. Companies that use BPS also think outside of the box. Creating new products, and expanding the product lines becomes a little easier, since finding new functions for products are similar to finding new functions for waste. The benefits of BPS is that it reduces the cost of operations by reducing the cost of waste, and also increases revenue by either selling the waste to manufacturing plants that can use it, or creating items themselves.
Operations Managers need to consider how to cut costs, increase efficiency, and dispose or not dispose of waste. In order for a company to make the switch to a system that reuses their waste. That company would have to have an owner willing to make the switch, people holding upper positions in the company who are also willing to make the switch, and an amazing operations manager who will do the research and create a plan.
Once the plan is created, the operations manager would then have a project to oversee and that means they need to design a very good project plan, find the critical path, and have close to perfect estimates for crashes. This is an elaborate project which will be difficult. That operations manager would have to redesign production process that incorporates By-product Synergy.
A company that only focuses on their manufacturing process and not their waste only focuses on half of the production process. The questions they are most concerned with answering are, what is the product? How is the product made? Where does the product go?
A company that use BPS also asks, “what are your resources, and how can we organize to maximize the value we create?” (Quote found in article). This is also a new way of thinking and looking at efficiency, which is a very important concept that operations managers are always looking at.
Article by: Michael Blanding
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