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Influence of the lean approach on corporate
environmental sustainability: a case study

Matteo Ferrazzi<sup>1[0000-0001-9035-0773]</sup>, Stefano Frecassetti<sup>1[0000-0002-9649-314X]</sup>, and Alberto Portioli
Staudacher<sup>1[0000-0002-9807-1215]</sup>

¹Politecnico di Milano, Department of Management, Economics and Industrial Engineering, via Lambruschini 4, b, Milano, Italy

matteo.ferrazzi@polimi.it

Abstract

The past few decades have witnessed relentless economic growth and increased human welfare due to extreme competition from companies globally and increasingly demanding users. This has led to extreme exploitation of natural resources, with dramatic consequences for the environment. In the coming years, the transition to more environmentally sustainable models must be central for companies. One possible solution for manufacturing companies, is to address environmental sustainability needs by developing a Lean approach. In recent years, the Lean approach to environmental sustainability has gained increasing attention, both from academia and companies. Nevertheless, there are still several aspects to investigate on the influence of the lean approach on environmental sustainability. This paper through the analysis of a case study of an Italian manufacturing company shows how the use of the lean approach, through the A3 problem solving framework, enabled the company to improve its sustainability performance. Specifically, the company was able to identify and eliminate non-value-added handling in its warehouse, decreasing forklift kilometrage and consequently limiting fuel consumption and CO2 release.

**Keywords:** lean approach, lean management, A3 problem solving, sustainability, environmental sustainability, CO2

# 1 Introduction

In recent decades, economic growth and increased human well-being around the world have come at the cost of rapidly increasing natural resource use. The debate has increasingly focused on how to reduce the use of raw materials and energy globally while keeping pace with a changing world [1,2]. Today, the transition to more sustainable management solutions is a central topic for companies in all sectors. The concept of environmental sustainability must now be a priority for managers everywhere. Companies have been forced to rethink their management and operational strategies, seeking to remain competitive in the marketplace while at the same time reducing their impact on the environment [3,4]. Among various solutions, one possible for manufacturing industries is to address environmental sustainability needs by
developing a Lean approach [5,6]. In recent years, the interaction between the Lean approach and environmental sustainability has gained more and more attention. Because of its rationale, which aims for production that optimizes resources and reduces waste, adopting a Lean approach is a solution that could push organizations to take advantage of a more sustainable rationale [7]. It is therefore interesting to investigate how lean methodology can be a tool for companies to improve their sustainable performance. The lean approach has among its fundamental pillars the reduction of waste, seeking to apply the vision of "doing more with less"[8]. The Lean Green approach is a current headline topic for both companies and academics. By its logic, the Lean approach is a solution that could prompt organizations to rethink their operations with the goal of embracing sustainability [9,10]. Nevertheless, according to some authors, there is a need to better understand the compatibility and impact of lean initiatives on sustainability [11,12,13]. The literature review was crucial in trying to identify some still unclear aspects of the influence of the lean approach on environmental sustainability. The papers analyzed for the literature review clearly express that, the lean methodology has helped organizations achieve operational excellence and, in this way, achieve organizational goals such as profitability, efficiency, responsiveness, quality, and customer satisfaction [14,15]. However, the effect of this approach on environmental performance is still unclear, as little empirical research has been conducted in this area. The literature review has shown that there is a positive influence of the lean approach, on environmental sustainability [16,17,18]. This influence, however, is not always manifested in the same way. In most of the cases studied, the influence of lean management is positive and brings benefits in terms of increased sustainable performance. For example, through the work of Garza-Reyes et al., 2018 [19], it is explained how five of the most important lean techniques (JIT, autonomy, kaizen/continuous improvement, total productive maintenance (TPM), and value stream mapping (VSM)), can influence four different environmental performances (material use, energy consumption, non-produced output, and pollutant release). This study shows that companies with the lean approach have seen most environmental performance improve. However, in some contexts the lean approach did not lead to the desired results, in terms of environmental sustainability. An analysis of another study by Dieste et al. 2019 [20], through a review of existing literature, shows that the impacts of lean practices do not always have a positive effect on sustainable performance. In fact, a portion of the analyzed studies claimed that the use of some lean techniques has a negative impact on the sustainability of companies. In addition, the identification and resolution of problems related to environmental sustainability is a topic that has yet to be studied. The lean methodology over the years has developed a framework capable, through sequential steps, of targeting and solving specific problems in even very complex environments [21,22]. The framework is known as the "A3 model."

It is clear from the literature review that there is a lack of empirical studies that confirm the positive impact of the Lean approach on sustainable performance. The main objective of this research is, through the analysis of a case study, to investigate the influence of lean on environmental sustainability and how this influence manifests itself. Specifically to fill the gap in today's literature, this paper seeks to answer the question, "If and how Lean approach is able to positively impact
sustainable performance?". Specifically, this paper seeks to understand how the effect of the lean approach, using the A3 problem-solving framework, affects a company's sustainable environmental performance. As anticipated, this research is based on the analysis of a single case study of an Italian manufacturing company that, thanks to the A3 model, managed to optimize its internal logistics movements, reducing fuel consumption and consequently CO2 emissions. The following paragraphs will present the case study, how the company tackled the problem by following the steps of the A3 model, and finally showing the results obtained.

## 2 Methodology

The case study proposed in this paper, considers an Italian manufacturing company, a leader in the production of tapes for the automotive sector, professional craftsmen, and industry, as well as for end users. The core business focuses on packaging and wrapping solutions, and in industrial production, on products for wrapping and fixing wiring harnesses and surface protection in the automotive industry, as well as for splicing, sealing, and repairing. The first warehouse is the largest and is mainly dedicated to raw materials used by all types of machines, while semi-finished products, packaging materials and resins are stored in the second. The case study analysis focused on material flows in the plant to increase logistical efficiency, optimize space, reduce transfer times, and increase operator safety. The company also has environmental sustainability as its first goal and consequently pushes everyone to work toward building green and lean operations. The main objective of the analysis in this case study is to understand how the 'use of a lean approach can help increase sustainable environmental performance for the company. Specifically, the company wants to reduce fuel consumption related to nonvalue-added movements made by forklifts.

### 2.1 Application of the lean approach through the A3 model

The problem analyzed in the case study was addressed using the lean approach of the A3 problem solving framework. The A3 methodology is a structured approach to problem solving and continuous improvement, first used at Toyota and typically used by lean manufacturing professionals. It has been used by various cases in the literature [19, 20]. The following will explore how the company addressed the issue of environmental sustainability by going through the PDCA (plan, do, check, act) steps of the A3 model (see Fig. 1).
<figure><img src="image_2.png" /><figcaption>Fig. 1. A3 problem solving framework: PDCA steps</figcaption></figure>

## 2.2 Problem statement and problem background

Movements within the warehouses were the focus of the analysis because forklift movements are more frequent than in other areas of the plant. Based on the analysis of material receiving data, layouts, infrastructure, and warehouse strategies, the area where to go for change was identified. There is a lack of standardization in the raw materials warehouse, as positions for each product are not assigned in an optimized manner. Therefore, because of this problem, forklifts must travel a greater distance than required to locate/pick up products from their assigned positions. Due to the unavailability of storage racks, forklifts must make many extra movements. The company is aware that standardized material handling procedures and new warehouse strategies can generate benefits if well utilized, so it has become a priority to find a way for all operators to execute the change with a unified approach, which is reflected in a decrease in forklift miles traveled and consequently a reduction in CO2. Movements in the raw materials warehouse are more complex and have more room for improvement in terms of forklift operations, so the company decided to take the first corrective actions for environmental sustainability in this specific area. Next, to identify in greater detail the problem to be attacked, an ABC analysis was carried out on the inventory in the warehouse. ABC analysis is an inventory management technique that determines the value of items in inventory based on their importance to the business. ABC analysis ranks items based on demand, cost, and risk, and inventory managers group items into classes based on these criteria. This helps business managers understand which items are most critical to their organization's financial success. The company conducted the ABC analysis in terms of the number of movements in inventory considering the total movements made from January 2021 to March 2022. The analysis showed that 3.37% of the material was responsible for 70.16% of the number of movements. This analysis shows that there are very few categories of materials that contribute to most movements
in the plant, but the strategy is the same for almost all materials. Once the company identified which materials have the greatest impact on the total warehouse movement, it mapped the non-value-added movements by dividing them into the five different categories, estimating for each the average number of kilometers traveled by forklifts (see Graph. 2).

* Extra movements in inbound logistics: In receiving goods into the warehouse, raw materials are temporarily stored in unsuitable locations due to limited warehouse space. Total Non-value-adding distance travelled = 1793 Kilometers / Year

* Extra movements to place goods on shelves: due to poor selectivity in the warehouse, forklifts make extra movements to select the desired material. Total Non-value-adding distance traveled = 433.47 Kilometers per year

* Extra movements to place goods for next shift: given the limited space available in both production departments and the warehouse, materials needed for the next shift are left in the aisles, causing extra movements. Total Non-value-added distance = 1802 Kilometers per year

* Incorrect/missing placement of identification labels on materials: mishandling of material labeling leads to avoidable handling. Total non-value-added distance = 624.5 Kilometers per year

* Non-optimized warehousing strategy: Material is randomly assigned to locations based on available free space. A partial strategy exists, but it is not formulated in an optimized manner. No ABC analysis is performed to define the material strategy. Total non-value-added distance = 4000 Kilometers per year

<figure><img src="image_3.png" /><figcaption>Graph. 2. Non value added distance (kms per year)</figcaption></figure>

## 2.3 Targets

Once the problems related to material handling in the raw materials warehouse and the associated miles to the year of nonvalue-added handling were identified, the company decided to set targets for improvement. The quantitative targets defined by
the company were essential both to have objective feedback on the improvement project and to always have a trail to follow when implementing countermeasures. The company estimated, for the five categories of moves explained above, a reduction in km per year ranging from 60% to 80% for must-have targets, up to 95% for nice-to-have targets. The company estimates to decrease the number of kilometers traveled in a year from 5770 to 7129, going to significantly impact the decrease of CO2 emitted by the forklifts.

## 2.4 Devolving countermeasures, implementing, and monitoring

The company after identifying the targets for improvement focused on analyzing the root causes related to the problems identified. The causes identified below are related to the reduction of non-value-added movement.

The causes are:

* Goods for the next shift are stored in the main aisles of the warehouse.

* Forklifts move around materials due to mislabeling.

* There is no interconnection in the forklifts.

* The efficiency of forklifts depends on the skill level of the operators.

* Material is not taken directly to the shelves after unloading.

* There are no assigned spaces for products.

Once the root causes of non-value-added goods handling problems were identified, the company developed seven different types of countermeasures, which go directly to attack the root causes. The first countermeasure was the construction of dedicated shelves for Class A material in terms of the number of movements. These shelves should be located near the exit/entrance gate of the warehouse. Since the installation of the shelves involves large capital investment and long construction time, it was planned to develop another solution that requires no capital investment until the shelves are installed. The strategy of placing the semi-finished products closer to the entry/exit point and grouping them according to the plant's processing shifts was changed. Using FIFO logic, materials are placed near the entry/exit point of the warehouse following the order of the processing shifts (Grouped as materials used in the 1st, 2nd, 3rd, 4th shift). Other countermeasures implemented are related to the mismanagement of material labels. The company decided to purchase portable label printing machines and integrate them with SAP. With the help of this machine, operators would be able to affix labels to materials while they are still inside the truck and take them directly to their assigned spaces. The second countermeasure is to sensitize suppliers to put the material in the trucks so that the labels are facing outward to facilitate unloading by the operators. In addition, the material is only labeled on one side, so when the forklift picks up a unit of material, there is a 50 percent chance that the label is on the other side, so the forklift must move to pick it up. As a countermeasure, affixing labels on both sides eliminates unwanted movement of the forklift around the material to handle it. To facilitate more complex unloading and placement of materials in the warehouse,
forklifts should be equipped with GPS for better interconnection. If a forklift needs another forklift, the operator can send a request to the system, and it will be received by the nearest operator. If the latter rejects it, it will be passed on to the next nearest operator. In addition, the provision of single-ear headsets to the forklift operator would reduce the non-value-added time he or she spends answering calls with the forklift still on. Finally, as a last countermeasure, the company developed new warehouse strategies by optimizing handling. For the distance traveled to be minimized, materials with high handling must be kept closer to the point of entry/exit. Therefore, the company decided to place materials that move most with high frequency near the entry/exit point, ensuring that units of the same size remain grouped together.

<table><caption>**Table 1.** Relationship between problem, root cause and countermeasure</caption><thead><tr><td>Problem</td><td>Root cause</td><td>Countermeasure</td></tr></thead><tbody><tr><td>Non-optimized warehousing strategy</td><td>Goods for the next shift are stored in the main aisles of the warehouse.</td><td>Changing warehouse strategy</td></tr><tr><td>Extra movements to place goods for next shift</td><td>Forklifts move around materials due to mislabeling.</td><td>In-ear headphones</td></tr><tr><td>Extra movements in inbound logistics</td><td>There is no interconnection in the forklifts.</td><td>Putting labels of both sides of the material</td></tr><tr><td>Incorrect/missing placement of identification labels on materials</td><td>The efficiency of forklifts depends on the skill level of the operators.</td><td>Installing the labelling station near the unloading area</td></tr><tr><td rowspan="2">Extra movements to place goods on shelves</td><td>Material is not taken directly to the shelves after unloading.</td><td>Changing the strategy of how to prepare the material for the shift</td></tr><tr><td>There are no assigned spaces for products.</td><td>Installing shelves<br>Installing GPS for interconnectivity of the forklifts<br>Efficient training modules for the forklift operators</td></tr></tbody></table>

As can be seen from the above table (see Table 1), there is a clear link between problem, root cause and countermeasure. Finally, the countermeasures to be implemented were classified according to two criteria, commitment, and impact. As a
result, the seven countermeasures were clustered into four different groups. In this way, the company was able to define the priorities, resources to be invested, and the timeline for implementing the countermeasures (see Fig. 3).

<figure><img src="image_4.png" /><figcaption>Fig. 2. Countermeasure implementation matrix</figcaption></figure>

## 3 Results

The company using the A3 framework was able to identify several countermeasures to limit non-value-added forklift movements. The company identified possible root causes and developed countermeasures to eliminate each of the identified problems. A total of seven countermeasures have been developed. The company estimates that through their implementation it aims to save about 17,000 to 21,000 euros per year and between 5700 and 7100 km per year, so perfectly in line with the targets shown above. In addition, two of the countermeasures include only changing the warehouse strategy and do not require any capital investment. About 40-50% of the total savings come from these solutions. While all other countermeasures require a capital investment, which the company will pay for because it is aware of the huge impact it will have on fuel savings and consequently on the company's sustainable performance. In fact, the company has been very pleased that it has met its goal of reducing CO2 emissions through this lean problem-solving approach. The company estimates that the project will be able to reduce the carbon footprint created by the handling of the forklifts, aiming to reduce CO2 emissions from 14 to 10 tons. Also, as
a side effect, some of the countermeasures have also had an impact on increasing the safety of forklift operators. The effectiveness of these countermeasures is difficult to quantify, but the feedback received from operators and the logistics manager is very positive.

# 4 Conclusion

The lean approach proved essential in addressing and achieving the sustainability goals the company was aiming for. Through this satisfying project, the company gained awareness of the impact of its internal logistics processes with the goal of improving its environmental performance. Using the lean approach, through the adoption of the A3 methodology, the company managed to reduce the miles traveled by forklifts in its warehouse. Starting with the goal of improving sustainable environmental performance, the company using the A3 methodology was guided throughout the development of the project. The use of the A3 problem solving framework allowed, starting with a broad and ambitious goal of identifying and defining a concrete problem, to measure its AS-IS performance, identify the root causes of the problem, and develop tailor-made countermeasures. This approach had a direct effect on the reduction of nonvalue-added forklift movements, and consequently to a reduction in fuel consumption, reducing CO2 emissions. In addition, as a result of this experience, the company has become more aware of environmental sustainability aspects. In fact, the results obtained allow workers to be more aware of the importance of their impact on the sustainable performance of the entire organization and the positive impact that can be achieved through lean thinking, generating greater motivation for their work. This article helps to show a real-life case in which lean thinking is applied with the goal of solving corporate issues related to the environment, and how the lean approach has affected the company's sustainable performance. The results obtained and the growing interest in environmental issues of both management and operators show that there is a positive influence of the lean approach on environmental sustainability issues. Through the spread of lean culture, the company in the future can continue to address issues related to environmental sustainability. The spread of lean culture is manifested in small, targeted continuous improvement projects with specific goals to measure performance and project success. Managers could benefit from this research to understand the simplicity and usefulness of using A3 methodology as a lean tool to address problems related to environmental sustainability. In conclusion through this paper important implications can be formulated for managers to develop a deeper and richer understanding of lean as a tool to achieve better environmentally sustainable performance, and to help them formulate more effective strategies for its use. The limitations of this paper's research are related to the use of a single case study; in fact, more empirical evidence studied in different contexts is needed to understand in depth the influence of lean approaches on environmental sustainability. Future research will seek to explore this issue further by outlining how the influence of the lean approach manifests itself on environmental sustainability, and how its benefit can be applied in other business contexts.
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