Lean vs Green

It occurred to me quite suddenly the other day while reading an article on “Green” warehousing, that we must always be aware that there is a total cost and value picture which transcends the focus of looking at inventory from a pure ordering and carrying cost basis. In addition, our attention must now also be on the likes of carbon footprints and other ecological issues.
To give this idea some tangibility, I dreamed up a scenario to demonstrate my point. Let’s assume we run Manufacturing Company X and one of our main raw materials is available a mere 20 miles from our plant. We have no quality issues with the supplier and our demand is totally stable. The rate of usage is ten units a day (no waste or scrap), and the company operates five days a week (If you find such a place, I want to work there). Additionally, we release material from a blanket order and pay against a monthly statement. The material costs $10/unit and our carrying cost is 20% of our average inventory. We pick up the raw material with our truck which costs us $.50/ mile to operate. I have summarized this data in the table below. Out big decision is how much and how frequently do we pick up this material? Let’s compare a weekly pickup to a daily pickup as shown below.


Cost Factors Five Trips/wk vs One trip/wk

Transport Cost. 5X 20 miles X $.50/mi = $50.00/wk vs 1X 20 miles X.50/mi = $10.00/wk

Inventory Cost 5=avg inv X $10/unit X 20% = $10 vs 25 =avg inv X $10/unit X 20%= $50

Total Cost $60.00 in both cases

Of course, I have left out the flexibility and visibility of a lower inventory and a few other possible qualitative factors, that would support the daily pickup suggested by Lean, but I counter that my daily delivery truck may introduce serious carbon footprint issues over time. I for one have had my “evaluation horizon’ expanded by the article on greening the warehouse. I just wanted to pass these thoughts along to you.
Sincerely,
Ron Althaus