MANAGING PRODUCTION AND OPERATIONS FOR SUSTAINABILITY

BY

DR OLANIYI OPANUGA, FNIPM, FIoMD, FSCOM, FSCSCMP, COPOM©

President/Chairman Council Nigerian Institute of Production Management (NIPM)

INTRODUCTION

What  I have been teaching production and operations managers at the Post-Graduate School of the College of Production and Operations Management -COPOM about clean production, green and sustainable manufacturing in Nigeria has been exemplified by the decision of the Nigerian Breweries (NB) to adopt solar (a form of renewable energy) to power its Ibadan Brewery. This Heineken’s first solar project in Africa is a commendable pioneering effort because the cost of energy will reduce while carbon (Co2) emissions will also reduce. We know that large amounts of carbon dioxide causes global warming and climate change. It is necessary to save our environment. The company calls it a support to Heineken’s global ‘drop the c’ programme for renewable energy according to the Managing Director of NB, Jordi Borrut Bel. For me, this should also boil down to lower manufacturing cost and increased stakeholders value such as moderate consumer prices, employee welfare and earnings per share (EPs) and a reduction in environmental threats.

Because energy cost is prohibitive in the country industrial organizations should look for cheaper and better sources. Coal, nuclear, oil and natural gas are not renewable but hydropower, solar, wind get thermal and biomasses on generators are both renewable and sustainable. Running a factory, offices or home is very expensive, yet the power plants operating in the country(which are not able to meet the energy needs of even 50 percent of its population of about 200 million people)fall into hydro-electric (water generated) and thermal (gas or fossil fuel fired) power plants.

We should emulate countries like China which is focused on increasing the share of renewables as a source of energy security apart from reducing carbon emission.

 

• RENEWABLE ENERGY: ANTIDOTE FOR COST-PUSH INFLATION

These renewable energy sources including hydrogen, biogas, wave and tidal power are so called because they can be replenished naturally they are naturally available and have less negative impact on the environment. Adopting sustainability principles and policy is critical to all production and operations. Sustainability means the ability of a resource to maintain its utility for generations without having adverse effects on the people and the environment.

It is about achieving success or making money today without compromising tomorrow.

Because the energy element of cost of production is very high in Nigeria manufacturers should invest in renewable energy. Nigerian consumers are groaning under the weight of inflation occasioned by high prices pushed to them by manufacturers (and producers generally). Electricity tariffs are arbitrarily increased with no guarantee of adequate supply of power. Manufacturers under the aegis of Manufacturers Association of Nigeria (MAN) who use gas to power their plants are currently complaining that the new Federal Government directive that the price of gas should be reduced has fallen on deaf ears of the gas marketers and franchise holders. On the order hand, gas companies believe that the price is justifiable given the cost of production. Yet, not much is being done to reduce gas flaring to minimize waste, save cost and

 

curb pollution. The damage done by gas flaring to health and environment is too serious to be ignored. Effective solutions to capture associated gas should develop.  We will discuss more on these issues at the level of SPEPOM-the Society of Petroleum Production And Operations Management of NIPM. Here, we see transferred costs at play. As the naira get depreciated sale of gas (and other resource inputs) in dollars further worsens the cost issue. Meanwhile it is against the directive of the Central Bank of Nigeria (CBN) that businesses transacted in the country be paid for in dollars. The Ministry of Petroleum Resources and the CBN should look into these and other issues. The Nigerian Electricity Regulating Commission (NERC) should work harder at enforcing the implementing the Meter Asset Provider (MAP) regulation to stop the electricity distribution companies (Discos) from exploiting consumers who are not metered but charged based on spurious, outrageous and exploitative pricing called estimated billing. Many companies have dumped National Grid for Independent Power Supply while a number of them such a the Flour Mills of Nigeria Plc, Tower Aluminium, Nestle, Cadbury Nigeria Plc, Lafarge Africa Plc, PZ Cussons, Nigeria Breweries Plc and Dangote have been generating their own power based on gas turbines  rather than relying on the epileptic Discos or diesel generating set.

 

Business cannot be sustainable with energy cost gulping up to 40% of total expenditure. How do we encourage local start-ups or attract foreign investors?

It is not good for the nation’s economy to have the Central Bank OF Nigeria (CBN) projecting inflation at 11.4% for 2019 rather than working to have single digit. But can we really blame the CBN for cost-push inflation? Many factors drive cost up-our main seaport, Apapa, Lagos is congested, our roads are bad, electricity is in short supply and costly, tariffs are high and taxes  are multiple and so on. How do we expect better logistics services with port congestion and bad roads? How can we satisfy our customers with delayed deliveries? How do we increase productive capacity with intermittent power outages or unavailability of materials? These are not just examination or test questions for my class at the College of Production and Operations Management(COPOM) Institute of Operations Management Development (IoMD) but questions for which  CEOs as well as Production And Operations Manager must provide answers if their organizations are to operate sustainably. By Production and Operations Managers I am not only referring to persons using the title or so designated.

By the time you finish reading this article you will know who the production or operations managers are perhaps including you!

 

• THE PUSH FOR PROFESIONALISM

Over the years the Nigerian Institute of Production Management (NIPM) has organized national conferences and workshops involving the Federal Government, State Governments and the Organized Private Sector (OPS) to highlight and deal with the issues affecting production and operations in Nigeria. As the Director General of NIPM. I approached the Presidency in Abuja, the Ministries of Industry, Science and Technology, Labour and several other agencies to propagate the importance of professionalism in production and operations management. This prompted the Federal Government to send a delegation of the National  Planning Commission (NPC) led by its Director Mr. J.A.O Olaniyi representing the Chief Economic, Adviser to the President, Chief Phillip Asiodu to attend the 3^rd NIPM Annual General Meeting/National Conference in 2000. This happened two years after the Federal Government approved the registration of NIPM as a professional body to regulate the practice of production and operations in Nigeria.

 

 

However, the growth of the Institute has been hampered with its membership base and influence limited because the wrong impression is that the profession falls within the manufacturing sector. And the manufacturing sector has not been growing remarkably in the last 30 years. The slow growth rate of the manufacturing sector also accounts for the high level of unemployment in the country.

 

• THE ROLE OF OPTIMUM RESOURCES

Optimum Resources Limited is a reputable training and management consultancy company that has been supporting the Nigerian Institute of Production Management (NIPM) over the years, specifically since 1989 both financially and technically. The findings in a research conducted by the company provided insights into the ways and means by which organizations can look both externally and internally for landmark results.

The role of research, development, technological innovation, integratious, systems and culture change among others were highlighted. Business sustainability is multidimensional I believe NIPM needs to expose: its members more in this knowledge area. A lot of our problems are caused by bad government policies and lack of adequate incentives and infrastructure.

 

At Optimum Resources we let our clients and trainees understand that every attempt to add value in production and supply chain they are incurring cost. Hence, efforts should be geared towards ensuring that the value is higher than the cost. The mistake should not be made about other costs that are not obvious. There is direct materials cost, direct labour cost and factory or manufacturing overhead. When you add opening inventory and subtract closing inventory you will arrive at cost of goods manufactured.  The question is; how do these costs build up? The last time I trained the staff from Cadbury Nigeria Plc, Friesland Campina Wamco Nigeria Plc, Seven-Up Bottling Company Plc, Dangote Industrial Ltd, UAC Foods Nig Plc, Prime Pak Industries Ltd, Afrab Chem and Berger Paints Nigeria Plc I emphasized the need for improved line utilization and waste reduction as the little things we fail to do on the factory floor or along the way between the suppliers and the customers result in huge costs when they remain unchecked overtime. I also taught the ways to achieve same. However, learning has better impact with reinforcement. Continuous staff training is very important and such should respond to change-the dynamics of the internal and external environment. Lean Manufacturing or lean production is becoming popular now but some organizations are going about it the wrong way. Hence, they save costs at one end and incur more costs at the other end.

 

• KNOWLEDGE FOR SUSTAINABILITY

Globally, sustainable production and operations is the concern of sane humans the citizens, people and the government, the employers, management and the employees as well as the suppliers, producers and the consumers. The reason is not farfetched, whether it is about the environment or the bottomline or the need to embark on programmes and projects that are aimed at achieving a balance between social responsibility with business concerns. It includes the way we design our products, processes and systems and the way we manage our waste. We should not only be concerned about our control of sources of raw materials and allied supplies but also about wastes arising from production processes and product usage by the final consumers/end users. A strategic plan must be put in place to ensure the sustenance of our operations while protecting the consumers and the environment. That commitment must be strongly backed top management, consistently driven down the rungs on the ladder and diffused across the organization, with periodic evaluation.

 

 

 

I told my class at a training organized by Optimum Resources that sustainability is an important function and a top job in reputable organizations like Unilever Nigeria Plc, Nestle Nigeria Plc and Guiness Nigeria Plc are clear examples in sustainability practices.

Whatever organization you run, remember the need to create sustainability value. Knowledge of sustainability enables you to increase economic value. Nigeria is not only causing green house effect, contributing to global warming through gas flaring but also wasting resources. At the micro level consumers and indeed, households produce wastes (yes, consumers are also involved in production) most of which could be re-used, recycled or better managed to save costs or earn income but for lack of sustainability knowledge. In the same vein, organizations can turn their waste to wealth, reduce operating costs and increase their bottomline by improving their processes across the board (all departments are involved in production or operations), working better with suppliers and customers, engaging in innovation and adopting improved technologies. The way to go for every right thinking management is to integrate all its business interests with the present and future needs of the environment and strikes a balance in every policy, strategy or decision. It makes because it is the environment that will in turn sustain the business. One way of achieving result is to constantly engage all the stakeholders including communities, civil societies, government, suppliers and the customers. Another way is to ensure the production of sustainable products or services. Production and operations should not just be about goods or services but most importantly about benefits, now and in the future.

Going back to production, operations and sustainability issue the notable firm of management consultants-Optimum Resources Limited has worked with numerous organizations to bring down the cost of their operations. Optimum Resources train managers on different techniques of reducing waste and while optimizing productivity without compromising quality. In some organizations, for instance, it was discovered that unprofessional practices and incompetence, indolence and change adversity were at the root of their uncompetitiveness or low profitability. A bad negotiator, an ineffective team leader, an unprofession, production, operations or supply chain manager are waste pipes, for example.

An organization’s sustainability programme should be based on a sustainable policy which recognizes that production and operations involves and affects everybody. Apart from the factory every department is involved in production and operations though operating by another name. Their inputs and outputs should be subjected to continuous measurement and improvement

 

• CONCLUSION

Sustainability is not just giving back to the society but about denying the society nothing. We need to support the environment. Whether we are  going green, reducing and recycling waste, reducing carbon emissions, reducing environmental impacts, making our products safer for the consumers, supporting the communities, saving energy costs or adopting renewable and clean energy, improving technology and processes to deliver enhanced value, the focus should but be on manufacturing or the factory but on the people, both internally and externally  because everyone is a production person even though he/she doubles as a consumer.

It is better not to start out as a production and operations organization than to achieve a phyrric victory and be relic to horrendous past.

 

 

 

 

 

 

For Additional Reading see:

OLANIYI OPANUGA, “The Relevance of Business of Social Role Concept in Nigeria”

Business Times Feb. 10, 1986 P.7

OLANIYI OPANUGA, “Business Ethics And Rational Corporate Behaviour”

Business Times August 12, 1986 P.11

OLANIYI OPANUGA, “Consumer Protection And Business Growth In Nigeria”

Financial Punch Sept. 3 1986 P.14

OLANIYI OPANUGA, “Criteria Which New Products Should”

Business Concord Sept. 18, 1987 P.14

*Publishers: Daily Times of Nigeria, Punch Newspapers, and Concord Press of Nigeria

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