Lean-Green BSC Cause-and-Effect Framework

The supply chain managers should identify the performance measures. Usually, they identify the measures according to their objective requirements and practical experiences (Cai et

al., 2009). To get a balanced performance measurement they often decide to use the BSC.

Several authors categorized a number of measures by the different BSC perspectives (Kaplan and Norton, 1996; Chia et al., 2009; Hubbard, 2009; Sidiropoulos et al., 2004; Hsu and Liu, 2010; Brewer and Speh, 2000; Bhasin, 2008). To develop a BSC as a strategic and dynamic performance measurement system, Bhagwat and Sharma (2007) point out three principles:

 built in cause-and-effect relationships;  include sufficient performance drivers;  provide a linkage to financial measures.

Cai et al. (2009) refer that most of the indicators/measures in a supply chain are correlated and have complicated cause-and-effect relationships. These cause-and-effect relationships can make the connections among objectives and measures in the various perspectives.

According to Hsu and Liu (2010) "there are strong relations among performance measures covering multiple dimensional but balanced aspects for a delicate strategy control. For example, measures of learning and growth perspective could strongly affect internal process perspective and therefore affect financial perspective". Another example is supplied by Bhagwat and Sharma (2007): "flexibility of service systems to meet particular customer needs (internal business process perspective) will be more likely to meet customer expectations (customer perspective). Higher level of customer expectations will lead companies to supply more innovative products and services (learning and growth perspective). This in turn will increase the market share and profitability (financial perspective)". The cause-and-effect relationship can involve some, the four or more perspectives in the BSC and may evaluate lean and green supply chain management.

This approach creates a BSC framework for evaluating lean and green supply chain performance. The four standard perspectives were used where the lean-green measures are selected. These measures were based on literature review and they intend to lead into the

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meaning of strategy: they were selected as important features taking into account the following purposes:

 for financial measures two core measures were selected: i) "profitability and revenues" which is based on profit after interest and tax, profit from recycle and resource consumption products, revenue and revenue of green products, return rate of environmental investment and return of investment (Chia et al., 2009; Sidiropoulos et

al., 2004; Hsu and Liu, 2010; Bhasin, 2008); and ii) the measure "cost" based on

operational costs, disposal and pollution treatment costs (Hsu and Liu, 2010; Zhu et al., 2007; Hervani et al., 2005);

 for customer measures were selected the "market share" as market share by product group (Chia et al., 2009; Hubbard, 2009; Sidiropoulos et al., 2004; Bhasin, 2008) and "customer satisfaction" that can be measured as customer returns, responsiveness and on-time delivery (Sidiropoulos et al., 2004; Hsu and Liu, 2010; Bhasin, 2008; Hervani

et al., 2005);

 for internal business process measures was used "waste reduction" (Chia et al., 2009; Zhu et al., 2007), as it is based on traditional lean wastes and green wastes (EPA, 2007); and "productivity" was used, as well, as it is based on process and operational efficiency and capacity utilization (Hubbard, 2009; Hsu and Liu, 2010; Hervani et al., 2005);  for learning and growth measures, "employee morale and satisfaction" can be expressed

by the number of accidents, absenteeism and labour turnover (Chia et al., 2009, Sidiropoulos et al., 2004; Hsu and Liu, 2010; Bhasin, 2008; Gurumurthy and Kodali, 2008); and "employee’s education and training" based on quality of professional/technical development and environmental education and training (Hsu and Liu, 2010; Bhasin, 2008; Hervani et al., 2005).

It is possible to recognize that supply chain business practices and actions influence the performance measures and they are related with each others. The "employee morale and satisfaction" measure may be justified with the following Kaplan and Norton (1996) statement: "the most satisfied customers were the ones served by the employees who scored highest in morale". Gordon (2001) state about the lean and green implementation that employee morale increases through the pride of working for a lean-green organization and report fewer illnesses and accidents. In addition, EPA (2007) refers that "when employees take pride in their work there can be a substantial positive effect on organizational morale and that can empower employees and promote an improvement in productivity". Financial benefits may be reached due to improvements in operational efficiency or productivity (Nawrocka et al., 2009).

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103 According to Pettersen (2009) improve productivity and make products with fewer defects to precise customer satisfaction, are some of the goals using lean characteristics as for example continuous improvements and just-in-time philosophy. Gordon (2001) states that introducing efficiencies will contribute to earn more market share. EPA (2007) refers that the benefits of coordinating lean and green approach pass through cost reduction, improve process flow, meet customer expectations and improve employee morale and commitment.

Employee education and training are main issues on waste reduction. The education of employees has a relation with product conformity (Hsu and Liu, 2010) reducing waste. Besides, it is possible to get financial benefits from a waste reduction (Nawrocka et al., 2009). Learning to see and eliminate waste is the basis of lean approach (EPA, 2007). Thus eliminating production wastes and environmental wastes indicate opportunities for saving cost (EPA, 2007; Pettersen, 2009). Another result from lean and green implementation stated by Gordon (2001) was "paying less for disposal because much less is wasted; earning revenues trough recycling". Figure 4.7 illustrates the cause-and-effect relationships between measures that were developed in the BSC perspectives approach.

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With this diagram, it is possible to visualize how lean and green measures are related and it is possible to find out an entire sequence of linkages:

 A growth on "employee’s education and training" (learning and growth), drive to "waste reduction" (internal business process), which increase "profitability and revenues" and decrease "cost" (financial).

 An increase on "employee morale and satisfaction" supports an improvement in "productivity" measure, driving to a rise in "customer satisfaction" and "market share". These last measures (in customer perspective) increment "profitability and revenues" (in financial perspective), which provides a possibility to make more investment in "employee’s education and training" (in learning and growth perspective).

These linkages in the scorecard are an example of how to evaluate the organization and its supply chain performance and allow to analyze the relationships between the measures. The elements adopted to work in the lean-green approach may influence the performance results. These results must be monitored and analyzed to provide feedback, as it will influence how organization improves the business and its supply chain.

4.7. Chapter Overview

This study suggests that management frameworks studied in Chapter 3 can be a good starting point for modeling a lean-green supply chain business. This chapter attempts to describe the different steps of a lean-green transformation, developing a lean-green supply chain management framework. The proposed conceptual framework consisted in the definition of the criteria with corresponding elements, guidelines and scoring system. It is possible to conclude that there are elements that support both, a lean approach and a green approach.

Connected is the lean-green monitoring system that is very important to give feedback to management. With this information managers can take actions, establish new strategic objectives and improve processes. For a lean-green transformation the BSC can be considered a useful tool to evaluate SC performance.

With this conceptual framework it is possible to reinforce the idea that lean-green is a good structure for organization`s supply chain. Organizations must develop their supply chain management framework to stay correctly positioned and aligned with the market.

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