Greening the Supply Chain at Danaher

Companies across the globe are seeking energy-efficiency, new environmental programs, and related methods to protect the fragile business environment. Danaher is among one of the companies leading environmental initiatives and identifying opportunities to “Green” their supply chain. Greening a supply chain can be achieved by implementing a process of using environmentally friendly agents and transforming them into byproducts that can be improved or recycled within the existing environment. This process develops outputs that can be reclaimed and re-used at the end of their life-cycle thus, creating a sustainable supply chain where companies can reduce costs while helping the environment. At Danaher, many times these initiatives are the result of federal regulatory initiatives or are customer driven. In an interview with John Dion, Vice President of Global Services for Danaher, he gave an example of the latest request from some of their top customers relating to consumable waste streams. One area that the company is exploring is expanding their use of water based solvents and reducing the amount of solvent based chemicals in their supply chain. He stated that customers are seeking medical devices containing green alternative components as part of their own “green” strategy. Since Danaher is highly focused on meeting the needs of its customer, it has taken the steps needed to use the “environmentally friendly” solvent as much as possible in its components. Not only is this is an example of a best practice among medical device manufacturers, but a way the company can solidify its competitive edge within the industry.
One global regulatory initiative impacting Danaher has been the “Restriction of Hazardous Substances Directive” enacted in 2006 in the European Union. Typically referred as the “lead free” directive, it restricts the use of six substances in the manufacturing of medical devices. These substances include: lead, mercury, cadmium, hexavalent chromium, polybromiated biphenyls, and polybromiated diphenyl ether. In addition, the RoHS initiative was designed to address the issue of consumer electronics waste. The rapid pace of new technology has created a tremendous buildup of waste within landfills and raised biological toxicity concerns among environmentalists. Both of these concerns addressed by the directive directly affected the PC circuit boards built into the medical devices manufactured by Danaher. John Dion mentioned that the RoHS directive had an immediate impact to the company in the form of component obsolescence. Millions of PC boards throughout Danaher’s global supply chain had to be quickly disposed of and new ones had to be manufactured to meet the specifications of the directive. He mentioned that these manufacturing changes also posed challenges to Danaher’s global supply chain. Senior executives had to conduct strategy meetings to discuss whether it made sense to streamline the supply chain with components containing the RoHS specifications even though these specifications may not be required in other countries. The RoHs initiative has increased in popularity globally and in fact, the United States Congress is currently reviewing legislation to incorporate the RoHS initiative into a new national “green” policy.

In addition to the pending legislation in Congress, the United States Environmental Agency has published a document called the “Lean and Green Supply Chain” stressing the importance of companies to develop a new leaner and greener supply chain. It highlights four key steps that take place in the decision making framework of developing a green supply chain. These include: identifying costs, determining opportunities, calculating benefits, and implementing the policies. The document clearly shows the value of companies looking long term at their environmental initiatives as a means to increase their sustainability. It specifically references an example of Comed; a company who shares similarities to Danaher with respect to the financial and environmental burden related the disposal of its chemical solvents and PC boards. The document highlights how Comed was able to achieve a cost savings of $1,000,000 and reduce their hazardous solvent waster by 85% by implementing the EPA “green supply chain” decision making framework.
It is apparent that companies like Danaher are moving towards sustainable, green supply chains. Sustainability can be a competitive advantage for many companies. If they can develop a sustainable supply chain, great cost savings can be achieved by not having to dispose of harmful by-products, reducing obsolescence, decreasing the amount of money spent on scrap and the resources spent on adhering to regulatory issues.

Recommendations:
1) Develop a “Green Task Force” that utilizes the EPA framework and investigates opportunities for greening the supply chain at Danaher. It would encompass executives from the key global markets to ensure streamlining of all initiatives and compliance to global regulations.
2) Develop a “Green Fleet” of company owned vehicles. Institute a mandate for hybrid vehicles with gas mileage of 40mph or higher. This would affect primarily the Danaher “Service Division” which repairs equipment and dispatches technicians to customer sites. It would result in cost savings on fuel purchases by Danaher as well as reduce the demand on global oil.
3) Capitalize on new IT technology available (Webex, Skype, etc..)
The Danaher Service Desk could utilize Skype for troubleshooting customer repair issues before deployment of technicians. This could result in less service calls on common repair issues and potentially decrease the technician response time from less than 4 hours. Webex could be utilized for training of staff in place of on- site facility training reducing the expenses incurred for travel and lodging.