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Sustainability Case Analysis: HLC 1

Sustainability Case Analysis:

Environmental Product Differentiation by the Hayward

Lumber Company

Paulina Jaswiec

MBA 550, Business Operation

Sustainability Case Analysis: Environmental Product Differentiation by HLC


1. Summary of the article

a. Who: Hayward Lumber Company, open since 1919 has seen profit

losses increase over the years, increase of restrictions on the industry

and the environment.

b. What: Previously they were building in traditional methods, and not

investing in any new developments to add more value, control the

supply/ inventory more accurately (JIT management), and differentiate

themselves by offering better

product diversification that will

increase margins on products.

c. Where: Even being the 44th

largest building supplies in the

US, and the 5th in California,

Hayward Lumber Company

needs to reposition its operations-

strategically placing them

between San Louis Obispo and

Santa Barbra so they become

more industry dominate.

d. Needs: They want to be the leading supplier of environmentally

friendly building materials, operations, and systems in central

California.

e. Problems/ Opportunities: (1) Shift to more green products, (2)

promote and introduce better recycling methods, and (3) to form a

better auditing system.

2. Summary of Group Decision

a. Answer Why or Why not, What, and How: The Hayward Lumbar

company will invest on making this change because it has a higher

payoff in the future, since the market is moving in that direction.

Demand has steadily going up for green products.


Governments are giving tax breaks for those whom build LEED

certified homes.

The company will gain recognition for being sustainable and

environmentally responsible.

More builders are looking for new ways to construct homes

without being so destructive to the environment and the habitants

of the ecosystem.

New building methods will grab the new market

Working as a leader in depleting the environment for sellable good,

the corporation must finds a way to give back by changing the

internal culture and values, so that the new strategy is also

implemented within the corporate walls

b. How should the recommended decision be implemented: The

demand chain for the FSC certified lumber must differ from the non-

certified. JIT management, and ordering two weeks prior to

construction. Diversifying products. Environmental strategy education,

and to discover new construction techniques. Offering a sales team that

will work to get LEED certification, rebates, and tax cuts.

c. How can the problem be fixed?

Analyzing the cost of the FSC lumbers and non- certified

lumber.

Prove that the corporation can manage its inventory better with

the ecosystem and how.

How JIT management can help manage inventory for the FSC,

the new products, and truss plant.

Show a diagram of the supply and chain prior to the change and

after to prove the change.

Show the value of the new ECO changes.

Offer methods how the lumber company can position itself so

that the buyers are enticed to purchase.

Highlight the advantages of having a Eco Education Program,

and why it will but them above the competition.


d. Summarize the solution: We recommend, that the project

management team focus on adding value to the company, and driving

innovation through education. Additional capital to be spend of

developing JIT systems, construction methods, and introducing eco-

friendly products. Adding the new strategic Eco Plan of the Truss Plan,

Eco-Timber (FSC) and designing/ developing the eco- techniques will

help diversify the company, improve staff productivity, reduce tax

costs, and improve future profit margins.

3. Position Statement

a. Decision: HLC is dependable supplier of the wood products, solutions and

services from 1919. Due to the tight time –frame with contractors using

the traditional methods in supplies HLC had a challenge work with

delivering. By implementing new technology system as JIT into a hub of

the organization, not only will it performance improves and but the agility

will quicken the operational processes, while introducing a higher quality

level. Position statement of the company is based on dependable way of

cooperating, in the quality of product, differentiation, ECO education,

LEED system, FSC certification, mission of green company, greening

constructions, and moral obligation to return something to forests. By this

factors economic position of the prosperity is derived. The project of

adding value to the company would help HLC to use new innovative

approach in the supply chain. Management team should implement the

project of maximizing economic value along with providing high quality

product by reducing costs in production.

Reasons Why Who What Where How

Bill Hayward is very knowledgeable about the builder supply chain but

has followed the changes in the industry. He has seen some other

companies use different system in environmentally specifications, for

getting higher quality. He decided to get higher environmental

leadership position in construction`s area. For that reason HLC hired

manager (director) of sustainability to investigate the trend of high

standards: high quality, energy efficiency, safety and health. As well,


than was launching the environmental strategy (building green and

selling whole systems)

Environmental upgrades are costly; the capital costs could be recouped

through operational savings. CEO hired external sales team

management project team for implementing these strategy.

Management project team should to do a project of how to achieve

energy efficiency, using new IT and JIT system, environmental green

strategy and to meet LEED Gold standards. Sales team is trained to

focus on forecasting and coordinating sales, building negotiations and

relationships with customers, analyzing gathered information about

potential building projects, forecasting demand. HR department is

responsible for implementing the internal culture renovate strategy

focused on green incorporating values

4. Evidence

HLC identified thee opportunities to company`s pursue: the 1st one is Truss plant.

Specialized in, “advance framing” design to avoid waste. 2nd pursue is design the

center to serve quick growing building market. 3rd and last, buying Eco – Timber

products

a. Why: Frustrated with glacial pace of innovation construction was

decided to change in manufacturing structure, with reducing

20%lumber of the production facilities to meet LEED Gold Standards.

b. Who: Truss plant is settled for collaboration with builders and custom

homes. Green design center for Green Allianz, environmentally

oriented associations of builders and architects. Eco-Timber`s

customers as follows, architectures and environmental interested

clients, Nike, Disney, etc.

c. How: Truss Plant would specialized in avoiding waste and careful

design. Expected to be the most competitive on a high-volume job,

because design cost would be spread over many units.

d. What: Design center would provide lush showcase for equipment’s.

Including greening buildings and surrounding landscapes.


e. Where: Truss Plant would be located on Santa Maria, to serve San

Luis Obispo and Santa Barbara counties. Green Market in Santa

Barbara. Eco – Timber plan is now situating in San Rafael, California,

but has many distribution partners

Disadvantage: Truss Plant

- Before was Delay in launch, Costs is higher because of

value added, Challenge in demand, because truss plant is

seasonal work and depend on regional growth.

Advantage:

- Increasing market share, potential growth

- Increasing confidence of product

- Reduce warranty and costs for services

- Challenge decision for solving the problem in

manufacturing process, computer controlled

- Truss plant would be indoor facilities

- Customers could cancel the order at any time

- Customer satisfaction

- Eco-Timber is establishing partnerships with FSC suppliers

5. Action Plan

a. Verdict: All the actions of the section “Summary of Group Decision” will

be implemented by 31st March, 2015.

b. How do you solve the problem? The special project management team

will solve all the problems occurring during the implementation phase. All

the important steps will be discussed directly with Bill Hayward,

President, CEO, and Chief Sustainability Officer, Hayward Lumber

Company.

c. How do you implement a decision? The special project management

team will implement the decision. This team will be consisting of CFO –

John Black and six other people (three from financial and three from

marketing department of the HLC).


d. How do you improve a performance? Several steps will improve a

performance. The project management team will prepare a schedule of

implementations according to the deadline. The progress will be checked

every 14 days on Wednesdays at management company meetings. Reports

of activities (Activity Reports) will be prepared every 14 days to these

meetings as well. The performance will also be monitored by different

questionnaires (customer satisfaction, employee education skills, etc.) as

well as by financial outcomes like financial ratios (difference in turnovers,

costs, inventory), and financial reports.

e. ELEMENTS OF THE ACTION PLAN

Outline of executive action: All the goals will be set and approved

by the project management team as well as by Bill Hayward, CEO.

Each goal will be in detail specified. CEO will approve specific

Steps. Detailed analysis will be prepared to an each goal such as a

volume of risk, benefits, a financial impact. The project

management team is responsible for the whole implementation

phase. Responsibility for the each goal will be set internally in the

team. The main representative of the team is John Black (CFO)

6. State Goals

a. Goal 1: Adding Value to the Company

The project management team will immediately focus on adding

value to the company, and driving innovation through education

b. Goal 2: Improvement of staff productivity

The project management team will find best ways to improve staff

productivity.

c. Goal 3: Improves quality

Eco Plan and Designing/ Developing the eco- techniques center

will be constructed

New strategic Eco Plan of the Truss Plan will be built.

d. Goal 4: Promotes sustainable actions

Eco-Timber (FSC) will be bought.

The company Eco-Timber will be bought, mainly because of the

HLC company product diversification and the expected future


growth of Eco – Timber in flooring from FSC, reclaimed flooring,

bamboo flooring, etc.

e. Goal 5: Developing new JIT systems

Additional capital will be spent of developing JIT systems,

construction methods, and introducing eco- friendly products.

f. Goal 6: Reduce tax costs, and improve future profit margins

According to the condition of Leadership in Energy and Environmental

Design (LEED), there are several possibilities of lowering tax costs.

The improvement of profit margins is also the case

7. Steps

A plan consists of a series of actions to be taken over a period of time.

Step 1: Implementation

The first step is to introduce all of the implementations to the whole

company so they know that there will be changes in the company and that

all employees will became a part of this change. Afterwards several

milestones will be determined based on the areas that need to be

implemented as described in State Goals. Each output from those

milestones will be delivered firstly to Bill Hayward directly by John

Black who will be responsible for this implementation. The reason is that

in case of any important questions he will be prepared for the discussion.

Step 2: Create a vision

We need to clearly define the purpose of those changes to the company.

This vision will be the basement for any further changes. By doing this

everyone will know where the business is heading and what direction it

will have in the upcoming years. This part is very important because it

will show the competition our advantages same as it could reveal our

weaknesses – in terms of product differentiation etc. To encourage the

effort of every employee the best way is to clearly define what our goals

are and what we need to work on in upcoming period of time. This step

very depends on the fact how it will be communicated.


Step 3: Select manufacturing partners

To meet the LEED Gold standards and get the FSC certification we need

to establish a cooperation with strong manufacturing partners. Our goal as

a strong company with the heritage is to present only great innovative

product and to meet the highest standards in the industry. This is very

closely connected to the companies we need to establish partnership with

in the following phases. To achieve this it will be necessary to do proper

market survey followed by tightening the criteria for tendering all of our

suppliers and partners so the company will be able to deliver the first class

products and services.

Step 4: Control and speed-up all steps, allocations

By proper controlling we should be able to minimize the idle times

between the tasks during all phases. These steps need to be done before

any further actions will be taken. The first of all we will need to define

who will be responsible for this control. We are planning that there

should be at least six people who will be free for a controlling tasks

within the phases. The identification of the control principles will be

essential for speeding-up of all processes. Clearly instructions will be

given to all controlling personal. These people will be responsible for

the quality and speed of all given tasks. John Black will make final

allocation of controller personnel.

8. Short-Term /Long Term Steps and Risks Associated

a. What are the Short-term steps

The most important in short-term planning is to meet the LEED Gold

standards and to get the FSC certification. This entitles us be much

more eco-friendly in a very short time, this will supported by using the

Eco – Timber followed by designing and developing new techniques

which will help us to diversify the company. This includes one very

crucial area, which is establishing the new truss and eco plant.


However this task needs to be delivered separately by the project

management team.

b. Short-term risks

There might be several risks connected in meeting the LEED Gold

standards or in getting the FSC certification. Further details will be

available once the procedure will get started and we will get feedback

from the authorities. Further controlling and planning will be needed

after this phase.

c. What are the Long-term steps

From the Long-term view we see the opportunity to become the

leading supplier of environmentally friendly building materials and

services in central California. The achieve this we need to start on the

Job Performance by setting new internal system for employees (goal

settings, reward system, feedback evaluation etc.) Customer support

will be another important area, which need to be taken care of in the

upcoming year. For these phases new operations plan needs to

established after all Short-term changes will be implemented. In

connection we will prepare special project for lowering tax costs. The

improvement of profit margins is also possible after further market

research.

d. Long- term risks

Long-term risks are connected mainly with the possible regulations or

reductions of reducing tax costs for the eco-friendly businesses.

Furthermore we expect no other long-term risks in this business area

except of the growing competition. Although this risk is not possible to

avoid we should be able to monitor the market and based on the

situation take appropriate actions.

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