Integrated Product Management
Integrated Product Management (IPM), also known as Life Cycle Management (LCM), is a management paradigm that takes optimisation of the product chain as its fundamental viewpoint.
- May 2016
An Environmental Profit & Loss account (E P&L) was conducted by Arla Foods, the third largest dairy cooperative in the world, with the aim of documenting the total environmental impact of Arla Foods.
- October 2014
This project consisted of an industrial E P&L for the Danish apparel consumption conducted across three levels: industry, company/brand and product.
- February 2014
This project was a collaborative effort, looking into Novo Nordisk's value chain, leading to the first Novo Nordisk Environmental Profit and Loss Account (E P&L).
- January 2014
The purpose of this project was to provide an overview of DuPont N&H’s total CO2e emissions (the so‑called organizational carbon footprint) to enable decision‑making and prioritization in their environmental work.
- September 2005
EMAS is the EU's environmental management instrument, which is voluntary and is aimed at all types of businesses. EMAS stands for "Eco‑Management and Audit Scheme". This project provided a database for Danish businesses with examples of management schemes.
- December 2004
The Background Report for a UNEP Guide to Life Cycle Management ‑ A bridge to sustainable products was as a support to the UNEP Life Cycle Initiative and the UNEP Guide to Life Cycle Management.
- March 2003
The purpose of this project was to test the implemention of a product‑oriented environmental management system at all levels in a large bakery enterprise. Peter Senge's concept of a learning organization was an inspiration for the project.
Product orientation as a management paradigm
The original inspiration behind Integrated Product Management (IPM) comes from Product Life Cycle Assessment, a technique to assess the environmental impacts related to a product with the aim of minimising these impacts seen over the entire life cycle of the product, from raw material extraction to final disposal. In IPM, the life cycle concept is expanded to other areas of concern, notably management of economic costs and quality.
Product orientation, chain-orientation and life cycle orientation are synonyms, since the integrated optimisation of a product must necessarily consider the entire production-consumption chain, i.e. what in environmental contexts has come to be known as “the product life cycle”. Since the term “life cycle” has other connotations in biology and business economics, we generally prefer the term “product chain”, with “life cycle” as a synonym.
While environmental concerns are still an essential element of IPM, and IPM includes a life cycle oriented environmental management system, IPM is more than an expanded environmental management system.
In an organisation, which is truly product or chain-oriented, each part of the organisation has its specific role to play in relation to the overall goal of optimising the products. Chain-oriented considerations are not isolated to specific programmes, but are embedded in the very organisational structure. Co-operation and information exchange among departments is an essential part of the chain-oriented organisation searching for overall, sustainable rather than local and short-term optimisations.
IPM develops and integrates of a number of techniques, which hitherto have been developed in isolation, such as Green purchasing, Life Cycle Assessment, Green marketing, Design for Environment, Total Cost Assessment. See also the paper “LCM – a synthesis of modern management theories” for a description of the links between the IPM (LCM) concept and other management concepts and tools. Besides this, new techniques and procedures are developed for each part of the organisation, as described below.
Why implement Integrated Product Management?
By looking beyond the company gates IPM enhances the competitiveness of the entire product chain, by optimising both economics, quality, and environmental impacts throughout the life cycle of the products. In this way, a more sustainable competitiveness is achieved, also for the individual actors in the chain.
Developing the chain-oriented organisation
Due to the high number of items, which are typically purchased in a company, time seldom allows a detailed valuation of each item. It is therefore important to know which items have the largest chain impact, so the efforts can be focused there. To make sound purchase decisions, information is needed not only on the performance of different suppliers, but also on the further consequences of the purchased items in the product chain. The way the items are used in the production or in the final product may be much more relevant for the overall impacts than their previous history. Trade-offs have to be made between environmental properties, quality and price as well as between past environmental performance and environmental performance later in the product chain. Compared to an ordinary purchase department, the chain-oriented purchase department must have much more insight into the life cycle performance and life cycle costs of the different purchased items and play a much more active role both towards the suppliers and towards the rest of the company. The relationship to the suppliers may slowly be deepened to heighten the awareness, increase the information exchange and maybe to build alliances with especially chain-oriented suppliers.
Production with a chain perspective
The production departments play a key role in collection of data from the production itself, in generating new ideas and in carrying out improvement programmes. Often, the production departments are also responsible for the local environmental issues, including occupational health. Neighbours, local authorities and trade unions should be given information to place the local environmental problems and solutions in their life cycle perspective, so that solutions to local problems do not lead to problems elsewhere.
Chain-oriented marketing, sales and information
Customer relations are an important part of the information flow of the chain-oriented organisation. Emphasis is on interactive communication rather than one-way advertising, as the feedback from customers is vital for adjusting both products and information to suit the needs of the customers. Understanding how the consumers make the trade-offs between the price, the environmental benefits of the product and its other qualities, is used to delineate the space for further improvements. Understanding the trends among consumers allows for long term planning and timing of the introduction of new products.
Chain-oriented marketing and information must be fact-based, trustworthy and contain strong elements of education and awareness-building. Customers should be brought to view themselves as another important part of the chain with their own responsibilities for the further impacts in the product chain. Simple claims of e.g. environmental superiority will seldom have a long-term effect as compared to building a trustworthy image of a company, which seriously works for continuous improvement of its products in co-operation with the other parties in the chain.
The goal of integrated logistics is to reduce the environmental, economic and quality impacts from transport and storage. Here it is not enough to look at the external and internal supplies and deliveries of individual components and products. The transport of personnel to and from the workplace as well as the way the product finally reaches the consumer may be of as much relevance. Joint transport, reduction of the transport needs, longer planning horizons, better fits between transport means and transport need, reduced packaging and direct-delivery may be some of the options investigated. Maintenance and take-back options for the product may also be investigated as part of the product chain strategy.
Chain-oriented research and development
No organisation is better than its parts. A chain-oriented organisation needs chain-oriented employees. The personnel administration must ensure that recruitment and education plans are directed at developing quality-conscious, environmentally responsible employees, who actively participate in the company programmes and are open towards the need of others in the chain-oriented organisation. The personnel administration should actively support and encourage individuals who take communicative, environmental and quality-improving initiatives. Read more on our page on employee participation.
Life cycle oriented environmental and quality management
Chain-orientation is inherent to quality management, but the full life cycle perspective, going beyond the immediate suppliers and customers, may still need to be implemented.
For environmental management, the life cycle perspective can initially be implemented in relation to the environmental reviews, not only taking into account the direct environmental impacts but also the impacts caused by activities elsewhere, due to the raw materials purchased or due to the products sold. The life cycle oriented environmental management programme considers environmental conditions at suppliers, sub-contractors and licensees and how these are included in purchase decisions and awarding of contracts. Life cycle aspects are included in programmes to develop new activities, products and processes. The information given to consumers is expanded to contain advice on environmentally sensible use and disposal of the product.
Chain-oriented personnel and knowledge administration
No organisation is better than its parts. A chain-oriented organisation needs chain-oriented employees. The personnel administration must ensure that recruitment and education plans are directed at developing quality-conscious, environmentally responsible employees, who actively participates in the company programmes and are open towards the need of others in the chain-oriented organisation. The personnel administration should actively support and encourage individuals who take communicative, environmental and quality-improving initiatives.
Chain-oriented legal administration
As ultimately responsible for the legal relations and the design of contracts, the legal administration should investigate the possibilities for incorporating product-chain aspects into the formal relations to suppliers, sub-contractors, licensees and local authorities. In its long term planning, it should aim at reducing or sharing product liability and anticipate regulation that will affect the working of the chain-oriented organisation.
Chain-oriented financial administration
The ordinary accounting of a company does not split out the production costs on the individual products and even when using cost allocation for pricing or when budgeting for specific projects it is seldom that all costs are correctly allocated. In the product-oriented organisation, Total Cost Assessment may give a product perspective to costing, which matches that of environmental life cycle assessment. In Total Cost Assessment also indirect, hidden and less tangible costs are included, and costs (and benefits) within a longer time horizon (10 to 15 years) are included. However, most important is the complete allocation of all costs back to the products and processes whence they arose, also known as activity-based costing. Total Cost Assessment may be introduced for valuation of specific projects but the full benefits will only be obtained if the daily accounting operates on this basis.
The indirect, hidden and less tangible costs included in a Total Cost Assessment include costs for waste storage and handling, monitoring, record keeping, reporting, training, emergency preparedness, medical surveillance, insurance, decreased lifetime of installations, property damage, loss of working days due to illness, lost productivity, time for handling community concerns, and lost market shares due to perceived environmental problems. External costs, for which the company is not presently responsible, such as the costs of preventing or compensating for general environmental damages, are not usually included in a Total Cost Assessment. If they were, this information would overlap that of environmental life cycle assessments, since these assessments are accounts of such externalities in the product chain, although usually not monetarised.
Chain-oriented strategic management
Strategic decisions have a large influence on environmental impacts. Location of a new plant, or expanding or closing of an old one, a decision on a merger, enter a new market, deploy a new process, or develop a new product, are all examples of decisions which can be taken with or without a view to the product chain impacts. The building of a chain-oriented organisation can be completely compromised if decisions at the strategic level are not justified by product chain information and communicated to the rest of the organisation in this spirit. Long term life cycle based planning and scenario techniques should be used to avoid “spur of the moment”-decisions.
Besides overseeing the development of the chain-oriented organisation within the company, the strategic management also has the responsibility to initiate and confirm co-operation with other actors in the product chain. While some companies may control important parts of their products’ life cycles and therefore may implement substantial life cycle improvements without asking the assistance of others, joint implementation with other companies in the chain usually creates an important synergy effect. Joint implementation has also come to be known under the name integrated chain management, a term coined in the Dutch national environmental policy plan of 1989. The initiative for joint implementation typically comes from an influential (large) company in the chain. Less often, co-operation is initiated by groups of small companies in a product chain or in a region. Product chains seem to be natural starting points for co-operation, since products already constitute the common ground for the economic exchange between the companies.