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Sustainable Manufacturing
- 1. Sustainable M S t i bl Manufacturing f t i Remaking Today s Manufacturing Enterprise for Today’s Tomorrow’s Economy February 2009 Greg Gorbach Vice President ARC Advisory Group ggorbach@arcweb.com
- 2. Agenda Climate And Resource Constraints are Beginning to Drive Manufacturers • Climate-Related Risk Increasing • Marketplace Demanding Sustainability • Scale of Needed Changes is Large Enterprise-wide Sustainable Manufacturing p g • Business, Supply Chain, Engineering, Operations Sustainable Manufacturing Toolbox 2 © ARC Advisory Group
- 3. Climate Science and Emerging Business g g Imperatives 3 © ARC Advisory Group
- 4. Direct Observations of Recent Climate Change Source: Intergovernmental Panel on Climate Change, Fourth Assessment Report, 2007 4 © ARC Advisory Group
- 5. Human Contribution to Climate Change Source: Intergovernmental Panel on Climate Change, Fourth Assessment Report, 2007 5 © ARC Advisory Group
- 6. Global Anthropogenic Greenhouse Gas Emissions a) Global Anthropogenic GHG Emissions; b) Share of Anthropogenic GHG Emissions in 2004; c) Anthropogenic GHG Emissions Share by Sector in 2004 Source: Intergovernmental Panel on Climate Change, Fourth Assessment Report, 2007 6 © ARC Advisory Group
- 7. Marketplace Pressure for Sustainable Manufacturing is Growing Wal-Mart president and CEO Lee Scott in their March 2008 Global Sustainability Newsletter: “We will require all suppliers who work with us through global procurement, who are domestic or importers, or who manufacture Sam’s Club or Wal-Mart private brands, to demonstrate that their factories meet specific environmental, social and quality standards. We environmental standards have already started doing this, and we hope to extend the requirements to all of the above-mentioned suppliers within three to five years. y We will only work with suppliers who maintain our standards throughout our relationship, so certification and compliance will be part of our supplier agreements. We will favor – and in some cases even pay more – for suppliers that meet our standards and share our commitment to quality and sustainability. Paying more in the short term for quality will mean paying less in the long term as a company.” company 7 © ARC Advisory Group
- 8. Climate Induced Risk is Growing Cost •EEnergy C t Cost • Emissions Cost • Water Availability • Waste Cost • Materials Scarcity Market Valuation • Product Mix Risk • Customer Environmental Awareness • Brand Valuations • Reputational Risk • Product/Service Opportunities 8 © ARC Advisory Group
- 9. What Can be Done? Available Strategies for Solving the Climate Problem 9 © ARC Advisory Group
- 10. The Eight Wedges of the Stabilization Triangle by Socolow & Pacala, Princeton University and CMI Source: Carbon Mitigation Initiative (CMI) 10 © ARC Advisory Group
- 11. Available Carbon Emissions Reduction Strategies Category Strategy Description Transport efficiency Double the efficiency of all cars (2 billion cars) Transport conservation Cut total passenger vehicle miles in half (increase public transportation) Increased Efficiency and Building efficiency ff d Apply best new technologies (insulation, heating, lighting, etc.) Conservation Electricity production Raise plant efficiency from 40% to 60% efficiency Apply CCS to Electricity Store CO2 from fossil fuel plants underground (700 large coal plants or Fossil Fuel generation ge e at o 1400 natural gas plants) 00 atu a p a ts) Based Apply CCS to Hydrogen Hydrogen fuel from fossil sources with CCS displaces hydrocarbon fuels Strategies and production (produce hydrogen at 10x current rate) Carbon Apply CCS to Synfuels Capture and store CO2 from Coal Synfuels production (at 180 large plants) Capture and production Storage (CCS) Fuel Switching Displace coal-electric plants with natural gas (1400 1GW coal plants) coal electric Nuclear electricity Displace coal-electric plants with nuclear electric plants (add 2x current capacity; 50 yrs sustained effort) Wind Electricity Displace coal-electric plants with wind electricity (30x current capacity) Nuclear Energy and Solar El t i it S l Electricity Displace coal-electric plants with solar electricity (700x current capacity) Di l l l t i l t ith l l t i it (700 t it ) Renewables Wind Hydrogen Produce hydrogen with wind electricity (for use by half of the world's cars) Biofuels Displace petroleum fuels with biomass fuels (30x current capacity) Forest S F Storage Carbon C b stored in new forests; halt deforestation di f h l d f i Biostorage Soil Storage Carbon stored in agricultural soil; use conservation tillage on all the world's agricultural soils Source: Carbon Mitigation Initiative (CMI) 11 © ARC Advisory Group
- 12. Enterprise Sustainable Manufacturing p g 12 © ARC Advisory Group
- 13. Today’s Business Challenges Continue Sustainability Layers onto Existing Drivers Globalization R id P d t I Rapid Product Innovation ti Process Innovation Emissions Reductions Business Sustainability Raw Collaboration Materials, Finished Goods Ingredients Add Value in Synchronization Supply Production Operations Delivery Lean Continuous Improvement Production Compliance Risk Management Packaging Performance P f Flexibility Pull-based Production Etc. 13 © ARC Advisory Group
- 14. Market Pressures Operations Headaches Shifting customer requirements impact business every day Faster turnaround Reduced price Consistently high quality Smaller lots Delivered on my terms and y schedule Green packaging and transport Socially responsible y p production More products and more variations More real-time info about my orders Component traceability You handle recycling Be more responsive when p things change 14 © ARC Advisory Group
- 15. Sustainable Manufacturing Plant Levers What Can be Done to Impact Sustainability? ARC Sustainable Manufacturing Plant Model Improve Performance Energy & Water Products Materials & Components Production Waste Product Design Execution E i Emissions Improve Carbon Burden Energy Burden ability urden urden Product & acity Process Waste Bu Mfg Capa Mfg Capa Water Bu B Design Improve Production Engineering Physical Plant Assets Engineering and Mfg Operations Have Critical Roles 15 © ARC Advisory Group
- 16. Sustainable Manufacturing Lifecycle Engineering and Operations are Critical to Achieving Goals Business Systems Emissions Supplier Network Product Support Power Mfg Customers Dealer Operations Water Logistics Design Engineering Waste ARC CMM Model – Discrete Industries 16 © ARC Advisory Group
- 17. Sustainable Manufacturing Lifecycle Engineering and Operations are Critical to Achieving Goals Recycle Business Systems Re-use Emissions Supplier Network Product Emissions Support Power Mfg Customers Dealer Operations Water Fuel F l Logistics Design Engineering Waste ARC CMM Model – Discrete Industries 17 © ARC Advisory Group
- 18. Sustainable Manufacturing Lifecycle Engineering and Operations are Critical to Achieving Goals Recycle Emissions Emissions Business Systems Raw Re-use Materials Emissions Supplier Network Product Emissions Support Logistics Power Mfg Customers Dealer Operations Emissions Extraction Water Fuel F l Logistics Design Engineering Waste Potential for aARC CMM Model – Discrete Industries the Business Model Significant Change to 18 © ARC Advisory Group
- 19. What Would Sustainable Manufacturing Look Like? Environment & Resource Friendly Products Environment E i t Environment E i t & Resource & Resource Friendly Friendly Supply Chain Plants 19 © ARC Advisory Group
- 20. The Manufacturing Balance Has Changed It is time to revisit technology justifications YESTERDAY: Cheap E Ch Energy Cheap Water Cheap Waste $$$ ‘Free’ Emissions Predictable P di t bl Expensive Controls & Raw Materials Automation Technology Available Talent Pool Expensive Software and IT TODAY: Cheap Controls & Automation Technology $$$ Cheap Software and IT Energy cost swings Water cost rising Expensive Waste Expensive Emissions Unpredictable Raw Materials Limited Talent Pool 20 © ARC Advisory Group
- 21. Sustainable Design & Engineering Full-Featured, Collaborative Systems Speed the Work Business ARC CMM Model Increasing need for energy efficiency, emissions monitoring, ERP process changes, packaging changes, asset upgrades, and HR FIN new controls and metering… places greater demands on Design, Engineering teams SCM CRM Suppliers Customers Product Design PLM •Energy Efficiency Enterprise Infrastructure Product •Carbon Footprint TMS •Alternative Materials •Energy BOM Operations Mgt Process Engineering Design & Systems •Reduce Asset Energy, Water, Engineering Process & Carbon, and Waste Burdens Assets Equipment & E i t •Improve Flexibility Automation •Virtualization Production 21 © ARC Advisory Group
- 22. Sustainable Manufacturing Operations Flexible, Collaborative Platforms Ease the Transition Business ARC CMM Model Increasing need for energy efficiency, emissions g gy y, monitoring, and regulatory tracking… ERP requires new functionality, enhanced visibility and HR FIN planning, and greater collaboration in and with Manufacturing Operations SCM CRM Suppliers Customers •Production Execution PLM •Detail Scheduling Enterprise Infrastructure •Energy Management TMS •Water Management g •Waste Management Operations •Compliance Assurance Operations Mgt •Production Efficiency Management Systems •Asset Energy Monitoring & Maintenance •Carbon Tracking Equipment & E i t •Process Control P C t l Automation •etc Production 22 © ARC Advisory Group
- 23. Sustainable M S t i bl Manufacturing f t i Tools and Techniques February 2009 Greg Gorbach Vice President ARC Advisory Group ggorbach@arcweb.com
- 24. Sustainable Manufacturing Toolbox g 24 © ARC Advisory Group
- 25. Sustainable Manufacturing Toolbox A collection of useful ‘nuggets’ to help you in your Sustainable Manufacturing Journey: Goal Setting Examples • Prevention of Global Warming Targets •R Resource C Conservation T i Targets Reporting Sustainability Progress Potential Sustainability Initiatives by Department y y p Prioritizing Business vs. Environmental Needs The Role of Collaboration in Sustainability Assessing new Technologies and Business Processes Continuous Improvement and Sustainability Governance of Sustainable Manufacturing 25 © ARC Advisory Group
- 26. Set Sustainability Goals Sample Prevention of Global Warming Targets Reduce emissions of greenhouse gases, calculated in terms of CO2 emissions, from all sites by 10 p , y percent or more in 2009 and 30% or more by 2012. Reduce CO2 emissions during transport of products or materials by 20% o more. a e a s y 0% or o e Reduce manufacturing CO2 per vehicle produced (per unit produced) by 25% by 2012 Reduce energy consumed in manufacturing per vehicle produced (per unit produced) by 25% by 2012 Reduce energy consumption of products in use by 15% or more. more Produce 2 new profitable major products that help reduce GHG 26 © ARC Advisory Group
- 27. Reporting CO2 Reduction Progress Amount of CO2 Emissions From Manufacturing Facilities Amount of CO2 Emissions From All Manufacturing Facilities Kt CO2 % 100 99.9 400 97.9 98.2 100 93.9 330 300 282 286 90 299 236 81.1 217 200 80 100 70 ~ ~ 0 0 (FY) 1990 2002 2003 2004 2005 2006 Manufacturing Value = Total production cost excluding direct material cost, other facilities’ components, and procured components Amount of CO2 emissions Index per unit of manufacturing value (compared to FY 1990) 27 © ARC Advisory Group
- 28. Set Sustainability Goals Sample Resource Conservation Targets Reduce waste from manufacturing sites by 25% or more Achieve a waste reuse/recycle ratio of 95% or more Reduce waste generated per vehicle produced (per unit produced) by 40% by 2012 Achieve a reduction in volume of water purchased or drawn from groundwater for manufacturing purposes at sites of 20% or more Conduct life cycle assessments for all major products Continually increase resource recovery and re-use from end-of-life products d f lif d t 28 © ARC Advisory Group
- 29. Reporting Waste Reduction Progress Amount of Waste From Manufacturing Facilities Volume of Waste Generated by All Manufacturing Facilities Kt % 96.8 97.7 99.4 99.5 99.6 99.0 40 100 100 99.9 30.5 85.0 30 28.5 28 5 27.6 27 6 75 24.3 24.8 20 50 10 25 ~ ~ 0 0 ( ) (FY) 2002 2003 2004 2005 2006 2010 Manufacturing Value = Total production cost excluding direct material cost, other facilities’ components, and procured components Disposed Volume Recycled Volume Index per unit of manufacturing value (compared to FY 2005) Recycling Ratio 29 © ARC Advisory Group
- 30. Reporting Water Reduction Progress Amount of Water Used by Manufacturing Facilities Volume of Water Used by All Manufacturing Facilities Mm M 3 % 100 40 100 88.7 90.0 6.35 6.05 5.97 5 97 30 5.67 5.55 75 20 50 10 25 ~ ~ 0 0 (FY) 2002 2003 2004 2005 2006 2010 Supply Water Industrial Water Groundwater Index per unit of manufacturing value (compared to FY 2005) 30 © ARC Advisory Group
- 31. Enterprise Sustainable Manufacturing Map of Potential ESM Initiatives by Department Energy Emissions Scarce Water & Hazardous Waste Mgmt Reduction Reduction Raw Materials Materials & Recycling Reputational Risk and Brand Valuation Management Green Product and Service Opportunity Identification Increased Internal and External Collaboration Enterprise Carbon Trading Energy Planning Green Office Facilities Manufacturing Site Location Planning & Optimization SC Network Planning & Optimization Supply Chain Transport Asset Efficiency REACH Carbon Tracking Consumer Labeling Plant Asset Efficiency Production Renewable Power e.g. Wind Packaging Operations Energy Management Production Efficiency Energy Effi i t P d t E Efficient Products Alternative M t i l Alt ti Materials Product Low Carbon Footprint Products Design Energy BOM Flexible Production Process/Plant Optimized Processes Alternative Processes Design Additional Metering & Sensing Virtual Validation & Pilot Green Construction 31 © ARC Advisory Group
- 32. Align Business and Environmental Needs Sustainable Manufacturing Priority Matrix (Example) Medium Priority High Priority Energy Management ness Value GHG Mitigation Water Waste Carbon Tracking Supply Chain Initiatives Conservation Mitigation Busin Market and Regulatory Pressure Low Priority Watch List Environmental Sustainability Impact Each Manufacturer Sh ld E t bli h ESM P i iti E hM f t Should Establish Priorities Based on its Unique Circumstances LCF = Low Carbon Footprint GHG = Greenhouse Gas 32 © ARC Advisory Group
- 33. Collaboration and Sustainability New Processes and Functions Cut Across Groups and Apps Business/IT Carbon SC Planning & Logistics Tracking ERP E&E (Emissions & SC Network Route Carbon Energy) Planning New Tracking, New Design Optimization and Visibility KPIs Compliance Supplier Design Energy Operations Ope ations Mgt Req’ts Efficient, Low- E&E Carbon Product Targets Efficiency Data Collection & Sharing Design E&E Efficient PLM Mfg Process New Metering Automation & Sensing Energy BOM New Plant Models with E&E Improve Energy/Emissions Production Assets Design Asset g Performance E&E Upgrades/ ALM Replacements Design Facilities Reduce Energy Consumption Facilities E&E Upgrades/ Replacements p Engineering Plant 33 © ARC Advisory Group
- 34. Real-time Plant Floor Energy Management Enables Operators to Make Energy Decisions in Real-time Targets Visibility & Alerts Analysis & l i Real-time Management Plant Floor Tools Energy Management g Data Gathering Energy Production Info Info Metering Production Steps Plan and Track Energy Consumption by Unit Produced gy p y 34 © ARC Advisory Group
- 35. Assessing New Technologies & Processes Consider cost, benefit, and production impact Benefit No. of Estimated Potential ROI Time to Disruption Pilot Lead Impacted No. No Project Type Instances Cost Benefit/yr +/ +/- Benefit Factor ID'd? ID d? Dep t Dep't FTEs Dep'ts Priority Dep ts Track Energy by Unit 101 for Product XYZ GHG 13 $10M 200 KT CO2 pos 18 mos med yes Mfg 3 Design, IT Green Lighting in 102 Plants GHG 44 $4M 25 KT CO2 pos 6 mos lo n/a Facilities 1 n/a NA Inbound Packaging Supply 103 Reduction Waste 28 $0.25M 50 K Ft3 pos 10 mos lo yes Chain 0.5 Mfg Eliminate Compressed 104 Air Controls GHG 7/100's / $ $13M 200 KT CO2 neg g 24 mos med y yes Mfg g 2 n/a / 40 KGal Replace water wash H2O 105 with air wash Water 4 $6M - 2 KT CO2 pos 15 mos hi yes Mfg 3 Design Steam systems & traps HVAC & R f i Refrigeration ti Motors & VSD's Waste Heat Recovery etc Production Technology Improvements Can Reduce Energy, Resource Consumption, Waste and GHG’s 35 © ARC Advisory Group
- 36. Sustainable Manufacturing DMAIC Apply continuous improvement techniques to new issues Define process improvement goals (e.g. energy and emissions reductions) that are consistent with market ) demands and the enterprise sustainability strategy. Measure key aspects of the current process and collect data. Analyze the data to verify cause and effect relationships. cause-and-effect Determine what the relationships are, and attempt to ensure that all factors have been considered. Establish costs and benefits of mitigation options. Identify ‘low-hanging fruit’ Improve or optimize the process based upon data analysis. Control to ensure that any deviations from target are corrected before they result in defects (e.g. energy or emissions spikes). 36 © ARC Advisory Group
- 37. A Governance Model for Sustainable Mfg Enterprise Focus, Visibility, and Accountability are Critical Corporate Sustainability Officer Executive Team CxO CSO Sustainable Manufacturing (SM) g SM Manager (Business Unit SM Leader) Governance Council SM Governance Council Members: gned Objectives VP Business Unit • CSO (Leader) • CIO SM Bus/Fin / • Representatives of Business and Corporate p p Oversight Leadership Functions Corporate Team Team SM Oversight Team Members (example): Manager Goals • VP Manufacturing (Leader) • SM Manager (Facilitator) Results • IT Manager SM Initiatives • Operations Manager Alig Supervisor Portfolio • Supply Chain Manager Strategy Management • Purchasing (Improve • Product Engineering SM Programs • Manufacturing Engineering Sustainability) Management • Maintenance Operator (Execute to Goals) • Shipping/Receiving • Facilities Typical Sustainability Program Elements: Enterprise Supply Chain Production Ops Product Eng Plant Eng Risk and Valuation Transport Efficiency Energy Mgmt Lo-Energy Products New Metering Green Opportunities Carbon Tracking Asset Efficiency Lo-Carbon Products Flexible mfg Location Planning SC Network Plan Green Packaging Energy BOM Optimized Assets Carbon Trading REACH Prod’n Efficiency Alternate Materials Green Construction 37 © ARC Advisory Group
- 38. Final Thoughts g 38 © ARC Advisory Group
- 39. Now is the Time to Act Enterprise Sustainable Manufacturing Supply Chain Operations • Supply Chain Network • Production Execution Design • Detail Scheduling • Carbon Tracking • Energy Management • Route Carbon Optimization • Water Management • Regulatory Tracking • Waste Management • Supplier Packaging Policies • Compliance Assurance • JIT vs. Emissions Tradeoffs • Production Efficiency • etc • Asset Energy Monitoring & Maintenance Business Design & Eng • etc • Sustainability Strategy • Tradeoffs and Priorities Product Design • Brand and Reputation Risk • Energy Efficiency Management • Carbon Footprint • Mfg Location Planning • Alternative Materials • Energy, Emissions Policies • Energy BOM • Facilities Improvements Process Engineering (Lighting, HVAC, etc.) • Reduce Asset Energy, Water, • New Construction Policies Carbon, and Waste Burdens • Upgrade Policies • Improve Flexibility • Master Scheduling • Virtualization Manufacturers Can Benefit by Taking an Enterprise-Wide Approach 39 © ARC Advisory Group
- 40. Be Prepared Identify Potential High-Impact Sustainability Initiatives ARC Sustainable Manufacturing Plant Model Improve Performance Energy & Water Products Materials & Components Production Waste Product Design Execution E i Emissions Improve Carbon Burden Energy Burden ability urden Product & urden acity Process Waste Bu Design Mfg Capa Mfg Capa Water Bu B Improve Production Engineering Physical Plant Assets Anticipate Evolving Corporate Requirements for Sustainability 40 © ARC Advisory Group
- 41. Our Challenge: Successfully Transition to 21st Century Manufacturing Model Climate change and sustainability will y fundamentally change manufacturing as each company revisits where plants are located, how materials are sourced and shipped, and tradeoffs in how goods are produced. Productivity, efficiency, tracking, quality, tracking quality and visibility will be more important than ever. 41 © ARC Advisory Group
- 42. Thank You 42 © ARC Advisory Group