Sustainable Manufacturing

S t i bl M f t iS t i bl M f t iSustainable Manufacturing

Remaking Today’s Manufacturing Enterprise for

Sustainable Manufacturing

Remaking Today’s Manufacturing Enterprise forRemaking Today s Manufacturing Enterprise for Tomorrow’s Economy

February 2009

Remaking Today s Manufacturing Enterprise for Tomorrow’s Economy

February 2009February 2009February 2009

Greg GorbachVice President

ARC Advisory [email protected]

AgendaAgenda

Climate And Resource Constraints are Beginning to Drive ManufacturersBeginning to Drive Manufacturers• Climate-Related Risk Increasing• Marketplace Demanding SustainabilityMarketplace Demanding Sustainability• Scale of Needed Changes is Large

Enterprise-wide Sustainable Manufacturingp g• Business, Supply Chain, Engineering, Operations

Sustainable Manufacturing Toolbox

2© ARC Advisory Group

Climate Science and Emerging Business Climate Science and Emerging Business g gImperatives

g gImperatives


Direct Observations of Recent Climate ChangeDirect Observations of Recent Climate Change


Source: Intergovernmental Panel on Climate Change, Fourth Assessment Report, 2007

Human Contribution to Climate ChangeHuman Contribution to Climate Change



Global Anthropogenic Greenhouse Gas EmissionsGlobal 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



Marketplace Pressure for Sustainable Manufacturing is GrowingMarketplace 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 Wefactories meet specific environmental, social and quality standards. We have already started doing this, and we hope to extend the requirements to all of the above-mentioned suppliers within three to five years. yWe 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 ”


paying less in the long term as a company.

Climate Induced Risk is GrowingClimate Induced Risk is Growing

CostE C t• Energy Cost

• Emissions Cost• Water Availability• Water Availability• Waste Cost• Materials Scarcity• Materials Scarcity

Market Valuation• Product Mix Risk• Customer Environmental Awareness

• Brand Valuations


• Reputational Risk• Product/Service Opportunities

What Can be Done? Available Strategies for Solving theWhat Can be Done? Available Strategies for Solving theAvailable Strategies for Solving the Climate ProblemAvailable Strategies for Solving the Climate Problem


The Eight Wedges of the Stabilization Triangle by Socolow & Pacala, Princeton University and CMIThe Eight Wedges of the Stabilization Triangle by Socolow & Pacala, Princeton University and CMI


Source: Carbon Mitigation Initiative (CMI)

Available Carbon Emissions Reduction StrategiesAvailable Carbon Emissions Reduction Strategies

Category Strategy Description

Increased ff d

Transport efficiency Double the efficiency of all cars (2 billion cars)Transport conservation Cut total passenger vehicle miles in half (increase public transportation)

Efficiency and Conservation

Building efficiency Apply best new technologies (insulation, heating, lighting, etc.)

Electricity production efficiency

Raise plant efficiency from 40% to 60%

Fossil FuelApply CCS to Electricity generation

Store CO2 from fossil fuel plants underground (700 large coal plants or 1400 natural gas plants)Fossil Fuel

Based Strategies and

Carbon Capture and Storage (CCS)

ge e at o 00 atu a gas p a ts)Apply CCS to Hydrogen production

Hydrogen fuel from fossil sources with CCS displaces hydrocarbon fuels (produce hydrogen at 10x current rate)

Apply CCS to Synfuels production

Capture and store CO2 from Coal Synfuels production (at 180 large plants)

Fuel Switching Displace coal electric plants with natural gas (1400 1GW coal plants)Fuel Switching Displace coal-electric plants with natural gas (1400 1GW coal plants)

Nuclear Energy

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)

S l El t i it Di l l l t i l t ith l l t i it (700 t it )and Renewables

Solar Electricity Displace coal-electric plants with solar electricity (700x current capacity)

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)

F S C b d i f h l d f i


BiostorageForest Storage Carbon stored in new forests; halt deforestationSoil Storage Carbon stored in agricultural soil; use conservation tillage on all the

world's agricultural soils

Source: Carbon Mitigation Initiative (CMI)

Enterprise Sustainable ManufacturingEnterprise Sustainable Manufacturingp gp g


Today’s Business Challenges ContinueSustainability Layers onto Existing DriversToday’s Business Challenges ContinueSustainability Layers onto Existing Drivers

GlobalizationR id P d t I tiRapid Product InnovationProcess InnovationEmissions ReductionsSustainability

Business

CollaborationSynchronization LeanContinuous Improvement

Raw Materials,

Ingredients

Finished GoodsAdd Value in

Production Operations

Supply Delivery

Continuous ImprovementComplianceRisk ManagementPackagingP f

Production

PerformanceFlexibilityPull-based ProductionEtc.


Market Pressures Operations HeadachesShifting customer requirements impact business every dayMarket Pressures Operations HeadachesShifting customer requirements impact business every day

Faster turnaroundReduced priceConsistently high qualitySmaller lotsDelivered on my terms and yscheduleGreen packaging and transportSocially responsible y pproductionMore products and more variationsMore real-time info about my ordersComponent traceabilityYou handle recyclingBe more responsive when


pthings change

Sustainable Manufacturing Plant LeversWhat Can be Done to Impact Sustainability?Sustainable Manufacturing Plant LeversWhat Can be Done to Impact Sustainability?

ARC Sustainable Manufacturing Plant Model

Production E i

Products

Waste

Energy & Water

Materials & Components

Improve Performance

Execution EmissionsProduct Design

abili

ty

acity

urd

en

urd

en

Burd

en

urd

en

Improve Product & Process

Mfg

Cap

a

Mfg

Cap

a

Ener

gy

B

Wat

er B

u

Car

bon B

Was

te B

u

Design

Production Assets

EngineeringImprove Physical

Plant


Engineering and Mfg Operations Have Critical Roles

Sustainable Manufacturing LifecycleEngineering and Operations are Critical to Achieving GoalsSustainable Manufacturing LifecycleEngineering and Operations are Critical to Achieving Goals

BusinessBusiness Systems

EmissionsSupplier Network

Product Support

CustomersDealer

Power

Water

Mfg Operations

Logistics

WasteDesign


ARC CMM Model – Discrete Industries

WasteEngineering


Recycle

Business

Re-use

Business Systems

EmissionsSupplier Network

EmissionsProduct Support

F l

CustomersDealer

Power

Water

Mfg Operations

Fuel

Logistics

WasteDesign



WasteEngineering


Recycle

BusinessEmissions

Emissions

Re-use

Business Systems

EmissionsRaw

MaterialsSupplier Network

EmissionsProduct Support

Logistics

F l

CustomersDealer

Power

WaterExtraction Emissions

Mfg Operations

Fuel

Logistics

WasteDesign



WasteEngineering

Potential for a Significant Change to the Business Model

What Would Sustainable Manufacturing Look Like?What Would Sustainable Manufacturing Look Like?

Environment& Resource

FriendlyProducts

E i tE i t Environment & Resource

Friendly Plants

Environment & Resource

Friendly Supply Chain


The Manufacturing Balance Has ChangedIt is time to revisit technology justificationsThe Manufacturing Balance Has ChangedIt is time to revisit technology justifications

Ch EYESTERDAY:

Cheap EnergyCheap WaterCheap Waste‘Free’ EmissionsP di t bl

$$$PredictableRaw MaterialsAvailable Talent Pool

Expensive Controls & Automation TechnologyExpensive Software and IT

Cheap Controls & Automation Technology

TODAY:

Energy cost swingsWater cost risingExpensive Waste

Automation TechnologyCheap Software and IT$$$


Expensive WasteExpensive EmissionsUnpredictable Raw MaterialsLimited Talent Pool

Sustainable Design & EngineeringFull-Featured, Collaborative Systems Speed the Work Sustainable Design & EngineeringFull-Featured, Collaborative Systems Speed the Work

ARC CMM ModelBusiness

ERPHR FIN

Increasing need for energy efficiency, emissions monitoring, process changes, packaging changes, asset upgrades, and

new controls and metering…

CustomersSuppliers

CRMSCM

places greater demands on Design, Engineering teams

TMS

Enterprise InfrastructurePLMProduct

Product Design•Energy Efficiency•Carbon Footprint•Alternative Materials

E i t &

Operations Mgt SystemsDesign &

Engineering Process & Assets

•Energy BOMProcess Engineering•Reduce Asset Energy, Water, Carbon, and Waste Burdens

•Improve Flexibility


Equipment & Automation

Production

Assets •Improve Flexibility•Virtualization

Sustainable Manufacturing OperationsFlexible, Collaborative Platforms Ease the Transition Sustainable Manufacturing OperationsFlexible, Collaborative Platforms Ease the Transition

Business

Increasing need for energy efficiency, emissions ARC CMM Model

FINERP

HR

g gy y,monitoring, and regulatory tracking…

requires new functionality, enhanced visibility and planning, and greater collaboration in and with

Manufacturing Operations

CustomersSuppliers

CRMSCM

Manufacturing Operations

TMS

Enterprise InfrastructurePLM

•Production Execution•Detail Scheduling•Energy Management •Water Management•Waste Management

E i t &

Operations Mgt Systems

Operations Management

g•Compliance Assurance•Production Efficiency•Asset Energy Monitoring & Maintenance

•Carbon TrackingP C t l


Equipment & Automation

Production

•Process Control•etc

S t i bl M f t iS t i bl M f t iSustainable Manufacturing

Tools and Techniques

Sustainable Manufacturing

Tools and TechniquesTools and Techniques

February 2009

Tools and Techniques

February 2009

Greg GorbachVice President

ARC Advisory [email protected]

Sustainable Manufacturing ToolboxSustainable Manufacturing Toolboxgg


Sustainable Manufacturing ToolboxSustainable Manufacturing Toolbox

A collection of useful ‘nuggets’ to help you in your Sustainable Manufacturing Journey:your Sustainable Manufacturing Journey:

Goal Setting Examples• Prevention of Global Warming Targets

R C i T• Resource Conservation TargetsReporting Sustainability ProgressPotential Sustainability Initiatives by Departmenty y pPrioritizing Business vs. Environmental NeedsThe Role of Collaboration in SustainabilityAssessing new Technologies and Business ProcessesAssessing new Technologies and Business ProcessesContinuous Improvement and SustainabilityGovernance of Sustainable Manufacturing


Set Sustainability GoalsSample Prevention of Global Warming Targets Set Sustainability GoalsSample Prevention of Global Warming Targets

Reduce emissions of greenhouse gases, calculated in terms of CO2 emissions, from all sites by 10 percent or 2 , y pmore in 2009 and 30% or more by 2012.Reduce CO2 emissions during transport of products or materials by 20% or more.a e a s y 0% o o eReduce manufacturing CO2 per vehicle produced (per unit produced) by 25% by 2012Reduce energy consumed in manufacturing per vehicleReduce energy consumed in manufacturing per vehicle produced (per unit produced) by 25% by 2012Reduce energy consumption of products in use by 15% or moreor more.Produce 2 new profitable major products that help reduce GHG


Reporting CO2 Reduction ProgressAmount of CO2 Emissions From Manufacturing FacilitiesReporting CO2 Reduction ProgressAmount of CO2 Emissions From Manufacturing Facilities

Amount of CO2 Emissions From All Manufacturing Facilities

400

Kt CO2

330

10097.9

99.9 98.2

93.9

100

%

300

200217

236

282299

286

81.1

90

80

100

0

70

0

~~

2002 2003 2004 2005 20061990(FY)0 0

Amount of CO2 emissionsIndex per unit of manufacturing value (compared to FY 1990)

Manufacturing Value = Total production cost excluding direct material cost, other facilities’ components, and procured components


Index per unit of manufacturing value (compared to FY 1990)

Set Sustainability GoalsSample Resource Conservation Targets Set Sustainability GoalsSample Resource Conservation Targets

Reduce waste from manufacturing sites by 25% or moreAchieve a waste reuse/recycle ratio of 95% or moreReduce waste generated per vehicle produced (per unit produced) by 40% by 2012produced) by 40% by 2012Achieve a reduction in volume of water purchased or drawn from groundwater for manufacturing purposes at sites of 20% or moreat sites of 20% or moreConduct life cycle assessments for all major productsContinually increase resource recovery and re-use from

d f lif d tend-of-life products


Reporting Waste Reduction ProgressAmount of Waste From Manufacturing FacilitiesReporting Waste Reduction ProgressAmount of Waste From Manufacturing Facilities

Volume of Waste Generated by All Manufacturing Facilities

30

40

Kt

28 5 27 630.5

100

75

%

100 99.9

85.0

99.4 99.6 99.099.597.796.8

30

20

24.3

28.5 27.624.8

75

50

2002 2003 2004 2005 2006 2010(FY)

10

0

25

0

~~

( )

Recycled VolumeIndex per unit of manufacturing value (compared to FY 2005)

Manufacturing Value = Total production cost excluding direct material cost, other facilities’ components, and procured components

Disposed Volume



Recycling Ratio

Reporting Water Reduction ProgressAmount of Water Used by Manufacturing FacilitiesReporting Water Reduction ProgressAmount of Water Used by Manufacturing Facilities

M 3

Volume of Water Used by All Manufacturing Facilities

100

88.7 90.040

Mm3

6.05 5 976.35

100

%

30

20

6.05 5.975.67 5.55 75

50

10

0

25

0

~~

2002 2003 2004 2005 2006 2010(FY)0 0


Supply Water Industrial Water Groundwater


Enterprise Sustainable ManufacturingMap of Potential ESM Initiatives by DepartmentEnterprise Sustainable ManufacturingMap of Potential ESM Initiatives by Department

Energy Reduction

EmissionsReduction

Scarce Water & Raw Materials

Hazardous Materials

Waste Mgmt & Recycling

Reputational Risk and Brand Valuation Management

Green Product and Service Opportunity Identification

Enterprise

Manufacturing Site Location Planning & Optimization

Green Office Facilities

Carbon Trading

Energy Planning

Increased Internal and External Collaboration

Supply Chain

Manufacturing Site Location Planning & Optimization

SC Network Planning & Optimization

REACH

Consumer LabelingCarbon Tracking

Transport Asset Efficiency

Production Operations

Alt ti M t i lE Effi i t P d t

Consumer Labeling

Packaging

Plant Asset Efficiency

Renewable Power e.g. Wind

Energy Management

Production Efficiency

Product Design

Process/Plant

Alternative Materials

Alternative Processes

Low Carbon Footprint Products

Energy Efficient Products

Energy BOM

Optimized Processes

Flexible Production


Design Additional Metering & Sensing

Virtual Validation & Pilot

Green Construction

Align Business and Environmental NeedsSustainable Manufacturing Priority Matrix (Example) Align Business and Environmental NeedsSustainable Manufacturing Priority Matrix (Example)

High PriorityMedium Priority

ue

GHG

Energy Management

ness

Val GHG

Mitigation

Carbon TrackingSupply Chain Initiatives

WasteMitigation

WaterConservation

Bu

sin

Market and Regulatory Pressure

Environmental Sustainability Impact

Low Priority Watch List

E h M f t Sh ld E t bli h ESM P i iti


Each Manufacturer Should Establish ESM Priorities Based on its Unique Circumstances

LCF = Low Carbon Footprint GHG = Greenhouse Gas

Collaboration and SustainabilityNew Processes and Functions Cut Across Groups and AppsCollaboration and SustainabilityNew Processes and Functions Cut Across Groups and Apps

Business/ITCarbon

Ope ations Mgt

ERPSC Planning & Logistics

E&E (Emissions & Energy) Planning

and Visibility

Tracking, Compliance

New KPIs

Carbon Tracking

SC Network DesignNew

Supplier

Route Carbon Optimization

Operations Mgt

AutomationPLM New Metering & Sensing

Data Collection & Sharing

E&E Targets Efficiency

Design Energy Efficient, Low-Carbon Product

Design E&E Efficient Mfg Process

Req’ts

Production Assets

& Sensing

Improve Energy/Emissions

PerformanceDesign Asset

Energy BOM New Plant

Models with E&E

Facilities

ALM

Performance

Reduce Energy Consumption

gE&E Upgrades/ Replacements

Design Facilities E&E Upgrades/ Replacements


Engineering Plantp

Real-time Plant Floor Energy ManagementEnables Operators to Make Energy Decisions in Real-timeReal-time Plant Floor Energy ManagementEnables Operators to Make Energy Decisions in Real-time

Visibility & AlertsTargets

l i &Real-time Plant Floor

Energy Management

Analysis & Management

Tools

Production Info

Energy Info

g

Data Gathering

Metering

Production Steps

Plan and Track Energy Consumption by Unit Produced


gy p y

Assessing New Technologies & ProcessesConsider cost, benefit, and production impactAssessing New Technologies & ProcessesConsider cost, benefit, and production impact

No ProjectBenefit

TypeNo. of

InstancesEstimated

CostPotential

Benefit/yrROI +/-

Time to Benefit

Disruption Factor

Pilot ID'd?

Lead Dep't FTEs

Impacted Dep'ts PriorityNo. Project Type Instances Cost Benefit/yr +/ Benefit Factor ID d? Dep t FTEs Dep ts Priority

101Track Energy by Unit for Product XYZ GHG 13 $10M 200 KT CO2 pos 18 mos med yes Mfg 3 Design, IT

102Green Lighting in Plants GHG 44 $4M 25 KT CO2 pos 6 mos lo n/a Facilities 1 n/a

103NA Inbound Packaging Reduction Waste 28 $0.25M 50 K Ft3 pos 10 mos lo yes

Supply Chain 0.5 Mfg

104Eliminate Compressed Air Controls GHG 7/100's $13M 200 KT CO2 neg 24 mos med yes Mfg 2 n/a/ $ g y g /

105Replace water wash with air wash Water 4 $6M

40 KGalH2O

- 2 KT CO2 pos 15 mos hi yes Mfg 3 Design

Steam systems & traps

HVAC & R f i tiHVAC & Refrigeration

Motors & VSD's

Waste Heat Recovery

etc


Production Technology Improvements Can Reduce Energy, Resource Consumption, Waste and GHG’s

Sustainable Manufacturing DMAICApply continuous improvement techniques to new issuesSustainable Manufacturing DMAICApply 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.Analyze the data to verify cause and effect relationships. 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).


A Governance Model for Sustainable MfgEnterprise Focus, Visibility, and Accountability are CriticalA Governance Model for Sustainable MfgEnterprise Focus, Visibility, and Accountability are Critical

CxO

Executive Team

Sustainable Manufacturing (SM) SM Manager

CSO

Corporate Sustainability Officer

CxO

VP

gGovernance Council

Business Unit

Bus/Fin SM

SM Manager(Business Unit SM Leader)

ctiv

es SM Governance Council Members:• CSO (Leader)• CIO• Representatives of Business and Corporate

Manager

/Leadership

TeamOversight

Team SM Oversight Team Members (example):• VP Manufacturing (Leader)• SM Manager (Facilitator)• IT Manager• Operations Manager SM Initiatives g

ned

Obje

Results

p pFunctions

Corporate Goals

Supervisor

Operator

• Supply Chain Manager• Purchasing• Product Engineering• Manufacturing Engineering• Maintenance• Shipping/Receiving• Facilities

StrategySM Programs Management

(Execute to Goals)

Portfolio Management

(Improve Sustainability)

Alig

• Facilities

Enterprise Supply Chain Production Ops Product Eng Plant Eng

Risk and Valuation Transport Efficiency Energy Mgmt Lo-Energy Products New Metering

Typical Sustainability Program Elements:


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

Final ThoughtsFinal Thoughtsgg


Now is the Time to ActNow is the Time to Act

Enterprise Sustainable Manufacturing

OperationsSupply Chain• Supply Chain Network Design

• Carbon Tracking• Route Carbon Optimization• Regulatory Tracking

• Production Execution• Detail Scheduling• Energy Management • Water Management• Waste Management

Design & EngBusiness• Sustainability Strategy• Tradeoffs and Priorities• Brand and Reputation Risk

Regulatory Tracking• Supplier Packaging Policies• JIT vs. Emissions Tradeoffs• etc

Product Design• Energy Efficiency

Waste Management• Compliance Assurance• Production Efficiency• Asset Energy Monitoring & Maintenance

• etc

Brand and Reputation Risk Management

• Mfg Location Planning• Energy, Emissions Policies• Facilities Improvements (Lighting, HVAC, etc.)

• New Construction Policies• Upgrade Policies• Master Scheduling

• Carbon Footprint• Alternative Materials• Energy BOMProcess Engineering• Reduce Asset Energy, Water, Carbon, and Waste Burdens

• Improve Flexibility• VirtualizationMaster Scheduling

Manufacturers Can Benefit by Taking an


Enterprise-Wide Approach

Be PreparedIdentify Potential High-Impact Sustainability InitiativesBe PreparedIdentify Potential High-Impact Sustainability Initiatives

ARC Sustainable Manufacturing Plant Model

Production E i

Products

Waste

Energy & Water

Materials & Components

Improve Performance

Execution EmissionsProduct Design

abili

ty

acity

urd

en

urd

en

Burd

en

urd

en

Improve Product & Process

Mfg

Cap

a

Mfg

Cap

a

Ener

gy

B

Wat

er B

u

Car

bon B

Was

te B

uDesign

Production Assets

EngineeringImprove Physical

Plant


Anticipate Evolving Corporate Requirements for Sustainability

Our Challenge:Successfully Transition to 21st Century Manufacturing ModelOur Challenge:Successfully Transition to 21st Century Manufacturing Model

Climate change and sustainability will yfundamentally change manufacturing as each company revisits where plants are located, how materials are sourced and shipped, and tradeoffs in how goodstradeoffs in how goods are produced. Productivity, efficiency, tracking quality andtracking, quality, and visibility will be more important than ever.


Thank YouThank You
