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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
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© ARC Advisory Group
4. Direct Observations of Recent Climate Change
Source: Intergovernmental Panel on Climate Change, Fourth Assessment Report, 2007
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5. Human Contribution to Climate Change
Source: Intergovernmental Panel on Climate Change, Fourth Assessment Report, 2007
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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
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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
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9. What Can be Done?
Available Strategies for Solving the
Climate Problem
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10. The Eight Wedges of the Stabilization Triangle
by Socolow & Pacala, Princeton University and CMI
Source: Carbon Mitigation Initiative (CMI)
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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
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.
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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
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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
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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
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© 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
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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
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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
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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
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© 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
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© 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
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
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© 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
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© 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)
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© 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
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© 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
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© 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)
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© 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
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© 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
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© 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
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© 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
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© 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
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© 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).
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© 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
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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
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© 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.
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© ARC Advisory Group