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Foecke - How? Strategies for Greening the Supply Chain
Foecke - How? Strategies for Greening the Supply Chain
Foecke - How? Strategies for Greening the Supply Chain
Foecke - How? Strategies for Greening the Supply Chain
Foecke - How? Strategies for Greening the Supply Chain
Foecke - How? Strategies for Greening the Supply Chain
Foecke - How? Strategies for Greening the Supply Chain
Foecke - How? Strategies for Greening the Supply Chain
Foecke - How? Strategies for Greening the Supply Chain
Foecke - How? Strategies for Greening the Supply Chain
Foecke - How? Strategies for Greening the Supply Chain
Foecke - How? Strategies for Greening the Supply Chain
Foecke - How? Strategies for Greening the Supply Chain
Foecke - How? Strategies for Greening the Supply Chain
Foecke - How? Strategies for Greening the Supply Chain
Foecke - How? Strategies for Greening the Supply Chain
Foecke - How? Strategies for Greening the Supply Chain
Foecke - How? Strategies for Greening the Supply Chain
Foecke - How? Strategies for Greening the Supply Chain
Foecke - How? Strategies for Greening the Supply Chain
Foecke - How? Strategies for Greening the Supply Chain
Foecke - How? Strategies for Greening the Supply Chain
Foecke - How? Strategies for Greening the Supply Chain
Foecke - How? Strategies for Greening the Supply Chain
Foecke - How? Strategies for Greening the Supply Chain
Foecke - How? Strategies for Greening the Supply Chain
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Foecke - How? Strategies for Greening the Supply Chain

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  • 1. How? Strategies to Green the Supply Chain
  • 2.  
  • 3. A VERY (very) LARGE PENSION FUND SAYS RETROFIT INDUSTRIAL ENERGY EFFICIENCY IS THE BEST ASSET CLASS ON THE PLANET WHY?
  • 4. AN INVESTIGATION WITH THE ENVIRONMENTAL DEFENSE FUND AND WAL-MART GLOBAL SOURCING IN CHINA VISITING OVER 600 FACTORIES IN WAL-MART’S SUPPLY CHAIN FOUND…
  • 5. 30-50% reductions in energy intensity in plastics fabrication possible Some factories doing more than 60% --on total energy
  • 6. With throughput and quality improvements
  • 7. <ul><li>Opportunities everywhere </li></ul><ul><li>Wood fabrication </li></ul><ul><li>Metal fabrication </li></ul><ul><li>Painting and coating </li></ul><ul><li>Complex systems manufacturing </li></ul><ul><li>Compressed air </li></ul><ul><li>Process heating--process cooling </li></ul>
  • 8. ALL HAVE POTENTIAL FOR 30-40% REDUCTIONS IN TOTAL ENERGY INTENSITY Less than 2 years simple paybacks JUST ON ENERGY SAVINGS
  • 9. 4 big conclusions
  • 10. Target-rich but data poor Data Target
  • 11. The people with the answers have poor business models
  • 12. Someone has to LOOK WRONG NO ONE WANTS TO TAKE THE HIT
  • 13. Raw material extraction Factories Use Disposal The Merchant Supply Chain Product life cycle
  • 14. Raw material extraction Factories Use Disposal Negative environmental impact The Merchant Supply Chain
  • 15. Raw material extraction Factories Use Disposal Negative environmental impact Merchants’ ability to reduce impact The Merchant Supply Chain Where we need to go
  • 16. Steps to a strategy <ul><li>More data </li></ul><ul><ul><li>Meters </li></ul></ul><ul><ul><li>Process type and operation </li></ul></ul><ul><ul><li>State of play </li></ul></ul><ul><li>Better data </li></ul><ul><ul><li>Self-reported just not good enough </li></ul></ul><ul><ul><li>Be bold; bring a list of proposed alternatives tied to Best Practices </li></ul></ul>
  • 17. Steps to a strategy <ul><li>Are you a “manufacturing” customer? </li></ul><ul><ul><li>Comfortable with process and design </li></ul></ul><ul><ul><li>Involved beyond cost, time and quality </li></ul></ul><ul><ul><li>If so, determine best practice and hold factories to progress against that </li></ul></ul><ul><li>Or a “merchant” customer? </li></ul><ul><ul><li>Focused on cost, time and quality </li></ul></ul><ul><ul><li>Limited insight into process and design </li></ul></ul><ul><ul><li>If so, make a clear link to environmental progress against action plans and supplier acceptance </li></ul></ul>
  • 18. Steps to a strategy <ul><li>EE is not a core competency for factories </li></ul><ul><ul><li>Usually less than 10% of controllable Cost of Goods Sold </li></ul></ul><ul><ul><li>Avoid it because they’ve been burned or it seems esoteric </li></ul></ul><ul><ul><li>Energy costs buried in overhead </li></ul></ul><ul><ul><li>SO </li></ul></ul><ul><li>Who are your implementation partners? </li></ul><ul><ul><li>EE technology providers: make it easy for them </li></ul></ul><ul><ul><li>Energy providers: help them aggregate </li></ul></ul><ul><ul><li>Consultants: use for process expertise and oversight </li></ul></ul>
  • 19. Steps to a strategy <ul><li>Account for the uniqueness of each factory </li></ul><ul><ul><li>Goals </li></ul></ul><ul><ul><li>Implementation arc </li></ul></ul><ul><ul><li>Presence of technical management </li></ul></ul><ul><li>Make it easy for factories to “do the right thing” </li></ul><ul><ul><li>Connect rather than direct </li></ul></ul><ul><ul><li>Connect environmental progress with manufacturing excellence </li></ul></ul><ul><ul><li>Collaborate </li></ul></ul>
  • 20. Project Typology Type 1: The Straight Shot Description : Low-cost (to implement) simple project with minimal production risk and very low technology risk Distribution: 10% of 1 st 1000 factories; 5% after that. Ratio will repeat in other consumer products supply chains, but also other types of supply chains. Concentration increases to 20% in supply chains with higher value-added (e.g., electronics assembly). Scope: Usually one relatively simple EE opportunity, requiring minimal data collection and project development EE Scale: One discrete energy use consumes 60% or more of total energy, and has EE opportunity exceeding 40% energy intensity reduction Example: Plastic fabrication, toys, dolls. Installing servomotors and electromagnetic induction heaters reduces electricity use by 50+%
  • 21. Project Typology <ul><li>Type 2: Rolling Thunder </li></ul><ul><li>Description: A progression of 3-7 low-cost (to implement) simple sub-projects with minimal production risk and very low technology risk. Best approach is to nest sub-projects, implementing several sub-projects simultaneously. </li></ul><ul><li>Distribution: 60% of 1 st 1000 factories; 75% after that. Ratio will repeat in other consumer products supply chains, but also other types of supply chains. Concentration decreases to 50% in supply chains with higher value-added (e.g., name brands). </li></ul><ul><li>Scope: A mix of base load and process load EE opportunities, requiring minimal data collection and project development </li></ul><ul><li>EE Scale: Each discrete type of energy use consumes 10-20% of total energy; one use may exceed 30%. EE opportunity range from 15-70% energy intensity reduction (each use and EE opportunity set) </li></ul><ul><li>Example: Plastic fabrication + metal fabrication + motor production + coating + assembly, small appliances. </li></ul><ul><ul><ul><li>Install servomotors and electromagnetic induction heaters in plastic injection molders reduces electricity use </li></ul></ul></ul><ul><ul><ul><li>Install servomotors on large machine tools with variable loads </li></ul></ul></ul><ul><ul><ul><li>Optimize demand and generation of compressed air </li></ul></ul></ul><ul><ul><ul><li>Optimize chilling/cooling, especially cooling towers </li></ul></ul></ul><ul><ul><ul><li>Revamp HVAC, especially ventilation </li></ul></ul></ul><ul><ul><ul><li>Insulate ovens and rehab burners and controls </li></ul></ul></ul><ul><li>Total reduction in energy intensity = 40+% </li></ul>
  • 22. Project Typology Type 3: Bigfoot Description: One big complex project with 2-3 critical and related sub-projects; some production risk and low technology risk Distribution: 5% of 1 st 1000 factories; 0% after that. Ratio will repeat in other consumer products supply chains, but also other types of supply chains. Concentration increases to 25% in supply chains with higher value-added (e.g., electronics production; major appliances). Scope: A mix of base load and process load EE opportunities, requiring extensive data collection and project development EE Scale: Total energy use of main project and all sub-projects exceeds 75% or more of total energy, and has EE opportunity exceeding 40% Example: Production of television sets. Revamping HVAC, process controls and base load to balance and optimize thermal loads across entire building envelope reduces electricity use by 40%
  • 23. Project Typology <ul><li>Type 4: Slow and Steady </li></ul><ul><li>Description: A progression of 3-7 moderate-cost (to implement) sub-projects with minimal production risk and very low technology risk. Each project implementation complete before the next is opened. Requires a “portfolio ” approach. </li></ul><ul><li>Distribution : 25% of 1 st 1000 factories. Unknown ratio will repeat in other consumer products supply chains, as well as other types of supply chains. </li></ul><ul><li>Scope : A mix of base load and process load EE opportunities, requiring minimal data collection and project development </li></ul><ul><li>EE Scale: Each discrete type of energy use consumes 10-20% of total energy; one use may exceed 30%. EE opportunity range from 15-70% energy intensity reduction (each use and EE opportunity set) </li></ul><ul><li>Example: Plastic fabrication + metal fabrication + motor production + coating + assembly, lighting. </li></ul><ul><ul><ul><li>Install servomotors and electromagnetic induction heaters in plastic injection molders reduces electricity use </li></ul></ul></ul><ul><ul><ul><li>Install servomotors on large machine tools with variable loads </li></ul></ul></ul><ul><ul><ul><li>Optimize demand and generation of compressed air </li></ul></ul></ul><ul><ul><ul><li>Optimize chilling/cooling, especially cooling towers </li></ul></ul></ul><ul><ul><ul><li>Revamp HVAC, especially ventilation </li></ul></ul></ul><ul><ul><ul><li>Insulate ovens and rehab burners and controls </li></ul></ul></ul><ul><li>Total reduction in energy intensity = 50% </li></ul>
  • 24. Scope and Scale and Distribution of EE Projects Wal-mart GS China Supply Chain Straight Shot 10% of total factories Rolling Thunder 60% of total factories Bigfoot 5% of total factories Slow and Steady 25% of total factories Capex $(US)500,000 $100,000 to $2 million $2 million $(US)250,000 to $1,000,000 Energy spend/yr $960,000 $40,000 to $3.2 million $3.0 million $250,000 to $1 million EE value $230,400 $16,000 to $1.28 million $1.2 million $125,000 to $500,000 Approach Cluster by EE opportunity Cluster by product type and process; nested One-by-one Cluster by EE opportunity; portfolio
  • 25. Are you willing to…? <ul><li>Vouch for the credit quality of factories in your supply chain? </li></ul><ul><li>Co-invest in EE projects? </li></ul><ul><li>Engage in collaborative projects to develop EE alternatives by guaranteeing orders/prices? </li></ul><ul><li>Mandate metered data? </li></ul><ul><li>Work with the “muddled middle” after you scoop up the “early adopters”? </li></ul><ul><li>Integrate EE (and overall environmental/social progress) with sourcing and product design? </li></ul>
  • 26. Things you need to know <ul><li>Audits do not really work very well </li></ul><ul><li>Many factories do not “own” their processes </li></ul><ul><li>You, as a “Big Customer”, may be the only independent and neutral source of info for factories </li></ul><ul><li>After the first 20% of gains in reducing energy intensity, EE pays off very slowly…unless the factory is horribly inefficient </li></ul><ul><li>Finance (at the moment) seems to be a “Key to the [Implementation] Kingdom” </li></ul><ul><li>Go to the Gemba; boots on the ground are critical </li></ul>

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