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  • 1. Green Supply Chain Management: Final Paper Professor: Dr. Roland Geyer Authors: Christian Del Maestro, Adam Rohloff Servicizing the Computer Supply Chain: Potential Economic and Environmental Benefits of Cloud Computing May 21, 2010
  • 2. GSCM: Thin Client/Cloud Computing Del Maestro, Rohloff The IT industry has recently been included as a significant actor in global greenhouse gas (GHG) emissions, at approximately 2-3% of emissions, roughly equivalent to the international airline industry [IUSE, 2009]. An ever increasing innovation cycle with shorter product lifecycles, exponentially increasing demand for data and processing power, and more energy intensive processing have fueled this emissions increase. We suggest a strategy that can substantially dematerialize the industry by increasing computing utilization rates through centralization of computing power, and distribution of computing as a service. This concept, cloud computing, has been emerging for the past decade, but only to a certain degree, and without any evidence of dematerialization. As an academic demonstration, we seek to show the potential that cloud computing has to fully servicize the computing industry, significantly reducing material and energy consumption while enhancing performance and productivity. 1 Cloud Computing The concept of cloud computing can be implemented to varying degrees. In its most simple and existing form, it offers online data storage on a remote server that can be accessed via the internet. The next level of the cloud is where not only data but applications are accessed via the cloud, known as software as a service (SAAS) or platform as a service (PAAS) deployment [Right Scale]. This eliminates the need to install and manage the hardware-software interface internally and can ease the burden of providing sufficient computing power and IT management for a firm. Companies such as Google, Amazon, and Microsoft have begun investing in this type of infrastructure, and Google Docs is a simplified application of this concept. The ultimate level of cloud computing, known as infrastructure as a service (IAAS) is where software , operating systems, and server hardware and infrastructure are all managed as a service within the cloud. Computing resources can be distributed amongst one or many remote servers and computers, and delivered via the internet to the end user. The potential energy, material, time and cost savings for this ultimate form of cloud computing are vast. The utilization rates of a common desktop in a business environment are between 10-20% [Zhou, 2009]. By centralizing the computing power in the cloud, the need for end-user processor power is minimized, and utilization rates can be vastly increased to as high as 80-90% [Zhou, 2009]. Not only is this far more energy efficient, but reduces the material needs for 5/21/2010 2
  • 3. GSCM: Thin Client/Cloud Computing Del Maestro, Rohloff procuring local machines. Instead of high performance desktops, thin- client machines can be used that are vastly simpler, lighter smaller, and less energy intensive. Programs like Windows Remote Desktop and are the closest thing to true cloud computing that exists today, however these services our not intended to necessarily replace your desktop, but to complement it. Coordination between machine makers, software designers, and internet infrastructure and bandwidth providers will have to continue to develop, so that a seamless IASS service can eliminate the need for desktops. 2 Goal and Scope The goal of our analysis is to show that even on a small scale, implementing the principles and infrastructure of cloud computing to the degree of IAAS can reduce both environmental and economic costs of computing. Additionally, because the benefits of cloud computing come primarily from dematerialization and productivity increase, environmental and economic costs are highly correlated. The economies of scale of a national scale cloud computing infrastructure are a complex system to simulate. For the purposes of our analysis, we chose to compare the life cycle of a collection of 100 traditional desktops vs. a network of 100 thin-client machines (w/server allocation) to simulate a micro-scale version of a cloud. This 100 client cloud system is comparable to the computing needs of a small business. Small businesses often do not have the capital to invest in internal computing infrastructure and IT, and cloud computing would perfectly suit their needs. Companies such as Right Scale are targeting these kinds of customers for their cloud services. Full cloud computing for larger firms is less realistic, as they have their own IT capabilities, higher utilization rates, and security concerns that would discourage cloud use, at least in its infancy stages before security and lock-in issues are resolved [Right Scale]. The scope of our analysis is small, and it should be recognized that economies of scale in a true cloud infrastructure would further enhance the potential economic and environmental savings. Our analysis looks at the life cycle of a thin-client + server, desktop, from material procurement, pre-component and component production, final product assembly, use, and disposal. Our quantitative analysis focuses on manufacturing and use phase environmental and economic costs. Quantitatively we only consider global warming potential (GWP) as an environmental indicator while waste, water, and toxicity indicators are described qualitatively. Our economic scaling factor could be used for a quantitative comparison for the remaining environmental indicators. 5/21/2010 3
  • 4. GSCM: Thin Client/Cloud Computing Del Maestro, Rohloff This is defensible as the major difference between the two supply chains is the use of less material, which reduces costs over almost every link of the supply chain. We purposely omitted the impacts of keyboards, monitors, and mice in our analysis, as these would be necessary in both cases. We also do not calculate office cooling savings from using thin clients. Thin client machines use considerably less power, and therefore distribute less heat than traditional desktops into the office environment. This was difficult to quantify and left out of our scope. Baseline numbers for the environmental impact of the computer components and processing (packaging, transport, manufacturing, etc) were derived from Williams (2004), and scaling factors were used to compare our thin-client machine. Scaling factors included the: economic factor, based on cost difference and used when no other data was applicable; transport factor, based on volume (since density of thin client was roughly equal to desktop, volume was assumed to be the constraining factor for transport costs); and packaging factor, based on surface area difference. Power consumption requirements, used for use-stage calculations were based on manufacturer specifications. 3 Description of the Supply Chain Rather than individual supply chains descriptions, a simultaneous supply chain comparison is more useful in this case because the actual stages of the supply chain are nearly identical. The critical differences along most stages are less material and energy inputs, and so in most cases a simple scaling factor can be implemented. The only supply chain additionality is the cloud distributor stage, interjected between computer hardware distributor and end-user. Figure 1 describes the traditional supply chain of the desktop and identifies changes and reductions in inputs when comparing the thin client cloud system. In most cases environmental and economic consideration are linked to dematerialization and lower energy requirements. 5/21/2010 4
  • 5. GSCM: Thin Client/Cloud Computing Del Maestro, Rohloff Figure 1 -Supply Chain of the Desktop vs. Thin–Client (w/ server share) Supply Chain Components, processes, inputs Environmental Economic Stages Considerations Considerations Desktop (100) Thin Client (100 + Server) Pre-component semi conductors, Less input Less material Less material and manufacturing circuit boards, silicon (economic input, less energy input, (raw materials, wafers, other scaling factor) environmental lower costs production) impact Component manu- Main board (fans, No fans, smaller Fewer Same as above facturing CPU) CPU, no HDD, components, (production) Drivers (HDD, smaller power simpler optical drives, power supply, simpler components, less supply) Cards graphics card, environmental (memory, graphic, less casings, less impact. sound, modem), packaging, less Casings ( Fan, Wire, cushioning b/c no tower, other) fragile optical Packaging (box, and HDD drives cushion) Assembly Primarily energy Less energy Less energy, Same as above requirements requirements smaller GWP Transport Mass, Volume, Smaller mass and Less fuel, smaller Same as above packaging volume, less GWP requirements, cushioning because no fragile optical drives Thin-Client Cloud Not part of traditional Server, IT Server impacts Added link to the Provider supply chain management, are allocated supply chain. (server and amongst thin Distributed server infrastructure) clients. costs and labor costs (IT) End Use Desktop power Thin client power GWP directly Costs related to requirements (~130 requirements related to power power Whr per user), and (~12 Whr per requirements requirements and maintenance user). Simpler maintenance. machine, less maintenance Disposal Volume, Mass, Less material, Less material Similar to (recycling, reuse, materials toxicity. less disposal. input and longer environmental landfill) Product life cycle, ~ Product Life lifecycle, less costs 3 years Cycle, 3-5 years, environmental as performance is impact. at server, not at thin-client. Total Economic $500 $350 Cost 5/21/2010 5
  • 6. GSCM: Thin Client/Cloud Computing Del Maestro, Rohloff 3.1 Additional Value Considerations of Cloud Computing The cloud distributor supply link indicates potential for innovation and business growth for this sector, stemming from added value for the consumer as the computer is servicized. Besides reducing economic and environmental costs, cloud computing provides additional performance benefits, inherent to the cloud. In fact it is these performance benefits that are most likely driving the current growth of the cloud computing industry, and not necessarily the environmental, or even economic benefits. Some of these noted benefits include: Significantly greater computing power by tapping into powerful supercomputer [Business Week, 2007] capabilities; 1. Lower cooling costs because less heat loss; less security (theft) concerns because thin client machines have no value without the cloud; 2. Reduced labor costs because less requirements of on site IT department; 3. Greater mobility because of enhanced remote desktop capabilities; 4. Lower switching costs as upgrading computing performance does not require purchasing a new machine. 5. Reduced office noise pollution w/o fans It is important to recognize the possibility that cloud computing will not replace but supplement (rebound effects) desktops because of the added performance benefits of cloud computing. Consumers may retain their desktops, and simply add cloud computing capabilities to it. 5/21/2010 6
  • 7. GSCM: Thin Client/Cloud Computing Del Maestro, Rohloff 6. Environmental Valuation 3.2 Methodology and Scaling Factors Inventory values for modeling in this analysis were used from Eric Williams’ study titled ‘Energy Intensity of Computer Manufacturing: Hybrid Assessment Combining Processes and Economic Input-Output Methods’ published in the Environmental Science and Technology Journal (2004). No data was available to assess the environmental impacts of the thin-client unit. A series of scaling factors were calculated to adjust the desktop inventory values from Williams 2004 to estimate the impact from the manufacturing of a thin-client. 3.3 Economic Scaling Factor Because the energy inventory for manufacturing is only available for a desktop, an economic scaling factor was used to project the environmental impact of thin-client manufacturing. The thin-client has fewer printed circuit boards, no hard disk, no fan, slower processor speeds and less overall components which result in an overall lower environmental impact from manufacturing. The retail prices were used for the two machines to calculate the economic scaling factor. The implied assumption is that if a good costs more, it will contain additional materials and embedded energy. The prices and scaling factor are provided below: Type Desktop Thin Client Model Dell Optiplex 745 [Optiplex] HP T5145 [T5145] Price ($) 482 200 Picture 5/21/2010 7
  • 8. GSCM: Thin Client/Cloud Computing Del Maestro, Rohloff Equation 1 - Economic/Environmental Scaling Factor Desktop price $482 = = 2.41 ThinClient price $200 i. Sample Calculation Desktop computer assembly requires 35.5 MJ of direct fossil energy and 51.2kWh of electricity [Williams 2004]. Using the economic scaling factor, the impact of the thin client’s assembly process can be projected: 35.5 MJ 51.2 kWh = 14.7 MJ = 21.2 MJ 2.41 2.41 Full series of calculations found in Table 2. 3.4 Power Usage Calculation The inventory values for the desktop are several years old (2004), so an adjustment was required to account for the increased power efficiency of a newer machine. The electricity used in the use phase was calculated with the specs for the machines in this analysis. Type Desktop Thin Client Server Model Dell Optiplex 745 HP T5145 2DLW Serv N20 Energy Demand – Active (watts) 123 11.4 865 (full utilization) Energy Demand – Sleep (watts) 3 1 Instantaneous Power Demand for Thin Clients and Desktops 140 120 100 80 watts 60 40 Server Allocation 20 0 Thin Client + Server Allocation Desktop Figure 2 5/21/2010 8
  • 9. GSCM: Thin Client/Cloud Computing Del Maestro, Rohloff kWh (OfficeWorkday hours * Powerwatts + Idle / Night hours * Powerwatts ) * = UsePhaseDemand kWh 1000 Equation 2-Thin Client Power (Use Phase- 1 Year) 1 (2080 * 11.4 + 6680 * 1) * = 111kWh 1000 Equation 3 - Desktop Power (Use Phase - 1 Year) 1 (2080 * 123 + 6680 * 3) * = 276 kWh 1000 Because the server powers multiple thin-clients simultaneously, an allocation was used for an accurate comparison (Figure 2). 3.5 Transportation/Logistics Scaling Factor There are considerable environmental gains that can be achieved with respect to transportation logistics. Type Desktop Thin Client Model Dell Optiplex 745 HP T5145 Dimensions (inches) 4.5x15.7x13.9 7x7x2 Volume 982 98 Packaging Surface Area 702.86 154 Mass (lbs) 23 3 The size of the thin-client is considerably smaller than the standard desktop used in this analysis. In addition, the mass of a thin-client is only 3lbs compared to the desktop that weighs 23lbs. More units can be packed into the same container volume and shipped from OEMs to distribution outlets and consumers. Equation 4 - Transportation Scaling Factor Volume DesktopBox 982 Inches3 = TransportScalingFactor = = 10 VolumeThin _ Client Box 98 Inches3 For every desktop that is shipped, it is estimated that 10 thin-clients can fit in the same volume of a container or package. To ensure that mass would not be an additional constraint while shipping, the weights of each shipping box are compared: 5/21/2010 9
  • 10. GSCM: Thin Client/Cloud Computing Del Maestro, Rohloff Mass of 10 thin-clients Mass of 1 Desktop 3lbs*10=30lbs 23lb The mass is not significantly more for the grouped package, so the likely shipping constraint is the volume of the container. 3.6 Packaging Scaling Factor The smaller packages that return transportation gains also require less packaging for shipping. To calculate the packaging scaling factor, the surface area of material that is required to package the container was used. Type Desktop Thin Client Model Dell Optiplex 745 HP T5145 Packaging Surface Area 703 inches 154 inches SurfaceArea DesktopBox 703 Inches 3 3.7 = PackagingScalingFactor = = 4.5 SurfaceAreaThin _ Client Box 154 Inches3 3.8 For each box shipped, it is estimated that 4.5 times less packaging will be required due to the considerable size differential. 5/21/2010 10
  • 11. GSCM: Thin Client/Cloud Computing Del Maestro, Rohloff 3.9 Impact and Energy Requirements Table 1 Color Data Source Scaling Factor Data from Williams 2004 n/a Calculated from Economic Scaling Factor 2.41 Calculated from Transport Scaling Factor 10 Calculated from Packaging Scaling Factor 4.56 Calculated from Manufacturer Power Specs n/a Table 2 Desktop Thin Client Desktop Thin Client Direct Fossil Direct Fossil Production Use (MJ) Use (MJ) Electricity (kWh) Electricity (kWh) Production Analysis Semi Conductors 298.00 123.65 170.00 70.54 Printed Circuit Boards 26.70 11.08 7.71 3.20 Bulk Materials: Control Unit Silicon Wafers 38.10 15.81 Computer Assembly 35.30 14.65 51.20 21.24 IO Analysis Electronic Chemicals 381.00 158.09 18.50 7.68 Semi Conductor Manufacturing Equipment 392.00 162.66 29.40 12.20 Passive Components 109.00 45.23 10.30 4.27 Disk Drives and Parts 365.00 0.00 23.00 0.00 Transport 338.00 33.80 3.50 0.35 Packaging 120.00 26.32 4.80 1.05 Other Processes 973.00 403.73 61.00 25.31 Total Production 3038.00 979.20 417.51 161.66 Use Phase 275.88 111.36 Total Production + Use Phase 693.39 273.01 5/21/2010 11
  • 12. GSCM: Thin Client/Cloud Computing Del Maestro, Rohloff The energy inventories from Table 2 are used to estimate the global warming potential (GWP) of desktop and thin-client use and manufacturing. Table 3 – Coefficients provided by PE International GaBi4.3 Type Coefficient Unit Electricity Generation (US Average) 0.804 Kg/kWh Fossil Fuel Use 0.223 Kg/MJ Greenhouse Gas Equivalent for Production and Use Phases for Computers 1800 1600 Server Production 1400 Allocation kg CO2equivalent 1200 Use Electricity 1000 800 Production Electricity 600 400 Direct Fossil use 200 0 Desktop Thin Client/Server Figure 3 – Use phase is estimated to be three years. Total Impact for Small Business with 100 Machines 180000 160000 140000 120000 kg CO2 Equiv. 100000 Desktop 80000 Thin-Client 60000 40000 20000 0 Figure 4 5/21/2010 12
  • 13. GSCM: Thin Client/Cloud Computing Del Maestro, Rohloff 7. Economic Evaluation of Thin-Clients The following scenario assumes that a business purchases the server for the internal computation and storage power to run a small company. Type Desktop Thin Client Server Model Dell Optiplex 745 HP T5145 DLW Serv N20 Price ($) 482 200 4000 The server can handle the computational power of approximately 20 machines performing common business tasks and applications (Linux Terminal Service Project 2009). The cost of the server is allocated at a ratio of 1/20. Equation 5 ServerCost $4000 CostAllocation = = = $150 per _ workstation ThinClients 20 Life Cycle Cost of Desktop and Thin Client/Server Allocation $700 $600 $500 Cost ($) $400 Electricity Cost Unit Cost $300 $200 $100 $- Thin Client + Server Desktop Allocation Figure 5 - Cost for three years of operation A rate of 10% was used to discount the electrical cost cash flows on an annual basis. If a company purchased the equipment internally (server + thin-clients) the cost savings would be 5/21/2010 13
  • 14. GSCM: Thin Client/Cloud Computing Del Maestro, Rohloff significant over the three years. For a typical small business with 100 machines, the savings returned would be approximately $20,000 over three years. Disposal The economic costs of disposal were not quantitatively evaluated in this analysis. Because the thin-clients are smaller and have less components, disposal costs will likely be lower, and could be estimated using our economic scaling factor. Computing as a Service: If the computational power and data storage services were provided by an external agent even greater efficiency gains would be obtained through increased optimization and economies of scale for cooling. In addition, a small company would need less internal information technology staff to run their systems if the servers were offsite. The utilization rate for the server’s computational power would increase because the cloud service company can take advantage of national economies of scale. The peak computational demand required by businesses would be more evenly distributed because of the time zones in the country. A three year time span was used for this analysis, but there are no technical constraints limiting the thin-client to such a short-lifespan. It is feasible that the hardware could last much longer (5+ years) because they are not as performance-dependent as a desktop machine. The servers can be upgraded centrally rather than the individual desktop machines, but with the thin- client setup, users still receive the same unit of computing at their desks. If the internet can reliably and quickly route business machine computational power, the market for traditional desktop machines could be affected. Companies that provide desktop business machines (Dell) would need to shift their business models. A greater reliance on high- performance centralized servers will likely drive the market for computing in coming years. Innovation in computational service contracts will emerge and small companies will have less risk investing in IT equipment. Cloud providers could provide the thin-clients for free or a monthly rental rate similar to the approach currently utilized by cable companies. Because the thin-clients do not need to be upgraded as frequently because computation occurs offsite, cloud providers could re-use thin-clients further decreasing the environmental burdens. 5/21/2010 14
  • 15. GSCM: Thin Client/Cloud Computing Del Maestro, Rohloff 8. Economic and Environmental Evaluation This case study represents the coveted win-win outcome of strategic supply chain management. The switch from traditional desktops to thin-clients returns both environmental and economic savings. The strong linear correlation between economic and environmental benefits from thin- client implementation verifies the pollution prevention benefits of dematerialization through decreased resource use. Economic and Environmental Evaluation of Thin- Clients Compared to Desktops 100% 80% 60% 60% 40% 31% 20% 0% Economic Savings Environmental Savings (GWP) Figure 6 In an alternative study, the cost savings with 175 thin-clients returned an economic savings of €660 or 28% (IUSE 2009). The IUSE study included disposal costs that were omitted from this study. Type 100 Client Cloud Simulation IUSE Study(175 client) Scope 3 years 5 years GWP (kg) per machine 1679 1220 GWP (kg) per year 560 244 There are many factors that were outside the scope of this analysis, but it is likely that in most cases the un-quantified aspects will provide additional environmental and cost savings for the thin-client option. 5/21/2010 15
  • 16. GSCM: Thin Client/Cloud Computing Del Maestro, Rohloff 9. Constraints and Challenges 3.10 Reliability and Security With any reliance on new technology, businesses may be hesitant to fully move to a cloud based thin-client service. If all computational and data storage is provided live in the cloud, a business is completely reliant on their internet connection. If for any reason the internet goes down, all the workstations would be effectively useless and productivity would suffer. Businesses may also be wary of outsourcing their sensitive data to external third party companies that provide a cloud service. Privacy issues could hinder deployment of full cloud computing as the importance of data security can trump potential economic and environmental gains. 3.11 Switching Costs If computation and data storage is provided as a service, there could be considerable business costs required to switch service providers. Businesses would essentially be locked into their service provider and even if another company could offer cheaper rates, a considerable transaction cost would have to be considered. 3.12 Scope of Analysis The only indicator used in this analysis is global warming potential. There are other environmental impacts in computer manufacturing such as human and aquatic toxicity that are important to consider. As much as 70% of the human toxicity impact occurs during the disposal stage of the extended supply chain [Byung-Chul et. al 2004]. However, because the switch to thin-clients (and the cloud) is essentially a dematerialization strategy for pollution prevention, all of these other environmental impacts associated with component manufacturing will be reduced. When data storage and computation is provided as a service that is routed through the internet, additional network components and electricity will be required. This study omits the impacts associated with an increasing demand requirement for internet infrastructure. 3.13 Uncertainty The raw values for energy requirements for PC manufacturing published by Williams 2004 already have embedded uncertainty and then they are scaled again in this study to account for 5/21/2010 16
  • 17. GSCM: Thin Client/Cloud Computing Del Maestro, Rohloff thin-client manufacturing impacts. There is a considerable error margin with our projected GWP reduction of %60. 10.Conclusions The dematerialization strategy for altering the IT supply chain with thin-clients and computing resources in the cloud can return both environmental and economic savings. The suggestion in literature [Williams 2004, Byung-Chul et. al 2006] that increased PC reuse rates and upgradability potential will lead to environmental savings is correct, however no trends in this area are emerging. The usage of thin-clients and cloud computing may turn out to be the preferable route to reduce the environmental impacts of computing. The issue of computer obsolescence may become less of an issue because the thin-client’s performance can increase with additional computational resources from remote servers. This effectively extends the life of the equipment used in office computing as computational services in the cloud can always be upgraded. Computing as a service is an exciting proposition and will potentially grow as internet bandwidth becomes cheaper, faster, and more reliable. The switch to the cloud also has the ability to promote innovation and entrepreneurship because small businesses and start-ups will face much lower capital costs for IT and computing. A large focus with computing revolves around the energy-efficiency of chips, however the cloud provides a path for dematerialization that does not rely on re-use and upgradability. 5/21/2010 17
  • 18. GSCM: Thin Client/Cloud Computing Del Maestro, Rohloff 11.Sources Choi, Byung-Chul, Hang-Sik Shin, Su-Yol Lee, and Tak Hur. "Life Cycle Assessment of a Personal Computer and its Effective Recycling Rate." Int. J LCA 11 (2006): 122-28. Computing Heads for the Clouds 16 Nov. 2007. Business Week. 5 June 2009 <>. Linux Terminal Server Project. 2009. GaBi 4.3 Software. PE International. 2009. Environmental Comparison of the Relevance of PC and Thin Client Desktop Equipment for the Climate, 2008. Fraunhofer Institute for Environmental, Safety and Energy Technology, UMSICHT. Williams, Eric. "Energy Intensity of Computer Manufacturing: Hybrid Assessment Combining Process and Economic Input-Output Methods." Environ. Sci. Technol. (2004): 6166-174. Why Right Scale: Cloud Portability, Right Scale. Accessed June 5th, 2009 <> Zhou, Ben. "Cloud Computing." Personal interview. USCB. 03 June 2009. HP Compaq t5145 Thin Client. Brochure. 5 June 2009 <>. Dell Optiplex 745 Tech Specs. Brochure. 5 June 2009 <>. 5/21/2010 18