How?  Strategies to Green the Supply Chain
 
A  VERY  (very) LARGE PENSION FUND SAYS  RETROFIT INDUSTRIAL ENERGY EFFICIENCY IS THE BEST ASSET CLASS ON THE PLANET WHY?
AN  INVESTIGATION  WITH THE ENVIRONMENTAL DEFENSE FUND AND WAL-MART GLOBAL SOURCING IN CHINA VISITING OVER 600 FACTORIES I...
30-50%  reductions in energy intensity in plastics fabrication possible Some factories doing more than  60% --on total ene...
With throughput and quality improvements
<ul><li>Opportunities everywhere </li></ul><ul><li>Wood fabrication </li></ul><ul><li>Metal fabrication </li></ul><ul><li>...
ALL HAVE POTENTIAL FOR 30-40% REDUCTIONS IN TOTAL ENERGY INTENSITY Less than  2 years  simple paybacks  JUST ON ENERGY  SA...
4   big conclusions
Target-rich but data poor Data Target
The people with the answers have poor business models
Someone has to LOOK WRONG NO ONE  WANTS TO TAKE THE HIT
Raw material extraction Factories Use Disposal The Merchant Supply Chain Product life cycle
Raw material extraction Factories Use Disposal Negative environmental impact   The Merchant Supply Chain
Raw material extraction Factories Use Disposal Negative environmental impact   Merchants’ ability to reduce impact The Mer...
Steps to a strategy <ul><li>More data </li></ul><ul><ul><li>Meters </li></ul></ul><ul><ul><li>Process type and operation <...
Steps to a strategy <ul><li>Are you a “manufacturing” customer? </li></ul><ul><ul><li>Comfortable with process and design ...
Steps to a strategy <ul><li>EE is not a core competency for factories </li></ul><ul><ul><li>Usually less than 10% of contr...
Steps to a strategy <ul><li>Account for the uniqueness of each factory </li></ul><ul><ul><li>Goals </li></ul></ul><ul><ul>...
Project Typology Type 1: The Straight Shot Description :  Low-cost (to implement) simple project with minimal production r...
Project Typology <ul><li>Type 2: Rolling Thunder </li></ul><ul><li>Description:  A progression of 3-7 low-cost (to impleme...
Project Typology Type 3: Bigfoot Description:  One big complex project with 2-3 critical and related sub-projects; some pr...
Project Typology <ul><li>Type 4: Slow and Steady </li></ul><ul><li>Description:  A progression of 3-7 moderate-cost (to im...
Scope and Scale and Distribution of EE Projects Wal-mart GS China Supply Chain Straight Shot 10% of total factories Rollin...
Are you willing to…? <ul><li>Vouch for the credit quality of factories in your supply chain? </li></ul><ul><li>Co-invest i...
Things you need to know <ul><li>Audits do not really work very well </li></ul><ul><li>Many factories do not “own” their pr...
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Foecke - How? Strategies for Greening the Supply Chain

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Foecke - How? Strategies for Greening the Supply Chain

  1. 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?
  3. 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…
  4. 5. 30-50% reductions in energy intensity in plastics fabrication possible Some factories doing more than 60% --on total energy
  5. 6. With throughput and quality improvements
  6. 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>
  7. 8. ALL HAVE POTENTIAL FOR 30-40% REDUCTIONS IN TOTAL ENERGY INTENSITY Less than 2 years simple paybacks JUST ON ENERGY SAVINGS
  8. 9. 4 big conclusions
  9. 10. Target-rich but data poor Data Target
  10. 11. The people with the answers have poor business models
  11. 12. Someone has to LOOK WRONG NO ONE WANTS TO TAKE THE HIT
  12. 13. Raw material extraction Factories Use Disposal The Merchant Supply Chain Product life cycle
  13. 14. Raw material extraction Factories Use Disposal Negative environmental impact The Merchant Supply Chain
  14. 15. Raw material extraction Factories Use Disposal Negative environmental impact Merchants’ ability to reduce impact The Merchant Supply Chain Where we need to go
  15. 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>
  16. 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>
  17. 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>
  18. 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>
  19. 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+%
  20. 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>
  21. 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%
  22. 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>
  23. 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
  24. 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>
  25. 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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