Supply Chain Management Blog : CO2

How did HP become a "Green" Company?

christianverstraete — Fri, 25 Sep 2009 07:37:00 GMT

On Monday, Newsweek released their inaugural Green Rankings , and interestingly, HP finished at the top. In an article, titled " The Greenest Big Companies in America " they explain they decided to publicize this list to recognize the efforts...(read more)

Generate Value while going Green

christianverstraete — Mon, 01 Dec 2008 16:59:00 GMT

Up till a couple months ago, green was on the agenda of most enterprises. Since the financial meltdown has come with its economical difficulties and recession fears. It looks like green is disappearing from the agenda quickly, despite the fact going green can reduce costs, as illustrated by Reuters.. If this is the case, I believe it is a tremendous mistake. Working on their environmental impact helps companies reduce costs and mitigate risks. I also believe it may allow them to increase revenues by taking market share away from their competition. Let me try to illustrate my point here.

One of the key environmental measurements today is CO2 emissions. This is NOT the only element, but it is an important one as glasshouse gasses seem to impact our planet rather drastically. CO2 emissions have a lot to do with the burning of fossil energy. Again, there is more to it than that, but it is an important contributor. Reducing energy consumption is a way to reduce CO2 emissions, which in turn reduces the importance of a element of large variance in the supply chain. Even if the price of the barrel of oil is back around 50 $, the fact it went all the way to 147$ has been a wakeup call for many companies. If the economy picks up again, it could be back at such levels by the summer. So, the energy cost factor is a volatile one. Reducing its important in the product cost is more than welcome. So, by reducing cost and variance in the cost we have addressed an environmental concern. Green and costs are not mutually exclusive, as many people believe.

The other element to take into account is that, independently of reducing costs, it remains important to avoid being on the first page of the newspapers due to an environmental issue. This is probably more the case for companies owning a brand, as the brand is typically what suffers of such issues. And this is where risk mitigation comes in. Risk mitigation may cost money, indeed, and in difficult economical times, companies may be tempted not to focus on it. That is like not paying your insurance premiums when things get somewhat tougher. You might be able to get away with it, but there is the remote possibility of an issue that actually may leave you in a desperate financial situation. Aren't insurances there to avoid that?

The last element I want to bring up is the fact that focusing on the environment may increase your business, and I would like to illustrate this approach using a simple case study. Wal-Mart, the US retailer, initiated an "Eco-Challenge" some months ago, pushing their suppliers to submit ideas for the development of products with low amounts of packaging material. Our packaging engineers got working on this and one of them, based in Grenoble - France, came up with a brilliant and simple idea for our notebooks. Often when you buy a notebook, you also buy a carrying case, isn't it? You want to be able to safely transport your notebook. Well, what if HP provides you a notebook with it carrying case. Oh and by the way, let's manufacture that case from 100% recycled material. Rather than putting the notebook in specific packaging for its transport from Asia, we can now use the carrying case to do this. If it protects your notebook when you take it around, it can also do the same when HP's logistics partners transport it, isn't it? The advantage is 97% packaging material reduction. The only packaging left is the cardboard box in which a five notebooks are grouped to facilitate the stacking on the pallet. The consumer goes home with his/her new product in a nice bag and does not need to get rid of packaging material either. Everybody wins in the game. Not only did we win our category during the challenge, we are now also selling the product in the Wal-Mart stores. If you are interested in more details, you may want to look here.

The energy costs associated with running some of our products (eg. PC's) over their lifecycle are two to three times the price of the product itself. How many of us are looking at the actual consumption of a product prior to making a decision. In looking at total cost of ownership, buying the cheapest product may not always be the best solution. Making a product using less energy also benefits the customer. And we hope it increasingly becomes a sale criterion as consumers and businesses alike become more environmental conscious.

During the design of a product many decisions are taken that will affect both the cost and the eco-friendliness of the final product and its supply chain. Having development engineers that understand how to make products "greener", is a tremendous asset to reduce both the cost and environmental impact of the product throughout its whole lifecycle. We call this "Design for the Environment".

Using IT to make the company green

christianverstraete — Mon, 25 Aug 2008 15:18:00 GMT

In one of my previous posts, I referred to the WWF report "The potential global CO2 reductions from ICT use". Last week I had the opportunity to talk to one of my colleagues who collaborated with the WWF in this report, and we started a very interesting discussion on the use of IT to reduce companies' effect on the environment.

IT consumes 2% of the world energy, and although it is important to reduce that one, there are the other 98% and according to the report, 37% comes directly or indirectly from the industry. Our topic of discussion turned around how we could use IT to help reduce this amount. There are three clear areas that we came up with, first, the manufacturing process itself, second transportation and third the use and recycling of the product.

I remembered a conversation a couple years ago where somebody told me a CPU chip would go two or three times around the world prior to being delivered as part of a computer at your doorstep. Frankly, is that really needed? Could we use simulation software to optimize the manufacturing process, ensuring that, while maintaining the lowest possible cost, we can reduce the CO2 emissions.

Many of our factories are automated today, and they use MES (Manufacturing Execution Systems) to understand and optimize their operations. But those systems do not take environmental concerns into account as they exist today. This is another area we should work on.

As part of research for a greener IT, HPLabs has focused on effective cooling methods for computers and racks. In doing so, they managed to reduce the energy usage by up to 40%. Now, many manufacturing processes require to be cooled. Could some of the approaches developed by HPLabs being used for those processes? Although there is no clear answer today, it's worth asking the question and looking at potential opportunities for piloting. Now, you may argue this has little to do with IT directly, and you are right. However, if it helps, that's the most important isn't it.

At HP we are using a design for the environment (DFE) approach in product development, identifying the actual implications of the product under development to the environment. Simulations during the process allow us to anticipate future consumption and other key data items. Here again, IT can help understand what is required to develop a loc carbon product.

I realize I have only scratched the surface here, but am looking at your inputs and ideas. This subject will be core and center in conversations between manufacturers in the near future, so let's prepare ourselves.

We need the End-to-End view

christianverstraete — Fri, 18 Jul 2008 13:09:00 GMT

I ran into a blog entry on Cnet the other day. It was entitled "LCD making worse for the environment than Coal?". This got me thinking. LCD televisions and screens are often seen as "green", eco-friendly, because they consume less energy than conventional CRT tubes. However, according to the blog, during manufacturing nitrogen trifluoride, whose globe-warming effect, according to scientists, is 17.000 times stronger than that from CO2, is used in chemical vapor disposition. I have heard a lot of requests to move to flat panel displays for lower energy consumption, but this was the first I heard about the harm during manufacturing.

It illustrates very well the importance of looking at the impact of a product throughout its whole lifecycle, from manufacturing all the way through recycling. Most companies today unfortunately do not provide that information, nor do they focus on that. We find many, laudable, efforts to reduce this or that substance from a product, but it is not put into context. If we take a substance out, by what do we replace it? Is the new substance, including its manufacturing, usage and recycling, less harmful than the previous one? These are the real questions that we need to ask ourselves.

HP and a number of other companies are using "Design for the Environment" to take the product lifecycle into account right from the product design stage. In doing so, they not only look at the manufacturing of the product, but also at its usage and recycling. Such approach requires an in depth understanding not only of the components going into the product (which can be obtained from the suppliers), but also from the product usage (work with consumers), and recycling operations. But to achieve this, the company needs data, provided by suppliers, the distribution channel, the consumers, and the reverse logistics partners. This is becoming the next battlefield. The companies that will be first at being able to convince their partners to share more information and use it to their advantage to make "greener" products will be the ultimate beneficiaries. Legislation helps, but has a tendency to lag behind the innovators.

With the same logic in mind, I was surfing another blog entry, called "BPA-free and proud of it", pointing out that Sigg, a Swiss company, has developed reusable drinking bottles in stainless steel to reduce the usage of disposable bottles and cups. It's an interesting concept. However, let's think about the lifecycle impact. What has been the effect of manufacturing the stainless steel and paint on the environment? How much water is used to rinse the bottle? If the bottle needs to be collected for refill, what is the effect of the collection process? And I could continue that way. Frankly, I don't know the answers to those questions, and the bottle may be a great addition to our increasing list of "greener" products. Unfortunately, I don't know whether anybody ever did the exercise.

You disagree with me, obviously feel free to react.

I am going on holiday for a couple weeks, so will be quiet, but my partners are keeping the blog going during my absense.

BOS & BOC, new acronyms to get used to?

christianverstraete — Sun, 13 Jul 2008 09:48:00 GMT

Green, sustainability and SER, are terms that appear increasingly in our publications and conversations. They draw our attention on the fact our products interact with their environment and potentially harm it. That impact needs to be evaluated from the development of the product onwards, and obviously, diminished as much as possible. This is what is being called DfE, design for the environment.

But this is easier said than done. Indeed, in today's environment, suppliers do not have the information at hand for each of their components, ingredients or substances. Actually, as mentioned in my previous post, the way to calculate the impact is not standardized, so even if the values exist, what do they mean?

During the development of a product, a Bill of Materials (BOM) and Bill of Process (BOP) are created. These will be used at a later stage in the operational systems. I would like to argue that we need to add two new bills to the series. These are first, the Bill of Substances (BOS), which would contain all the substances contained in the product and their quantities, and second, the Bill of Carbon (BOC), containing the amount of carbon emissions for the product at all stages in the manufacturing. There should be a close link between the BOM and the BOS, and between the BOP and the BOC. Operational systems should include modules to report on those two bills.

But now, how do we get the data to populate them. Obviously, the base information related to the components, ingredients and substances needs to come from the suppliers and be augmented with the data associated with the company's operations. The easiest way to do this would be for each company to report both the BOC and BOS for their own products. For the BOS, the information should be the sum of the information of each of the components, ingredients and substances included in the product, potentially reduced by the substances subtracted during the process. For the BOC, we should start from the sum of the information coming from the suppliers and add the quantities generated during manufacturing and transportation.

For the Bill of Carbon, we should agree on a standard way of calculation to ensure the numbers are meaningful and reflect reality. Obviously averages may have to be used, as not all manufacturing facilities generate the same amount of CO2 to make the same product, and that transportation can depend on the warehouse/distribution center used, on the distance to the customer etc. Let's stay pragmatic. Gaining visibility of the amount of CO2 generated, even if it is an average, would already go a long way to focus the attention on reducing it.

So, are we ready to increase our usage of three letter acronyms?