Tuesday, January 29, 2013

Insourcing and green manufacturing

Or how to win friends and influence people

My dad, as I mentioned in a blog some time ago, was a tool room supervisor for a large John Deere factory in Wisconsin. In his role, which he went into after becoming a journeyman machinist and toolmaker himself (the kind of skills manufacturing is looking for these days and can't find enough of!) was to supervise a large department of similarly talented machinists and tool makers who were tasked with building the tooling and other hardware needed in the factory to make the components of the products Deere built there.

As he took on more and more management he was encouraged by his supervisor to take a class in management and leadership. In those days a very popular course was fashioned by a man named Dale Carnegie and accompanied by a book by Mr. Carnegie titled "How to win friends and influence people."  According to Wikipedia How to Win Friends and Influence People  is one of the first best-selling self-help books ever published.  First published in 1936, it has sold 15 million copies world-wide. The first of twelve things the book promised to do for the reader was "Get you out of a mental rut, give you new thoughts, new visions, new ambitions." Other deliverables included making you a better speaker and leader.

The book, and the course I presume, offered guidelines and tips about communication, working with people and getting the most of interactions with your co-workers or direct reports as well a how to turn challenges into opportunity. Or, perhaps, how to turn opportunity into bigger opportunity!

I thought of this the other day when reading an article in The Economist (January 19th, 2013) talking about the move to insourcing jobs by many US companies (talk about getting out of a mental rut!). The article covered the expected reasons for this ranging from increasing labor costs in many formerly low- wage countries, quality issues, increased advanced manufacturing technology in the US, long delivery times due to shipping from overseas, supply chain interruptions, disconnect between design and manufacturing and the inherent confusion that creates etc. Also, as the labor content of manufactured products decreases, the incentive to move to lower wage locations decreases since the potential savings is reduced. We'll talk more about automation and sustainability in a future posting.

You can add to that the challenges of supply chains, linking innovation to manufacturing when R&D are separated by an ocean and, specially for energy intensive products, the cost and availability of energy.

It did not, surprisingly, mention any of the concerns raised here about environmental issues with offshore production, carbon footprint, or the social impacts of complex supply chains.

My first reaction was - what a great opportunity insourcing offers (and the assumed re-industrialization that implies) to use our engineering skills to insure these are greener processes and systems at the same time. Now, I fully realize that we are not talking of the re-invention of industry in the US but a "rolling renovation" of processes, systems and facilities to address this insourcing. Shouldn't this rolling renovation include green manufacturing?

What kind of innovation are we talking about?
 - enhanced productivity (remember our goal of reducing impact/GDP from the IPAT equation!?)
 - green technology wedges for
     - reducing waste in processes (increasing material yield)
     - increasing energy efficiency
      - more renewable energy supplies or energy recovery in manufacturing
      - improved material selection (less hazardous/toxic and more recyclable
            or renewable materials)
      - new process technologies and/ or hybrid processes
      - enhanced efficient factory operation
      - leveraging
     - and so on (dig back through the the older blogs for more specifics!)

Insourcing means business decision making - considering the return on investment or the old "bang for the buck". That decision making needs to include the results of green manufacturing innovation.

Interestingly, a recent report on manufacturing from McKinsey (Manufacturing the future: the next era of global growth and innovation published in November, 2012 addresses some of this. We'll delve more into this report in a later posting - it is ripe with information and justification for greening manufacturing as part of a savvy business strategy and, additionally, as the right thing to do.

As part of a discussion on "innovation in production" it includes green manufacturing as one of the trends worldwide - even in China. Energy productivity and reduction of greenhouse gases are drivers of manufacturing innovation.

The report lists many of the items we've covered in this blog in the past - reduced carbon emissions by adjusting the source of energy, process energy, energy recovery from processing for re-use, facility heating and ventilating, etc. The report claims that energy costs can make up to 20% of the "land costs" for energy intensive products. Here energy intensive products are referring to chemicals, cement and aluminum but the reference covers a wide range of products with lower, but significant, energy costs. So, from embedded energy in materials in products to process energy, to system and facility resource consumption - innovation and green manufacturing go hand in hand.

With increased energy supplies in the US, much of it natural gas or "clean" energy, the insourcing of manufacturing if it materializes as predicted will spur substantial manufacturing activity including the refurbishment or building of new manufacturing facilities, the restructuring of supply chains, and so on.

This is an opportunity to include environmental metrics into the economics of  insourcing decisions. There is a lot of evidence in the business press, this blog or other  blogs (like Green-biz or Environmental Leader) to substantiate the business case for this. Even more, as we are able to quantify them, add the social impact aspect as well.

This is an opportunity we cannot afford to take lose And wouldn't our actions on this win friends and influence people?  Dale Carnegie would be proud!


  1. Hi David,

    Great post. With the advances in new technology in the US, sustainable options are better, faster, cheaper and green. This has been our business focus.



  2. Dear Sir:

    Nice article. You have nicely articulated many thoughts about the role of manufacturing to reduce the carbon emissions, effective control of the energy input to the system, drivers behind manufacturing innovation etcetera. I learnt many ideas and importance of the green manufacturing which has a big potential to reduce the bad impact on the green environment which is the right of every living thing on the Earth. This article definitely helps me in the R&D of truck's part at Volvo India.

    Thank you!

    Mahesh Teli