Wednesday, August 7, 2013

Resource Sustainability and Embedded Costs will Define Future Manufacturing Competitiveness


Interview with Sustainability Outlook Magazine - India
This is the text of an interview with an Indian on-line magazine “Sustainability Outlook”. I was interviewed by them in June this year as part of a focus on “Sustainability as a Key Driver for Innovation” (a theory I wholeheartedly subscribe to!) and the article just appeared in their on-line issue. The conversation centered on ways in which sustainability can drive innovation in the Indian manufacturing sector but the topics are in general much broader and may be of interest. The magazine covers a broad range of environmental and sustainability issues in India and the world. The article is reprinted here with their permission.

How would you define what Green Manufacturing is?

Green manufacturing is about implementing any kind of substitution in the manufacturing process which leads to a reduction in energy consumption, resource consumption, waste by-products, and water usage. Any and every step that makes the production of a product, component or part of a system more sustainable can be termed as Green Manufacturing. Sustainability as a phrase is a discrete term – one is either sustainable or not. However, the problem in manufacturing is that it is difficult to accurately quantify all steps in the process and thus be able to assess with precision whether the processes are truly sustainable or not. 

Where do you think lies the link between innovation and green manufacturing?

 I believe that Sustainability is a great driver for innovation. If you look at the big transitions that have happened in the last 100 years or more, you will notice that they have always been promoted by the need to get more value out of a process or reduce cost or inefficiency. Henry Ford epitomized this when he pushed the transition from a craft production to an automated production. People like these took the inefficiency out of random organization and made the whole process more organized. As a result productivity went up, cost went down and controlling ability elevated further.  I think sustainability presents the same kind of opportunity now. People are inherently, as part of good business practices, trying to reduce the cost of ownership of manufacturing machinery, trying to increase productivity, maintain high quality and reduce variability.

Sustainability gives us the opportunity to reflect on things which might not have been considered in the past. Issues like the cost of energy, which suddenly is now obvious to everybody but which some years ago no one paid attention to; the cost of water, the treatment of it and the condition in which it can be released, the cost of materials etc. are things which are slowly coming into the mainstream dialogue and emerging as key parameters with which processes’ efficiency can be judged. In addition, we now need to factor in social variabilities which are not necessarily technical in nature but can lead to disruption of entire supply chain.  This new way of thinking  is propelling efforts towards an enhanced manufacturing approach which factors in all of these issues and identifies areas which need and could be improved – leading to not only a reduction in adverse environmental impacts but also an enhancement in the financial bottom-line of the firm; as also an efficient and cost-effective process.

Manufacturing has gone through its own evolutionary process – from craft production to mass production and now to mass customization. To what end do you think there is going to be a fresh wave of manufacturing which will take into account sustainability?

I absolutely think that the time will come, if it hasn’t already, to take into account resource sustainability and “embedded costs”. Of late there have been a lot of studies trying to understand why companies embody sustainable business plans. The first set of drivers that one notices includes reputation, competitiveness, product awareness and solid business strategies because people tend to like companies that at least attempt to be more sustainable. The next level tends to be about cost related issues. Going back to Henry Ford, he was no environmentalist but he was smart enough to realize that if one bought some material and didn’t utilize it to its optimum use and threw some part of it away, one is essentially throwing something that one has already paid for. Equally importantly, one is also essentially paying someone to dispose-off that waste.

Up until recently accounting systems and performance measurement systems weren’t in place to allow manufacturing to track those costs separately. For instance, of late there has been a huge push in the metal cutting industry to reduce the usage of coolants because as it turns out, analysis showed that the costs of cutting fluids, the handling of it and its disposal, amounted to a huge hidden cost and was a burden to the production process. Before the study, however, nobody had actually known what the cumulative peripheral costs were and couldn’t extract a specific cost.

Now I think you can actually make good arguments as to what the total benefits are: including cost benefits, business benefits while keeping in mind things like regulatory issues. If you use less of some material that is highly regulated, then you end up paying less to dispose it, pay less to protect your employees while they work with it, pay less to handle it and store it in your facility. It’s like light weighting in automotive industry – the more you reduce the weight of the vehicle but keep the same strength, the better the fuel economy gets. It’s kind of like materials and resourcing in factories – the more you reduce, the more agile you become.

To what extent do you think manufacturing units are aware of the energy footprint of their products? Do you think that green manufacturing as a concept has been mainstreamed enough in commercial manufacturing, in India particularly?

I think the increasing cost of electricity and other resources has forced people to understand and to pay attention to how they use resources. People are increasingly trying to understand how much energy they are using, how much of it is being used productively and how much of it is being wasted through sheer negligence. So increasing cost of electricity is one of the reasons why more people have started thinking on these lines. The next is water – the cost and availability scenario has induced people to start paying attention. The ones that are a little bit trickier include cost of packaging, the cost of other resources used in the facility that might not be associated directly with the process, etc. But the rapidly changing energy picture has been a huge eye-opener.

Manufacturing in India has very significantly come down in the past few years. What in your opinion could provide a fillip to the manufacturing sector?

India has a huge consumer base and a tremendous market and an exceptionally entrepreneurial society which essentially means that efforts can be converted into products quite nicely. There is a culture of education and technology which is quite strong. Some countries have lots of energy, others have a lot of natural resources; I think to India’s benefit there is a strong education, information science culture and capability – as time goes on, this is going to make processes more efficient and will definitely catalyze waste reduction efforts  as also optimal use of resource or energy. It is the infrastructure that needs to be in place to ensure that the variability of these things can be guaranteed. My sense is that the potential of having the right set of tools for the next big industrial revolution is probably higher in India – rather than say China or even Europe. If you look at Central Europe, they have a very strong manufacturing infrastructure but do not quite have the same affinity for information processing and IT that exists in India. Also there is a huge market in India, which is hard to come by anywhere else.


What do you see as the major challenge to environmentally friendly manufacturing? Is it to do with less diffused and available technology or does economic feasibility play a role in this?

The two are probably tied together and this applies everywhere. If you are trying to grow your business, you will require additional resources and will need more energy, water, materials, access to transportation and access to these can be variable and inconsistent. What is needed is the sort of lean technologies which help to make processes more scalable in the presence of variable demand. The Japanese pioneered the Toyota principle which essentially allows the production system to accommodate huge variability in demand or huge variability in exchange rate between the yen and the euro.

My sense is that with respect to environmental issues or green technology, companies will benefit by having another degree of responsiveness to changes in availability or the lack of it in resources, supply chain disruptions etc. The companies which figure this out will become more competitive because if there are disruptions or reductions or unavailability of resources, then these are the companies which will be prepared for such challenges.

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The next blog posting will focus on the environmental pros and cons of additive manufacturing! And make sure to check out the Green Manufacturing Facebook page for interesting tidbits on green manufacturing in the news. And, of course, hit the "like" button!

And - save the date - August 29th. LMAS researchers present as part of a webinar sponsored by Sustainable Minds on Creating Knowledge Workers for the Greener Product Marketplace Part 6: Showcasing Sustainable Manufacturing at UCB. Register for this free webinar at the Sustainable Minds link above.

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