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.

The effective utilization of resources

How about resource productivity?

As part of thinking about mechanisms, and metrics, for driving green manufacturing, it came to mind that there is always a lot of talk, specially in the US, about the tremendous advances in labor productivity that have occurred over the last several decades. The Bureau of Labor Statistics (or BLS) is the official keeper and generator of this statistic about the performance of the US economy.

The BLS website defines labor productivity as the relationship of "output to the labor hours used in the production of that output." It measures these in terms of two  productivity metrics - major sector and industry productivity. BLS states that "The Major Sector Productivity program publishes quarterly and annual measures of output per hour and unit labor costs for the U.S. business, nonfarm business, and manufacturing sectors. These are the productivity statistics most often cited by the national media. The Industry Productivity program publishes annual measures of output per hour and unit labor costs for U.S. industries."

The kind of "news" this generates is typical of the following, from the BLS website, reported on June 5, 2013. "Productivity increased 0.5 percent in the nonfarm business sector in the first quarter of 2013; unit labor costs decreased 4.3 percent (seasonally adjusted annual rates). In manufacturing, productivity increased 3.5 percent and unit labor costs decreased 10.0 percent."

This means that, thanks to a number of improvements in industry, manufacturers managed to squeeze out 3.5 percent more output per unit of labor input. This could be due to work organization, automation, simplified production, incentives, etc. This is generally considered to be "good news."

In fact, the increase of productivity in the US labor market is a driver for business competitiveness. Higher productivity maintains a strong labor-cost advantage (at present, US productivity is 3x Mexico, for example) and has been growing at about 2.5% each year.

So, what does all this have to do with green and sustainable manufacturing!?

Why not measure and track resource productivity too?

Seems obvious when you think about it. Why not consider resource productivity along with labor productivity as a measure of competitiveness for manufacturing (or any industrial sector for that matter)?

Gary Pisano and Willy Shih in their book "Producing Prosperity – Why America Needs a Manufacturing Renaissance," Harvard Business Review Press, Boston, 2012, discuss productivity as a measure of innovation in manufacturing. They refer to something called "Total Factor Productivity" which combines all inputs – labor, capital, and others – to create a measure of overall efficiency for an economy. This is driven by innovation in products and processes and makes a company, country, region attractive to productive activities. (Note: this is a good read if you are thinking about broader manufacturing issues and not "just" green manufacturing!)

So, how does this fit in?

Recall the IPAT impact equation? Its been discussed a number of times in this blog (most recently back in May) and it proposes a simple methodology for assessing the impact of technology (and manufacturing of products) based on the population, a measure of affluence or standard of living (here the GDP/capita - an imperfect but useful metric) and the impact per unit of value created in manufacturing (impact/unit GDP).

You may remember that I made some note that the only thing manufacturing engineers can affect in this equation to move towards reducing impact is the impact/unit GDP - that is, the impact (in terms of consumption or generation of damage) of the products we create. If we can offer the same or greater value with reduced impact we are on the right path.

So, sounds a lot like productivity doesn't it?!

The problem is, we've got to get moving!

At present our impacts are too large.  According to Dr. Margot Hutchins, the Associate Director of the Laboratory for Manufacturing and Sustainabiity (LMAS) at UC-Berkeley, we are utilizing 1.5 times the capacity of the planet in terms of resource consumption with an impact of emissions of CO2 and pollutants, depletion of resources, solid waste, etc. The usual problems.

Looking to the future she predicts that population (the P in IPAT) will will increase by ~40-30% by 2050. Affluence, A in IPAT,  is also growing quickly in many nations – ~3-5x increase by 2050. And this is to be expected. Everyone wants a better standard of living. The result is that we may need to increase our efficiency (that is, reduce the T) by a factor of nearly 10!!! Meaning, we've got to reduce impact of our products while maintaining their value - or growing it - in the eyes of the consumer.

Tall order. So, how would resource productivity come into this? 

First of all, how should we define this? Following on the definition of labor productivity, resource productivity would be the amount of output (value) created per unit of resource expended (or unit of impact).

How might we measure this? These units of resource (or impact) could be employed -
     - Global warming gases emission (CO2, methane CH4, N2O, CFC’s)
     - Yield or % Recyclability
     - % Reuse of materials or remanufacturing
     - Pollution (air, water, land)

and these could be per capita, per GDP, per area/nation, and so on.

As with higher labor productivity which bolsters a nation's labor-cost advantage, higher resource productivity maintains a strong resource-cost advantage.

More value, lower impact - sounds like something we should look into.

It is sort of like the term used in the aerospace industry - the “buy to fly ratio.” This term came up in this blog back in July of 2010 as part of a discussion on "Degrees of Perfection". It is, in a nutshell, the amount of material, for example, that ends up flying on the aircraft normalized by the amount that was purchased and processed at the start of the production line. It is often, for some aerospace components, a very low number.

But we also see this in other products. You may recall a conversation on this back in June of 2011 under the topic of "Less can be more"! based on some research by Professor Julian Allwood at Cambridge University on the yield of material in processing to create some common products - like beverage cans, automotive panels, etc. But Professor Allwood is more careful in his counting. He doesn't just track yield gate to gate in part of the production but all the way from the melt on creation to the finished product. In the case of both steel and aluminum the "cumulative yield" (meaning the amount of material from the raw stock - in this case liquid metal in the ladle after it was refined - to the finished product) was as low as 40-50% in some cases and, for some aerospace components fabricated of aluminum, in the low 'teens.

And the "cumulative impact" of that material when it finally got into a product necessarily included the energy that processed the "wasted" material along the path to production. Just because you recycle material that is left on the shop floor doesn't mean you "hit the reset button" on imbedded energy, or its environmental impact,  in the product.

This did not mean that the manufacturers were being necessarily wasteful - just that the process technology was not able to extract more finished product out of the material without large amounts of waste.

This is not usually accounted for (except in the price of the component which reflects the material and processing supply chain). But the associated impacts for sure aren't accounted for.

What if we were measuring, along with labor productivity, the resource productivity? Would this drive us to innovate in the process technology to improve the "buy to fly ratio"? It would reduce the impact in proportion to the increase in yield of material processed - less waste means, in addition to less cost, less impact. Each kg of wasted material has embedded energy, water, and other resources in it.

Let's start talking about resource productivity when we speak of manufacturing. And this can be a strong driver for manufacturing innovation as well.

In the next postings we'll address some of the follow-on innovation that could improve our resource productivity and, in the process, explore some ideas on tracking resource productivity.

And, a reminder about the Green Manufacturing Facebook page  - more frequent comments and items on green and sustainable manufacturing and the issues that affect it. 

Cheap Labor, out of Fashion?: New Models for Assessing Supplying Decisions after the Bangladesh Factory Collapse

Social Aspects of Green and Sustainable Manufacturing

From time to time this blog will include appropriate contributions from others. This posting is one of those and comes from a PhD researcher in the Laboratory for Manufacturing and Sustainability, Ms. Rachel Simon.

The Rana Plaza factory collapse in Bangladesh, with a final death toll of 1,127 workers, officially ranks as one of the worst manufacturing disasters of all time. The tragedy exhibits a new reality for producers with supply chains that are global and complex: a diversity of suppliers along the value chain may protect producers from the vulnerabilities of disruptions, but it can also expose them to additional risks—such as hidden costs and a damaged reputation—resulting from using even a single supplier with any bad environmental or social practices. In light of these developments, what will be needed for companies to consider and mitigate these risks?

You may recall from earlier articles about labor and the social impacts of sustainability  we have discussed here the “triple bottom line.” For those that did not read these postings, the “triple bottom line” term originated in 1994 with John Elkington (he called it the 3-P’s: profit, people and planet) with the “people” part indicating “a measure in some shape or form of how socially responsible an organization has been throughout its operations.” What remains debated is what the social responsibility measurements of a company should be, and how they can be accurately assessed. While we, at our lab, have been working on identifying the best social metrics for manufacturing, supply chain management, and risk aversion, it is often difficult to pinpoint the perfect social metrics because, they are, in general, an indirect and imperfect measurement of a conceptual ideal.

Similar to the environmental issues that result from production, there are often social costs to workers and surrounding communities, the burdens of which are borne by people beyond the scope of production and consumption (you may also recall our reference in the blog to Elizabeth Kolbert’s analogy on externalities about global warming being like a drunk man that the public must pay for in the cost of a police escort home or a visit to the emergency room). For instance, while companies may contribute to the costs of the rescue and relief efforts at Rana Plaza, their contributions will not likely exceed the long term total costs to survivors, the families of workers, and the Bangladeshi public. Also, just as with environmental issues, it is a short-sighted perspective that often leads to business decisions that create entrenched social issues. With sourcing garments from Bangladesh, companies have been mostly concerned with the cost of sourcing per unit produced. However, when everything is taken into account, companies may end up spending more to compensate for these disasters, repair their damaged reputation, find and build relationships with new suppliers, or improve the existing conditions in Bangladesh in order to continue doing business there. Social metrics are precisely what are necessary to prevent producers from being associated with, or contributing to, the conditions that led to the tragedy in Bangladesh repeating in the future. Regardless of which party is ultimately responsible, these disasters in the production chain put brands at risk, and the issues that created them need to be handled to achieve sustainability.

One of the benefits to a company that outsources components is that they do not have to invest their own resources into managing the conditions under which they are produced. Companies have challenged the idea that they hold a large part of the responsibility to enforce the working conditions of their suppliers. However, in Bangladesh, brand owners appear to be past the point where they can debate on the principles of what should be. Instead, they have been faced with strong public sentiment about their role in incidents such as the Rana Plaza collapse, and the Tazreen factory fire that preceded it which killed 112 workers last November. In both of these catastrophes, labor groups and the media have been quick to identify which fashion labels have been found in the rubble of the fallen factories. In the wake of Rana Plaza, the Los Angeles Times, the New York Times, the Wall Street Journal, and the Washington Post, have all featured articles about which retailers have signed a proposed legally binding agreement on worker safety and building regulations for Bangladesh. Sumi Abedin, a survivor of the Tazreen factory fire, who jumped three stories—not to save her life, but to save her body in hopes that her family could identify her remains—tours the United States, advocating companies and consumers to improve the working conditions for garment workers like her in Bangladesh.

Now companies that do not wish to further tarnish their brands are faced with the decision to continue to source from Bangladesh, and help improve the working conditions there, or sever their ties with a location that has proven to be risky. Unfortunately, neither option can be implemented immediately, or without costs. For manufacturers wishing to leave Bangladesh, the limitations on the existing production capacity elsewhere makes it impossible to do so anytime in the near future. KeithBradsher reports in the New York Times that only a few countries in the world—China, Bangladesh, Vietnam, Indonesia; and potentially, Cambodia and Pakistan—have developed the production systems necessary to turn out the quality and volume which retailers need within the timeframe in which they want it. He further notes that this production capacity in alternative Southeast Asian factories is already being fully utilized. In fact, a leading garment sourcingcompany estimates that only 10 to 20 percent of Bangladesh’s current output, or $2 billion to $4 billion worth of goods per year, could be shifted in the next nine months to other countries. So, even for companies wishing to move out of Bangladesh, the feasibility to do so is questionable. In the meantime, companies will likely have to develop a strategy for their continued sourcing from Bangladeshi factories.

Additionally, a move out of Bangladesh will be accompanied by increased costs. Today, Bangladesh is the cheapest place in the world to manufacture clothing on a large scale. For instance, the average Bangladeshi garment factory worker earns $37 a month, compared to $120 in Cambodia’s Phnom Penh, $145 in Vietnam’s Ho Chi Minh City; $190 and $300 in Indonesia’s Semarang and Jakarta and $500 in China’s Guangzhou. Historically, brands turned to Bangladesh for cheaper production when prices in China began to increase. As demand for the cheap Bangladeshi labor grew, the existing garment industry was not able to support it. Low wages, paired with an expiration of the quotas governing the amount of garments that U.S. companies could import, drove rapid development in Bangladesh to serve unmet demand. Elizabeth Cline, a journalist and author of Overdressed: TheShockingly High Cost of Cheap Fashion, notes that the approximately 4,000 factories in Bangladesh could not keep up with the pressure of trying to compete with the 40,000 garment factories in China. According to Kapner, Mukherji, and Banjo of the Wall Street Journal, labor groups in Bangladesh say that factory owners illegally converted hundreds of residential and other buildings into makeshift garment factories. They also cite monitors who claim that factory owners would often build additional floors on to existing factories without concern for fire or other building codes. From 2005 to 2012, the number of garment factories increased 30% to 5,400 factories, according to the Bangladesh manufacturers' association.

Not only did cutting corners allow factory owners to keep pace with the expanding demand, but it also allowed them to keep the prices low. The tragedies that have recently occurred in Bangladesh happened in factories where owners neglected to provide—and pay the overhead associated with—appropriate building construction and maintenance according to codes: adequate lighting, ventilation, and emergency exits, and the necessary oversight to enforce safety standards. Additionally, it became difficult for brand owners to determine precisely in what factory, and under which conditions, their garments were being made, as a network of sub-contractors grew to serve primary factories that were at capacity.

Certainly, fixing these long standing issues of negligence in the Bangladeshi garment industry will require a capital investment. However, the question that should be asked is: will the capital that is required to fix the existing issues in Bangladesh cost more or less over the long term than the higher prices of production in other locations. Also, and more broadly, is there a cost level below which ensuring a minimum level of working conditions become untenable?

While relocating can alleviate some of the issues associated with manufacturing in Bangladesh, it does not guarantee that the problems occurring there will not be duplicated elsewhere. Could new demand in a different country drive rapid expansion at the cost of building safety? Will factory owners elsewhere compromise standards to improve their profit margins? With demand for production exceeding supply, will unsafe factories be sub-contracted against the wishes of manufacturers? Investing in Bangladesh will likely improve the status quo, while it is uncertain if moving elsewhere will be trading in one set of problems for another.

What is clear is that the existing model of developing and monitoring corporate codes of conduct for suppliers has not worked in Bangladesh. Foxvog and Gearhart of the International Labor Rights Forum criticize corporate supply chain monitoring systems for placing additional requirements on factories without providing them the financial means necessary to meet them. They also claim that these systems encourage factories to keep safety risks secret, out of fear that the companies will stop doing business with them, if they were to find out. While these sentiments clearly reflect the perspectives of labor, their accuracy does not hold less true.

Extensive research has been conducted proving that the environment in which laborers work affects their productivity. Even without reference to such studies, it is easy to suppose that in Bangladesh, where the work force is already trained and incredibly effective, productivity may improve if factory employees had adequate lighting and a consistent power supply, and did not work while in fear of a fire or a building collapsing. For manufacturers, improved working conditions would also reduce the uncertainty and risks of disruptions resulting from a similar disaster, and the unrest that would likely follow it, such as was seen with the worker protest that following the Tazreen factory fires.

Multiple polls and studies have indicated that consumers have a desire to buy ethical clothing, and may even be willing to spend more on garments that are made with good labor standards (see, for example, a. Hiscox, M. J., and Smyth, N. F. (2006). Is There Consumer Demand for Improved Labor Standards? Evidence from Field Experiments in Social Labeling. Department of Government, Harvard University; b. Elliott, K. A., and Freeman, R. (2001). White hats or Don Quixotes? Human rights vigilantes in the global economy (No. w8102), National Bureau of Economic Research.; and Kimeldorf, H., Meyer, R., Prasad, M., & Robinson, I. (2006), Consumers with a conscience: will they pay more? Contexts, 5(1), 24-29). 


However, while this sentiment has been expressed for over 20 years, growth in the ethical fashion market in recent years has been small - so called ethical consumerism and ethical clothing (see, Mintel, 2009. Ethical Clothing –UK-2009. Mintel International Group Limited).

For garment manufactures currently sourcing from Bangladesh, moving past the Rana Plaza collapse will be a challenge, regardless of what steps they take. However, perhaps this point also serves as an opportunity to fill a niche that currently isn’t being served, for those with the foresight to pursue it.

Comments and inquiries about this posting will be referred directly to Ms. Simon for her response. 

More on the social aspects of sustainability next time.

Green and Frugal, Part II

Broadly frugal

In the last post (an embarrassing long time ago!) the discussion centered on "frugal engineering" or, as it is sometimes referred to as "frugal innovation."  It was noted that frugal engineering usually refers to reducing the complexity and cost of some good and the production of it so that, for example, it might be more accessible in developing economies. It can also include simpler (or fewer bells and whistles) products that are devoid of non-essential features. One market for this is the so-called developing economies where there is an emphasis on simple basic performance and durability and less on glitz. The theory is that selling such products, made cheaply (but well!) would couple volume with thin profit margins to address the growing markets in these countries for basic goods and services - cars, cell phones, appliances. 

The expectation is that result frugal engineering will not create products (or processes) with inferior quality. Hence production must be similarly efficient and, it would be assumed employ "frugal use of resources" as well.

An article in mid 2010 on "The importance of Frugal Engineering" published by Booz and Company reviewed some of the fundamentals of this new way of designing and producing products for the "bottom of the pyramid." These include elements we should already be doing - but focused laser sharp on a different segment of the consumer market: understanding the consumer, bottom up innovation, organizational agility including cross functional teams, nontraditional supply chain and top down support.

They give several great examples in the article and we'll summarize on here - that of the Nokia 1100 cell phone. With the first glimmer of economic prosperity in pretty much any country people buy a cell phone. Not a fancy one. A functional one. One that might work in agricultural conditions - dusty and dirty. One for field workers in humid environments. The describes the development of a phone for such circumstances.  Nokia engineers noticed that the humidity of the working environment made the phones slippery and hard to hold on to or dial. The result was a phone with a nonslip coating on the keypad and sides. To resist the damage from dust and other contaminants in some of the factory environs the handset was designed to minimize dust infusion. The phones are also very basic - send/receive calls and texts, monochrome screens, fewer features so power draw is lower and they can last longer between charges. The Nokia engineers added only one feature that might be an "extra" - a small, energy efficient flashlight that is a big hit in areas with frequent blackouts or poor lighting - meaning pretty much most of the markets this phone was designed for. It sells (in 2010 at least) for $15-20 and is apparently a best seller.

So, what can we learn from this for a broader market - one that is already enjoying the fruits of be "further up the development curve"? If you "google" the term frugal you get quite a screen full. The usual implication is getting more but spending less. Well, that works! It also starts with clothing - buy second hand, buy fewer, buy better quality (things that last), chose versatile over stylish (ok…let's see how that works!), repair/modify as needed, make your own. You can find more on this line at a number of websites - like frugal girl. 

Importantly, this does not mean buy cheap clothes if you want to include sustainability in your wardrobe. The trend to "throwaway fashion" based on cheap, rapidly changing styles made with inexpensive materials and low labor is anathema to sustainability. One only need to reflect on the recent tragedy in Bangladesh to drive that point home.

But, remember the first paragraph above and the discussion in the last posting - frugal does not mean low quality or, importantly, lower value (quality for the price).

That last one, quality for the price, is the one to watch. Recall our discussion in the past on the IPAT equation for estimating impact of technology? The acronym is defined as  IPAT: I = P x A x T or  Impact = Population x Affluence x Technology. The key term green manufactures and engineers need to keep in focus is "Impact/GDP" - that is, the environmental and social results or impact associated with the value of the product or technology. That's the one we can influence. Being able to increase the value of the product or technology while at the same time reducing the impact from using the product is green. If this is done sufficiently over a wide enough range of products (or manufacturing processes) we can become sustainable.

This should apply across all economic domains and the elements of frugal outlined in the Booz paper should equally apply. 

Understand the customer - let's assume the customer is interested in being truly green (and on the road to sustainable); certainly in the San Francisco Bay area this is appealing to the "developed" crowd. But we'll need to make sure we can address the customer needs straight off but include enough style to make the product acceptable. 

Bottom up innovation - rethink all aspects of the product or process; specially with efficiency of resource use, and recovery, in mind. 

Organizational ability - this is more than beating up the supplier for lower cost. This implies less obvious tradeoffs between similarly capable but less impactful solutions; Often suppliers can or will work with the designer to insure the specifications are met but not just by using something "off the shelf" or, perhaps, off a different shelf. An interesting article on frugal engineering (albeit in a slightly different context) in supply chains was in the Financial Times in May, 2011.

Top-down support - this is the Kennedy Moon Landing mission declaration - but for frugal engineered and manufactured products; "We will make a X for $Y." That might mean not adopting the same product platform that serves another market demographic. Or developing one that extends across a broader range of market.

In the Booz article one of the bolded text box statements is "In mature industries, companies are optimized for their main customers. For emerging markets, a different approach is required." True. But, let's consider the "sustainable-minded consumer" (including the manufacturing engineer or factory manager) as an "emerging market" too. How would we design and build our products for that growing market? As we are able to deliver products with equivalent capability/functionality/value but with lower impact those consumers leaning in this direction will go for it. 

Companies are already on board. There are already so many examples on the web and in the media about companies being more productive and profitable using fewer resources, less energy and water and, more and more, with lower social impact throughout the supply chain. This is the solution to greenwashing - deliver real measurable green value in a product that meets the consumer's needs - whether in a field in India or a start up in San Francisco. How about we focus "laser sharp" on that?

Green and Frugal, Part I

Frugal Innovation and Green

The last posting centered on innovation and sustainability - or creating "new" value  - and the role of green innovation in product design and manufacturing. Recently I've been reading about, and hearing about, "frugal engineering." Or, it is sometimes referred to as "frugal innovation." As an engineer I'm happy to have the terms innovation and engineering used interchangeably!

Frugal engineering usually refers to reducing the complexity and cost of some good and the production of it so that, for example, it might be more accessible in developing economies. Wikipedia defines frugal engineering in this way and states that the term "refers to removing nonessential features from a durable good, such as a car or phone, in order to sell it in developing countries. Designing products for such countries may also call for an increase in durability and selling them, reliance on unconventional distributions channels. Sold to so-called "overlooked consumers", firms hope volume will offset razor-thin profit margins. Globalization and rising incomes in developing countries may also drive frugal innovation."  

Importantly, the result of frugal engineering is not products (or processes) with inferior quality. But there is an emphasis on low cost of product. So, to insure reasonable margin, production must be similarly efficient.

There is always a tension between "built to last" and "built to last long enough!" This becomes a major issue in closed loop systems such as those illustrated with the Ricoh Comet Circle and other closed loop scenarios. We covered the comet circle some time ago. (And from Ricoh). The comet circle, shown below from Ricoh,

shows both the forward and reverse logistics path we've discussed before - material flowing via the product to the consumer and then material flowing to other uses after product use by the consumer. The "most sustainable" here is the loop that goes back to the consumer with the same product providing the same function. The challenge of "built to last" vs "built to last long enough" plays an important role here. Products with long lives will be more reasonably returned to similar use at a similar functional level. Products which fail, or the obnoxious subset of failure, being overcome by new technology, will have longer loops and, by definition, be less sustainable.

So, how do we decide where is the "sweet spot" between designing products (made of components) that last a long time vs those that fail earlier. One critical question is "should we design (and make) all the components to fail at the same time and incur the extra cost and, likely, over design, or should we let one or more components fail earlier and then reuse the remaining components as with remanufacturing?

Engineers have been dealing with the tradeoff between product design, quality and failure for a long time. This is usually discussed as part of product reliability. Dennis Wilkins (retired from HP) explains that reliability engineers characterize the lifetime of a population of products using a graphical representation called the "bathtub curve." The bathtub curve is characterized by three periods in a product life: an infant mortality period (early failure) 

with a decreasing failure rate, then a normal life period (also known as "useful life") with a low, relatively constant failure rate, and ending up with a wear-out period of accreted failure exhibiting an increasing failure rate. Engineers try to reduce failures at each stage of product life by efforts such as "burn-in" or running the product for some time to catch early failures or other tests to attempt to screen out infant mortality failures. Design and manufacturing choices can reduce (or increase!) failures at any stage - depending on quality of components and design and production.

Professor Sami Kara and colleagues at the University of New South Wales in Australia have studied this problem, as applied to appliances, for some time. The studies explore the useful life of components with the thought to identifying those that have significant use in a second life versus those that fail with the appliance. This can drive the economic models for re-manufacturing but is dependent on simple ways to estimate which components have life left and, importantly, how to assess this easily and reliably. Challenges include the cost of testing procedures that might increase labor costs for remanufacturing or re-use, necessity for disassembly of an appliance to access the component to assess its condition, inaccurate test data with respect to condition, degradation or remaining life and questions about number of samples that need to be tested to get reliable data.(see "Reliability assessment of components in consumer products - a statistical and condition monitoring data analysis strategy" by Mazhar, Kara and Kaehernick, 2005). 

Kara describes some of their studies showing that some very inexpensive components of large appliances fail early and render the appliance unusable - and often it would be very inexpensive to improve these components for a dramatically longer product life. One that comes to mind is the door seal on a residential refrigerator. But when is "good enough" for a product component good enough?!

So, that's one consideration in design, production and life of the product.

Another consideration is product efficiency improvements resulting from new technologies. If product technology (in tens of operating energy or resource consumption) changes rapidly it might be advantageous to upgrade products (meaning change and replace) more often. Alternately, if product technology evolves slowly, there may be little advantage, from a consumption angle, to upgrading. The tipping point is with respect to embodied energy in the product.

Julian Allwood, who's been mentioned before in this blog, covers the tradeoff in his book Allwood and Cullen, Sustainable Materials with Both Eyes Open, UIT, Cambridge, 2012. There are two distinct strategies depending on whether or not the product has "high embodied energy" or "low embodied energy". Recall that embodied energy is the energy (and resources with their energy footprints) required to manufacture the product. Products with high embodied energy and low energy in use are candidates for replacement less often with technology enhancements while product with low embodied energy and high energy in use with improving efficiency are candidates for replacement more often as seen below. The strategy can have a big impact on the cumulative emissions (as from the energy) over the life

cycle of the product. This was the issue we discussed some time ago with respect to the "cash for clunkers" program as part of the recovery - it would be advantageous, from an environmental angle,  to replace an old car with a newer car only if the newer car had sufficiently better fuel economy to offset over its life the embedded energy of the vehicle it was replacing plus save fuel.

Enough to consider for the moment! We'll pursue this more with respect to frugal engineering and green in the next posting.

And, follow us on Facebook for more current items and observations - Facebook.com/GreenManufacturingBerkeley!

Innovation and Sustainability

(Or creating "new" value)

In one of my previous posts the subject of externalized costs was dealt with in some detail (see the posting of December 29th, 2012 to be specific.) The idea that we are not really paying for the true expenses associated with the products we consume. The discussion went on to muse about how we might address that.

You might also recall a posting in this blog a long time ago (July 2009) speaking about the "next leap forward" in manufacturing. The evolution of manufacturing in terms of productivity, flexibility, response time, work philosophy or business model, and market responsiveness/customer “pull” shows the evidence of tremendous changes from the earliest organized industry or manufacturing in the 1800s up to today. These changes correspond to distinct periods of production. These periods can be characterized as the craft period, mass production period, flexible production period and lean manufacturing period. The point was that, over the years in the progress of manufacturing, different individuals observed ways to increase the value of the operation by, for example, increasing machine availability, reducing errors/increasing yield, organizational improvements, etc. and then adjusted/modified the processes or systems or business models to capture that value. 

On a recent trip to Europe for a conference I spent some time catching up on magazines I never get to spend enough time with. The Economist issue of January 12th  had an article titled "Has the ideas machine broken down" on the loss (or apparent loss of) innovation in the world - specially the US. It showed a number of types of data purporting to show the decline in growth of GDP per capita (specifically the decline in "percent increase on previous year") in the US starting in about 1950 after several hundred years of steady increase year over year. Don't worry - the GDP/person is still increasing in the US as it is in the world, but the rate of increase is declining. The article quotes Peter Thiel, one of the founders of PayPal, an internet payment company, and the first outside investor in Facebook, a social network, who says that "innovation in America is 'somewhere between dire straits and dead'. Engineers in all sorts of areas share similar feelings of disappointment. And a small but growing group of economists reckon the economic impact of the innovations of today may pale in comparison with those of the past."

Wow. Could it be we don't need any more gadgets or apps?! Maybe we need something that generates real new wealth!

Could sustainable, or at least green, manufacturing be a way to both enhance value and real growth (meaning insure that the resources created by successful businesses and their employees go to growth and not to fix problems created by non- sustainable practices)? That is, if we are not taxed with the costs of healthcare required to "fix" the impacts on humans of pollution (air, water or land), work related problems (hearing loss, injury, etc.), disposal of waste from production and consumption, wouldn't we be able to put some of that revenue towards growing our economy and,at the same time, improve the standard of living of a lot off people?

This semester Dr. Margot Hutchins and I are teaching the Sustainable Manufacturing graduate course in Mechanical Engineering at Berkeley. We have a great group of students who are engaged in the issues, challenges and opportunities. So, a week ago I was starting a lecture on linking manufacturing to sustainability and made the statement to the effect that "there are only three means to create new value in the economy - mining, agriculture and manufacture." Everything else is just redistributing that money in some way (Wall Street/banking money changers, healthcare and education sectors, various other services -- insurance, haircuts, making frapuccinos, etc).

The reaction of the class was strong and immediate. Howls of concern were raised ranging from the inappropriateness of using GDP as a measure of value created (referring to an earlier discussion of the IPAT equation in the class) to comments that this does not value the work or contributions of service sector, psychologists, hairdressers, etc. I tried to explain that this does not create anything "new" and, in some cases, is questionable as to any value. But, the class was not convinced.

So, I resolved to prepare some more background information to prepare the discussion better and try to offer a more reasoned argument.

Although I've seen it referred to in other documents, Bob Lutz, former Chrysler executive and auto industry driver, summed it up like this in a New York Times opinion piece (“Coming Back Home,” New York Times, August 4, 2011):

“From the earliest days of economic activity, it's always been recognized that there are only three ways to add value. The first is to "get it out of the ground" by mining (or drilling), thus creating a commercial commodity where none existed before. The second, of course, is "grow it": prepare the soil, fertilize, seed and harvest; again producing, through agriculture, an economically desirable product. The third, and most important, is "making it": using ingenuity, labor and capital to transform the products of mining and growing into hard tangible consumer goods. Other activities, like services, are helpful, but they do not create new wealth the way mining, agriculture and manufacturing do.”

This is bolstered by data from the Bureau of Economic Analysis in their input-output tables (available at link). That data shows the economic activity generated per unit of output of a sector. Manufacturing and agriculture are the only two sectors for which one dollar of activity generates more than one dollar of broader economic activity - $1.35 and 1.20, respectively. All others generate less and sometimes significantly less, for example, transportation $0.95 and retail $0.55. Mining is not included in the data.

There is an interesting discussion on this topic on the "as green as it gets.org" website. First, they distinguish between creating wealth and getting rich. They list a few examples - I can inherit a million dollars, and I’d be rich, but I didn’t  create any wealth.  I can convince my government that I’m a good candidate for a research fellowship, and I can get wealthy regardless of what I create.  I can steal from my neighbor and make myself wealthy without making wealth.   I can exploit natural resources and pull trees out of the  jungle and generate  income, though most of the wealth  was actually generated by Mother Nature.

Turns out, economists identify four different economies: 

- Primary economies -  the production or extraction of raw materials such as agriculture, forestry, 

mining, fishing.

- Secondary economies -  manufacturing and processing.

- Tertiary economies - retail, distribution, and service. 

- Quaternary economies - research and development, creating ideas and inventions that can later be used by folks in other sections to make a new or better product.

So, continuing to draw on the "asgreenasitgets.org" discussion, wealth is principally generated in manufacturing. In Primary economies, we utilize wealth from Mother Nature. In Secondary economies, we manufacture wealth.  In Tertiary economies, we move wealth around.  In Quaternary economies, we prepare the manufacturing sector to make more wealth.  If you are going to create wealth (which should not be confused with making someone wealthy) you must manufacture.  And, the more value added in manufacturing, the more wealth you create.

So, back to innovation and green manufacturing. I used what I thought would be my killer closing argument with the class by again referring to the IPAT equation. In that equation, you'll recall, one term that engineers can influence is "impact/GDP." Meaning, if we wish to offset or blunt the drive for improved standards of living by people around the world (hence consuming more of everything) and the continuous growth of population, then we need to develop manufacturing technologies that reduce the impact (environmental, social, etc.) associated with production and GDP growth. 

That's where innovation needs to come in. Processes and systems in the secondary economy that convert materials into new products with substantially reduced impact.

We've actually discussed a number of these kinds of "innovative manufacturing" technologies in other postings here. And we will keep introducing them from time to time as examples of what can be accomplished. As a member of the fourth economy - this is my small contribution to creating wealth.