Greener Manufacturing and Operations : From Design to Delivery and Back [1 ed.] 9781909493223, 9781874719427

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GREENER MANUFACTURING AND OPERATIONS FROM DESIGN TO DELIVERY AND BACK

Edited by Joseph Sarkis

Greener Manufacturing and Operations FROM DESIGN TO DELIVERY AND BACK EDITED BY

JOSEPH SARKIS

First published 2001 by Greenleafpublishing Published 2017 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN 711 Third Avenue, New York, NY 10017, USA Routledge is an imprint of the Taylor & Francis Group, an informa business Copyright © 2001 Taylor & Francis Typeset by Greenleaf Publishing. Cover design by Lali Abril.

All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. Notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe. British Library Cataloguing in Publication Data: Greener manufacturing and operations: from design to delivery and back 1. Industrial management - Environmental aspects 2. Industrial ecology I. Sa rkis, Joseph

658.5

ISBN 978-1-874719-42-7 (hbk)

CONTENTS

Foreword .............................................................. 11 Roger E. Kasperson, Stockholm Environment Institute, Sweden

Introduction ........................................................... 15 Joseph Sarkis, Clark University Graduate School of Management, USA

PART 1: Operations Strategy and Policy . ................................ 23 I.

Implementing the industrial ecology approach with reverse logistics 24 Michael Martin, University of Exeter, UK 1.1 1.2 1.3 1.4 1.5 1.6

2.

Levels at which the concept can be applied ............................ The six Is of industrial ecology ..................................... Reverse logistics principles ........................................ Types of reverse logistics system .................................... The five Rs of reverse logistics ...................................... Final comments ................................................

26 29 31 32 34 35

Life-cycle chain analysis, including recycling ........................ 36 A.J.D. Lambert, Technische Universiteit Eindhoven, the Netherlands 2.1 2.2 2.3 2.4

Product process chains ........................................... 37 Discarded complex consumer goods ................................. 45 Life-cycle assessment (LCA) ........................................ 50 Conclusions ................................................... 55

3. Management of pollution prevention: Integrating environmental technologies in manufacturing .................................... 56 Neil Jones, INSEAD, France, and Robert D. Klassen, University of Western Ontario, Canada 3.1 3.2 3.3 3.4

Limits to end-of-pipe environmental technologies ...................... Conceptual framework ........................................... Managing to move beyond end-of-pipe pollution technology .............. Managerial implications and future directions .........................

58 61 65 67

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4. Organising environmental investments in small and mediumsized firms: A cost-benefit instrument as a tool for integrating environmental policy into overall business policy . .................. 69 Anja de Groene, Hogeschool Zeeland, University of Professional Education, the Netherlands, and Job de Haan, Tilburg University, the Netherlands 4.1 4.2 4.3 4.4 4.5 4.6

s.

Cost-benefit analysis ............................................ Environmental management measures ............................... Findings ...................................................... Discussion offindings ............................................ Lessons learned ................................................ Conclusions and (managerial) implications ............................

70 73 75 79 80 81

Green issues in product development .............................. 83 Johan Sandstrom, Umea University, Sweden 5.1 5.2 5.3 5.4 5.5

Driving forces, action and beliefs .................................... Grass roots and technocrats ....................................... Husqvarna .................................................... Duni ......................................................... Legislation, rhetoric and incrementalism ..............................

83 84 84 87 89

6. Corporate environmental reporting: Value for manufacturing operations ............................... 91 Harry Fatkin, Fatkin Consultancy, USA 6.1 6.2 6.3 6.4 6.S 6.6

PART 2:

What is environmental reporting? .................................. 92 Reporting and manufacturing operations ............................. 93 Report pioneering: the Polaroid case ................................. 95 Environmental reporting evolution .................................. 99 Environmental reporting's future .................................. 100 Conclusions .................................................. 103

Manufacturing and Operations Practice ... ..................... 105

7. Industrial hazardous waste minimisation: Barriers and opportunities ....................................... 106 Mark Atlas, North Carolina State University, USA 7.1 7.2 7.3 7.4 7.5

Biennial Reporting System data ................................... General waste minimisation trends ................................. Waste minimisation actions ...................................... Waste reduction quantities ....................................... Conclusions ..................................................

107 109 113 115 120

8. Sustainable manufacturing in Lebanon ........................... 121 Toufic Mezher, American University of Beirut, USA 8.1 8.2 8.3 8.4 8.5 8.6 8.7

The concept of best practice ...................................... 122 Compiling records of best practice ................................. 123 The state of the environment ofLebanon ............................ 123 Methodology and scope of the study ............................... 124 Results and interpretation of results ................................ 125 The role of the technology triangle in the sustainability of industry ........ 132 Conclusions .................................................. 134

7

CONTENTS

9. Customers as green suppliers: Managing the complexity of the reverse supply chain ............. 136 Stephan Vachon, Robert D. Klassen and P. Fraser Johnson, Richard Ivey School of Business, University of Western Ontario, Canada 9.1 Reverse supply chain ............................................ 9.2 Supply chain complexity ......................................... 9.3 Managing reverse supply chain complexity: implications for environmental performance ......................... 9.4 Concl usions ..................................................

70.

137 140 143 148

A framework for green supply chain costing: A fashion industry example ...................................... 150 Stefan A. Seuring, Carl-von-Ossietzky Universitat Oldenburg, Germany 10.1 10.2 10.3 10.4 10.5

Supply chain management ...................................... Cost management and supply chain costing ......................... Analysing cost drivers in the supply chain of the fashion industry ......... Optimising costs in the supply chain of the fashion industry ............. Conclusions .................................................

150 153 155 157 160

n. Design for energy efficiency and selection ........................ 161 Marc A. Rosen, Ryerson Polytechnic University, Canada 11.1 11.2 11.3 11.4 11.5 11.6

Energy and conversion technologies ............................... Impact of energy use on the environment ........................... Design for energy efficiency ..................................... Design for energy selection ...................................... Limitations on increased energy efficiency .......................... Case study: reducing environmental impact through co-generation of electricity and heat ............................... 11.7 Closing remarks Appendix: Internet sites .............................................

72.

162 162 163 168 169 171 176

ISO 14001: Greening management systems .... .................... 178 Nicole Darnall, North Carolina State University, USA, and Deborah Rigling Gallagher and Richard N. L. Andrews, University of North Carolina, Chapel Hill, USA 12.1 ISO 14001 environmental management systems and the National Database for Environmental Management Systems ............ 12.2 Adopting ISO 14001: three case studies ............................. 12.3 Internal results of ISO 14001 adoption .............................. 12.4 External results of ISO 14001 adoption .............................. 12.5 Summary of results ............................................ 12.6 Conclusions .................................................

PART

179 180 183 186 189 189

3: Tools for Managing Greener Manufacturing and Operations ..... 191

73. Environmental management policies: A comparison of reactive and proactive approaches ............... 192 Karl-Werner Hansmann and Claudia Kroeger, University of Hamburg, Germany 13.1 Environmental strategies ....................................... 193 13.2 Environment-oriented production planning ......................... 194

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GREENER MANUFACTURING AND OPERATIONS

13.3 13.4 13.5 13.6 13.7

Numerical example for the reactive production planning model .......... 196 The proactive production planning model ........................... 198 The approach of 5chaltegger and Sturm ............................ 199 Dual prices as weights for pollutants ............................... 201 Summary ................................................... 203

14. Aggregate planning for end-of-life products . ...................... 205 Surendra M. Gupta, Northeastern University, USA, and Pitipong Veerakamolmal, IBM Corporation, USA 14.1 Problem context .............................................. 14.2 an analytical solution .......................................... 14.3 An illustrative example ......................................... 14.4 Conclusions ................................................. Appendix: notation used in this chapter .................................

205 207 210 215 215

1S. Assessing life-cycle environmental impact: Methodology to spur design of greener products and processes .... 223 K. Ravi Kumar, University of Southern California, USA, Arvind Malhotra, University of North Carolina, USA, and Dongwon Lee, University of Southern California, USA 15.1 A life-cycle assessment framework ................................ 15.2 A proposed methodology ....................................... 15.3 Components of the vector of impact of product on the environment ....... 15.4 Illustrative application ......................................... 15.5 Conclusions and future research .................................. Appendix: vector of impact of product on the environment ..................

224 226 230 236 240 241

16. Tools for closed-loop manufacturing .............................. 243 Ad l. de Ron and Frans W. Melissen, Eindhoven University of Teehnology, the Netherlands 16.1 16.2 16.3 16.4 16.5

The product design phase ....................................... Optimal life-cycle and design for recovery ........................... The manufacturing phase ....................................... The recovery phase ............................................ Summary and conclusions ......................................

244 245 248 249 254

'7. Recovery strategies and reverse logistics network design .......... 256 Harold Krikke, Erasmus University, the Netherlands 17.1 17.2 17.3 17.4 17.5

Reverse logistics developments in Europe ........................... Research design and methodology ................................ Modelling recovery strategies .................................... Modelling logistics network design ................................ Main findings ................................................

257 258 259 266 271

18. A framework for hierarchical planning and control for remanufacturing . ............................................ 273

v. Daniel R. Guide lr and David W. Pentieo, Duquesne University, USA, and Vaidy layaraman, Washington State University, USA

18.1 Research literature ............................................ 275 18.2 A framework for a closed-loop hierarchical planning model .............. 276 18.3 Conclusions and areas for future research ........................... 287

9

CONTENTS

PART

4: Case Studies . ................................................. 289

'9. Design for environment at Sony: 'Incorporating a sound respect for nature' ......................... 290 Shane J. Schvaneveldt, Weber State University, USA, and Hidetaka Yanagida and Akira Isobe, Sony Corporation, Japan 19.1 19.2 19.3 19.4 19.5

Overview of Sony's environmental initiatives ........................ Creating environmentally conscious products at Sony .................. Emphasis areas for design of environmentally conscious products ......... Support tools for design for environment ........................... Conclusions .................................................

291 292 294 297 301

20. Chevron corporation:

Strategic financing for energy efficiency projects .................. 303 Forrest Briscoe, MIT Sloan School of Management, USA 20.1 20.2 20.3 20.4 20.5 20.6 20.7

Background: project specifications ................................ Pre-project perspective: energy efficiency at Chevron .................. The project context ............................................ The energy efficiency industry .................................... Project implementation ........................................ Performance-based financing .................................... Conclusions .................................................

304 305 307 308 309 310 311

21. A structured approach to industrial emission reduction:

The case of a gypsum wallboard production plant ................. 314 Richard A. Reid, University of New Mexico, USA, Elsa L. Koljonen, Intel Corporation, USA, and J. Bruce Buell, Lafarge Gypsum Corporation, USA 21.1 The Deming Cycle: a structured guide to continuous improvement ........ 315 21.2 Applying the Deming Cycle to process improvement: a case study ......... 320 21.3 Some conclusions and managerial implications ....................... 328 22. Textile waste-water reduction: A case study . ......................

331

Charles L. MCEntyre, Tennessee Valley Authority, USA 22.1 22.2 22.3 22.4

Example facility .............................................. Holistic assessment methodology ................................. Audit results ................................................. Conclusions .................................................

332 332 335 337

23. Development and application of a pollution prevention index as a P2 metric in a manufacturing plant . .................... 339 Eric H. Snider, GeoSyntec Consultants, USA, and Daniel B. Moorhead, Tenneco Automotive, USA 23.1 23.2 23.3 23.4 23.5 23.6

The logic behind the pollution prevention index ...................... Pollution prevention index: details of use ........................... Plant-specific use of the pollution prevention index for waste reduction .... Continuous improvement: adjusting the goals ....................... Benchmarking pollution prevention indexes among facilities ............ Conclusions .................................................

340 344 346 346 347 348

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24. Assessment of environmental impacts: A case study of an integrated approach at the plant level .......... 349 Matti Melanen and Kimmo Silvo, Finnish Environment Institute, and Lea Gynther, Electrowatt-Ekono Oy, Finland 24.1 Approach and methodology used ................................. 350 24.2 The UPM-Kymmene Kaukas plant and its environmental impacts ......... 354 24.3 Discussion and conclusions ...................................... 357

Bibliography. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 359 List of abbreviations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 370 Author biographies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 373 Index ................................................................ 379

FOREWORD Roger E. Kasperson Stockholm Environment Institute, Sweden

The advent of a new century finds corporations living in a curious world of changed responsibilities, conflictive expectations and ambiguous opportunities in regard to environmental management and industrial ecology. It is a time of new pressures and constraints, changing relationships with external regulators and publics, and globalisation of the business arena. A short two decades ago, preventing industrial accidents and injuries to workers was the simple focus ofindustrial health and safety. Rapid reaction to environmental problems sufficed for responsiveness, end-of- pipe solutions defined the approach of public regulators and corporate managers alike, accountability proceeded along well-defined channels to shareholders and public oversight agencies, and the goals of the corporation lay primarily in achieving success, in its business operations and bottom-line results. Two decades later, the results of a revolution in corporate management of environmental, health and safety issues are readily apparent, as the scope ofchapters in this book suggests. End-of-pipe approaches have given way to concern with green supply chains, waste reduction and energy conservation. Anticipatory rather than reactive strategies have become the norm for competent dealing with environmental and risk issues, coupled with proactive management and decision-making. Environmental reporting and information dissemination beyond the walls of the corporation are significant corporate functions, new standards and guidelines are embodied in the ISO 14000 series, the role of the corporation in broader societal concerns with sustainable development and respect for nature is a subject of debate, and all core functions of the corporation now need to be involved in environmental objectives and performance. These transformations demonstrate that the societal context in which corporate environmental management occurs is quite radically different at the advent of a new century from what it was in 1980. The US Environmental Protection Agency concluded more than a decade ago that the coming years of environmental management would need to depart substantially from the past. Protecting the environment is progressively shifting from 'cleaning up messes' to the design ofindustrial and economic policy, with a recognition that corporations must take on new responsibilities rather than simply adhering to

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externally defined obligations. Publics in the United States and abroad have become more risk-averse so that the social climate surrounding corporations is a shifting one, which expresses mounting concern over even small health and environmental risks and growing scepticism over the benefits of technological development. This has been accompanied by changed societal expectations concerning ways in which corporate decisions are made, involving a new set of expectations, for informing corporate neighbours and customers and meeting ill-defined but deeply felt standards for transparency in corporate decision-making. Being successful in such an altered environment carries substantial implications and burdens for the corporate engagement of environmental and health risk management. It is one thing to note the need for corporations to be proactive in environmental performance, quite another to deliver on the goal with consistency and effectiveness. Again, this is a matter that comes through strongly in this volume. The array of corporate shifts required for anticipatory and more proactive strategies require, for example, that the corporation enhance its environmental and health expertise so that future issues, and what comes through the regulatory pipeline, can be anticipated and easily internalised into corporate strategies and management routines. An internal corporate decision, auditing and enforcement system must be in place with sufficient resource allocations and high corporate priority to ensure success. Involvement of the corporate core function in the environmental mission requires organisational structures and processes that internalise and prioritise, and not marginalise, this arena of corporate activity. And close attention to green supply lines, product life-cycles, pollution prevention, investigating 'close calls' and industrial ecology carry their implications for investment in corporate expertise, recruitment, training and reward systems. Such issues question the place of environmental management in corporate culture. Corporate culture involves deep facets of the corporation: the basic values, beliefs, norms and assumptions that members have about the corporation and its mission; the organisational structures and rules of behaviour that rest on these shared values; the relationships and communications that give coherence to the corporation; and the policies and procedures that implement corporate goals and values. Corporations with clear missions, well-developed values and norms, and carry-through to behaviour are strong cultures with the potential for high corporate performance on environmental management objectives. The emerging manufacturing and operations practices explored in this book entail the interactions between such innov~tions and the place that environmental goals occupy within the corporate culture and the ~onsistency that exists among values, structures and behaviour. Creating and maintaining a strong corporate culture will ultimately be a prerequisite for the success of innovations in corporate environmental management. At the same time, a strong corporate culture does not come free but requires substantial corporate investment of high-level attention, management priority at all (and certainly top) management levels, and continuing attention to detail. Moreover, as experience has shown, lapses soon register their deleterious effects. Experience of environmental management as a broad facet of corporate goals and performance will need to overcome significant impediments and challenges arising from broad interactions with the society of which they are part. Some of these arise from corporate inertia and the normal process of diffusing of innovations, in corporations or other social institutions. Thus, it is predictable that some corporations and especially those that are more established, more profitable, and with longer business time-

FOREWORD

13

horizons, will be pioneers and early adopters of environmental innovations. Those that are smaller, more financially stressed, and with shorter time-horizons, will be the late adopters. The slow adoption of pollution prevention programmes and climate change initiatives reflect this tendency. The key challenge in driving higher overall corporate environmental performance will be one of forging consistency-how to bring along the laggards and late adopters more rapidly to the pace-setting standard of industrial leaders. The challenges continue to unfold. The 1980s and 1990S mark a period during which corporate restructuring encountered the flowering of environmental programmes. The results of this encounter are diverse and still ambiguous. On the one hand, the set of changes associated with restructuring-downsizing of staff, and particularly whitecollar managers, outsourcing of corporate functions, and the acclaimed (but probably rarer) re-engineering of production processes-has depleted corporate priorities and resources allocated to environmental management expertise, routines and communication. Such changes can have obvious negative impacts, more on corporate culture probably than on corporate organisation and procedures. Since the adverse results of environmental performance, more poorly delineated than for other areas of corporate performance, have frequently stemmed from poorly planned downsizing procedures rather than the potential that more far-reaching re-engineering might afford, the track record is still unclear. Nonetheless, as often noted by those in the middle of corporate downsizing or outsourcing exercises, 'The EHS people are the first to go, and the last to be hired back.' They are also typically not included at high levels of the restructuring decision and planning process. What the results will be of the economic downturn of the early 2000S and the long-range impacts of the I I September 2001 terrorist attacks on the World Trade Centre on the world economy, and ultimately individual corporate environmental performance, will remain uncertain for years. In view of this uncertainty, corporations face some significant unfolding challenges in proceeding with the state-of-the-art developments so well described in the chapters that follow. As several of the chapter authors have noted, thus far corporate managers have concentrated on harvesting 'low-hanging fruit'. The next transition will entail moving beyond easy targets in pollution prevention, waste minimisation and green supply chains to a more fundamental corporate orientation to pursuing broader societal objectives for sustainable development. In the end, this will prove to be an even more daunting challenge than the transition over the past two decades to internalising environmental and health management into corporate programmes and objectives. Sustainable development, for all its murky and ill-defined meaning, surely involves an embrace of broader societal goals than corporations have been asked thus far to address. These include such contentious matters as sustainable energy supplies, social equity within and between societies, support for developing countries, protection of the global environment, appropriate world trade arrangements and enhancing options for future generations. Corporations are being and will be called on to participate in achieving broader societal objectives than have up to now been the domain of public policy. Included among these will be a new corporate role in transferring technologies, be they manufactured products, industrial processes, technological research and development, technical knowledge and services, or education and training. New ethical principles may emerge that will require internalisation in corporate cultures and codes of responsibility. Whether this will involve a sea change further along the emerging directions noted in this volume, we shall see. The world is currently on an unsustainable course to the future,

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GREENER MANUFACTURING AND OPERATIONS

and significant departures in the way that governmental institutions and corporations operate may be closer on the horizon than is generally understood. The trend that has been apparent over the past two decades may only presage broader changes about to come in which corporations acquire a new social role and set of functions. Can corporations, which possess such impressive capabilities for managing risks and contributing to a sustainable world, reconcile the traditional quest for economic gain with the new embrace of industrial ecologies that map routes to a more sustainable planet?

INTRODUCTION Joseph Sarkis Clark University Graduate School of Management, USA

The greatest opportunity for making a positive impact on the directions society is taking, with respect to the environment, lies with the corporate sector. In addition, whether or not corporations take the lead in this area could significantly impact their long-term competitiveness and survival. Such efforts require not just a local or even regional focus, but a broader global outlook as well. Within the organisation we are also aware that every function-marketing, finance, human resources, purchasing, engineering and so on-will, to a greater or lesser extent, have some form ofimpact on corporate environmental sustainability. One core corporate function that has a profound and direct impact on corporate environmental performance is manufacturing and operations, a subject of great concern to researchers and practitioners in fields ranging from the social and natural sciences to management and technical engineering. In recent years, a number of issues have arisen in this area, incorporating such topics as design for the environment, total quality environmental management, green supply chains, reverse logistics, environmental management systems and standards-particularly the development of the ISO 14000 series-and source reduction. Surrounding these evolving topics is proactive corporate environmental management practice, as a response to competitive pressures, rivalling in importance the corporate response to command-and-control environmental regulatory pressures. The focus of managing operational environmental concerns has also evolved from end-of-pipe control to in-process actions to reduce or even eliminate waste. Add to these developments the integration of economic, social and environmental dimensions, which has influenced the growth of sustainability into a new management discipline. The aim and scope of this book is to help capture these and other emerging environmental manufacturing and operations practices and issues in one volume. It is intended to aid managers, engineers, students, researchers and consultants in understanding the issues, principles and tools for managing the operations and manufacturing function in an environmentally benign and sustainable manner. To this end the book presents state-

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of-the-art practices and likely future trends in environmentally conscious manufacturing and operations. This is done through a mixture of case studies, empirical and applied theoretical papers. The book includes conceptual ideas whose time will arrive, along with practical applications that managers and practitioners can apply immediately. It does not attempt to be exhaustive-no one volume can be-but I do believe it is comprehensive in its coverage ofissues. The book also ranges from considering the single-function internal focus of the organisation to the much broader systemic linkage of issues typical of multi-organisational operations and relationships. In addition, the operations aspect does not necessarily need to focus on standard durable goods-based industrial practices; many of the principles developed and presented here can also be extended to the more general process management of service organisations. Furthermore, operations and manufacturing do not necessarily focus merely on the day-to-day planning and management of this function; in fact, a number oflevels of decision-making are represented in this volume, from long-term strategic issues such as supply chain design to traditional short-term operations decision-making and planning issues such as production planning. The interest in contributing to this book was very large, and the 24 chapters selected present a wide breadth of subjects. However, there remain further substantial untapped ideas, viewpoints, tools and practices that could be of benefit to a wide variety of organisations.

Overview of the book This volume is organised into four major parts, with significant overlap, which I will attempt to tie together in this Introduction. The four parts are, respectively: 'Operations Strategy and Policy'; 'Manufacturing and Operations Practice'; 'Tools for Managing Greener Manufacturing and Operations'; and, finally, 'Case Studies'. There is an even dispersion of chapters (six to each part). The first part, 'Operations Strategy and Policy', focuses on broad implications of greener manufacturing for the organisation. These ideas and topics will have long-term and multi-functional impact on the organisation and its policies, as well as relating them to external pressures or broader social policies. We begin with two complementary chapters which place the organisation within the broader context of the industrial ecology and life-cycle analysis paradigm, two topics that recur throughout the book. Michael Martin begins by providing some background and discussion on industrial ecology-a term that could easily have been a subtitle for this book. His perspective is broad, but supports many of the operational issues and tools identified later in the book. Chapter 2, by A.J.D. Lambert, presents a review that strategically operationalises many of the first chapter's industrial ecology perspectives, by describing the problem from the foundation of product process life-cycle chains. Both chapters identifY the critical role of reverse logistics in their cyclical and multi-organisational perspectives. A number of other chapters return to the issue of green supply chains and reverse logistics including: work on managing different product environments in the reverse supply chain (Vachon et a!., Chapter 9); costing in the green supply chain (Seuring, Chapter IO); along with broad

INTRODUCTION

17

tools for design and control of reverse logistics networks and chains (de Ron and Melissen, Chapter 16; Krikke, Chapter 17; and Guide et aI., Chapter 18). A critical mechanism in strategically managing corporate environmental issues is technology and the technology and innovation strategies of organisations. Jones and Klassen, in Chapter 3, discuss environmental technology strategy and address the question of why organisations seem to favour end-of-pipe technology over the more effective pollution prevention and source reduction-type technology. How organisations can overcome the barriers and reasons for selecting a less effective technology is an outcome of their analysis of the situation. In Chapter 4 de Groene and de Haan provide supporting evidence to Jones and Klassen's contention that the end-of-pipe, incremental approach is not necessarily the best method from both a profitability and an effectiveness standpoint. They demonstrate this from the perspective of small and medium-sized companies using a cost-benefit methodology. This methodology can be compared and contrasted with Chapter 10 on costing for the green supply chain and Chapter 24, a case study on valuation and costing in Finnish industry. These chapters on costing and measurement follow on from the various chapters in Part 3 on the subject of tools, which are reliant on accurate measures and costs for designing, evaluating, operating and monitoring greener operations. Whereas technology is one strategic mechanism assisting an organisation in greening the manufacturing and operations function, another important factor to be considered is the design stage. The strategic design of products, with respect to incorporating internal and external green issues, is presented by Sandstrom in Chapter 5. He provides a couple of case examples and draws conclusions from the experiences of these companies on how managers should guide the product design process given the varying legislative pressures. Sandstrom finds that the environment is still not a central issue in product design. To overcome this, more proactive tools and practices may be needed. Chapters in Part 3 (Chapter IS by Kumar et al.) and Part 4 (Chapter 19 by Schvaneveldt et al.) provide tools and methodological approaches that may help organisations break down these organisational barriers and further support green product design. In each of these chapters, cases of how the methodologies were applied are also presented. Harry Fatkin, in Chapter 6, provides an interesting perspective on the competitive and strategic use of environmental reporting by organisations. He not only shows the importance of data and performance measurement in relation to operations, but also its importance for strategic reasons and for dealing with external stakeholders. In many ways environmental reporting sets the stage in the use of environmental performance measures for competitive reasons and as a method to limit liability and manage public relations. Example performance data and measurement approaches that are necessary for environmental reports-applied in actual case studies, from cost valuation and pollution prevention perspectives-are described in Chapters 23 (Snider and Moorhead) and 24 (Melanen et al.). Part 2 concerns practices that organisations use, at a more operational level, in managing for greener manufacturing. We begin this part with a broad study by Mark Atlas (Chapter 7) who evaluates a large database on us industrial facilities which describes practices for hazardous waste minimisation. He finds that the popularity of waste minimisation approaches has been tempered in recent years by the picking of the 'lowhanging fruit'. In other words, according to Atlas's findings, examples of easy-toachieve, high-benefit projects and programmes are less common. He has also found that

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making progress in this area does not necessarily mean big investments in technology and equipment, but can be achieved by more organisational-type changes. In a contrasting, and much smaller, study from primary data sources, Toufic Mezher (Chapter 8) investigates the policies and practices of manufacturing organisations in Lebanon. This study provides a contrast, as the focus is on a developing nation with smaller facilities. One of the major findings in this study is that small organisations in developing countries, in order to successfully implement greener practices and technology, will need the support of universities and governments-what he has defined as the 'technology triangle'. This is one of the few studies on greener manufacturing in developing countries that has emerged recently, and shows that there are significant barriers still to be overcome in this area. Vachon et al. (Chapter 9) have put together a conceptual model incorporating the concept of complexity to help understand green supply chain management practice. In this chapter, they look at product recovery practices in two contrasting manufacturing firms: one from the steel industry and one from the electronic office equipment industry. They argue that the complexity of the supply chain may influence the adoption and implementation of green supply chain practices. The lack of a good costing model in supply chains, and especially green supply chains, is a gap that Seuring (Chapter 10) seeks to fill. The dearth of such models makes it hard to manage operations across supply chains. With the fashion industry and green product development as the backdrop, Seuring shows how his costing frameworks will aid managers in analysing and optimising costs. The work provides a useful link between the supply chain-focused chapters and those that focus on the design of the product throughout its life-cycle (Chapters 15 and 19). Design practice and issues from the perspective of energy resources is the emphasis of Chapter I I by Rosen. He first presents the advantages of designing for the environment, especially from an energy efficiency perspective. Second, he provides a number ofpractices that can be applied by engineers and managers in the design of organisational processes and systems that can be used to make organisations more energy-efficient. The comprehensive treatment of this issue provides a good background for Chapter 20 (Briscoe) in the case studies section, which looks at innovative financing schemes for energy efficiency-type programmes. Both these chapters provide a strong argument for incorporating an inter-organisational energy supply chain to seek environmental and economic savings. This is especially true as manufacturing operations and industries become more automated and heavily energy-reliant. No book on organisational environmental management, whatever the remit, would be complete without some focus on environmental management systems. Darnall et al. in Chapter 12 provide readers with an overview of some of the issues associated with ISO 14001 environmental management systems and their impact on organisational operations. This work references three case studies from a much larger study that investigates ISO 14001 adoption in the US. They make clear the internal and external organisational operational outcomes of this adoption, which range from increased employee involvement in environmental management to improved vendor contracting and relationships. The results point to the non-technology and managerial benefits associated with ISO 14001 adoption. In this sense, ISO 14001 can also be viewed as a managerial tool to help organisations make environmental management more pervasive within and between organisations.

INTRODUCTION

19

Tools for managing operations and manufacturing make up the focus of Part 3. Such tools, in an environmental context, are at relatively early stages in their development. The book presents some general approaches for planning and designing, evaluating and controlling operations from an environmental perspective. The tools presented in this part are systemically and/or quantitatively focused. Case examples help to further understand the purpose and application of these models. The emphasis is not necessarily on modelling or solution approaches, but more on the managerial utility and application of these tools. Chapter 13, by Hansmann and Kroeger, begins this part by providing two production planning models that show varying results, depending on the environmental proactivity of the underlying assumptions of the objective as set forth by management. The primary difference in these tools is whether the goals are to maximise profit or minimise emissions. Another production planning model is presented in Chapter 14 (Gupta and Veerakamolmal) for end-of-life products. This tool focuses on products that return for remanufacturing purposes, where disassembly operations of an organisation achieve much greater importance. An example from the electronics industry exemplifies the capabilities and savings associated with the mathematical programming optimisation model. This approach can complement the tools in Chapters 17 and 18, which also aid in the management of reverse logistics and remanufacturing of products. In Chapter IS, a methodological tool by Kumar et al. is proposed for determining how a design or redesign of a product will impact the rest of the life-cycle of that product. It links the preceding and succeeding chapters by focusing on the impact of a laser-printer cartridge in a remanufacturing setting. Yet it provides a different tool set that incorporates a number of tangible and intangible attributes and measures in its evaluation scheme. The major objective of the methodology is to identifY opportunities to improve the environmental status and assess whether environmental impact has actually been reduced or has shifted elsewhere in the product's life-cycle. Thus, this tool's ultimate purpose is not to optimise, but to monitor the product's overall environmental, social and economic impact. In a more operational and process-oriented perspective, with a strong product development relationship (as described in Chapter 2 by Lambert), de Ron and Melissen (Chapter 16) discuss a series of three tools. Management can use these tools to aid in what they have defined as closed-loop manufacturing, which includes design, manufacturing and recovery. They do not necessarily develop new tools, but show how existing tools, both optimisation- and design-oriented, can be used to aid in managing the environmentally sound closed-loop manufacturing concept. At the end of their loop is the recovery process. This is something that the next two chapters greatly emphasise. Chapters 17 and 18 are based on tools for optimising the management of the reverse flow of the product. A meta tool set could be put together from among these and previous tools described for the recovery and reverse logistics phases. Krikke, in Chapter 17, looks first at aiding the decision about which recovery strategy should be adopted (i.e. re-use, recycling or disposal) and then introduces an optimal reverse network design model to help in supporting these strategies. That is: where in the network and in what capacity should these recovery strategies be implemented? This sequential process is similar to the hierarchical process introduced by Guide et al. in Chapter 18, which may extend the design of networks to the point where planning and then control of these networks can be completed. The long-term planning and tactical control of remanufactured and recovered products is the goal of their chapter.

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Part 4 presents a series of practical case studies, which supplement many of the theoretical and conceptual underpinnings presented in the previous three parts. Some of these relationships have already been identified. Each of these chapters emphasises a significant amount of practitioner involvement. The first case study chapter (Chapter 19 by Schvaneveldt et a!.) is one of the few Asianfocused ones here and represents a best-practice application of designing for the environment at one of the world's leading electronics firms (Sony). It highlights the innovative process and tools used at Sony for designing green products. Chapter 20, by Briscoe, describes how a unique financing relationship developed between a petroleum company (Chevron), an energy services firm, and a niche financier. This relationship helped Chevron see the total benefits of an energy efficiency programme that would not have been otherwise justified. Many lessons are learned from the novel relationship that exists in this supply chain. Reid et a!. (Chapter 21) show how a well-structured continuous improvement system can be a valuable tool to help in the environmental operations improvement of a wallboard manufacturing facility. They apply Deming's Plan-Do-Study-Act Cycle three times to come up with a continuously improving solution to the emissions problem faced by the organisation. The process was heavily reliant on employee involvement in continually seeking these improvements. It shows how important the human resources element and a structured approach are for greener operations. This holistic and structured approach within a strong multidisciplinary team is also evidenced in a case study for waste-water reduction (Chapter 22 by McEntyre). This is a source reduction case study, which focuses on previous chapters' assertions that source reduction is a more effective practice than end-of-pipe solutions. Whereas the previous chapters in this part show how solutions can be designed and implemented, Chapters 23 and 24 focus on how you can develop and use performance measures that can be used at the design, planning and implementation stages, but also may significantly impact the monitoring and feedback of green operations. Thus, completing the management cycle, Chapter 23, by Snider and Moorhead, shows how Tenneco Automotive has introduced a pollution prevention index as a metric for showing how specific in-plant process or waste-handling changes had an impact on the organisation's pollution prevention index. They develop metrics for a hierarchical set of measures including the plant, department and operating unit level. The final chapter of the book (Melanen et a!.) focuses on the study of bottom-line metrics (that is, costs and monetary valuation). They identifY limitations in the valuation of environmental benefits and impacts and warn of differing results. They present this caveat within the context of environmental permitting and legislation. Many companies should be aware of these issues, especially when evaluating and monitoring programmes at the plant level of analysis. They posit that a wider agreement on principles and further research efforts are needed for the practical implementation of monetary valuation in the integrated permitting process, such as that in the European Union.

INTRODUCTION

21

Conclusion There is much to be learned from the chapters presented here by researchers and practitioners from a variety of disciplines, regional locations and backgrounds who have added to this area of ever-increasing importance. But we can also see that there is still much research, development and learning that needs to be completed in this very dynamic and evolving topic. Of course, this effort would never have come to fruition without the hard work to develop-and willingness to share-these ideas by the authors of the many chapters in this book. Nor would these ideas been made available to the larger community without the help of the Greenleaf Publishing staff and its managing editor, John Stuart, whose guidance and expertise were truly valuable in putting together this timely and necessary work.

Joseph Sarkis September 2001

Part 1 OPERATIONS STRATEGY AND POLICY

a

IMPLEMENTING THE INDUSTRIAL ECOLOGY APPROACH WITH REVERSE LOGISTICS

Michael Martin University of Exeter, UK

Van Engelshoven (1991) made the perceptive observation that the words economics and ecology derive from a common root, the Greek word ekos, which means household, or everything in proper order. In the context of his article, Van Engelshoven used the noun household as a synonym for our global environment or natural ecosphere. What has happened over the past 200 years is that technological innovations have driven economic growth into conflict with the natural ecology of our planet, so that everything is in potentially catastrophic disorder. That is, since that time, our originally essentially benign relationship with our natural ecosphere has been systematically eroded. The challenge of environmental or 'green' management is to reverse this erosion. The challenge is to seek to restore our original healthy relationship with the natural ecosphere, without the undue sacrifice of continued technological improvements and economic growth goals. One approach to this challenge is that of industrial metabolism and industrial ecology. 'Industrial metabolism' is a term coined by Ayres (1989) who likened the industrial transformation of materials to those occurring in the natural ecosphere. The natural ecosphere is a near-perfect system for recycling materials, depending only on radiant solar energy as an external supply source. He therefore coined the term to emphasise the importance of biological-like behaviour in industrial processes. To illustrate his ideas, Ayres draws examples from the chemicals industry. The growth of this industry has been characterised by the not infrequent conversion of ,waste' into a useful by-product, which later becomes the dominant output of the process. One such example is coal tar, generated as a waste product by gasworks, for which a range of uses was subsequently found, including synthetic aniline dyes, phenolic resins, aspirin and sulphur drugs. Ayres's concept of industrial metabolism is epitomised by tracing the networks of suppliers, producers and consumers of specific chemicals and metals, either because these mate-

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rials are pollutants and/or health hazards (such as lead) or because they are too valuable to be lost (such as platinum), with the intent of designing recovery systems to create closed metabolic cycles for individual materials (see Graedel and Allenby 1995). Applications of the approach to the us glass industry (Ruth and Dell'Anno 1997) and five us metals sectors (Ruth 1998) are reported. Frosch and Gallopoulos (1989) extend this concept to view an industrial network as an industrial ecosystem, with a behaviour analogous to a community of biological organisms in which everything produced, living or dead, is used by some organism for its own metabolism. In their ideal industrial ecosystem, each process and network of processes is viewed as an interdependent part of a larger system. Frosch and Gallopoulos recognised that their ideal is unlikely to be fully realised in practice, except possibly in a few instances, but that by striving towards it substantial reductions in environmental pollution should be attainable. Tibbs (1993) describes industrial ecology as follows: In essence, industrial ecology involves designing industrial infrastructures as if they were a series of interlocking manmade ecosystems interfacing with the natural global ecosystem. Industrial ecology takes the pattern of the natural environment as a model for solving environmental problems, creating a new paradigm for the industrial system in the process.

Industrial ecology's exponents argue that it's overarching natural design principle, which embraces other approaches (see e.g. Ashford and Cote 1997; Graedel and Allenby 1995), is a powerful approach to improved environmental management. That is, they claim that it provides a broader conceptual framework within which the other approaches may be integrated. For example, Capra (1992) has developed an eco-auditing treatment for firms, based on German approaches, which is claimed to be more radical than existing British and us environmental auditing practices. It requires the development of a flowchart of the metabolic processes of the firm: that is, the movement of materials, people and energy from the outside, through the firm and back to the outside. It is designed to help clarifY comprehensively, to all employees, the physical realities of the organisation, including its connection to suppliers, customers, the community and the natural environment. It thereby creates a corporate culture that supports traditional ecoauditing, total quality environmental management (TQEM) and so on. As Capra puts it, while the other approaches provide the necessary conditions, industrial ecology provides the sufficient condition for effective environmental management. Individual corporations cited as applying industrial ecology approaches in the USA include Apple Computer, AT&T, The Boeing Company, Digital Equipment Corporation, General Motors, IBM, Hewlett-Packard, Hughes Electronics, Motorola, Northern Telecom, Polaroid and Xerox. The approach is also being applied in Japan under the term 'eco-factory'. This chapter next describes how the industrial ecology approach is being applied at various multi-plant, regional and national levels, as well as in individual firms, and then continues by proposing six principles ofindustrial ecology. The implementation of these principles is dependent on the design of effective and efficient reverse logistics systems. Therefore, the principles, development phases and types of such systems are next discussed. The detailed design issues are then considered, it being argued that 'green' reverse supply chains and their associated reverse logistics systems will evolve analogously to the evolution of 'lean' forward supply chains and their associated forward

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logistics systems in the automobile industry in the 20th century. The five recommendations (the five Rs) of reverse logistics are then outlined and followed by some final observations.

1.1

Levels at which the concept can be applied

Opportunities to apply industrial ecology exist at several levels. 7.7.7 Intra-company level 3M has had in operation its now-famous 'Pollution Prevention Pays' programme since 1975. As an integrated company, 3M has found ways to improve the efficiency of its production processes, but it has also been able to move waste materials between units of the company. Its four-stage process involves reformulation, equipment redesign, process modification and resource recovery. This has resulted in a net reduction in waste discharged into the environment and overall savings in excess ofuS$500 million between 1975 and 1990. Other companies have their own programmes: Chevron has SMART (Save Money and Reduce Toxins), Texaco has wow (Wipe Out Waste) and Dow has WRAP (Waste Reduction Always Pays). A number of companies have been using industrial ecology to analyse opportunities without naming it as such. DuPont was wasting 3,600 tons a year of hexam ethyleneimine (HMI) from nylon production but found that it could be used in the pharmaceuticals and coating industries. Dow Chemical has set up management teams to identifY potential byproducts that are presently being thrown away. After studying five plants, it replaced some primary feedstocks with by-products and cut purchases of hydrocarbons , reduced the demand for expensive waste incineration and marketed surplus ethylene dichloride to other companies. This marketing of surplus ethylene dichloride is an example of a symbiotic relationship, a critical feature of natural ecosystems. In Japan there has been independent study of the application of industrial ecology under the name of 'eco-factories'. The Japanese Agency ofIndustrial Science and Technology has developed a model that integrates design of production systems technology with closed-loop manufacturing. This 'total system design' includes design for the environment at the product and process levels: disassembly, re-use and recycling, and control and assessment technology.

1.1.2

Inter-company level

Just as strategic alliances and joint ventures have allowed consortiums to share research and development (R&D) and market development costs, so too are there opportunities for waste management between companies. Dow Chemical and seven other plastics manufacturers formed the National Polystyrene Recycling Company to recycle polystyrene into non-food packaging. Raw materials are received in part from 450 McDonald's restaurants, which have installed separate recycling bins to encourage recycling. Another

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recycling effort involves a joint venture among 25 British firms, called Recoup, set up to recycle half of Britain's plastic containers by 1995. Associated with Recoup is Reprise, a separating plant that plans to have the world's first automatic process for separating polyethylene and polyvinyl chloride. 1.1.3

Industrial parks or estates

Natural ecospheres are, of course, networks, webs or communities of interdependent biological organisms or entities. Therefore, in order to mimic these features, the primary focus of the industrial ecology approach is on the more extensive community, at the regional, national and global network levels; a typical location is the industrial park or estate (Cote and Cohen-Rosenthal 1998). The benefits of applying ecosystem concepts to an industrial park or estate include: • Reduction in the input of materials and energy • Reduction in the overall output of waste • Reduction in financial, ecological and health costs • Increased awareness of the integration of environment and economy • The identification of new products and businesses making use of wasted materials Grant (1997) emphasises the importance of appropriate building and landscape design in applying the approach. The concepts of industrial metabolism and ecology are also implicitly applied at community and city levels in the principles of urban ecology as, for instance, discussed by Newman (1999a, 1999b). 1.1.3.1

Europe

Denmark The best-known application of the approach was in Kalundborg, Denmark. In this community, a coal-fired power plant, an oil refinery, a pharmaceutical plant, a plasterboard factory, a sulphuric acid producer, a fish farm, a cement producer, local farmers, district heating utilities and others interact to take advantage of discarded or wasted energy, water, chemicals and organic materials. The re-utilisation of what would otherwise be wasted has lessened the impact of industry on the environment while generating business opportunities and profits. In addition to the fact that it is an operating industrial ecosystem, the interesting aspect of this project is that it was initiated as an economic opportunity by innovative and forward-looking managers, as opposed to being a demonstration project. The Kalundborg symbiotic theme is being repeated with variations at numerous locations in Europe, North America and elsewhere. Sweden In 1987, researchers from the University of Lund, Sweden, initiated a project involving seven industrial firms in the city of Landskrona. Researchers assisted companies in finding opportunities for pollution reduction, with an overall goal of reducing the effect

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of industrial pollution within a community. One company in the study saved over 2.3 million Swedish krona per year by changing from solvent-based paints to powder paints, in addition to receiving indoor (and related health risks) and outdoor environmental benefits. Nether!a nds The PRE CARl Project is an initiative implemented by the Dutch Ministry of Transport and Water Management. The purpose of the project is to promote cleaner production through co-operation between corporations, water management officials and universities in the granting of water permits. The goal is the improvement oflocal water quality. Another Dutch initiative is the PRISMA research project, involving 10 companies in the Amsterdam and Rotterdam areas. The project identified 164 cleaner production opportunities for water emissions in the chemical, food processing, electroplating and metalworking industries. Also, Erasmus University is working with 85 medium to large companies and the Port of Rotterdam to create symbiotic relationships among them and to reduce the consumption of energy and the production of waste materials.

France The French PALME (Programme d'actions labelise pour maitrise de l'environnement) approach emphasises the environmental management of an industrial park rather than the development of symbiotic relationships among its members. Although the PALME requirements are very demanding, at least two sites in France have signed up to abide by them, and plans are afoot to establish a national PALME association. Rest of Europe Other projects are being performed in Europe in the Ruhr (Germany) and in Cork (Ireland). In Austria, the Kalundborg approach has been adopted over a larger and more complex industrial area in the Austrian province of Styria (population 1.2 million). There, substantial annual cost savings were obtained together with a recycling of 1.5 million tonnes in regional erstwhile 'waste' materials. 1.1.3.2 North America

Canada In Canada a feasibility assessment of designing and operating an eco-park was performed on the Burnside Industrial Park in Dartmouth, Nova Scotia (Cote and Smolenaars 1997). The park covers an area of 3,000 developed acres and includes 1,200 businesses with in excess of 15,000 employees. The Burnside project proved to be a precursor to numerous further efforts in North America (Block 1998), those in the USA being supported by the Environmental Protection Agency and the President's Council on Sustainable Development. USA and Mexico The USA has at least IS operating or planned eco-park approaches at local and regional levels (with a comparable number in Canada). Perhaps the most interesting is the international trans-border project through a waste-exchange facility between Brownsville,

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Texas, and neighbouring Matamoros, Mexico. One Mexican plant, with 2,000 workers, was able to recycle all its residuals except packaging foam. The exchange facility linked it with a firm that now uses the foam as a stuffing for the pet mattresses it makes and sells.

1.1.3-3 United Nations and Japan Also, industrial park applications have been initiated by the Japanese EBARA Corporation with the co-operation of the Zero Emissions Research Initiative (ZERO at the United Nations University and the Japanese Ministry ofInternational Trade and Industry (MITI).

1.2

The six Is of industrial ecology

1.2.1

Information Know what materials are being used and wasted. Information is the key.

Surprisingly, many managers do not know the qualities of materials they are using or discarding. Control mechanisms should be established that accurately measure these amounts-dollar amounts are not enough, as prices fluctuate. Waste audits or waste minimisation opportunity assessments should be conducted, and inventory levels should be reduced, which in turn will lower the risk of accidents in storage facilities and reduce wastage due to degradation of materials. This is not just an environmental trend; it is an efficiency and quality issue and is simply good business.

1.2.2

Incentives Give managers and employees the opportunity to use their ingenuity to develop pollution prevention programmes and to suggest process redesign, alternative materials and energy usages.

This might be encouraged by using rewards through which those who propose successful innovations are given a share in the benefits.

1.2.3

Investment When investing in developing countries, encourage cleaner production by locating in industrial areas where wasted materials or energy can be productively utilised by others.

This will foster better relationships with the domestic country, as company image and the images oflocal participants will be enhanced. This in turn promotes an image of socially positive investment as opposed to exploitation of third world resources. Furthermore, products from the operation will be regarded in a 'green' light and will therefore be more readily accepted in export markets.

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1.2.4

Integration Wherever it is feasible, a system should be established to allow the recycling, exchange or transfer of materials within an industrial complex.

A business eco-park potentially provides such a complex. A good information base on materials used, energy required and waste generated by the participating businesses is required, and there must be a willingness on the part of these businesses to provide the necessary information within the bounds of commercial confidentiality. Businesses that can make use of waste that is being generated, or is likely to be generated, should thereby be attracted to the park. When and wherever it is possible to do so companies should be co-located so as to maximise use of waste heat and waste-water. Scavengers and decomposers-that is companies that buy, sell, maintain, repair and trade remanufactured or second-hand goods-should also be encouraged. The overall quantity of materials required to manufacture products and offer services in the park can be reduced by cascading higher-quality wasted materials to businesses that can use lower-quality materials. 1.2.5

Interaction Strategic alliances and joint ventures should be encouraged.

Technical knowledge and resources can be pooled facilitate cleaner production.

1.2.6

to

reduce or eliminate waste and

to

Infrastructure Apply the principals of reverse logistics.

None of the above initiatives will be feasible let alone effective without a sixth I-an infrastructure to support them. Just as the achievement of effective lean production practices and of Just-in-Time (JIT) systems are dependent on effectively designed forward logistics systems, so the achievement of 'green' cleaner production practices and industrial ecology will be dependent on effectively designed reverse logistics systemsthat is, the collection, aggregation, processing, transportation and storage systems that recycle plant wastes or residual by-products back to their originators or to new 'customer' users. Thus, if the 'green' goals of industrial ecology are to be pursued, the logistics industry has a crucial role to play by designing and providing such systems. It therefore implies new customer requirements and opportunities for the logistics industry. Given its growing importance, the principles of reverse logistics systems are now discussed.

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1.3 Reverse logistics principles The us Council ofLogistics Management (Kopicki et al. 1993: 2) suggests that the concept of reverse logistics 'encompasses the logistics management skills and activities involved in reducing, managing and disposing of wastes. It includes reverse distribution, which is the process by which a company collects its used, damaged or outdated products or packaging from end-users.' Although this definition is less than all-embracing-ignoring the historic roles that third parties such as municipalities, composters and cascaders, and scavengers have played in reverse distribution-it does convey the essence of its role. At the individual plant level it requires: • Tailoring of the inbound supply chains to maximise the use of recyclables and recycled contents from both internal and external sources • Establishment of recycling, re-use and source reduction programmes to minimise packaging waste in the forward distribution system •

Development of reverse distribution capabilities to take back products and packaging from end-users

•

Use of third-party recycling, re-use and take-back services

Reviews of the role of reverse logistics in environmental management are provided by Wu and Dunn (1995) and by Carter and Ellram (1998). A discussion of the mathematical modelling approaches is provided by Fleischmann et al. (1997) and by Jayaraman et al. (1999)· 1.3.1

The successive phases of reverse logistics

If the above goals were to be successfully pursued and achieved by managers in all plants, the ideal of the industrial ecology approach would be realised in practice. However, it would be naIve to expect such goals to be achieved quickly. Like total quality management (TQM), successful total quality environmental management (TQEM) must be developed through a number of phases. The Council of Logistics Management suggests the following three-phase development programme with reactive, proactive then value-seeking goals. In phase I, companies respond mainly to legislative, customer and other requirements. In phase 2, companies become more sophisticated and develop environmental programmes and the internal recycling and re-use of materials, possibly participating with other parties and collaborating with government in the design of improved environmental guidelines and regulations. Re-use and recycling coalitions of private companies and public agencies can be formed to create reverse distributions and the foundations of an industrial ecology approach. Phase-2 programmes typically elicit top-management support, but it is the value-seeking approach of phase 3 that commits top management to the recognition that the development of core competences in environmental management is a source of potential competitive advantage. Phases 2 and 3 require firms increasingly to perform the following steps:

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• Step I: re-use, recycle and reduce their own residual waste materials • Step 2: retrieve products and packaging from customers for re-use and recycling • Step 3: wherever possible, sell any remaining residual recycled and waste materials to other manufacturers for use as raw material inputs • Step 4: wherever possible, purchase recycled and residual waste materials from other manufacturers for use as raw material inputs The industrial ecology approach is implicitly enacted with the increasing involvement of a growing coalition of manufacturers and other agencies in steps 3 and 4 and the development of appropriate reverse logistics systems.

1.4 Types of reverse logistics system There are two categories of reverse logistics system, known as closed-loop and open-loop systems, respectively. Forward logistics supply chains are based on successive producerdistributor forward linkages. In contrast, reverse logistics residual-recovery chains are based on collector-recycler backward linkages. Where recycled residuals are returned to an earlier producer in the same supply chain, a closed circle (or feedback loop) offorward and reverse loops oflinkages is created, and hence such systems are described as closedloop systems. Closed-loop reverse distribution systems are required to implement steps 1 (when more than one facility is involved) and 2, outlined in Section 1.3.1. Such systems are dedicated to the return of products, waste and packaging to an individual company from a further facility in its manufacturing chain or, more commonly, its customers. The forward and reverse systems are more commonly physically separate, but they can be integrated. When the residuals are passed to one or more third parties, no closed loop is created and thus such reverse distribution systems are described as open-loop systems. The simplest examples of this type of system are collection services for newspapers, packaging and beverage containers, as the residuals are segregated into homogenous categories prior to reprocessing.

7.4.7

Detailed design issues: from lean production to clean production

In Section 1.2.6, on infrastructure, it was argued that, just as the past design and implementation of lean production (as espoused in the best-selling book The Machine that Changed the World [Womack et a1. 1990)) was dependent on suitably designed forward supply chains and logistics systems, so the future design and implementation of cleaner production will be dependent on suitably designed reverse supply chains and logistics systems. It is important to note that it took decades to reach the current state-of-the-art in lean production, which is still evolving towards the ideal of the lean enterprise.

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Therefore, it must be expected that it will take some years to apply the industrial ecology approach to develop widespread recycling reverse supply chains to promote cleaner production and clean networks of enterprises. Despite this caveat, it is possible to suggest the steps needed to pursue this goal. •

Recycling should be localised at individual plants as much as possible to minimise the need for reverse distribution. It is only the materials and components that require external recycling, together with residual waste, that should enter the reverse distribution system.

•

Development of suitable reverse logistics systems will require the participation of a coalition of public and private agencies. Existing public collection services and municipal sorting, processing and recycling facilities may need to be expanded and, if appropriate, new ones introduced. A greater number of private intermediate processing facilities at appropriate nodes in the reverse system will also be needed. Traditional scavenger collectors, sorters, aggregators and brokers who receive and break down materials for re-use exist, but greater numbers and more sophisticated versions of these businesses must be established if the move to the widespread recycling of materials is to be achieved.

• Brokerage roles should be enhanced by the widespread dissemination of information on the availability of residual waste, recyclable materials and components. The Internet could be used, with a virtual waste exchange centre created as a website. The centre could provide advice on the current uses for residuals and actively seek out new markets for them. Markets for recyclable residuals can be and have been developed. For example, in the USA the demand for recyclable high-density polyethylene (HDPE) and polyethylene terephthalate (PET) exceeds supply. • The information system of the waste exchange centre could also keep track of entities through component identification, material coding systems and recycling histories. The last point is important because some materials can be recycled only a few times in certain re-usages. in the material, chemical and biological sciences should identifY further new markets for recyclable residuals in the future. The information system of the waste exchange centre should keep an up-to-date record of R&D outcomes and new market opportunities.

•

R&D

•

Cleaner production reverse logistics systems should be set up in specific industries: for example, for industries producing individual metals (Johnson 1998), plastics (Pohlen and Farris 1992), components such as returnable containers (Kroon and Vrijens 1995) and assembled products such as automobiles and electronic equipment, where they may be partially linked to the corresponding forward systems. They should also coalesce in geographical regions (as illustrated by the eco-park approach discussed above). Others will straddle a number of industries based on the reprocessing and novel re-usage ofheterogeneous wastes and be more closely analogous to food webs in nature.

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A feature of the growing role ofIean production, especially in Japan, has been the shift from short-term adversarial to long-term transparent partnership relationships between firms in forward supply chains (see Lamming 1993). A common feature of the application of burgeoning new technologies in the micro-electronics, computers, telecommunications, biological and pharmaceutical industries has been the crucial role played by joint ventures and strategic alliances. The development of new technology to create new products, processes and services is a multi-firm team game, since a single firm rarely has all the competences and capabilities needed. In fact, technological innovation and learning are increasingly being realised in supply chains and networks of firms rather than in the individual firm. Since the application of new technology will be required in reverse supply chains and distribution systems, innovation and learning will also be needed in applying the industrial ecology approach. That is, firms in specific industries or geographical areas will need to form 'green' alliance networks jointly to develop the reverse supply chains needed to maximise the residuals recycled in their jurisdictions. Meta-alliances may also be needed to implement reverse logistic systems that straddle two or more specific industries. These alliances could also promote the adoption of recycling methods through benchmarking and action learning programmes among their members. Potential opportunities for such initiatives are appearing with improved Internet-based communications among firms in networks, enabling participants to exchange information on web pages. As well as creating opportunities for new B2B (business-to-business) companies, e-commerce may well offer scope for R2R (recycle-to-re-use) brokerage firms as successors to traditional waste brokers.

1.5 The five Rs of reverse logistics Forward logistics have been defined by Seven Rights as 'ensuring the availability of the right product, in the right quantity and the right condition, at the right place, at the right time, for the right customer, at the right cost' (see Shapiro and Heskett 1985: 6). As stated earlier in this chapter, the five Is of the industrial ecology approach will be realised only through the sixth I ofinfrastructure which, in turn, must be realised through the following five Rs of reverse logistics (based on Guitini 1996). •

Recognise and record all external and internal transactions concerning material flows to ensure that all are tracked and monitored through the forward and reverse distribution systems to ensure that they reach their intended forward or reverse destinations, particularly if they are designated for supplier return, re-use, remanufacturing or recycling.

• Recover and return such designated materials to their suppliers. •

Recycle or re-use materials as much as possible internally to reduce residual waste to the minimum. The first step in the design of reverse logistics systems should be taken before entry into the system itself. That is, maximum use should be made of internal recycling or re-use loops to minimise the residual waste entering the external reverse distribution system.

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• Retire as much as possible of the residual scrap and waste into the reverse distribution system for recycling and reclamation . • Review, re-engineer or renew the reverse logistics system frequently, including its infrastructure and membership, to ensure that it is kept up to date and that further emerging opportunities for residual waste reductions are not being missed.

1.6 Final comments Reverse logistics has been defined as the way to maximise the value of residual assets. This definition is reflected in an observation of Peter Coors (chief executive officer of Coors Brewing Co.) who suggested that waste should be viewed as a residual asset you have paid for but cannot sell. He summarised this view, saying, 'Find pollution or waste and you've found something you paid for but can't sell. You've found inefficiency ... Fundamentally, all pollution is lost profit ... By striving to eliminate it, we together can grow a more efficient, competitive economy.' The full benefits of such assets will be achievable only within a network of organisations jointly applying the industrial ecology approach in combination with suitably designed reverse logistics systems. This chapter has outlined the principles of the industrial ecology approach, including some current examples of its application, and has also outlined the core principles of reverse logistics systems design. It has then argued that clean networks will evolve in a similar manner to the past evolution oflean networks in the automobile industry, but in pursuit of the goal of 'green' (as well as lean) manufacturing and operations.

D

LI FE-CYCLE CHAI N ANALYSIS, I NCLU DI NG RECYCLI NG

A.l.D. Lambert Technische Universiteit Eindhoven, the Netherlands

In this chapter a general discussion is presented on the different aspects of life-cycle chain analysis. As the closing of cycles is advocated as a principal condition for sustainable development, the concept oflife-cycle chain needs to be expounded. There may be some confusion regarding the different viewpoints on the concept of life-cycle that are used in the literature, so it is worth mentioning that two different concepts are applied here: the conceptual life-cycle and the material life-cycle. The conceptual product life-cycle refers to the product as a concept: namely, from an idea, via research and development, to production, introduction into the market, market penetration, becoming outdated and, finally, gradual substitution by a different product. This approach is of principal interest in the domains of marketing and long-term planning. The material product life-cycle, in contrast, refers to the product as a physical object. The material product life-cycle is the complete sequence of processes in a product's life, including production, consumption and waste processing. This is often called a cradleto-grave approach, because the cycle extends from materials extraction up to discharge of materials. This is used in the materials and energy analysis of products and particularly in environmental analysis. Here, the cumulative environmental impact of a product on the environment is quantified. At present, the most frequently used method in this field is life-cycle assessment (LeA). This is briefly discussed in Section 2.3. Chain analysis is a valuable tool in environmental management, particularly for effecting product stewardship and product responsibility (Hart I997; Veroutis and Fava I997). These concepts, originating from the process industry, are now incorporated in the legislation of about 40 industrialised countries and are implemented in many industries. Chain analysis typically goes beyond the system boundaries of a single company and at a minimum encompasses the domain of that company's suppliers and customers and, more frequently, even a substantial part of the chain. As a result, individual enterprises

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require insight into the product's entire life-cycle chain to reveal the consequences of product and process modifications on the environment as well as on, for example, energy use and costs. Since enterprises are increasingly concentrating on their core businesses and now outsource many of their activities, an approach that focuses strictly on the enterprise and excludes other aspects is not viable.

2.1

Product process chains

2.7.7

Aggregate chain modelling

As the emphasis in this chapter is on material product life-cycles, a basically physical approach is required in which energy and material flows playa central role. In environmental analysis, many features are closely connected to physical flows, such as raw materials consumption, production, energy consumption, waste and emissions. Physical flows are subject to laws of nature, such as mass and energy conservation and to chemical reaction equations. These relations can be used for balancing. The physical approach is based on industrial ecology (Ayres and Ayres 1996; Erkman 1997; Graedel and Allenby 1995) in which the exchange of material flows in the economy is treated similarly to that in ecosystems. In the process industry, material flow analysis is routinely performed. Though a similar method is useful in discrete manufacturing, in general the description of flows is not based on physical properties but on numbers of items and their composition in different discrete parts. This is reflected in the usual enterprise resource planning systems for discrete manufacturing, which are based on bills of materials (BOMs; i.e. lists of parts). For support of environmentally oriented decisions, the BOMs have to be complemented with information on mass and composition. Though the effects of discretisation, storage and so on complicate the physical description of discrete manufacturing, these are smoothed out over the rather long periods of time that are characteristic of chain analysis. This results in a method of description similar to that of the process industry. There, too, discretisation is present, as a result of batch-wise production and environmentally relevant periodic processes, such as cleaning and maintenance activities. Unification of the method of description is indispensable in life-cycle chain analysis, because a chain includes a combination of process and discrete manufacturing. Modelling is the creation of a simplified map of reality, conserving the features that are essential to the objective of the modeller. This means that a part of reality can be modelled in many different ways. Models of product life-cycle chains are set up by taking concepts from systems theory. A system is defined here as a number of objects and the relations between those objects and the environment of the system. A system boundary is defined between the system and its environment. Initially, the system is treated as a black box, where only its responses to signals from the environment are measurable, with no further knowledge of the system's inner structure. Opening of the black box reveals the objects of which a system is composed. Each of these objects is also a black box, which, again, in turn can be opened. Such a process is called a disaggregation process. If this is repeatedly applied to a system, a hierarchy oflevels of aggregation is established.

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Although the elements of a system seem well defined in theory, they are often fuzzy in practice. The system boundary of an enterprise, for example, is not simply its fence, and the boundary of a much more abstract object, such as a product chain, is even more ambiguous. As the objective of industrial ecology is to model material and energy flows in economically relevant processes, the relations between (sub)systems and their environment are principally defined through exchange of material and energy flows. In industrial ecology, a distinction is made between the 'technosystem' and the ecosystem. The technosystem is the physical basis of the human-controlled economy. It involves raw materials, buildings, machines, intermediate products, consumer goods, waste and so on. The ecosystem, or natural system, acts as the environment of the technosystem. Material resources in the ecosystem are organised in closed loops. This means that residual materials such as excrement and dead organisms are to a considerable extent re-used and thus virtually no waste is produced. A multitude of cycles are present, involving both the biotic and the abiotic part of the ecosystem: the water cycle, the carbon cycle, the nitrogen cycle, the sulphur cycle and so on. In contrast, material flows in the techno system show essentially linear characteristics. Copper, for example, is mined as an ore and is subsequently processed. Next, it is used in products. After a shorter or longer period of time, these are discarded. After that, much of the copper is not reclaimed but rather discharged to the ecosystem, principally because of the product's structure, in which the copper is combined with many different materials. Theoretically, many materials are not even recoverable (see Section 2.1.5, on consumption processes). In addition, the technosystem differs from the ecosystem by its dependence on exhaustible energy resources (i.e. fossil fuels) instead of solar energy. Both properties result in basically linear characteristics. This is illustrated in Figure 2.1 by means of a so-called product process chain (Sheng and Worhach 1998; van der Voet et at. 199a, 1995b). It represents a product life-cycle by an alternate sequence of trans formation processes (rectangles) and products (arrows). In Section 2.1.4, on production processes, some basic features of such a representation are explained. Figure 2.1 illustrates that, after consumption, some processes take place to prepare the discarded products for discharge. For the sake of simplicity, ancillary flows, energy use and process emissions are omitted in this figure. 2.1.2

Decomposition

When complex products are considered, it is useful to decompose the linear productprocess chain of Figure 2.1. The production phase is subdivided into three subsequent phases: • Materials production. This establishes the intrinsic properties, such as composition and is the domain of the process industry. • Parts production. This establishes the extrinsic properties, such as shape and size, and is the domain of discrete manufacturing. •

Assembly. This establishes the functionality of the product and is the domain of the assembly industry.

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Ecosystem

Technosystem Extraction

Production

Consumption

Upgrading

Discharge ____________ J I

Figure 2.1 Aggregated linear product process chain

Figure 2.2 shows the dis aggregated product process chain. In this figure the upgrading process is dis aggregated to the production process. Three degrees of re-use are discernible here: product re-use, parts re-use and materials recycling (Krikke et a!. Igg8a). This requires a sequence of processes for reclamation of the desired objects, Crucial to this sequence is the disassembly process. Disassembly is a non-destructive and reversible process for removing complete and intact parts and/or subassemblies. The terms 'dismantling' and 'dismounting' are used for destructive separation of parts from an assembly, aimed at materials recycling or freeing of other parts. Disassembly and dismantling are not sharply distinguished. In practice, a combination of both processes is carried out. However, the product is disassembled only up to a point, and thus the process is called partial or selective disassembly. It provides parts or subassemblies that can be re-used or that can be removed to facilitate subsequent disassembly operations (see Section 2.2.4, on chain considerations).

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, , , , , , , , , ,

Extraction

Materials production

Parts production

Parts re-use

I

Process waste

Assembly

Consumption

IProduct re-use

Repair

Disassembly

Freeing

Separation

Discharge

Figure

2 .2

Product process chain jor complex products, including re-use and recycling

A freeing process, frequently involving shredding, grinding or a similar destructive process, follows disassembly or dismantling. This results in fragments of material that have a more or less homogeneous composition and that are separable into different fractions. Magnetic separation for recovery of ferrous materials and eddy-current separation for the recovery of non-ferrous materials are the most frequently used. The remaining shredder light fraction (also called shredder fluff or shredder residue) includes glass, rubber, plastics, textile, cardboard and so on. Mechanical and chemical separation steps (such as float and sink separation, and gravity separation) are available to recover many of these materials on a laboratory scale. These separation processes are, however, often not feasible from an economic point of view because of the variety, the inhomogeneity (often composite materials are used) and the low specific value of the materials concerned. Moreover, many of these materials are contaminated by additives.

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Landfill of shredder light fraction is heavily restricted and its incineration is subject to legislation that prescribes strictly controlled conditions, because it may contain harmful substances, This makes the final treatment of shredder residue expensive, which is an incentive to reduce its bulk. This condition heavily influences the arrangement of the previous production steps, particularly the disassembly process. Therefore, product design has to account for easy disassembly of the parts, for a restricted variety of materials and for avoidance of materials that cannot be recycled, such as composites. In practice, this means that the product design must proceed simultaneously with the design of the upgrading system. Such an approach is included in design for disassembly. Many products that are presently discarded do not fulfil this condition, severely restricting disassembly.

2.1.3

Waste production

In a product life-cycle, a distinction is made between process waste and product waste. Process waste originates from the various processes in the product life-cycle, including consumption and the phases of the upgrading and recovery processes. In many cases, such waste can, with minor effort, be recycled to the original production process from which it originated. This is called internal recycling or micro-recycling. Waste from plastics moulding, for instance, is fed back to the moulding process because its composition is known and fits the process requirements. Because internal recycling proceeds within the 'black boxes' it is not indicated in Figure 2.2. Only external recycling is visualised there (e.g. by the arrow that points from parts production back to materials production). Product waste consists of discarded products that no longer provide the service they were intended for. Secondary materials from product waste can often be upgraded only to a lower degree of quality than the original materials, so they have a restricted range of applications. This may mean that they are utilised in products that are described by a different chain. When they are used in the same complex product it will be for a qualitatively lower application. This takes place, for instance, in automobile manufacturing in which secondary materials originating from parts with strict mechanical specifications (bumpers) are recycled to parts that are not subjected to these requirements. After several cycles in ever-lower-degree applications, such materials finally act as a filling material in products. Such a sequence is called downcycling or cascading. This can substantially increase the time of residence of a material in the techno system.

2.1.4

Production processes

Essential characteristics of a production process include: • Addition of value to a material object via a transformation process • Requirement of energy • Production of residual material flows, called waste and emissions (discharged to the atmosphere or water), in addition to products

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In addition to energy carriers, various ancillary materials and utilities are required for production. These are not meant to be part of the final product but leave the process as waste or emissions. The outgoing materials can be subdivided into various groups: Products. These are the desired result of the process and represent the greater part of the value added; a product can serve as an intermediate product or as an ancillary for a subsequent production process or may be intended for consumption or for use as a capital good.

•

• Co-products. These represent substantial value, although they are not an intended result of the process. •

By-products. These are also 'unintentionally' produced, but they represent a modest positive value; frequently, their specific value (e.g. in euros per kilogram) is less than that of the original raw material.

• Residual products. These are the process wastes (including emissions to the atmosphere, soil and water) that represent a negative value, meaning that one has to pay for the disposal of these materials; in many cases, processing of these products can increase their value. In Figure 2.3 a scheme of a production process is presented. It shows the different incoming and outgoing physical flows. Owing to mass and energy conservation, the amount of mass and energy that enters the system equals the amount that leaves it. Inevitable irreversibilities in the process always result in a loss of energy quality. Residual heat, for example, is characterised by a low exergyl content and a low energy density. This impedes many applications: for instance, the generation of electric power.

Outgoing energy

Incoming energy

----------.-

-----------.-

Residual products Ancilliary materials/utilities Raw materials intermediate products

•

PRODUCTION PROCESS

•

By· products Co· products Products

Figure 2.3 Scheme of mass and energy flows in a production process

42

The exergy content is the amount of mechanical energy that can be generated from a certain amount of energy. The exergy content is low, for example, in low-temperature residual heat.

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Quality of material flows is difficult to quantifY but is connected to applicability, which depends on many properties such as purity, in the case of materials, and dimensions, in the case of parts. In economics, the many aspects of quality are combined to give the market price of the respective material or part. This price, however, also includes many aspects that are not related to quality. Process and product design must account for the complete picture and should optimise the total added value of the outgoing products with respect to the incoming products or materials. One of the means of doing this is to minimise the amount of residual products. The following hierarchy of measures to attain this is frequently advocated: • Reduce the amount of waste • Use end-of-pipe technology to reduce harmful waste • Re-use residual flows as materials • Incinerate the residuals • Send the residuals to landfill Though complete closing of the chain is impossible from a theoretical point of view, in many individual companies all outgoing materials, except emissions to atmosphere such as flue gases, remain inside the technosystem. Even the waste is not directly discharged but is transferred to waste processing companies, where it is further processed prior to final discharge. From this it follows that a typical product process chain of a product is not linear but a branched network, with nodes connected to each process and each product flow. Product flows are governed via markets, in which supply and demand are balanced via a price mechanism. Frequently, such a market is open, which means that product flows can cross the system boundaries. The basic features of such a network are depicted in Figure 2-4. Here, markets are related to product nodes. Product flows from different processes, such as la and lb, can be combined here. A product flow can also be distributed between different processes, such as 2a and 2b. Moreover, products can be imported and exported across the system boundaries. Processes are connected to process nodes because they have multiple inputs (convergence) and multiple outputs (divergence). Such an approach has always been applied in the process industry, for this approach lies at the heart of the operation of this industry. A typical example of divergent operation is a petroleum refinery. Here, a feed of changing composition is separated into many products. This process has many degrees offreedom, which can be established depending on market circumstances. A typical convergent operation is an assembly line: parts are combined to form a single, complex product. When one focuses on physical flows, as in environmental considerations, all these flows have to be treated similarly-that is, as if they were valuable products. This is evident, because considerable costs or benefits are now connected to the residual flows that were formerly practically free. Therefore, this approach is both environmentally and economically beneficial. These costs and benefits might be economic-e.g by the introduction of waste treatment costs-or one might introduce potential environmental damage as a generalised cost.

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Convergence System boundary

Process lb

Process la

Import

-------""

Export

Product

Product node

Parallelism

Process 2a

Process 2b

Process node

Divergence

Figure 2-4 Convergence and divergence on the product process level

2.1.5 Consumption processes

From a physical point of view, consumption processes are similar to production processes. However, the value of the transformed material object is not created but rather destroyed during consumption (i.e. when providing service to the user). In fact, it is not the product but the service it provides that is normative, and substitution of one product by another that offers the same service with use ofless material is possible. This is called dematerialisation. Consumption can cause a significant amount of process waste and considerable energy use. For example, the energy required to drive a car throughout its lifetime is about ten times the cumulative amount of energy that is needed for its production. In addition, product waste is generated when the car is discarded. Because there are many different consumer goods and ways of consumption, product waste shows essential differences. Consumption processes can be classified in different ways: •

Consumption of materials and of discrete products. One uses a litre of petrol , a kilogram of meat, but an item of a car.

•

Active and passive consumption. In active consumption, the consumer goods are physically and/or chemically completely transformed and consequently are

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not recoverable (e.g. food and fuel). Residuals are emitted or remain as solid waste (e.g. ashes). In passive consumption, although the goods gradually lose their functionality, they retain their principal properties . • Instantaneous and durable consumption. Many materials are instantaneously consumed, but also many discrete products have a very short time of residence in the consumption process. Disposables, packaging materials, newspapers and similar products are used once and almost instantaneously finish up as household waste. Durable consumer goods have a much longer time of residence, up to many years, before they are discarded . • Diffuse and discrete consumption. If a good is consumed diffusely, it cannot be recovered because the resulting product waste is dispersed. This holds for many products (e.g. cleaning agents) and for the wear of discrete products (e.g. tyres). After discrete consumption, a product remains localisable and consequently recovery is possible. This can take place directly, via a take-back network, or indirectly, for example via separation of municipal waste. Consumption of a car, for example, is passive, durable and discrete. Consumption of petrol is active, instantaneous and diffuse. Consumption of capital goods is comparable to that of consumer goods. A relevant difference is that capital goods are used in production processes and consequently operate under completely different economic constraints. In the following sections on complex consumer goods the corresponding capital goods are implicitly included. From a recycling point of view, there are additional differences, for capital goods are in general more robust (e.g. trucks are more durable compared with cars) and discarded capital goods are often offered in large and quite homogeneous lots (e.g. monitors or business computers).

2.2 2.2.1

Discarded complex consumer goods Waste from complex products

Although a considerable share of discarded complex products consists of durable household goods, comparable capital goods are also included. To evaluate the current developments in the processing of this stream, it should be positioned, both quantitatively and qualitatively, within the framework of the general problem of waste. The definition ofwaste is rather fuzzy. An extended definition includes the 'waste' that is created through a mere displacement of materials. Examples are water, air, sand, soil, some organic waste and rock. Although the resulting material streams are considerable, their environmental impact is modest. Usually, no statistics of such streams exist. Material streams that are recycled inside companies (micro-recycling) are also not well documented. Their environmental impact proceeds indirectly (e.g. by the increased specific energy use of production processes). The major part of the registered waste-stream consists of bulk products, such as slag, sludge, ashes, manure and contaminated soil, amounting to several tonnes per year per

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capita. These streams usually include a large share of inert substances, such as water. Building and demolition waste counts for about 0.5 tonnes per year per capita. Much of this can be recycled. The amount of household waste shows a comparable figure. The share of paper (50%) and glass (10%) is recyclable. The organic share (20%) can be composted. The remaining share (20%) can be roughly divided into 7.5% ferrous and I.5% non-ferrous metals, 4% wood, I.5% textiles and 5.5% rubber, plastics and comparable materials. This remaining share originates mainly from packaging materials and discarded complex products. Because of differences in definition, waste collection systems and consumption patterns, a complete and detailed set of data on discarded complex goods is not available. 2 Moreover, it changes rapidly over time, because of technological progress. Cars, electrical devices (white goods) and electronic devices (brown goods) are important constituents. It is estimated that 50 kg per year per capita arises from discarded cars, and another 50 kg per year per capita arises from coarse goods, including furniture, carpets and so on. The combined quantity of white goods and brown goods presently amounts to approximately 25 kg per year per capita, including 9 kg per year per capita of capital goods. About 10 kg per year per capita are white goods: for example, refrigerators (1.2 kg per year per capita), washing machines, boilers, heating systems, cookers and so on. About 4 kg per year per capita are brown goods: for example television sets and monitors (2 kg per year per capita) and computer systems (I kg per year per capita). The total amount of printed circuit boards (PCBs) from all household and professional devices, cars included, is about 0.5 kg per year per capita. Although the contribution of discarded complex consumer goods to the total amount of waste is thus rather modest, it needs special attention. Its volume, its complexity, its growth potential and the presence of many hazardous substances make conscious processing both indispensable and difficult.

2.2.2

Cars and white goods

Many hazardous parts and working fluids are present in cars. The recoverable ferrous and non-ferrous metal fractions amount to about 70% and 4.5%, respectively, the nonferrous metal fraction consisting mainly of aluminium, copper, zinc and lead. There is a tendency in manufacturing to decrease the steel content in favour of use oflight metals, plastics and ancillary equipment. This is counterproductive with regard to recycling. Presently, cars are drained, selectively dismantled and subsequently shredded for volume reduction and recovery offerrous and non-ferrous metal materials. Consequently, a considerable amount of shredder residue is left, consisting of dust and light materials such as plastics, rubber, textiles and glass. Because cars consist of some rather large and homogeneous parts, selective dismantling results in recyclable parts and in a reduction of shredder residue. White goods also have a substantial metal content and several major and rather homogeneous, dismantlable parts. Typical composition figures (in percentage by weight [wt%]) are as follows: 2

Data on complex consumer goods originate mainly from German and Dutch sources, such as the Dutch waste processing association (1998, 1999).

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For an 80 kg washing machine: - Ferrous metals, 50 wt% - Concrete, 20 wt% - Electronic and electrical components, ro wt% - Packaging and documentation, 7 wt% - Other (non-ferrous metals and light materials such as plastics, glass and rubber), r3 wt%

• For a 35 kg refrigerator: - Ferrous metals, 63 wt% - Copper, 3 wt% - Aluminium, 5 wt% - Working fluids, 3 wt% - Plastics, rubber, glass, etc., 26 wt%

2.2.3 Brown goods The amount of4 kg per year per capita for discarded brown goods does not seem impressive. The real amount, however, is higher because of the increasing share of embedded electronics in non-electronic devices, particularly in cars. We are only at the beginning of developments in which use of electronics will penetrate virtually all domains of consumer goods (e.g. in smart buildings and in control systems for cars and even small household devices). Brown goods are not characterised by a high metal content or by the presence of a large number of major homogeneous parts. On the contrary, they are complex and usually consist of a multitude of hazardous substances. Hazardous working fluids, such as oil, fuel, refrigerants and electrolytes, are often present. Many hazardous substances such as pigments, soldering connections, alloys and additives to plastics, glasses and rubbers are dispersed in materials. Hazardous parts are present, such as batteries that contain heavy metals and electrolytes, displays containing fluorescent materials, and switches that contain mercury. Cathode-ray tubes can consist of up to 8% lead and also contain barium and cadmium for protection against X-rays. In electronic circuitry, many elements are present in varying concentrations. Metals account for about 27% of the weight of a PCB. Typical concentrations in PCBs are: • Iron, ro% • Aluminium, 5% • Copper, 5% • Lead, r% • Nickel, r% • Tin, 2% • Zinc, r%

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• Manganese, 1% • Bromine, 1% There are also traces of many other hazardous and/or precious metals such as silver, gold, platinum and palladium. Component housing (plastics and ceramics) and the support (glass fibre, phenol and cardboard) account for the remaining 73 wt% of PCBs. Theoretically, all these materials can be reclaimed, but this requires a complex sequence of processes, which is out of the question as concentrations are too low and too variable. There are a number of trends in brown goods that include opportunities and threats with respect to recycling: • Rapid technological change, resulting in the introduction of a massive number of new types of product (e.g. mobile phones) and a rapid succession of generations of existing devices • Miniaturisation, resulting in smaller parts with complex composition, complicating their economic feasibility for dismantling • Introduction of dedicated materials; for example, easily recoverable materials such as iron are replaced by materials with a complex composition, such as composites, that are almost impossible to recover • Irreversibility; for example, to reduce the number of parts, those allowing reversible connections (screws, etc.) are replaced by irreversible connections such as soldering and welding or by locking, severely complicating disassembly and subsequent separation of materials • Dispersed functionality; for example, miniaturised displays, sensors, processors, electrical motors and so on are increasingly being applied in various devices and even in buildings •

Enhanced reliability, extending the durability and consequently the time of residence in the technosystem; for instance, the standard warrantee period for household equipment is shifting from one year to three years

• Modularity, enabling repair and upgrading via exchange of modules rather than via replacement of the complete device and easing disassembly operations and re-use of intact modules • Commonality of parts and modules within different types and generations of products 2.2.4 Chain considerations In industrialised countries there is a tendency towards separate collection of complex household goods. Consequently, these are saved from landfill or incineration, enhancing the quality of slag and filter residues from the waste incinerators. In particular, the content of bromine (from flame-retardant), arsenic (in semiconductors), copper, chromium, mercury and lead (from cathode-ray tubes) and cadmium and nickel (from batteries) in slag will be greatly reduced. This enables utilisation of the bulk of the slag in road con-

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struction and so on. Processing of discarded complex products finally results in a certain amount of shredder residue. Incineration and subsequent storage of the slag should proceed in a way analogous to that of hazardous waste, which is expensive. These circumstances are in favour of reduction of the amount of shredder residue. This requires appropriate methods for processing the collected products. One ofthe first steps in processing involves selective or partial disassembly. The extent of disassembly is determined by a combination of technical, economic and environmental requirements (Lambert 1999), such as: • Removal of hazardous working fluids (e.g. de-gassing and draining offuel) • Removal of components that contain hazardous substances (e.g. batteries and electrolytic capacitors) • Collection of valuable parts (e.g. lenses) • Collection of parts that contain precious materials (e.g. catalytic converters) • Removal of parts (e.g. housing or fasteners) in order to free other components • Removal of parts (e.g. cables) that can contaminate other components or fractions •

Removal of parts for technical reasons (e.g. cables, as these obstruct a subsequent shredding process)

•

Removal of parts (e.g. interior lining of cars) to reduce the quantity of shredder residue

Selective disassembly is not a simple task for the present generation of brown goods. In fact, only partial dismantling operations such as the removal of the housing, the separation of principal modules, removal of PCBs, major coils, batteries, and cathode-ray tubes are practicable. PCBs and comparably complex parts are shredded and, subsequently, some metals can be separated from the resulting fragments. Obviously, the actual method currently used is far from ideal. Increased degree of disassembly and better separation of the materials is virtually impossible from both an economic and a technical point of view. Changes in design could improve this situation. With respect to design for recycling, the following requirements can be listed: • Dematerialisation • Application of re-usable and easily detachable modules • Increased commonality of parts and modules in different product types and product generations • Enhanced durability • Application of a restricted range of materials to facilitate recycling and reduce the amount of waste

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2.3 Life-cycle assessment (LeA) 2 .3 . 1

Standard life-cycle assessment

Though an extensive treatment of the LCA method falls beyond the scope of this chapter, a short introduction will be presented, focusing on the relation between LCA and recycling. The definition ofLCA is as follows (ISO 14040): Life-cycle assessment (LCA) is a technique for assessing the environmental aspects and potential impacts associated with a product, by: Compiling an inventory of relevant inputs and outputs of a product system Evaluating the potential environmental impacts associated with those inputs and outputs Interpreting the results of the inventory analysis and impact assessment phases in relation to the objectives of the study studies the environmental aspects and potential impacts throughout the product's life (i.e. cradle to grave) from raw materials acquisition through production, use and disposal. The general categories of environmental impacts needing consideration include resource use, human health and ecological consequences. LCA

This definition is from ISO 14040, an international standard within the ISO 14000 series. The ISO 14000 series encompasses the different aspects of environmental management systems in enterprises. ISO 14040 imposes standards on the LCA tool, based on experience that has been gathered during the past 30 years. The aim ofLCA studies may be to: •

Compare and evaluate products and processes

•

Analyse improvements

•

Aid design

In the references section some basic papers on LCA are mentioned (Guinee et al. 1993a, 1993b; Tillman et al. 1994; Azapagic and Clift 1999). Many more papers, handbooks and textbooks are available. Some of these are theoretical, others are practical or devoted to detailed studies on materials, products and processes. Results of these studies are compiled in databases and are added to LCA software tools such as SimaPro, which is developed by PRe Consultants BV, Amersfoort, the Netherlands. The development ofLCA started in the late 1960s when the first systematic studies were carried out that encompassed various relevant environmental impacts of a product during its complete life-cycle. These studies were focused on a comparison of different packaging systems, such as bottles and cartons. The need for a universally applicable method resulted in the ISO 14040 standard. The basic structure of the chain, which is studied in LCA, is presented in Figure 2.5. In its most simplified form, LCA exhibits a convergent tree structure. The only possible divergence is from a fixed share of the discarded product going to different final treatment methods, such as landfill or incineration.

z.

LIFE-CYCLE CHAIN ANALYSIS, INCLUDING RECYCLING

Lambert

51

Extraction

Production of parts

Assembly

Product

Consumption

Treatment options

I. _ _ _ _ _ _ _ _

_____________

~

__________

~_

_

_______ 4

Discharge

Figure 2.5 Tree structure of a typicallije-cyc/e assessment

Although LeA is a powerful tool for studying linear and mainly convergent chains, two objections become apparent in situations where there are recycle loops, such as those depicted in Figure 2.2, and with divergent processes, such as those depicted in Figure 2.4. The objections result mainly from the essentially different approach in LeA to products and waste, implying that no use can be made of mass conservation laws. In LeA, the environmental impact is connected to processes that use resources that contribute to exhaustion or depletion and that produce emissions and wastes that have an environmental impact.

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Recycling and waste treatment processes, in contrast, use waste and produce more useful products that substitute for virgin materials in various processes. In addition, residuals such as slag and emissions may be utilised. In practice, upgrading plants are often judged only in terms of their outgoing waste flows. Therefore, the main concept of LeA is not principally meant to include processes that use waste as a resource. For the treatment of branched product networks with various loops and nodes, including recycling processes, extensions to standard LeA are required. A brief discussion of these extensions is presented below.

2.3.2 Extended life-cycle assessment: inclusion of recycling As discussed in the previous section, the extension of the usual LeA approach to product chains with recycle loops and divergence is complicated (Azapagic and Clift I999; Tillman et a1. I994). A modelling method based on material balance equations can overcome these problems. Such an approach is illustrated in Figure 2.6. A simple chain with recycling is depicted here. The system under consideration is indicated by the shaded rectangle. Upgrading

~

P3

~

X3 Production

XI

I

I

Raw materials

PI

IX5

I X6 I

X21

I

P2

I X7 I

Consumption

X41

I

P4

I

X4

I

Discharge

Final treatment

Example of a chain diagram with recycling

Figu re 2.6

The system boundaries refer both to the parts of the technosystem that are not studied here and to the ecosystem. Characteristic parameters for the system of Figure 2.6 are the recycling factors, p. The share of discarded products that is collected for upgrading and recycling, P2, is given by

P2=~ x

[2.1]

2

Loss factors, J..., indicate the share of raw material that is not incorporated in the resulting product. In this example, two loss factors are discerned:

Al=~

[2.2]

A3 =

[2.3]

xl

x9 x3

2. LIFE-CYCLE CHAIN ANALYSIS, INCLUDING RECYCLING Lambert

53

In addition to the parameter definitions, balance equations are required, both for the product nodes and for the process nodes: X2

= X6 +

x8

X4

= x5 +

x7

[2.4]

+

[2.5]

x9

XI=X5+ x 6

[2.6]

X2=X3+ x 9

[2.7]

= X8 +

[2.8]

X3

x9

If storage effects in the system can be neglected, the mass balance holds both for the complete system and for each part of the system. This results in XI = X4. This expression simply states that the amount of waste that leaves the system equals the amount of raw materials that is required by the system. The environmental impact of the production of an amount of consumer goods, X 2, consists of the following contributions: •

Depletion of resources: cP I

•

Discharge of waste:

•

Contributions of processes:

XI

04 X4

Jrj Xl

+

Jr2 X2

+

Jr3 X3

+

Jr4 X4

Here CPi, 0 i, and Jti are constant factors that indicate the amount ofenvironmental impact per unit of flow. Some of the parameters of a product process chain are principally technically determined (e.g. the amount of coke that is required to produce one tonne of raw iron). Other parameters, such as the recycling factor, can be influenced. In practice, the relations between the different quantities are far more complicated than is indicated here. In fact, the costs, energy use and environmental impact of the recycling process increase more than proportionally with respect to the recycling factor. In most cases, complete recycling cannot be realised because of fundamental theoretical constraints. A typical example of the behaviour of the impact of the recycling process in connection with the recycling factor is depicted in Figure 2.7. This modelling method, based on the use of mass balances, can be used in combination with standard LCA analyses. To deal with outgoing flows of products, an additional extension of standard LCA is required. Figure 2.8 shows such a system. Here, the recycle flow X8 is fed to a different product chain instead of being returned to process Pj. In this case, the node equations have to be adapted and a further, negative, contribution, - cP 8 X8, to the environmental impact arising from X8 must be added. This accounts for the amount of virgin material that is substituted by the secondary material, represented by flow Xg. It is essential that this system be divergent as it generates two products: namely, those represented by X4 and X8. This requires adequate allocation of the environmental impact of the processes to those products. This allocation problem cannot be solved unambiguously. One has to attribute weight factors that distribute the environmental impact (and costs, energy use, etc.) of the different processes to the different products in a reasonable way. Usual methods involve allocation according to the market value of the respective

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1

o

Figu re 2.7 SpecifIC environmental impad of recycling as a fundion of recycling degree

To other chain

Xg Upgrading

Raw

materials

Figure 2.8 Example of a chain diagram with recycling and exchange

Discharge

Z. LIFE-CYCLE CHAIN ANALYSIS, INCLUDING RECYCLING Lambert

55

product and to the amount of raw material that is represented by the product. It is beyond the framework of this chapter to go into detail on allocation problems. In the references section, some papers on this subject are included (Azapagic and Clift 1999; Tillman et aI. 1994)·

2.4 Conclusions In this chapter the requirement of 'closing of the chain' advocated by those who wish to stimulate sustainable production is combined with existing concepts of mass-flow modelling of product chains. Therefore, the basic theory of mass-flow modelling is reviewed. Subsequently, different extensions of these concepts are presented. Although problems that are related to waste and discarded products are often treated separately, the intention of this chapter is to present these problems within a definite framework to enable a more effective treatment of measures of these quantities. From this, the following conclusions can be drawn: •

Better understanding of re-use and recycling requires modelling of productprocess chains. Such models may be used jointly by a number of companies, as these models describe a system that includes interaction between companies.

•

Astandardised method of chain modelling exists that can be used for products, including complex consumer goods.

• In modelling, one should pay careful attention to the definition of system boundaries. • Poor exchange of data between different companies in the chain is a major restriction on establishing optimal re-use and recycling chains. • Shredder residue will become the principal problem when bans on landfill and on incineration of some discarded tools and appliances come into effect. • The development of better, cheaper and more adequate separation methods will contribute only marginally to minimising the amount of shredder residue. •

Product design should contribute to minimising the amount of shredder residue both by building in ease of disassembly and by using a favourable composition of materials.

• Complex consumer goods (apart from cars) represent a relatively modest waste-stream. The challenge is in the complexity of that stream in terms of its mechanical and chemical composition. • Life-cycle assessment, although internationally standardised, requires substantial modification in order to include recycling and re-use. The quantitative results ofLCA depend strongly on the extent of recycling that is practised. There is not, however, a standardised method in LCA for modelling systems with recycle loops.

II MANAGEMENT OF POLLUTION PREVENTION Integrating environmental technologies in manufacturing Neil Jones

Robert D. Klassen*

INSEAD, France

University of Western Ontario, Canada

Many facets of manufacturing operations have important implications for the state of the natural environment. Design of the product, selection of raw materials, operation of the manufacturing process, delivery of the product or service and availability of re-use or recycling options for spent products all have ramifications for the rate and level of environmental degradation. For OECD (Organisation for Economic Co-operation and Development) economies, manufacturing accounts for 40% of sulphur dioxide emissions (the precursor of acid rain), 60% of water pollution, 75% of non-hazardous waste and 90% of hazardous waste (OECD 1995). As a result, research spanning the engineering, natural sciences, public policy, economics and business literature has proposed various strategies, approaches and actions to improve the environmental performance of manufacturing. This chapter focuses on the different types of environmental technology that manufacturing firms can employ to create competitive advantage as they respond to government regulations, public pressure and customer demands. Environmental technologies are defined in general as production equipment, methods, practices, product designs and delivery systems that limit or reduce the negative impacts of products or services on the natural environment (Klassen and Whybark 1999; OEeD 1995; Shrivastava 1995). Conceptually, environmental technologies may (1) capture and treat emissions and wastes, (2) substitute raw materials, (3) alter materials processing, (4) improve management practices or (5) modifY product specifications. However, past efforts to improve environmental performance have tended to emphasise technologies that capture and

*

Robert Klassen would like to thank the Social Science and Humanities Research Council (SSHRC) of Canada for financial support of this research.

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control pollutants before their release to the environment, but only after generation. These environmental technologies are commonly termed end-of-pipe or pollution control technologies and leave the original product design and manufacturing process virtually unaltered. Public opinion, along with a growing body of research, has dramatically shifted away from a narrow emphasis on end-of-pipe technologies to a broader objective of reducing pollution generation. Technologies that reduce pollution generation are commonly referred to as pollution prevention technologies, cleaner technologies or source reduction technologies (Ashford 1993; Freeman et al. 1992; OECD 1995; EPA 1989). Pollution prevention technologies extract and use natural resources more efficiently, generate products with fewer harmful components, minimise pollutant releases to air, water and soil during manufacturing and product use, and involve the design of durable goods that can be re-used or recycled (OECD 1995). To that end, pollution prevention through technological innovation has generally been accepted as one important source of substantive, sustained, long-term improvements in both economic and environmental performance (Ashford 1993). However, progress in developing and implementing this type of environmental technology has been disappointingly slow, despite the now widespread agreement that environmentally sound manufacturing must ultimately rely on the reduction of pollutants produced, not on end-of-pipe controls. Manufacturing investment has continued to emphasise end-of-pipe control technologies. For example, from 1980 to 1990 the proportion of US investment in end-of-pipe controls compared with change in process (one form of pollution prevention technology) has fallen only marginally, from 0.84 to 0.71 for air and from 0.87 to 0.78 for water (Lanjouw and Mody 1996). us statistics are not available for other forms of pollution prevention technologies, such as product formulation, training or environmental audits, although these are generally assumed to be proportionately smaller. A recent survey undertaken by Statistics Canada (1996) to measure a broader set of expenditures on environmental technologies revealed a similar pattern. End-of-pipe and integrated process changes accounted for over three-quarters of environmental capital expenditures. Of that, 82% were allocated to end-of-pipe controls, similar to the figure for the USA. So why have pollution prevention and cleaner technologies not been more widely adopted, both in absolute as well as in relative terms? The question is explored in the following sections, using the furniture industry as a case study and drawing on theory and evidence from the literature on technological innovation. Based on this literature, a framework that differentiates technologies based on their fit with existing technologies and organisations is developed to clarifY the complex organisational factors affecting innovation processes for environmental technologies. Finally, implications and recommendations for managerial action to achieve competitive advantage are presented.

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3.1 Limits to end-of-pipe environmental technologies 3.7.7 Classification of environmental technologies Since the early 1970S environmental regulation directed at manufacturing has tended to target either the product or the manufacturing process. In contrast, consumer demand, particularly in North America, has been only marginally appreciative of the environmental performance of products and processes. Thus 'command-and-control' regulations, with specific, prescribed limits for the level of pollutants that a manufacturing plant may emit, has been the predominant approach in North America and in the rest of the world (OECD 1995; Portney 1990). Command-and-control limits can be divided into performance-based standards that set ambient quality levels based on 'desired' levels (e.g. the us Clean Air Act) and technology-based standards that control specific discharges based on technological feasibility-'best available technology' (e.g. the us Clean Water Act). Often, legislation combines these two types of standard. The need to act quickly to reduce emissions of pollutants, driven by intense public pressure, has resulted in many governments encouraging the use of end-of-pipe controls, often through tax concessions or subsidies and faster approval of operating licences (OECD 1995). More recently, various forms of pollution prevention technology have attracted a great deal of interest, motivated by public policy (Freeman et al. 1992), improved technical understanding and broader dissemination (EPA 1989) and corporate pragmatism and economic self-interest (Ashford 1993; McDaniel et al. 1993). A general consensus has emerged that pollution prevention has the potential to eliminate environmental hazards more efficiently and effectively as it may include multiple improvements across the entire production system. For example, cleaner technologies can extract and use resources and energy more efficiently, reduce the release of pollutants during manufacture and delivery and encourage recycling of components and products. In addition to environmental benefits, economic benefits are purported to flow from these investments, creating a 'win-win' scenario (Makower 1993; Porter and van der Linde 1995; Schmidheiny 1992; EPA 1989).

Researchers and statisticians have further defined and categorised environmental technologies beyond the dichotomy of end-of-pipe controls and pollution prevention based on theoretical or empirical grounds (Table 3.1). A more precise categorisation is important to analyse and track patterns of investment in individual plants, firms or industries over time. In this chapter, extending such approaches to categorising environmental technologies, we draw on research in technology innovation to develop an alternative categorisation of environmental technologies. The different categories suggest different levels of difficulty in the adoption of pollution prevention technologies for managers of established firms.

3.7.2

Environmental technologies in the furniture industry

To illustrate and motivate our ideas for why pollution prevention technologies have been met with an apparent reluctance to adopt them, we first draw on an example from the furniture industry. The primary environmental issues facing this industry over the past two decades have been the reduction of air emissions and waste disposal. Air emissions,

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MANAGEMENT OF POLLUTION PREVENTION

General categorisation Basis of classification

Jones and Klassen

Reference

• • • • •

Operating and housekeeping practices Redesign or reformulation of products Process modification Changes in process equipment Substitution of less harmful raw materials • Removal of pollutants from wastestreams before reaching outside world

OECD 1995

• Production systems • Restoration systems • Control and assessment

• Product design and production process • Disassembly and materials recycling • Waste burden assessment and control technologies

Sarkis 1995

• Design for disassembly

• Product design processes including hardware, operating methods, techniques and management orientation • Production process changes to reduce or eliminate wastes, emissions and pollution or to improve efficiency • Application of quality control principles to improve environmental performance • Inter-organisational co-operation to collectively reduce the environmental load of a group of production facilities • Minimising the spread of enVironmentally harmful technologies

Shrivastava 1995

• Use of equipment and processes to prevent or minimise pollutant generation • Establish and monitor the environment

Sousane 1996

• Cleaner technologies

• End-of-pipe

• Manufacturing for the environment • Total quality environmental management • Industrial ecosystem

• Technology assessment • Pollution avoidance • Monitoring and assessment • Remediation • Pollution control

• Pollution abatement (end-of-pipe)

• Pollution reduction

• Use of technologies to render hazardous substances harmless • Use of technologies that render hazardous substances harmless before entering environment Patent data in the following classes: • Industrial and vehicular air pollution • Water pollution • Solid and radioactive wastes • Waste incineration • Oil spills

Lanjouw and Mody 1996

• Alternative energy • Recycling and re-using waste

Ta ble 3-1 Categorisation approaches and description of environmental technologies (continued over)

59

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General categorisation

Basis of classification

Reference

_ Pollution abatement and control expenditures

Nine categories of expenditure: - End-of-pipe _ Process-integrated _ Monitoring _ Assessment and audits _ Site reclamation and decommissioning _ Wildlife and habitat protection _ Waste management services _ Fees, fines and licences _ other

Statistics Canada 1996

_ Pollution prevention tech nologies _ Poll ution control technologies

_ Fundamental product changes _ Fundamental process changes

Klassen and Whybark 1999

_ Management systems

Table 3-1

_ End-of-pipe controls - Remediation - Management practices, monitoring and improvement systems

(continued)

specifically volatile organic compounds (VOCs), have been generated primarily from finishing operations, with the levels of emissions dependent on the type and amount of finish applied (e.g. paint, stain, lacquer, polyurethane, etc.), volume of production and time of year. New finishes are frequently introduced or changed at the plant level in response to changes in consumer demands. In addition, the blend of constituents must change as drying conditions change over the year. Possible options to reduce these emissions range from water-backed spray-booths (end-of-pipe control technology), to water-based finishes (product reformulation), to more efficient equipment for finish application (integrated process modification), to more extensive operator training (management systems) . While case studies of environmental technologies that reduce or eliminate the release ofvocs have been public knowledge since the I980s (WRRC I989), firms that are generally recognised to lead the industry-financially, operationally and environmentally-continue to evaluate their potential installation cautiously (Klassen I995). Costly end-of-pipe controls continue to be viewed as the primary means of reducing VOC emissions. Thus, more stringent regulations have resulted in dire predictions of a significant number of plant closures (e.g. Sheffield and Schmitt I993). When managers were asked to identifY reasons for the general slow implementation of cleaner technology implementation, several points were noted. These included potential quality problems with reformulated finishes, operating risk in terms of productivity and cost, preferred allocation of capital investment to more urgent manufacturing needs, ignorance of environmental and financial benefits, and requirements to retrain workers and maintenance personnel. However, in at least one plant, the operations ofwhich we studied in some detail, these reasons do not seem to explain fully the decisions made by managers. A large, sophisticated national firm owned the plant. Environmental issues were not viewed as unimportant, for environment-related investments had consumed approximately half their capital budget in recent years. Indeed, when faced with increased regulation on air pollu-

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tants and hazardous waste-while simultaneously having virtually no pressure from customers-significant process changes were being made in their 50-year-old plant. Waterbased collection systems in the spray-booths were replaced with dry filtration systems. This change did not significantly change overall VOC emissions; it did, however, eliminate the regulatory-driven requirement and expense of disposing of contaminated water as hazardous waste. In essence, one end-of-pipe control technology was simply and rapidly replaced with another-resulting in only limited improvements in environmental performance. More substantive changes were possible, but were being explored more slowly, if at all. New process equipment (i.e. spray equipment for the application of finishes) that could reduce overspray and waste was being tested. The company predicted that several changes in spray equipment would reduce overspray substantially, perhaps by 75%. A widely known, potentially feasible, and still more dramatic change-reformulation of finishes on the product to reduce or eliminate the use of organic solvents-was not then even being explored. Why was the introduction of new sprayers not done sooner, as the technology had been well documented and demonstrated (WRRC 1989)? Further, why were changes to finishes not being explored? Recent technological advances that have broadened the use ofwaterbased finishes to eliminate VOCs were only now being considered for the long term. It might be suggested that these decisions were not rational-significant environmental performance gains could and should have been aggressively pursued earlier. However, management saw their progression as a logical process of taking care of the most significant operational problems in an expedient manner. First, reduce hazardous waste, then undertake relatively simple process changes, and, finally, explore apparently difficult product changes (which also have implications for the process). Overall, the existing literature does little to distinguish which types of pollution technology will be most readily adopted and which will face significant delays in implementation. In effect, existing thinking tends to assume that the most effective solutions will be adopted as long as regulatory pressures or incentives are established. For example, Ashford (1993), borrowing terms from the innovation literature, offered some evidence that regulation for larger environmental performance improvements drives firms to choose more radical innovations. However, as will be explored next, evidence from the technological innovation literature suggests, as in our example from the furniture industry, that other, more subtle differences among technologies may also be important. These differences in turn suggest a more finely grained classification of environmental technologies that both sheds light on the problem oflow adoption rates of source reduction and suggests how pollution technologies in general may be more effectively managed.

3.2 Conceptual framework 3.2.1 Competing on technological innovation The design and implementation of any new environmental technology shares many characteristics with the new product or manufacturing technologies that constitute the core research on technological innovation. Thus, research in technological innovation

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provides a basis on which to identifY characteristics of environmental technologiesand, in particular, of cleaner, pollution prevention, technologies-that may affect the rate at which organisations adopt such technologies. One of the central findings of the research on technological innovation is that firms have often been late and ineffective in introducing new technologies, even when the introduction of such technologies was vital for the firm's economic performance. Research across a range ofindustries and over a variety of time-frames and circumstances has shown that existing firms perform poorly on average during many technological transitions (Anderson and Tushman I990; Christensen and Bower I996; Tushman and Andersen I986). Existing (i.e. incumbent) firms have been found both to lag the market in the introduction of technologies and to receive lower returns for the invtstments they make in the new technology. Examples come from industries as diverse as computer disk drives (Christensen and Bower I996), photolithography equipment (Henderson and Clark I990), jet engines (Constand I980), video recorders (Rosenbloom and Abernathy I982) and minicomputers (Anderson and Tushman I990).1 The key to understanding the consistent failure of incumbent firms to introduce competitively vital new technologies is the concept of competence destruction (Tushman and Anderson I986). Competence destruction occurs when a new technology is introduced to the industry that draws on principles, techniques and knowledge that substitute for the existing technological know-how. In general, incumbent firms fail to evaluate these new technological options properly. In several industries empirical studies have shown that incumbents lag entrants in the introduction of competence-destroying technological change (Anderson and Tushman I990). As a result, industry-wide technological changes often occur through the entry and subsequent dominance of new firms because incumbent firms cannot change their core features rapidly enough (Hannan and Freeman 1989). Moreover, Henderson and Clark (I990) found that, for innovations in system architecture, incumbents spent more but achieved less technological progress than did entrants, apparently because they followed a suboptimal approach to product development. In a recent review of over 40 cases of technological discontinuity, Utterback (I994) isolated three factors that predict whether incumbents will be able to dominate the new technologies. Perhaps foremost among them is whether the change is competence-destroying. In all cases, competence-destroying innovations were first introduced to a growing market by entrant firms, not incumbents. When incumbent firms were slow or inefficient in introducing new technologies that result in the competitive dominance of other firms, it was clearly not because such technologies were considered unimportant in general or because there was an absence of incentives. Therefore, even in the presence of strong regulatory and public policy incentives for the introduction of environmental technologies, this evidence suggests that incumbent firms might also be expected to introduce competence-destroying Most of the studies cited focus on the issue of share in the market segments that are created by the new technologies relative to the share held by the firm in the pre-existing market segments. Poor performance typically means an incumbent firm has a much lower share in the new markets than it did in the pre-existing markets. Therefore existing firms may continue to dominate the usually smaller and shrinking pre-existing segments. This is not to say that existing firms did not act optimally from a profit perspective in ceding share (Christensen and Bower 1996).

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environmental technologies more slowly than would firms with no pre-existing organisational experience. Although the empirical evidence is strongest for product innovations, similar forces are likely to be at work for some innovations in process technologies As a manufacturer gains experience with a particular production process, systems and expertise to solve problems are developed to improve process components. At the same time, expertise is developed concerning how different components of the manufacturing process interact with one another. For example, in the furniture industry, a firm may discover that problems in its finishing operation result from decisions or actions made at upstream operations. Over time, the firm develops an understanding of both the finishing operation and the relationships between this operation and sanding or cutting operations upstream. When changes are made to the system (e.g. by substituting a new automated cutting operation), the value of these accumulated manufacturing competences is now partially destroyed. Strong linkages to existing markets create further challenges for incumbent firms. Christensen (1996) has argued that many technological innovations result from the impetus provided by existing customers whose demands have a central place in the development process. Without such impetus, technological innovations can be difficult to introduce. Thus, stakeholders such as governmental agencies can provide the necessary impetus through new regulation to overcome organisational inertia for innovation in environmental technologies (Ashford 1993). However, Utterback (1994) reported many examples where existing firms were not technologically stagnant and where customer demands for the innovation were present. Yet these firms attained less progress than did new entrants along the most critical performance dimensions. Thus, byextension, demand alone for environmental technologies is unlikely to be sufficient to create effective innovation. Also, if customers and stakeholders do not favour changes in environmental technologies, further inhibition of the adoption can be expected.

3.2.2

Framework for environmental technological change

To develop a fresh approach to the problem of why managers may delay implementing environmental technologies other than end-of-pipe controls, a framework that characterises the relative degree of competence destruction of each technology is proposed in this section. This framework builds on recent research that provides evidence for two dimensions that are central to technological innovation (Henderson and Clark 1990). Innovation can occur in core components, the basic building blocks of a product and process, and/or the system architecture, namely the interactions among the components that give rise to the overall characteristics of the system (Fig. 3.1). For example, the wood furniture manufacturing process includes a number of basic operations such as cutting and shaping, followed by assembly and finishing. Each of these requires process equipment and materials that can be considered core components. In contrast, system architecture refers to the way these operations work together, including workflow between operations, scheduling and the location of quality inspection and rework operations. The more significant the change in either dimension the greater the loss of the firm's existing technological know-how (competence destruction).

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Core components (basic building blocks of the system)

SIMILAR

SIMILAR

MODIFIED

INCREMENTAL

MODULAR

End-oj-pipe Reclamation Decommissioning

Substitution oj individual process steps

System architecture (linkages between components) ARCHITECTURAL MODIFIED

External recycling Monitoring Audits

RADICAL

Product adaptation

Figure 3-1 Frameworkfor innovation in environmental technologies

For the most part, end-of-pipe pollution controls, such as air filtration devices, require very little innovation either to core components or to system architecture (Fig. 3.1). By virtue of their addition to the end of a process, the remaining product and process components remain unchanged. As such, the level of competence destruction for either system architecture or core component dimensions is very low. At the next level of complexity, changing individual components, such as spraying equipment, requires additional problem-solving and fine-tuning. However, new spraying equipment leaves the relationships between this and other core components largely unchanged. In contrast, implementing the external recycling of wood scrap does not affect the core components of the process but instead affects the way different parts relate to each other because the scrap typically must be segregated and handled differently. Additional co-ordination mechanisms will also be needed to develop external suppliercustomer relationships for recycling. The same rationale can extend to equipment-related modifications in the system architecture, except now the new equipment forces interrelationships to change. For example, as automated monitoring equipment is added to track material consumption of finishes or voc emissions from spray-booths, core components can begin to respond more effectively. As seen from these examples, equipment-based modifications to the system architecture also imply some level of change in the related workforce practices and inter-firm relationships. More radical innovation alters core components and system architecture and thus implies the greatest level of destruction of existing firm know-how. As external recycling of by-products is expanded and altered to internal recycling, core components of the

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firm's product and process system must also change to accommodate the greater variability inherent in these materials relative to virgin materials. For example, to recycle wood waste internally, some furniture components could be converted to particleboard, or boilers could be modified to accept wood chips as fuel. Now the infrastructural processes that co-ordinate these activities, material movements and production process must change, in addition to production equipment. Finally, if fundamental changes to both product and process are pursued, the entire manufacturing organisation must often change in dramatic ways. For example, developing and implementing new finish systems, such as water-based finishes, requires new product designs, different application equipment and techniques, and new drying capacity. This framework of innovation helps to explain observed patterns of innovation. Environmental technologies that are more 'radical' (i.e. more competence-destroying in terms of components and architecture) will be more difficult to introduce even if clear incentives for their adoption exist. Further, the framework suggests potential courses for managerial action to overcome organisational inertia. The next section considers such potential actions and introduces evidence to suggest that such practices may also create the potential for competitive advantage through environmental innovation.

3.3 Managing to move beyond end-of-pipe pollution technology Change of the magnitude demanded by radical technological change is difficult to achieve in any area, and even those who attempt radical innovation often fail. Specialists in particular areas of technological systems, such as in end-of-pipe pollution controls, form 'communities of practice' (Constant 1980) which extend knowledge, train practitioners and become an interest group supporting that technology. As such, technological systems acquire 'momentum' as 'inventors, engineers, scientists, managers, owners, investors, financiers, civil servants, and politicians often have vested interests in the growth and durability of a system' (Hughes 1987). The overarching point is that technology practices are strongly inertial and that fundamental changes in the technology strategy of firms or in their core competences will be rare. As a result, incumbent firms will be late to introduce new technologies and, if they do attempt it, will have great difficulties in doing so. However, there is at least one ray of hope for existing firms: research in operations strategy is now recognising strategic flexibility as a core competency (Hayes and Pisano 1994). By developing a capability to adapt quickly to changes, firms are better positioned to recognise and capitalise on opportunities presented by innovation. The obvious extension to environmental technologies suggests that, in general, firms that are more technologically dynamic are more likely to successfully implement innovations in environmental technologies that go beyond incremental, end-of-pipe control technologies. Thus, such firms should be seen as the most fertile ground for adopting innovative approaches such as pollution prevention. Two major areas where management can foster the organisational skills and actions that contribute to strategic flexibility in environmental technologies are described below.

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3.3.7 Internal, interlunctional co-ordination The design and production of a product or product class is a highly interdependent system. This interdependence expresses itself at multiple levels in the complex systems that control product design and manufacturing processes. Individual operations in the production line may be sensitive to changes in upstream operations. Or, new product designs may require changes in the manufacturing system, including raw materials, specific process equipment or procedures. For example, in the furniture industry, if plant managers desire to reduce voc emissions by eliminating the use of finishes containing organic solvents, other aspects of the product process system are immediately affected. This product change (material substitution) directly impacts the appearance (quality) of the product, as water-based finishes often do not have the same appearance and durability currently demanded by the marketplace. Further, this change has significant implications for other parts of the manufacturing process. Workers need retraining, as water-based finishes are more difficult to apply, finish materials take longer to cure (dry), production that requires rework is more difficult to repair, and process equipment (sprayers and storage vessels) is subject to greater corrosion. If, as an alternative, the less environmentally friendly option of using more efficient spraying equipment is chosen, a small number of workers need retraining and only some minor reformulation of finish material may be necessary. Finally, if endof-pipe control technologies are adopted, such as an air filtration system, product design and process operation is virtually unaffected. These interdependences must be managed within the organisation through the development of organisational structures and processes that can evaluate trade-offs between options to improve the system. In this example, product designers must consult with the manufacturing team about the application process; in general, new finishes that closely mirror those traditionally used can be introduced with less difficulty. If a water-based finish is to be introduced, product designers will require operations managers to arrange the retraining of operators, process engineers must design and build additional drying capacity, and quality personnel must change their inspection and rework procedures. The second alternative-the use of new spraying equipment-also requires co-ordination between plant management and process engineering and plant workers, as well as with suppliers (some minor reformulation of the finish may be needed). Finally, end-of-pipe technologies require only limited consultation between plant management and process engineering workers. Thus, innovation that requires modifications to the core components and to the system architecture requires far greater internal co-ordination than does innovation along a single dimension. Extending this rationale to a more general set of environmental technologies, we could expect to see that organisations with more developed co-ordination mechanisms between the functional areas are likely to find the development and implementation of cleaner, pollution prevention technologies easier. Mechanisms can include team structures for the development of introduction of new products (which may include environmental issues), frequent inter-functional communication, and internal rotation or exchange of personnel.

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3.3.2 Organisational filtering Incremental innovation, whether in environmental technologies or other aspects of the product and process, focus on minor changes to either the core components or the way these components relate to each other (Henderson and Clark 1990). Over time, as firms repeatedly introduce new products or modifY processes, information processing channels and information filters develop that reflect problem-solving and learning from previous experience. These are the deeply embedded processes that reflect a firm's 'way of doing things'. Such channels and filters speed problem-solving by quickly capturing relevant properties, whether customer-oriented or process-oriented. These filters have become increasingly important as the time-to-market cycle for new products continues to shrink (Stalk 1988). For example, in environmental technologies, given the current volume and complexity of environmental regulations, many plant managers are forced to rely on specialists, usually environmental engineers or managers, to monitor changes in environmental requirements. As regulatory demands tighten, the specialist automatically assesses whether the existing process would be in compliance, and then which type of environmental technologies could be added, usually based on past experience with other command-and-control regulations. This individual also addresses concerns raised by other outside stakeholders, such as environmental groups. The accumulation of channels and filters over a number of years implicitly limits the range of choices that are considered and how firms evaluate such choices. This occurs because new options outside the traditional scope of consideration are not easily recognised or because they are not understood within the context of existing relationships. For example, each new regulatory demand does not force a fundamental rethinking of the basic product offered by the firm or of the manufacturing process that produces the product. Instead, environmental specialists tend to extrapolate from past experience and incrementally modifY existing products and processes to accommodate the new demands. While radical changes are the most difficult, less radical core component and system architecture changes can also present difficulties. Component changes are difficult because new concepts may be difficult to locate and evaluate; system architecture modifications are troublesome because very subtle implications of changes in interaction may inhibit their detection and correction. However, as a manufacturing firm increasingly seeks to expand its scanning of competitive and technological possibilities, innovation in environmental technologies may increasingly accurately evaluate and favour pollution prevention and cleaner technologies.

3.4 Managerial implications and future directions The process of innovation in environmental technologies is challenging and difficult for managers-and more so than research on environmental technologies has tended to suggest. While barriers to the adoption of cleaner, pollution prevention technologies have been explored to varying degrees by others, synthesis of this research with the

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GREENER MANUFACTURING AND OPERATIONS

literature on technology innovation offers new insight into the organisational and managerial factors that retard the adoption of pollution prevention. This chapter identifies that innovation in environmental technologies alters the manufacturing system along two possible dimensions: the core components and the system architecture. Incremental innovation (i.e. end-of-pipe pollution controls) is the most common form ofinnovation for manufacturing firms to implement; however, this form ofinnovation is often less environmentally sound and may be more costly. Such a choice can thus compromise competitiveness. The framework developed here suggests that to choose and implement pollution prevention technologies that are more radical involves increasingly difficult challenges for management. Firms will be required to innovate along the component and the architectural dimensions, perhaps simultaneously. In many organisations this will necessitate the development of new approaches to the organisation of environmental efforts and the development of new skills. Three organisational challenges were identified and exploredmanufacturing competence destruction, internal co-ordination and organisational filtering. Overcoming these challenges requires new skills in the cross-functional management of the operations, environmental and marketing teams. In addition, manufacturing firms with deeply entrenched, inflexible systems for monitoring the competitive situation, although possibly efficient in assessing other competitive concerns, will not quickly recognise and develop innovations in environmental technologies. Management action to foster flexibility and breadth in identification and evaluation of new technologies is needed. More precise recommendations for particular industries will require analysis of the data for pollutant releases and environmental expenditures-data that is now gathered from most of the world's developed nations. At the same time, detailed case studies of the approaches and experiences of individual firms, especially concerning inter-functional co-ordination and manufacturing competency, would add to managers' insights and at the same time provide a basis for comparison with other firms in the broader survey research. Finally, more study is needed to help managers cope with the seemingly ever-expanding sources ofinnovation in environmental technologies. External sources of innovation in environmental technologies, including suppliers and other market forces, are likely to face different organisational hurdles than are internal sources of innovation, such as product development teams. ClarifYing the importance of different factors would improve managerial decision-making in introducing cleaner prevention technologies.

II

ORGANISING ENVIRONMENTAL INVESTMENTS IN SMALL AND MEDIUM-SIZED FIRMS A cost-benefit instrument as a tool for integrating environmental policy into overall business policy* Anja de Groene

Job de Haan

Hogeschool Zeeland, University of Professional Education, the Netherlands

Tilburg University, the Netherlands

In the Netherlands, three surveys, conducted in 1991,1992 and 1996, have indicated that voluntary introduction of environmental management is progressing in all branches of industry and with firms of all sizes, but not to such an extent as to satisfY government expectations (Heida et al. 1996; Van Someren et al. 1993). The 1996 survey also showed that systemisation and integration into all business processes was clearly lagging. Another major point was that existing environmental measures were, in many cases, directed only at effect prevention and not at source prevention. These results are consistent with other findings such as those of the total cost assessment (TCA) study in the USA (White et al. 1991) and of Earl (1996). The TCA researchers identified two reasons for the general adherence to end-of-pipe solutions in favour of pollution prevention projects: namely, the organisational structure and culture that inform the decision-making process, and the economic and financial constraints connected with the methods of capital allocation and budgeting. The organisation of environmental management to control and reduce pollution seems to be a complex question for many firms.

*

This project was financed by the Chamber of Commerce of Eindhoven and by the Ministry of Housing, Physical Planning and Environment in the Netherlands.

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GREENER MANUFACTURING AND OPERATIONS

In the Netherlands, trade organisations from different branches ofindustry argue that small and medium-sized firms are in fact willing to initiate and implement environmental management but find it hard to assess the technical and financial consequences. A particular problem concerns the tracing of cost and benefit categories. According to trade organisations, a detailed view of the costs and benefits will convince firms and stimulate them to implement internal environmental management programmes. With the aid of a cost-benefit analysis, the financial consequences of decisions can be made visible at the place where they actually occur (de Haan and Peters 1989 j de Haan and Terra 1990). Although small firms generally budget in an informal manner, focusing on shortterm operations and profitability, monetising pollution prevention and other environmental measures will improve decision-making, therefore making project benefits more persuasive. In this chapter the results of a research project on the costs and benefits of environmental measures in firms are presented. The aims of the project were: • To develop an instrument for firms with which to calculate costs and benefits of environmental measures • To lower the barrier against implementing environmental management in small and medium-sized firms • To integrate environmental decision-making into overall business policy In accordance with these aims, three stages in the project can be distinguished: development, application and policy-making. After the development of the instrument in the first stage, it was applied in firms in four different branches of industry: printing, car maintenance, food processing and metal products. In the last stage, the possibilities of integration of environmental issues into the overall business policy were made clear on the basis of the reports by the investigated firms. In the Section 4.1 some remarks on cost-benefit analysis are made, followed by a description of the instrument. To use the instrument in a correct manner it is necessary to define environmental measures (Section 4.2). Section 4.3 contains the key findings. In Section 4.4 the findings are discussed. In Sections 4.5 and 4.6 some of the lessons learned and the managerial implications are given.

4.1 Cost-benefit analysis Cost-benefit analysis is a technique used to support decision-making. It is applied under conditions where various parties are involved but in which neither 'hierarchy' nor 'market' can be used to make a correct valuation of alternatives. Examples are decisionmaking in airport construction, the privatisation of postal and telecommunication services and the reorganisation of social security systems. The essence of the technique is that winners have to compensate losers for their loss. This leads to three questions: what parties are involved, who are winners and who are losers and how should the (dis)advantages be valued? These questions must be answered before the decision rule used in cost-benefit analysis can be applied. In cost-benefit analysis, a project can be

4.

ENVIRONMENTAL INVESTMENTS IN SMEs de Groene and de Haan

71

accepted only if the winners can compensate the losers but still remain better off (Dewhurst 1972; Mishan 1971). It is also possible to use cost-benefit analysis at the company level. In a firm, several parties can be identified that do not necessarily share the same goals. Both in sociology (action theory [see Perrow 1986]; organisational behaviour [Buchanan and Huczynski 1985]) and in economics (agency theory [Douma and Schreuder 1998]) there is growing evidence that parties within a firm have differing interests. Thus, from a theoretical point of view, it seems logical to use cost-benefit analysis at the firm level. Cost-benefit analysis leans heavily on a ceteris paribus assumption. According to this assumption, all other relevant circumstances are supposed to remain unaltered and all changes thus result from the action taken. In this way, one is able to identifY the consequences relevant to the parties already known. The principle of the 'black box' (Kast and Rosenzweig 1979) can help evaluate the consequences in a simple way. It is not necessary to analyse all variables and all possible relations between them to gain enough insight into a system. If a consistent relationship between input (action) and output (results) exists according to one or more of the relevant parties, further analysis is not needed. When the relevant changes have been ascertained from a thorough analysis of the description of processes changed by a given measure, the measurement of its consequences is the next step. Existing market prices or internal tariffs may already be known. If not, they have to be found through available alternatives or possible opportunities, the so-called 'opportunity costs' (Kaplan 1983). An additional analysis is then required to discover what opportunities are available. There is also a third way to answer the question of value: the indirect approach. Let us suppose that an appropriate price for one or two items cannot be found; let us also suppose that the measured and valued costs exceed the benefits. If the decision is nevertheless carried out, the implicit value of these unmeasured and unvalued items is at least as big as the difference between costs and benefits. As has been stated, the consequences of the relevant changes must be measured, but a problem remains in actually identifYing which changes are relevant. The TCA approach (White et ar. 1991) is based on a comprehensive financial analysis of the life-cycle costs and savings of a pollution prevention project. The cost categories that TCA takes into consideration are as follows. • Category I: direct costs - Capital expenditures - Operation and maintenance expenses or revenues •

Category 2: indirect or hidden costs - Compliance costs - Insurance - On-site waste management - Operation of on-site pollution control equipment

• Category 3: liability costs - Penalties and fines - Personal injury - Property damage

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GREENER MANUFACTURING AND OPERATIONS

• Category 4: less tangible benefits - Increased revenues from enhanced product quality and company and productimage - Reduced health maintenance costs - Increased productivity from improved employee relations In our research we endeavoured to take all four categories into consideration. The easiest category to trace is the direct cost category. The indirect costs are hidden in the sense that they are either allocated to overheads rather than to their source or are altogether omitted from the project's financial analysis. Nevertheless, these hidden costs can be isolated in most cases. Liability costs are, by nature, difficult to estimate and are equally difficult to locate at a point in the life-cycle of a project. We will return to this problem in Section 4.5. The less tangible benefits are very difficult to treat. In the applications of the TeA method, these benefits were not identified. The measures under analysis are seen as investment decisions. Different alternatives can be judged by means of well-known selection techniques. Therefore, the amount of investment, the annual cash flows and the discount factor all have to be identified. In this project, two selection techniques have been used: the payback period, to indicate the risk, and the net present value (NPV) to indicate profitability. In our study we used the timehorizon taken by the firm itself. The instrument for identitying the costs and benefits of environmental management measures consists of a number of steps: • Step I: collect and choose the measures to be analysed (the various types of environmental measure are discussed in the next section); to localise the measure and to identity the consequences of the measures in other parts of a firm, a product flowchart is used to assist in the proper internal allocation of environmental costs to product lines or processes (the concept of a flowchart will be elaborated on in the next section) • Step 2: calculate the investments required for the measures (to be) implemented • Step 3: in the conventional part of the cost-benefit analysis, take into account the changes in existing cost categories and the new categories caused by measures that are directly visible (calculate the direct costs) • Step 4: in the additional part of the cost-benefit analysis, study the nature and size of the effects not directly visible or the effects that may even occur elsewhere in the firm (these are the indirect costs, liability costs and less tangible benefits); these effects will have been localised in step I but will not yet have been analysed in step 3 • Step 5: approve the measure only after the conventional and combined conventional and additional analysis has been carried out, by means of the usual investment selection techniques

4.

ENVIRONMENTAL INVESTMENTS IN SMEs deGroeneanddeHaan

73

4.2 Environmental management measures Firms can contribute to the reduction and solution of environmental problems, but the various kinds of environmental problem with which firms are confronted force them to look beyond the borders of the organisation itself, to the entire product life-cycle. Yet, in our analysis, only those costs that fall within the purview of the firm are taken into account. Life-cycle assessment is a technique that takes the social costs and benefits into account, whereas in this chapter the unit of analysis is an environmental measure and not the actual organisation. Environmental management measures are defined as measures aimed at controlling and reducing (ex ante and ex post) the negative effects of business activities on the natural environment. In this project only those measures that directly impact the natural environment are taken into account. This means that many types of ,control' measure (e.g. the introduction of an environmental management system) are not considered as environmental measures for the purpose of this chapter. Environmental measures are classified into five categories: •

Sanitation measures. These measures are aimed at the removal from the natural environment those effects of business activities that have already occurred (e.g. polluted soil, sediments and chemical waste).

• End-of-pipe measures. These types of measure are aimed at the reduction and control of present and future emissions; actions that reduce emissions without altering the existing production processes or products are end-of-pipe measures. • Administrative and organisational measures. Only administrative and organisational measures that directly influence the effects of production on the environment are taken into consideration (e.g. separate collection and removal ofwaste, external re-use of waste, and the storage of chemical waste); the regulation of waste-streams, resources and products diminishes and sometimes prevents pollution. • Adaptation of production processes. These are changes to production processes (e.g. the use of alternative resources or of other installations, and process modifications). • Adaptation of the composition of products. These changes involve the adaptation and redesign of products in order to diminish pollution; in some cases this will mean the end of a product or the start of production of a (completely) different product. Sanitation measures are measures to control and clean up pollution, whereas the other four measures are aimed also at the control and reduction ofenvironmental pollution and have an increasingly preventative impact. As mentioned above, environmental measures are those that have a direct impact on the natural environment, and this relationship can be visualised by means of product flowcharts to identifY the internal effects of the measure. The idea is that a measure taken in one place in the firm may also have effects on other areas, preceding or following in the process sequence. For each raw material

74

GREENER MANUFACTURING AND OPERATIONS

and additive, the source and destination can be traced-there are relevant parties connected with these streams who are thus easy to identifY. Moreover, within each area the process changes are listed systematically. Possible effects are to be expected prior to, at and after each step in the process. By examining the effects of environmental measures in this way we can be sure that all consequences are taken into account, that this is done systematically and that we can therefore concentrate on changes and avoid doublecounting. From the point of view of proper cost allocation and with the aid of a process flowchart all costs can be allocated to the processes responsible for their creation. As an example, the product flow of a hypothetical firm manufacturing metal products is presented in Figure 4.I. Two environmental measures are indicated in the chart: powder-coating and the reduction of paint overspray. The reduction of the paint overspray implies an adaptation of production processes; the measure is applied to the painting process and is aimed at reducing the use of paint. In the painting workshop, a detector was linked to the paint spray, which is triggered only when an object passes the detector in the spray cabin. The other measure indicated in the product flowchart is powder-coating. Powder-coating is a technique used as a substitute for wet painting, as a result of which no solvents are needed, meaning no emission of hydrocarbons. Moreover, less paint material is used in the production process. This measure is applied in the paint workshop, and the product flowchart demonstrates that the measure affects only Anti-corrosive fluids

Steel plates

Degreasing Paint or powder fluids

Pressing

Anti-corrosive treatment

Anti-corrosive waste Emission of hydrocarbons

Make ready for transportation

Figu re 4.1 The product flowchart of a hypothetical firm manufacturing metal products

4.

ENVIRONMENTAL INVESTMENTS IN SMEs deGroeneanddeHaan

75

the workstation itself (i.e. the actual place where activities have changed). Prior to the workstation only the purchase department is affected: there is less paint to buy. The supply of paint and the preliminary treatment of the metal objects remain the same. Subsequent to the workstation, there will be a change in the removal ofwaste in the sense that less waste has to be transported. Also, after the powder-coating procedure, the product drying time will be shorter. It is to be expected that the more preventative a measure, the greater (positive) the effects may be. Sanitation measures, for instance, will have no (positive) effects in the phases prior to the workstation involved, and both at and after this station there will be only costs. However, adaptations in the composition of the product may cause far greater (positive) effects, and these will occur in the phases prior to the workstation.

4.3 Findings The cost-benefit instrument as described in the previous sections has been applied in eight firms belonging to four branches of industry: printing (three firms), car maintenance (two firms), metal products (two firms) and food-processing (one firm). Each of the firms was visited for half a day, the researchers being accompanied by an environmental management expert from the relevant trade association. In the firms, key informants such as managing directors, production managers and executives responsible for environmental management were interviewed. The visit consisted of three parts: (a) a general introduction to the firm (its structure, strategy, etc.) and to its environmental policy; (b) a guided tour of the plant; and (c) fact-finding on some environmental measures already taken or being considered in the firm. The selection of the measures to be studied was carried out in consultation with all parties involved. For the researchers it was important that: • Each of the selected environmental measures would be analysed. •

Specific activities of the firms being investigated would have to be covered .

• Not only measures driven by government legislation would be analysed, but also those induced by economic incentives and particularly those taken on a voluntary basis; these voluntary measures were considered important, as they reflect the company's attitude towards environmental management. In the eight firms, 27 measures were analysed: 2 sanitation measures, 8 end-of-pipe measures, 3 administrative and organisational measures, 12 adaptations of production processes, and 2 adaptations of the composition of products.

4.3.1 Sanitation measures Two sanitation measures were analysed. In the first case, a car maintenance firm had to clean up contaminated soil after removing an oil tank. The direct costs were relatively low because of the possibility of digging up the soil and transporting it to a dumping site.

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GREENER MANUFACTURING AND OPERATIONS

In the other firm, soil throughout the factory site had been polluted over many years by companies from various industries that had been located there. The present incumbent decided to cease activities at that site and continue elsewhere. Sanitation is still necessary because the owner wants to sell the site and it is expected that the land will be used for residential building. From the cost-benefit analysis, it can be concluded that the costs of sanitation can vary dramatically, depending on the degree of soil pollution and the size of the polluted site. Benefits scarcely exist with this type of environmental measure.

4.3.2 End-oj-pipe measures The end-of-pipe measures concerned the purchase and installation of added equipment aimed at reduction and control of present and future emissions. The following measures were studied: the installation of an oil-water separator in a car maintenance company, the installation of shredder equipment in another garage, the purchase of a cap for the valve of an alcohol tank in a printing firm, the installation of extractor equipment for steam from welding, and a closed cooling system and the extraction of hot air in a metal products manufacturing firm. For the oil-water separator three options were studied. The Dutch water pollution act does permit pollution of water with oil up to a moderate level. Various alternatives for bringing the pollution down cheaply to this level are possible. Some alternatives were studied by comparing them with the most conventional and widespread techniques. With the aid of shredder equipment the volume of waste and therefore the number of containers needed to transport the waste can be reduced. The effect of placing a cap on the valve of an alcohol tank to prevent the contents evaporating was analysed The measures taken in the metal products firm were aimed at reducing the use of energy and water. The extraction of steam from welding also has benefits for the workforce, plus another department in the firm can be heated by the extracted hot air. From the cost-benefit analysis we can conclude that some measures did not require any investment at all, that others required only minimal investment and that four measures required considerable investments from the point of view of small and mediumsized firms. When no or minimal investment was made, cash flows were generated by an alternative working method or by a simple technical device and, of course, all of these measures yield a positive NPV. This is not the case, however, when considerable investments have to be made. Not only is the equipment expensive but the investment also generates only moderate cash flows. Obviously, this has to result in a long payback period and a negative NPV, generating unfavourable figures for risk and profitability. The effects of end-of-pipe measures were noticeable mainly at the workstation where the measure was implemented or at those that follow in the product flow, and these effects arise from the reduction of materials or the reduction of man-hours. Effects on subsequent workstations arise mainly from the reduction of time spent removing the waste by third parties.

4.

ENVIRONMENTAL INVESTMENTS IN SMEs de Groene and de Haan

77

4.3.3 Administrative and organisational measures In this category of measure, basic materials, additives, product flows and waste flows are regulated before they lead to emissions. Three measures in two firms were analysed, each aimed at improved regulation of flows of materials and waste to prevent environmental problems. The first measure, an oil separator, divides a single existing flow of waste into three: oil, oil-containing waste and scrap iron. The costs of removing each of these types of waste differ considerably. The aim of the second measure was to prevent spills of (photo )chemicals such as fixing and developing fluids, the underlying goal here being to prevent soil pollution. As the costs of the removal of different types of waste vary dramatically, it is often worthwhile to separate the various flows. Moreover, as removal of waste is strictly regulated, separation can prevent penalties. The separation of the various flows ofwaste is the third measure analysed here, and it is a measure applied by all firms. In two cases, the amount invested was relatively small, whereas the investment in the developer and fixer tanks was considerable. The investment in the oil separator has been successful, as a considerable cash flow was generated resulting from differences in the tariffs set for the removal of different types of waste. In one of the firms studied, 20 categories of waste are being separated. It is important to do this in the cheapest way. Firms can choose from two extreme strategies for minimising costs: namely, 'wait and see', and optimal separation ofwaste-streams. The former strategy implies no separation of waste, so no investment of money or time is needed. However, later, additional work may be generated to separate various flows: for example, a container may be sent back from a disposal site and extra amounts may be lost in fines. So, at a workstation, labour savings can be realised, but thereafter the costs may rise. In case of the optimal separation of waste, the amounts saved can be calculated, based on certain assumptions of relevant tariffs for the removal and distribution of different types of waste. With this method, savings can be calculated; in addition, the consequences of using more or less detailed categories in the separation of different types of waste can be assessed. The measure aimed at the prevention of soil pollution is difficult to analyse because of the problem of estimating the expected costs of sanitation at the end of the project. These costs may differ considerably, as has been argued above. Although there is a positive cash flow, a negative NPV still remains. Nevertheless, the measure has been undertaken, so the NPV amount can be conceived as an indication of the estimated avoidable costs of sanitation.

4.3.4 Adaptation of production processes In many of the firms investigated, adaptation measures were undertaken, contrary to the assumption prior to the project that few such measures would be found (see also White et al. 1991). A total of 12 measures were analysed, and these can be divided into three main categories: • Re-use of materials, either internal (e.g. re-use of thinner and printing plates in the printing industry) or external (e.g. re-use of silver)

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GREENER MANUFACTURING AND OPERATIONS

• Alternative methods of processing: use of hot-water cleaning of parts, use of Freon, use of silicone on baking plates and the use of a detector in a paint workshop •

Use of alternative materials: for printing plates, a device may be used to optimise the use of ink, or less energy-consuming and tailor-made metal plates may be utilised.

In only four cases were considerable investments made (i.e. 10,000 Dutch guilders [NLG] or more). This was mainly for new equipment. In three cases there was no investment at all. Evidently, for preventative environmental measures it is not always necessary to spend heavily. For most of the measures, the cash flow arises from the three places identified previously: before, at and after the workstation where the measure is implemented. The benefits in measures preceding workstations derive especially from reductions in materials usage; at the workstation, benefits derive for the greater part from higher levels of productivity. The results at subsequent workstations arise from the reduction of waste and the consequent reduction of the costs of removal. For most of the measures, the payback period is less than one year and in only one case does it exceed the project lifetime. In all other cases, the NPV is positive and in many cases it is a multiple of the invested amount.

4.3.5 Adaptation of the composition of products In the firms investigated, two product adaptation measures were identified. As expected, these kinds of preventative measure are not (yet) very popular, and relatively few examples could be found. In the food-processing firm, a new kind of packaging was introduced that contains 30% less raw materials than the old kind. The package is inextricably connected with the product and is used by the firm as a marketing tool. Powder-coating is a completely new product for the metal products firm. This company's main activity is the treatment of metal products, so any innovation in this area can be considered a product adaptation measure. The amounts invested are high compared with the amounts invested in the other type of measure. However, powder-coating is extremely profitable compared with wet coating and demonstrates effects before, at and after the workstation, whereas the packaging measure shows an NPV of 0 and affects only the relevant workstation. The total cost of developing the packaging was NLG 150,000. Taking into account the savings on raw materials, the NPV is negative and the payback period is far beyond the product-life offive years. Nevertheless, the new packaging has been introduced. The NPV of the marketing activities must be at least NLG 139,600, implying an annual sum of NLG 35,000 'savings' on marketing activities.

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ENVIRONMENTAL INVESTMENTS IN SMEs

de Groene and de Haan

79

4.4 Discussion of findings In Table 4.1 the results of the cost-benefit analyses of the five categories of measure are summarised. The most important conclusions are as follows . • All five categories of measure were present in the firms investigated. In the cost-benefit analyses, the emphasis lay on end-of-pipe measures and on production process adaptations-not for any solid reason but largely because of the widespread use and acceptance of these measures. End-of-pipe measures are curative and are mostly driven by legal requirements. Production process adaptations are preventative measures and are undertaken voluntarily. The same goes for product adaptations, two of which were analysed . • In general, the amount of investment is low (less than NLG 10,000), except in the case of sanitation and product adaptation. End-of-pipe measures require small amounts ofinvestment-in three cases no investment at all. Administrative and organisational measures and adaptations of production processes exhibit a broad range of investment levels. These measures and adaptations prove that environmental measures need not be 'too expensive'. Creative thinking can result in measures that require low investment but produce effective reduction of a firm's environmental impact. • Cash flows show different patterns for different types of measure. They also differ in the place where they occur: at the workstation, preceding the workstation, or following it. No. of Level of mea- amount sures invested

Types of measure

Before

At

After

Payback period (years)

Cash flow

Net present value

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2

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-

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213

AGGREGATE PLANNING FOR END-OF-LiH PRODUCTS Gupta and Veerakamolmal

Disassembly time WS1 Node

WS2 Time

Node

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Node

Time

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Node

Time

(root WS1)

5.7

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Ta ble 14.2 Disassembly times for various nodes in WS1-WS4 (see also Figs. '4.2 and 14.3)

Time period (t)1 1

3

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6

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SUPPLY

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150

150

Table 14.3 Supply and demand information for the example

They include component 18 used in WS5, component 19 used in ws6 and components 20-22 used in both WS5 and ws6. Hence, the list of components required for retrieval consists of component numbers 4,5,7-10 and 13-15. The list of components not utilised (and hence that must be immediately recycled and/or disposed of in the same period) consists of component numbers 1-3, 6, II, 12, 16 and 17.

:14.3.1

The steps of the algorithm

The following steps demonstrate the algorithm. •

Step I: input data is given in Tables 14.1-14.3 and the planning horizon, T = 10 periods; set t = 1.

• Step 2: determine the maximum yield for demanded components; the maximum component yield from the supply of products WSI-wS4 for component

214

GREENER MANUFACTURING AND OPERATIONS

numbers 4,5,7-10 and 13- IS are 580, 5IO, ISO, 170, 98, 127, 176, 127 and 248, respectively . • Step 3: assess to see if there are enough components to fulfil the demand; the net requirements (r~et) for component numbers 4, 5, 7-IO and 13- IS are 390, 390, 95, ISO, 95, IOO, 140, IOO and 195, respectively (note that there are receipts from external sources of component numbers 8, 13 and 14 in amounts of 50, 50 and IOO, respectively; see Table 14.5); since there is no shortage, set the demands d(Pj) to r~et; go to Step 5. • Step 5: formulate and solve the integer programming model and obtain the optimal number of units of computer models WSI-wS4 to disassemble; the numbers are, respectively, 73, 65, 62 and 75.

Periods

I1

2

3

4

5

6

7

8

9

10

SUPPLY OF PRODUCTS

WS,

75

75

75

50

50

45

45

30

0

0

WS2

65

70

105

90

90

80

80

75

0

0

W53

85

70

100

100

90

85

100

115

0

0

W54

85

105

110

145

130

130

150

140

0

0

YIELD OF COMPONENTS

P

p,

140

145

180

140

140

125

125

105

0

0

P2

170

175

210

245

220

215

250

255

0

0

P3

150

150

150

100

100

90

90

60

0

0

P4

580

570

770

660

640

580

610

590

0

0

Ps

510

560

640

780

700

690

800

790

0

0

P6

75

75

75

50

50

45

45

30

0

0

P7

150

140

205

190

180

165

180

190

0

0

P8

170

210

220

290

260

260

300

280

0

0

P9 P,o

98

101

126

98

98

87

87

73

0

0

127

131

157

183

165

161

187

191

0

0

PI'

310

320

390

385

360

340

375

360

0

0

0

0

P'2

75

75

75

50

50

45

45

30

P'3

176

157

228

217

202

187

210

228

0

0

P'4

127

157

165

217

195

195

225

210

0

0

P'5 P,6

248

256

312

308

288

272

300

288

0

0

310

320

390

385

360

340

375

360

0

0

P'7

395

425

500

530

490

470

525

500

0

0

Ta ble 14-4 Maximum component yield for the example

'4.

AGGREGATE PLANN I NG FOR END-OF-LI FE PRODUCTS Gupta and Veerakamolmal

215

• Step 6: updateN?H, N~se, N;e q andN1 isc of each component, as shown in Table 14·5· •

Step 7: since t

;00

T, increment t by one and go to Step

2.

• Continue repeating the above steps until, at Step 7, t is equal to TOO); proceed to Step 8. •

Step 8: stop.

The maximum component yield, the component retrieval plan and the results for the integer programming optimisation in each period are provided in Tables 14-4, 14.5 and 14.6, respectively.

14.4 Conclusions In this chapter, a methodology to determine the number of products to disassemble in order to fulfil demand for various components for remanufacturing in different timeperiods has been proposed. An algorithm based on integer programming has been presented to solve the aggregate planning problem. The objective was to find the most economical combination of products to disassemble to fulfil the demand for different types of component while keeping the quantity of partially discarded products in check and to incur the least cost for disposal.

Appendix: notation used in this chapter The smallest integer that is larger than or equal to a The element in row i and columnj of matrix f3 The ith element in vector y

PI

Receipts from external sources in period t (unplanned)

r make

Process makespan (time for the disassembly and retrieval of the components from the products) Shelf-life, or number of periods that a component can be kept in inventory without becoming obsolete or being degraded (an unwanted component has a shelf-life of zero) Subassembly node k in product i, same as Sub(i, k) (see Figs. 14.1 and 14-2)

216

GREENER MANUFACTURING AND OPERATIONS

Time period (t)

2

1

3

4

5

6

100

110

125

125

10

7

8

120

85

70 135

150

100

95

125 150

150

85

70

135 150

0

9

ItemWSs Gross requirements (demand) ItemWS6 Gross requirements (demand) Item Sub (WSS,l) Gross requirements

0

0

95

0gf; o

5 100 110

120

Item Sub (WSS,2) Gross requirements

--

0

95

100 110

120

85

70

135 150

0

95

100 110 120

85

70

135 150

0

0 100

125

125

100

95

125

150 150

0

0 100

125

125

100

95

125

150 150

0

0

Item Sub (WSS.3) Gross requirements Item Sub (WS6,1) Gross requirements Item Sub (WS6,2) Gross requirements Number of product WS, to disassemble

73

73

53

40

32

20

45

30

0

0

Number of product WS2 to disassemble

65

70

105

90

90

80

80

75

0

0

Number of product WS3 to disassemble

62

66

78

96

70

54

100 115

0

0

Number of product WS4 to disassemble

75

103

110 134 127 130

150 140

0

0

138

143

158

100

125

105

0

0

184

250

255

0

0

40

90

60

0

0

390 570

600

0

0

0

0

0

508 498

0

Item (P,) Number of components discarded Item (P2) Number of components discarded

137 169

Item (P3) Number of components discarded

146 146

130 122

~

!

106

80

64

470

440

360

0

0

0

0

0

248 460

632

564

468

0

0

102

92

0

0

564 468

610

590

0

0

102

92

0

0

Item (P4) (Shelf-life = 1, Quality = 100%)

390

450

Receipts from external sources

0

0

Available balance

0 140

Gross requirements

Net requirement

390

310

222

0

On hand from disassembly

530

558

682

632

Number used from disassembly

390

310

222

0

0

0

Note: Sub = subassembly

Ta ble 14.5

Component retrieval plan for the example (continued opposite)

'4.

AGGREGATE PLAN N I NG FOR EN D-OF-LI FE PRODUCTS Gupta and Veerakamolmal

Time period (t) Item (P4) (Shelf-life

I1 I2 I3

4

5

7

6

8

217

10

9

=1, Quality =100%) (co nt.)

Number of new components requi red

0

0

0

0

0

0

0

0

0

0

Number of components discarded

0

0

0

20

272

174

0

0 498

0

Item (Ps) (Shelf-life

=1, Quality =100%) 390

450

470

440

360

390

Receipts from external sources

0

0

0

0

0

0

0

Ava ilable balance

0

34

128

254

542

648

628

Gross requirements

570 600

0

0

0

0

800 790

0

0

Net requirement

390

416

342

186

0

0

0

0

0

0

On hand f rom disassembly

424

544

596

728

648

628

800

790

0

0

Number used from disassembly

390

416

342

186

0

0

0

0

0

0

Number of new components requ ired

0

0

0

0

0

0

0

0

0

0

Number of components discarded

0

0

0

0

182

258

58 200 790

0

73

73

53

40

32

20

45

30

0

0

110 120

85

70

135

150

0

0

0

0

0

422 462

432

Item P6 Number of components discarded Item (P7) (Shelf-life

=2, Quality =100%) 95

100

Receipts from external sources

0

62

0

0

0

0

0

Available balance

0

32

130

203

269

344

377

95

6

0

0

0

0

0

0

0

0

127

136

183

186

160 134

180

190

0

0

95

6

0

0

0

0

0

0

0

0

Number of new components required

0

0

0

0

0

0

0

0

0

0

Number of components discarded

0

0

0

0

0

31

0

0

30

190

200

250

250

200

190

250

300

300

0

0

50

50

25

0

0

0

0

0

0

0

0

0

6

1

69

133

143

143 123

123

Gross requirements

Net requirement On hand from disassembly Number used from disassembly

Item (P8) (Shelf-life

=2, Quality =100%)

Gross requirements Receipts from external sources Available balance Net requ irement

150 200

219

199

121 117

157

157

0

0

On hand from disassembly

150

206

220

268

254

260

300

280

0

0

Number used from disassembly

199 121

117

157 157

150

200

219

0

0

Number of new components required

0

0

0

0

0

0

0

0

0

0

Number of components discarded

0

0

0

0

0

0

0

0

0

123

Table 14.5 (from previous page; continued over)

218

GREENER MANUFACTURING AND OPERATIONS

Time period (t)

I1 I2

4

3

6

5

7

9

8

10

Item (Pg) (Shelf-life = 0, Quality = 70%) Gross requ irements Receipts from external sources Available balance Net requirement

95

100

110

120

85

70

135

150

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

95

100

110

120

85

70

135

150

0

0

On hand from disassembly

96

100

110

91

85

70

87

73

0

0

Number used from disassembly

95

100

110

91

85

70

87

73

0

0

0

0

0

29

0

0

48

77

0

0

43

43

48

39

37

30

38

32

0

0

125

125

100

95

125

150

150

0

0

Number of new components required Number of components discarded

Item (Pl0) (Shelf-life = 0, Quality = 75%) Gross requirements

100

Receipts from external sources

0

0

0

0

0

0

0

0

0

0

Available balance

0

0

0

0

0

0

0

0

0

0

Net requirement

100

125

125

100

95

125

150

150

0

0

On hand from disassembly

102

126

141

172

147

138

187

191

0

0

Number used from disassembly

100

125

125

100

95

125

150

150

0

0

0

0

0

0

0

0

0

0

0

0

37

44

63

130

102

59

100

105

0

0

275

312

346

360

319

284

375

360

0

0

73

73

53

40

32

20

45

30

0

0

190

200

220

240

170

140

270

300

0

0

50

50

25

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

Number of new components required Number of components discarded Item (Pn) Number of components discarded Item (P12) Number of components discarded

Item (P13) (Shelf-life = 0, Quality = 75%) Gross requirements Rece ipts from external sources Available balance Net req u i rement

140

150

195

240

170

140

270

300

0

0

On hand from disassembly

141

151

195

211

172

141

210

228

0

0

Number used from disassembly

140

150

195

211

170

140

210

228

0

0

0

0

0

30

0

0

60

72

0

0

49

52

66

71

60

48

70

77

0

0

Number of new components required Number of components discarded

Table

14.5 (from previous page; continued opposite)

'4.

AGGREGATE PLANNING FOR END-OF-LiFE PRODUCTS

Time period (t) Item (P14) (Shelf-life

I1 I2

Gupta and Veerakamolmal

3

4

200 190

5

219

10

6

7

8

250

300

300

0

0

9

=0, Quality =75%)

Gross requirements

200

250

250

Receipts from external sources

100

100

50

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

Available balance Net requirement

100

150

200

200

190

250

300

300

0

0

On hand from disassembly

112

154

165

201

190

195

225

210

0

0

Number used from disassembly

100

150

165

200

190

195

225

210

0

0

0

0

35

0

0

55

75

90

0

0

50

56

55

68

64

65

75

70

0

0

195

225

235

220

180

195

285

300

0

0

0

0

0

0

0

0

0

0

0

0

Number of new components required Number of components discarded Item P15 (Shelf-life

=0, Quality =80%)

Gross requirements Receipts from external sources

0

0

0

0

0

0

0

0

0

0

Net requirement

195

225

235

220

180

195

285

300

0

0

On hand from disassembly

220

249

276

288

255

227

300

288

0

0

Number used from disassembly

195

225

235

220

180

195

285

288

0

0

0

0

0

0

0

0

0

12

0

0

80

87

111

140

139

89

90

72

0

0

275

312

346

360

319

284

375

360

0

0

350

415

456

494

446

414

525

500

0

0

0

95

100

110

120

85

70

135

150

0

0

100

125

125

100

95

125

150

150

0

0

195

225

235

220

180

195

285

300

0

0

195

225

235

220

180

195

285

300

0

0

195

225

235

220 180

195

285

300

0

Available balance

Number of new components required Number of components discarded Item P16 Number of components discarded Item P17 Number of components discarded Item P18 Number of new components required Item P19 Number of new components required Item P20 Number of new components required Item P21 Number of new components required Item P22 Number of new components required

Table 14-5 (continued)

220

GREENER MANUFACTURING AND OPERATIONS

Time period (t) Profit ($)"

1

2

- 2,651.71 -1,398.79

3

4

5

6

7

8

9

10

126.85

752.55

2,059.42

3,415.58

1,357.63

1,535.11

0.00

0.00

NUMBER OF PRODUCTS TO ORDER FOR DISASSEMBLY (UNITS)

WSl

73

73

53

40

32

20

45

30

0

0

WS2

65

70

105

90

90

80

80

75

0

0

WS3

62

66

WS4

75

103

0 ._--0

78 110

96

70

54

100

115

0

134

127

130

150

140

0

• Negative numbers indicate a/ass.

Ta ble 14.6 Results for integer programming optimisation in each period

Available balance of components in inventory at the beginning of period t (note that the number of items in inventory is influenced by the shelf-life of each component), Mathematically, B, = {maximUm[O,(N2V - N,U~)] + maximum[O,(B,_1 - rf~ss + p, - 1 - N?~f)], if(-rshelf > 0)

0, otherwise C;cq/trans

Cost of acquisition and transportation for product i (dollars per unit)

Cproc

Processing cost per unit time (e.g. cost for disassembling, sorting, cleaning, identification and packaging) (in dollars per unit time)

C disp tot

Total disposal cost (dollars)

cf~~c

Total processing cost (dollars) Vector representing the total demand (number of units) for component Pj Disposal cost factor (in dollars per unit of index scale) Disposal cost index of component Pj (index scale: 0 = lowest, 10 = highest). This index represents the degree of nuisance created by the disposal of the component (the higher the value of the index, the more nuisance the component creates and hence the more it costs to dispose ofit).

F(Ej)

Percentage (fraction) of recyclable contents by weight in component Pj

Ii

Row vector of i ones Identity matrix of rank i Set of selected leaf successors of the root node in product i Set of selected leaf successors of the subassembly node Aik

m

Total number of components in the problem space

n

Total number of products in the problem space

14.

AGG REGATE PLAN N I NG FOR END-OF-LI FE PRODUCTS Gupta and Veerakamolmal

NC1';, i)

221

Multiplicity matrix representing the number of each type of component Pi obtained from each type of product i Vector representing the number of each of product i in the batch to be disassembled Vector representing the total number of units of component Pi that may require recycling and/or disposal

Nre/dispC1'; , i) Matrix representing the number of units of component Pi obtained from product i that may require recycling and/or disposal Matrix representing the number of units of component Pi retrieved from product i used to fulfil the total demand for components Number of components discarded (not needed) after disassembly and/or that have reached the end of their shelf-lives in period t. Mathematically,

N/isc = maximum[O,(N?-~shelf - Nt~:shelf

-

rr-.o:S~elf+l

-

~~~elf+2

- ...

-If

TOSS ) ]

+ maximum[O,(pt_rshe1f - ,f-~~If)]

Number of components on hand from disassembly (total yield of the component from the supply of products) in period t Number of new components required (to be ordered) in period t. This demand occurs when there are not enough components on hand from disassembly (N?H) to satisfY the net requirement (r~et). Mathematically, N'(q =

maximum[O. (rr et - N?H)]

Number of components used from disassembly in period t. Mathematically,

1'; Q(Pj, i)

Componentj Quality control variable representing the percentage (fraction) of component obtained from each type of product i that is not damaged

~

Recycling revenue factor ($/unit ofindex scale) Recycling revenue index of component Pi (index scale: 0 = lowest, 10 = highest). This index represents the degree of benefit generated by the recycling of the component (the higher the value of the index, the more profitable it is to recycle the component) Gross requirements of products and components in period t Net requirement of components after accounting for receipts from external sources (Pt) and available balance (B tl in period t. Mathematically, r;et

=maximum[O, (rfross -

p, - B,l]

Rr~t

Total recycling revenue (dollars)

R~gie

Total resale revenue (dollars)

Si

Total number of subassembly nodes for product i

Si

Vector representing the supply of product i from all sources

222

GREENER MANUFACTURING AND OPERATIONS

Sit

Vector representing the maximum supply of products in period t

T

Planning horizon

T(Aik)

Time to disassemble subassembly k from product i (unit time)

Tass

Assembly lead-time (the time it takes to assemble the products)

T1 T1is' is

Total disassembly time for every component in product i (unit time) Total disassembly time for a set of selected components in product i (unit time)

T root

Time required to disassemble the root node of product i (unit time)

Tord

Ordering lead-time (the time required to obtain the products for disassembly)

l'i

Resale value of componentj (in dollars per unit)

W(Pj)

Weight (in pounds) of component Pj

y tot (Pj, i)

Matrix representing the total yield of the number of components Pj retrieved from product i

Z

Integer programming (optimal) objective value

II

ASSESSI NG LI FE-CYCLE ENVIRONMENTAL IMPACT Methodology to spur design of greener prod ucts and processes K. Ravi Kumar

Arvind Malhotra

University of Southern

University of

Dongwon Lee University of Southern

California, USA

North Carolina, USA

California, USA

One of the major debacles of the I970S and I980s in industrial management in the USA was the failure to recognise the importance of 'quality' as a strategic tool to manage business. Japan led the way in 'quality' and is currently enjoying a competitive advantage as a result. Fingers have been pointed at researchers for not having led the way. From this perspective, Garvin (I988) pointed out that 'strategic quality management' is the capstone of a trend that began more than a century ago. Garvin also contrasted the various developmental stages of quality management: inspection, statistical quality control, quality assurance and strategic quality management. As the case of'quality', a similar situation is in the offing for the case of'environmental quality'. Facing more stringent environmental regulations or cost pressures, corporate responses have evolved from compliance, pollution reduction, to pollution prevention (Coddington I993). The prevailing belief is that the 'environmental quality' of products, processes and activities in a company is directly related to the cost structure of the company. In addition, the mismanagement of environmental quality is accompanied by various negative impacts such as regulatory shutdown, lawsuits, bad publicity, liability and so on. In this case, Europe seems to have set the pace for management innovation based on 'environmental quality', viewing 'environmental quality' as an opportunity to gain market satisfaction or competitive advantage. For example, Germany has enforced a law where companies must take back their product after consumer use and assume responsibility for recycling. BMW has proudly announced that its cars are 95% recyclable. According to Coddington (I993), BMW is already in the 'environmental management'

224

GREENER MANUFACTURING AND OPERATIONS

phase whereby holistic systems are designed to assess the life-cycle environmental impact of products and processes (See Table 15.1). The goal of this chapter is to provide a methodology for capturing the environmental impact of a product and related processes in discrete-part manufacturing based on the life-cycle assessment (LCA) framework. This methodology will help managers to take action in making their products and processes environmentally friendlier.

115.1

A life-~ycle assessment framework

LCA was introduced for evaluating the environmental costs to human beings and the

natural environment ofproducing new products or modifYing existing products. It covers

Key drivers

Compliance

Pollution reduction

Pollution prevention

Environmental management

• Regulation

• Regulation

• Regulation

• Cost

• Cost reduction

• Market satisfaction

• Efficiency

• Regulation • Competition • Global change

Focus

• Control effluents outside plant

• Manage process on the plant floor

• Competitive • Redesign process at positioning manufacturing • Product and stage package development • Revenue capture • Performance measurement

Parts of firm affected

• Environment

• Environment

• Environment

• Operations management

• Manufacturing management • Supplier management

Methodology

• Inventory analysis

• Inventory analysis

• Inventory analysis

• Customers • Suppliers

• Life-cycle a na lysis (to compare alter• Impact analysis • Impact analysis natives and (to determine (to compare identifyopporopportunities product tunities for to alleviate alternatives) improvement) impact)

Table 15.1 Phases o/managing environmental quality Source: adapted from Coddington 1993

• All organ isationa I functions

'5.

ASSESSING LIFE-CYCLE ENVIRONMENTAL IMPACT Kumaret al.

225

raw material procurement, processing, manufacturing, use and services, disposal and waste management. The Society of Environmental Toxicology and Chemistry (SETAe) identified three major components of LeA (see Fig. 15.1): inventory analysis, impact assessment and improvement assessment (Fava et al. 1990; SETAe 1993).

Improvement assessment

Impact assessment

Inventory analysis

Figu re 15.1 Components of life-cycle assessment Source: SETAe 1993

• Inventory analysis constructs an inventory of information on materials use, energy consumption, and waste toxicity and quantity regarding raw materials handling, processing, manufacturing, fabrication, packaging, distribution, storage, use, service, disposal, re-use, recycling and waste management. •

Impact assessment takes into account risks posed to people and the natural environment during the manufacture or use of products. The establishment of inventories helps to determine fields that need impact assessment.

• Improvement assessment is used to identity any possible opportunities for reducing contamination and environmental impact. The advantage of using LeA is that the coverage is fairly complete, which makes the estimate of environmental costs more accurate. The provision of information to policymakers will enhance the modification of existing regulations and legislation. For example, the US Environmental Protection Agency (EPA) has adapted the LeA concept to update the Clean Air Act Amendments (White and Shapiro 1993). Through integration of these individual contributions, the holistic environmental burden of a system can be evaluated. Notwithstanding this, the following disadvantages have been shown:

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•

It is irrelevant to business. Fiksel (1993) indicated that organisations have found LCA is not very relevant to their business.

• It is extremely expensive. Obtaining a reliable LCA is extremely resource-intensive, time-intensive and money-intensive (Cooney 1995). •

It is difficult to collect data. The necessary data might be cumbersome, of vary-

ing quality and is sometimes not available (White and Shapiro 1993). • It is difficult to identifY attributes and assign weights. It is necessary to incorporate any attributes, at various levels and from various perspectives, that concern sustainable resource use, ecological health, environmental quality and human health and safety (Keoleian and Menerey 1994). Many methodologies have been developed for life-cycle inventory development, but there is still a great need for a comprehensive methodology to determine the life-cycle impact of a product. The methodology should be one that is managerially relevant and relatively inexpensive, that does not require extensive data collection, utilises objective data and that has clear system boundaries. Further, such a methodology, along with tools and techniques, should be aimed at facilitating management innovation in life-cycle environmental improvement analysis so that managers can determine the process in which problems reside from a diagnostic point of view.

'5.2 A proposed methodology In this section we propose a methodology for capturing the environmental impact of a product and its related processes throughout the life-cycle of discrete-part manufacturing. The methodology is provided as a vector of measurable attributes, categorised under the taxonomy of social impact (effect on people), ecological impact (effect on ecology) and economic impact (effect on the firm) that can be aggregated at the business unit level. The first vector, of social impact, deals with the effects on people of materials used and wastes produced. The second vector, of ecological impact, relates to the effects of recycling, re-use and remanufacturing of a product based on the notion of materials balance. The third vector, of economic impact, converts the social and ecological impact of the firm's operations into managerially relevant costs to the firm, expressed in dollar amounts.

15.2.1

A life-cycle impact model

Taking into account the life-cycle impact of a product, we propose to construct an 'environmental assessment chart' for the products that a plant or a strategic business unit manufactures. The life-cycle impact includes that caused by the following factors: • Purchasing and selling processes (covering parts, materials, supplies, services and finished goods)

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Receiving, storing and maintenance processes (covering parts, materials, supplies, equipment and finished goods)

• Production processes (including assembly and packaging) • Transportation processes (covering purchased items, work-in-progress, finished goods, equipment and waste) • Disposal processes (covering parts, materials, supplies, services, finished goods, equipment and waste) •

Product use (in terms of the environmental impact of recycling, re-use and remanufacturing)

As a starting point, we use the (product) life-cycle system suggested by the us EPA (Keoleian and Menerey 1993), which includes raw material acquisition, bulk processing, manufacturing and assembly, use and service, retirement and treatment disposal. Based on the EPA model, a life-cycle impact model is provided, including processes, equipment, transportation and packaging. This makes the proposed model more comprehensive (see Fig. 15.2). /

(

Key

Use and service

~

;mp'ct

Transportation impact

~ Information flow

Packaging impact

Processing scrap - - - - _.••...J impact

Manufacturing and assembly impact

Bill of materials

Disposal and retirement

Product remanufacturing ~ impact Supply re-use impact

I

Process Equipment Materials Transportation

Figure 15.2 Proposed life-cycle impact model

Product and supply recycle impact

Earth and biosphere

Process route sheets

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GREENER MANUFACTURING AND OPERATIONS

In the model, the core building blocks for the environmental assessment chart would be the bills of materials (BOM) charts and the process route sheets (PRSs). Most manufacturing organisations already possess manufacturing BOMs and PRSs. The BOMs contain hierarchical information on the product structure, including purchased and produced parts. The PRSs contain detailed information on production, assembly and transportation processes, including part numbers, machine tools, tooling, supplies, jigs and fixtures and so on. Quite possibly, additional information on scrap generated and supply replenishment will need to be used to embellish the BOMs and the PRSs if such information is not already present. The packaging process is typically not part of the PRSs, but in our model the details of the packaging process are included.

75.2.2

The vector of impact of product on the environment

The 'environmental assessment chart' (Fig. 15.3) is constructed by having two transparent planes overlap. In one plane, it resembles a BOM structure, with each element depicted clearly. Each element might be a component (purchased or produced), a subassembly, an assembly, the final product or the packaged product ready to ship. In another plane, the environmental assessment chart depicts various processes (insertion, machining, soldering, assembly as well as the supplies required and the scrap generated) that are needed to put together elements at the lower level of the BOM to produce the elernent at the upper level of the BOM. An 'environmental performance vector', which consists of measurable attributes of environmental impact, can be associated with each element in the BOM view of the environmental assessment chart. It is named a vector of impact of the product on the environment (VIPE; see Fig. 15.3). For a complete description of the VIPE, see the appendix to this chapter. As already discussed, the environmental attributes are categorised into those with an impact on people, those with an impact on ecology and those with an impact on economy. In contrast to environmental impact assessment methods, environmental risk assessment methods typically consider the categories in terms of transport mechanisms: that is, in terms of air, water and soil contamination. These categories of environmental assessment are chosen to accurately specifY the impacts of (Fig. 15.2): • Manufacturing and assembly process • Scrap processing • Packaging •

Transportation

•

Use and service

•

Re-use, recycling and remanufacture of the product

•

Re-use of components, supplies and packaging

• Final disposal Two aggregation problems may arise: aggregation of impacts on an attribute and aggregation across attributes. Aggregation of impacts on an attribute takes place when

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Use of tool to assess the life-cycle environmental impact of products

Prioritise products based on the VI PE

Product 4

(I prod) 4

Identify the product with the greatest environmental priority

Component 1

(I

i;oo)

I

Sub-component 1

t

Part 1

Part 3

(li~)

(li~)

(li~)

t

t

Part 1

(li;~)

Part 1

(li~)

+

Part 1

Part 1

Part 2

(Ii~)

(li~)

Identification of major opportunity for environmental improvement enables focus of redesign efforts. Subsequent to redesign, the tool is used again to assess whether the impact has been reduced or shifted elsewhere.

Analyse and identify the major source of environmental improvement

(li~)

Identification of major environmental opportunity based on the largest jump In numerical value of I prod from one level to another. Information for analysis drawn from bill of materials and process route sheets.

VIPE = vector of impact of the product on the environment, fPmd

Figure 15-3 Environmental assessment chart

two or more elements of the lower level in the BOM are put together to obtain an element of the upper level in the BOM. Aggregation across attributes takes place when we try to draw different attributes within an element together. Various aggregation techniques exist, including weighted averaging, multi-attribute analysis, scale conversion to common units, scorecard-type measurement conversion and so on. However, it is not our intention in this chapter to force the adoption of an aggregation system that does not make sense to managers; rather, we will describe the environmental performance vector in as concise and compact way as possible.

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'5.3 Components of the vector of impact of product on the environment In this section, we present the components of the VIPE. These are the sub-vectors that attempt to capture the life-cycle impact of a product on environment. To reiterate, we propose that the VIPE include the following major components: • Social impact • Ecological impact • Economic impact The VIPE will provide measurements for each element of an environmental assessment chart, which is a combination of BOMs and the PRSs In the following, each of these components will be described in turn.

15.3.1 Social impact This component of the VIPE deals with the impact on people of materials used or produced as waste in manufacturing a product. This component of the VIPE has nothing to do with cost. Rather, this component involves the identification of materials that are used as inputs and that are produced as waste-streams. The social impact vector (called the 'red" vector) consists offour sub-vectors describing the social impact of materials • Used as input • Produced as solid waste-streams • Produced as liquid waste-streams • Produced as gaseous waste-streams Each of these sub-vectors again includes four elements that capture the following information: Regarding the production process, materials can be placed into one of two categories: materials in input processes and materials produced as waste-streams (solid, liquid and gaseous). In the view of regulatory agencies, materials can also be classified into two categories: red materials and non-red materials. Red materials are further distinguished into two types in terms of the degree of toxicity: banned materials and regulated materials. Banned materials are those whose use is absolutely forbidden by regulatory agencies (e.g. by the us EPA). Regulated materials are those that can be used but in a moderate amount, as designated by regulatory agencies. These materials have certain standards associated with their use. A deviation from the standard may result in punitive action by the regulatory agencies. The regulated materials generally have a priority associated with them in which higher-priority materials have higher risks associated or have more stringent standards associated with them. Non-red materials are materials that are not regulated or banned. This does not mean, however, that they will not be so in the future. Some materials that have been in use for a long time are now being regulated or banned (e.g. chlorofluorocarbons [CFCsJ). At present, our vector does not account for a potential change in the categorisation of materials.

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• Number of red materials, Nred •

Number of banned materials, Nban

•

Number of regulated materials, Nreg

• Priorities of regulated materials,

preg

Therefore, the social impact VIPE, I~:;~d , consists of the following components:

• • • •

(Med Nyan Meg Pje g) (N~ed N~an Nreg p~eg) s

(Nfed Nyan Nje g Pieg ) Nreg (Ngred N ban g g

p~eg)

where subscripts i, s, I and g refer to materials used as input, and materials produced as the solid, liquid and gaseous waste-streams, respectively

15.3.2 Ecological impact This component of the vector is based on the notion of balance in terms of value. The value of the resources used to produce a product should be managed efficiently to balance materials usage in a closed-loop fashion. For this purpose, the three Rs of the efficient management of the balance of materials are proposed: re-use, remanufacture and recycling. •

Re-use is the recovery of usable products or components that would otherwise be destined for remanufacture, recycling or disposal.

•

Remanufacture is the conversion into usable products or components from unusable products or components that otherwise would be destined for recycling or disposal.

• Recycling is the recovery of virgin materials from products or components that otherwise would be destined for disposal. The three Rs proposed above are viewed not only as a mechanism for reducing environmental impact by reducing the amount of waste released to the environment, but also as a mechanism for reducing consumption of resources in general by re-using materials already extracted from the environment rather than relying on virgin materials.

15.3-2.1 Components of ecological impact The ecological impactVIPE, I~~~d , consists of two categories. One category concerns the impact of the design of the product, the other concerns the impact of three wastestreams: solid, liquid and gaseous. Thus, the ecological impact vector (also called the 'resource conservation' vector) consists of four sub-vectors. These are the ecological impact of: • Product design •

Solid waste-streams

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• Liquid waste-streams •

Gaseous waste-streams

In the first sub-vector, we suggest there should be four elements considered based on the above definitions of the three Rs, for the efficient management of materials. The elements of the ecological impact due to product design are: • Re-usability,

Rre-use

• Remanufacturability, Rreman • Recyclability, Rrecyc •

Recycled input percentage, precyc

In each of the remaining sub-vectors, we propose the use of two elements to evaluate the impact of waste-streams: •

The number of the specified waste-streams produced, Nwaste+

•

The number of the specified waste-streams recycled,

Nwaste-

In sum, the ecological impact VIPE is as follows (where, as before, subscripts s, 1 and g refer to the solid, liquid and gaseous waste-streams, respectively): •

(Rre-use Rreman Rrecyc precyc)

•

(N~aste+ N;aste-)

•

(Nt aste+ Nt aste -)

•

(N;aste+ N;aste-)

15.3.2.2 Measures of elements of the ecological impact of product design

In this section we propose a method for measuring elements of the first sub-vector product design. To do so, it is imperative to understand the concept of 'degree of dismantlability (or disassembly)' in discrete-part manufacturing. Suppose that a component XI goes through some process in which itis combined with another component, X2, to give a component (or product) Z (see Fig. 15.4). Also, suppose that Xl is itself composed of components ofY l and Y 2 .

Figu re 15-4 Process flow: an example

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The degree of dismantlability of Xi from its parent product (or component) Z, D(X i I Z) can be defined as follows: 0, if Xi is not dismantlable from Z without being affected itself 1 -~ V(Z)

L a

V(X a ), if Xi is dismantlable but affects other components

1, if Xi is dismantlable, affects no other components [15.1] and is not affected itself where V(Xa) and V(Z) are the monetaryvalues 2 of the affected components, X a, and that of the parent Z, respectively. In other words, the degree of dismantlability of Xi when it is the component ofZ depends on to what extent it can be dismantled without affecting itself and other components Xa. The degree of dismantlability is 0, if Xi cannot be dismantled from its parent Z without affecting itself. The degree of dismantlability is 1, ifX i can be dismantled from its parent Z without affecting itself as well as without affecting all other components. We can think of a case where X i can be dismantled from its parent Z without affecting itself but where the dismantling process affects some of the other components Xa' In this case, the degree of dismantlability falls between and 1. Based on the concept of degree of dismantlability, the four elements in the first subvector of the ecological impact VIPE relating to product design can be measured. Re-usability, Rre-use, is measured in terms of the degree to which Xi can be dismantled from its parent Z; that is,

°

we-use

=

D(Xi I Z)

[15.2]

where D(X i I Z) is as defined in Equation [15.1]. In the special case where the component has no parent, then the dismantlability is taken as being equal to 1: [15.3] Remanufacturability, Rreman, is measured in terms of the proportional value of subcomponents, Y j , that can be dismantled from Xi and in terms of the proportional value of sub-components that can be dismantled from Y j • Remanufacturability should be traced back from the lower-level components up to the base components. weman(x;)

=

D(X i )

=

[LD(Yjl Xi)D(Yj)V(Yj )]

[L V(yj)r

1

[15.4]

where, for the special case where Y j is a base component (i.e. where Y j has no sub-components), 2 The value, however, needs to be appropriately defined: for example, purchase cost, disposal cost or resale price, etc.

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DCY)

=

1

[15.5]

and where VCY) is a monetary value ofYj . Recyclability3 of Xi, Rrecyccx i ), is measured in terms of the proportional percentage of the base components or materials obtained by subjecting Xi to certain processes. Recycled input percentage, precyc, is measured in terms of the proportional value4 of the materials, base components or components that have been recycled relative to the total value ofinputs to Xi.

15.3.3 Economic impact For any environmental impact measure to be managerially relevant, it should have certain dollar figures (tangibles) to indicate to managers the extent to which their products and processes are environmentally friendly. The economic impact component of the VIPE deals with this issue. It contains three sub-vectors of cost of impact: • The social cost ofimpact (effect on people) •

The ecological cost ofimpact (effect on materials balance)

• The cost of waste-streams

15.3.3.1 Social cost of impact The social cost of impact can be represented by two elements: •

Use cost

• Litigation cost The first element is the cost associated with using environmentally unfriendly materials (earlier categorised as 'red' materials). These costs are further broken down into: • Disposal costs • Procedural costs - Costs associated with handling banned or regulated materials - Operating costs - Notification costs - Reporting costs 3 Recyclability has both technological and economic implications. On the technological side, recyclability requires the existence of methods that can be used to extract the constituent materials from an obsolete product. On the economic side, recyclability depends on the existence of a market for these extracts. Furthermore, there must be a balance between the cost of employing the extraction technology and the quality of the extract such that the recycler has an economic incentive to undertake the recycling. Nothing is truly recyclable if there is no market for the recyclate. Collecting and generating recyclate is no guarantee that there is a demand for the resulting resource. 4 Further research should be done how we measure the values of recycled inputs as well as the total value ofinputs to Xi.

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Preventative and safety costs - Costs associated with safeguarding against the negative impact of using banned or regulated materials - Monitoring and testing costs - Record-keeping costs - Training costs - Inspection costs - Labelling costs - Medical surveillance costs - Penalties and fines

• Transportation costs - Costs of transporting the 'red' materials to and from the manufacturing facility The second important constituent of the social costs is the likelihood of being involved in litigation as a result of using certain materials. This can be represented in terms of the number oflawsuits that have been associated with 'red' materials in the past 5-10 years and the range of dollar amounts accrued as punitive costs associated with the lawsuits. This aspect of the social cost is not included in our vector, but may be an issue for future research.

15.3.3-2 Ecological cost of impact The ecological cost of impact includes costs accrued to the environment as a result of company practices. These costs are non-re-use cost, non-remanufacture cost, and nonrecycling cost. Non-re-use cost, C re-use-, is the loss of economic value of usable products or components destined for disposal. It is the cost caused to the environment by disposing of products or components that cannot be re-used as a consequence of their design. It is defined as follows:

cre-use- (Xi) =

I

V(X i ) [1 - D(Xi Z) - RPart(X;)]

[15.6]

where Rpart(X i ) is the partial recoverability factor of Xi, V(X i ) is the monetary value of Xi, and D(Xi I Z) is the degree of dismantlability of Xi from Z, also equal to the re-usability of Xi, we-use (X i). The non-remanufacture cost, C reman-, is the loss of economic value of non-re-usable products or components that are destined for disposal. It is the cost caused to the environment as a result of disposing of products or components that were not re-usable and that at the same time could not be remanufactured as a consequence of their design. It is defined as follows: creman-

(Xi)

= V(X i ) -

L D(Yjl Xi) V(Yj ) j

= V(X i ) -

L we-use (Y

j)

j

V(Yj )

[15.7]

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The non-recycling cost, crecyc-, is the loss of economic value of products or components that could have been realised by recycling the product rather than disposing of that product. It is the cost caused to the environment by disposing ofproducts or components that could have been recycled. It is defined as: [15.8]

15.3-303 Cost of waste-streams In the above sub-sections we have discussed the economic impact of materials used (social impact) and of products or components not re-used, not remanufactured or not recycled in terms of material balance (ecological impact). In addition, we propose to account for the economic impact of waste-streams (i.e. the cost attributable to wastestreams). The cost items that should be included in the cost of waste-streams are the same as those included in the social cost impacts described earlier.

15.3.3-4 Summary The economic impact components of the VIPE can be summarised as follows: •

Asocial cost associated with the use of ,red' materials

•

A sub-vector representing the ecological cost in terms of non-re-use, nonremanufacturing and non-recycling

•

Acost attributable to waste-streams

'5.4 Illustrative application In this section, the above-described methodology is applied to assess a laser-printer toner cartridge from an electronics company in the laser recycling industry. The company remanufactures various types oflaser-printer toner cartridges. We have selected a major product in terms of the production volume of each product remanufactured by the company. In applying the methodology, we restricted the scope of the analysis to the assembly processes of the product. These processes are useful for comparing the environmental impacts of the originally manufactured product compared with those of the remanufactured product. From the assembly process route sheet, we have chosen the following nodes (i.e. elements in Fig. 15.3) at which to construct the vectors: • Node A: final product •

Node B: assembled cartridge - Node B 1: waste hopper - Node B 2 : toner reservoir

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• Node C: casing with cleaning blade • Node D: toner hopper with doctor blade • Node E: glued toner hopper •

Node F: filled bottom hopper

•

Node G: sealed bottom hopper

In the following sections we provide a summary of the environmental impact of the product.

15.4.1 Social impact From Table 15.2 we can see that the product is not using any 'red' material (banned or regulated materials) and furthermore does not produce any harmful waste-streams. Therefore, the product has no social impact.

Node Description

Materials

Waste-streams

g g g N reg N reg M ed N~a n M eg p[e N ;ed N~a n N;e p ;e N Ired N Iban I pieg N gred N gban g p~eg

A

Final product

0

n/a n/a n/a

0

n/a n/a n/a

0

n/a n/a n/a

0

n/a n/a n/a

B

Assembled cartridge

0

n/a n/a n/a

0

n/a n/a n/a

0

n/a n/a n/a

0

n/a n/a n/a

B1

Waste hopper

0

n/a n/a n/a

0

n/a n/a n/a

0

n/a n/a n/a

0

n/a n/a n/a

C

Casing with cleaning blade

0

n/a n/a n/a

0

n/a n/a n/a

0

n/a n/a n/a

0

n/a n/a n/a

B2

Toner reservoir

0

n/a n/a n/a

0

n/a n/a n/a

0

n/a n/a n/a

0

n/a n/a n/a

0

Toner hopper with doctor blade

0

n/a n/a n/a

0

n/a n/a n/a

0

n/a n/a n/a

0

n/a n/a n/a

E

Glued toner hopper

0

n/a n/a n/a

0

n/a n/a n/a

0

n/a n/a n/a

0

n/a n/a n/a

F

Filled bottom hopper

0

n/a n/a n/a

0

n/a n/a n/a

0

n/a n/a n/a

0

n/a n/a n/a

G

Sealed bottom hopper

0

n/a n/a n/a

0

n/a n/a n/a

0

n/a n/a n/a

0

n/a n/a n/a

n/a

= not applicable

N"d = number of red mat eria ls number of banned materi als N'eg = number of regulated materi als N ban =

Ta ble 15-2 Summary of social impact

p reg = priority of regulated material s

Subscripts i, s, I and g refer to materials used as input, and materi als produced as the solid, liqu id and gaseous wa ste·streams, re spectively

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15.4.2 Ecological impact The ecological impact of the product design is summarised in Table 15.3. At node G (the sealed bottom hopper), the re-usability of the component is 1, which means that node G can be dismantled from the parent component (i.e. node F [filled bottom hopper]) without affecting other components. Product design

Node Description

Waste-streams

Rre-use

Rreman

Rrecyc

precyc

N,;aste+ N,;aste- Nwaste Nwaste- Ng3ste+ NwasteI

g

I

A

Final product

1.00

0.97

0.68

0.33

2

2

0

n/a

0

n/a

B

Assembled cartridge

1.00

0.97

0.72

0.35

0

n/a

0

n/a

0

n/a

B1

Waste hopper

1.00

1.00

0.85

0.23

2

0

0

n/a

0

n/a

C

Casing with cleaning blade

1.00

1.00

0.58

0.69

0

n/a

0

n/a

0

n/a

B2

Toner reservoir

1.00

0.92

0.55

0.55

2

0

0

n/a

0

n/a

D

Toner hopper with doctor blade

1.00

0.92

0.53

0.54

0

n/a

0

n/a

0

n/a

E

Glued toner hopper

1.00

0.91

0.50

0.52

1

0

0

n/a

0

n/a

F

Filled bottom hopper

1.00

0.88

0.35

0.38

4

0

0

n/a

0

n/a

G

Sealed bottom hopper

1.00

0.88

0.75

0.88

1

0

0

n/a

0

n/a

n/a

= not applicable = re-usability of product or component

w ecyc

= percentage recycled input used as material

w eman =

NWaste+

= number of waste-streams produced

R'"CYC

remanufacturability of product or component = recyclability of product or component

NWaste- = number of waste-streams recycled Subscripts s.1 and g refer to the solid , liquid and gaseous waste-stream s, respectively

we · use

input

Table 15.3 Summary of ecological impact The remanufacturability of the sealed bottom hopper is 0.88, which means that 88% of the value of the sub-components consisting of this component (node G) can be dismantled without affecting other components. The recyclability of the sealed bottom hopper is 0.75, which means that 75% of the value of the sub-components of the component (node G) can be recovered by recycling. To obtain these results, we used the cost of the product. The recycled input percentage is 0.88, which means that 88% of the value of the component (node G) consists of recycled input materials. We can also see the changes in value of the vector elements in terms of ecological impact. First, when the product moves from node G to node F, the recyclability and the recycled input percentages drop abruptly. In the case of recyclability, this is because of the toner, which is not recoverable, in the filled bottom hopper, in contrast to the bottom hopper, which can be recovered. The recycled input percentage reflects the fact that the toner used as input material is purchased as new rather than being recycled.

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When the product moves from node C to node B], the recyclability rises from 0.58 to 0.85. This is because the value of the recoverable drum at node B] is relatively high, whereas at node C the cleaning blade cannot be recovered. The value of the blade is relatively high compared with the total value of the casing and blade. From node C to node B] the recycled input percentage drops from 0.69 to 0.23. This is because, although the drum could be recycled, a new one is always used. Considering the final product (node A), this product can be dismantled to recover 97% of the total value of all the components. Some 68% of the value of the components of the product can be recovered by subjecting it to recovery processes, and 33% of the value of the product is in the form of recycled input materials.

15.4.3 Economic impact At node G in Table 15.4, the social cost of the product is $0.00, which means that node G (i.e. the sealed bottom hopper) has no 'red' material and so there is no cost associated with using environmentally unfriendly materials. Node

Description

Social cost {W

Cost of wastestreams {$r t

Ecological cost {$}

non-re-use t non-reman* non-recyc"

A

Final product

0.00

0.000

3.135

17.38

0.000

14.33

0.000

B

Assembled cartridge

0.00

0.000

0.036

B1

Waste hopper

0.00

0.000

1.480

4.434

0.022

C

Casing with cleaning blade

0.00

0.000

0.947

2.658

0.000

B2

Toner reservoir

0.00

0.000

0.179

9.709

0.127

D

Toner hopper with doctor blade

0.00

0.000

0.298

9.622

0.000

E

Glued toner hopper

0.00

0.000

0.832

9.243

0.022

F

Filled bottom hopper

0.00

0.000

6.854

8.476

0.044

0.00

0.000

1.573

1.547

0.022

G

Sealed bottom hopper

• t

The social costs associated with the use of , red' materials The ecological costs in terms of non-re-use The ecological costs in terms of non-remanufacturing .. The ecological costs in terms of non-recycling tt The costs attributable to waste-streams

*

Table 15-4 Summary of economic impact

In terms of ecological costs, the non-re-use cost is also $0.00, which means that there is no loss of economic value of usable components destined for disposal. In other words, there is no cost caused to the environment by disposing of components that, as a consequence of their design, cannot be re-used, because the sealed bottom hopper can be dismantled from the parent component (i.e. the filled bottom hopper) and re-used for remanufacturing.

.

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GREENER MANUFACTURING AND OPERATIONS

The non-remanufacturing cost is $1.573. This amount is a loss of economic value of non-re-usable components that are destined for disposal. This represents the cost to the environment of disposing of components that are not re-usable and that cannot be remanufactured because of their design. Here, the calculation of the non-manufacture cost is shown. It is calculated by Equation [15.7]. VeX;) is $6.1858 (i.e. the value of the sealed bottom hopper) given by the company. V(Yj ) is $4.613 (i.e. the value of the bottom hopper) also given by the company. D (Yj I Xi) is the re-usability ofYj . Because Y j has no sub-components, it is 1 (see Equation [15.5]). Therefore, using Equation [14.7], the non-remanufacture cost is $1.573 (i.e. $6.1858 - (1 x $4.613) = $1.573). The non-recycling cost is $1.547, which means that there is a loss of economic value relating to components that could be recycled yet are destined for disposal. It is also a cost to the environment resulting from the disposal of components that could have been recycled. The cost is calculated by multiplying the value of the sealed bottom hopper by [1- the recyclabilityofthe sealed bottom hopper] (i.e. $6.1858 x (l - 0.75) = $1.547). The cost of the waste-stream at node G is $0.022. It is the disposal cost of the empty glue can.

'5.5 Conclusions and future research In this chapter we have presented a methodology to capture the environmental impact of a product and its related processes throughout the life-cycle in discrete-part manufacturing. The methodology provides a means by which a firm can obtain the environmental status of its operations by using bills of materials and process route sheets, which any manufacturing firm already has in its possession. The environmental status is represented by a vector of measurable attributes, categorised under the taxonomy of social impact (effect on people), ecological impact (effect on ecology) and economic impact (effect on the firm) that can be aggregated at the business unit level. In this way managers can understand the extent of the impact of their products on the environment and recognise from where the differences in impact stem. More specifically, they can see where they are using materials inefficiently and where emissions or wastes can be reduced. The implementation of the methodology enables managers in different positions, such as plant managers and general managers, to visually appraise the environmental status of their operations and communicate with each other in the same language. Given the vector of environmental status, managers can 'zoom in' on components, supplies or processes that have created a significant environmental impact and concentrate efforts to diminish their environmental impact. In so doing, they can appropriately and quickly redesign their products and processes to enhance the environmental friendliness of those products. There are also limitations to the methodology proposed in this paper which need to be studied as future research. First, in improving the environmental impact measurement: •

Two aggregation problems may arise both in the aggregation ofimpacts on an attribute and in aggregation across attributes. Appropriate aggregation methods should be studied.

'S.

•

ASSESSING LIFE-CYCLE ENVIRONMENTAL IMPACT Kumaretal.

241

To measure an ecological vector, we used monetary terms in the equation to represent the balance of material maintained. However, weight, as an alternative unit, can also be used. Further study should investigate these measurement approaches.

Second, in managing suppliers: • Often, data for purchased components is not easily obtained from vendors, especially when the vendors do not want to release the information. This methodology can be developed as a tool to evaluate vendors incorporating environmental criteria. Third, in enhancing environmental service quality: •

Data describing environmental impacts after the distribution of products to customers is not easily obtained. This methodology can be used as a tool for translation of customer satisfaction into identifiable and measurable conformance specifications for environmentally friendly design of product and processes.

Last, in incorporating uncertainty: •

The vector does not capture the probabilistic nature of the model. In reality, there are many things that should be considered from a probabilistic view.

• In the economic cost vector, the cost oflong-term liability and lawsuit costs are not easily estimated. Methods for doing this must be developed.

Appendix: vector of impact of product on the environment Social impact sub-vector

'Red' materials in product:

Nr

•

Number of ,red' materials in the product,

•

Number of banned materials in the product, Nfan

ed

• Number of regulated materials in the product, •

Nr

eg

Priority of regulated materials in the product, preg

'Red' materials in waste-streams • Number of 'red' materials in waste-stream x (x = s, 1 or g, relating to solid, liquid and gaseous waste-streams, respectively), N~ed

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GREENER MANUFACTURING AND OPERATIONS

• Number of banned materials in waste-stream x, N~an •

Number of regulated materials in waste-stream x, N~eg

•

Priority of regulated materials in waste-stream x, p~eg

Ecological impact sub-vector

Product design •

Re-usabiIity of the product or component, Rre-use

• Remanufacturability of the product or component, Rreman • Recyclability of the product or component, wecyc •

Percentage recycled input to the product or component, precyc

Recyclability of the waste-streams •

Number of waste-streams produced of type x (x = s, I or g, relating liquid and gaseous waste-streams, respectively), Nxwaste+

• Number of waste-streams recycled of type x, N.,wasteEconomic impact sub-vector (c

SOC)

(Cre-use- Creman- crecyc-) (Cwaste)

•

Social costs associated with the use of ,red' materials, C SOC

• Ecological costs in terms of costs of non-re-use,

Cre-use-

• Ecological costs in terms of costs of non-remanufacture, • Ecological costs in terms of costs of non-recycling, • Costs attributable to the waste-stream,

Cwaste

Creman-

crecyc-

to

solid,

em TOOLS FOR CLOSED-LOOP MANUFACTURING Ad J. de Ron and Frans W. Melissen Eindhoven University ofTechnology, the Netherlands

There is no doubt that human activities affect the environment. The current status of global resources of raw materials and fossil energy carriers indicates that we have to treat these resources sensibly. This means that losses and waste have to be reduced or even prevented, emissions and pollution have to be avoided and the consumption of raw materials and fossil energy carriers has to be decreased. These goals can be realised by altering business processes in such a way that products and production systems will be less harmful to the environment (e.g. generate minimal amount ofwaste and pollution), scarce materials are substituted and end-of-life products and their components and materials are re-used. The realisation of such a production ambition requires sensible effort directed towards continuous improvement ofefficiency, quality and flexibility, in all phases of the product life-cycle, resulting in saving considerable amounts of time, money and materials while avoiding waste. In this chapter, we address this ambition by proposing an alternative way of managing environmental requirements. Our approach might not be as 'high-minded' as some other doctrines and models available, but we feel strongly that our approach is a realistic and business-like way of dealing with today's business challenges and opportunities. In this chapter we address a number of specific tools and techniques already available to most companies that can be used to meet environmental requirements. We will show that sensible effort directed towards continuous improvement of efficiency, quality and flexibility will logically result in sustainable production and will, in fact, close the manufacturing loop. Attaining these goals will not require fundamental changes in the way a company should be managed, and the solutions are not part of any new 'green religion'. Striving for sustainable production and closing the manufacturing loop may simply require optimal application of known and available tools and techniques. In the remainder of this chapter we will be looking at three sets of tools, corresponding to the product design phase, the manufacturing phase and the recovery phase of an operation. These tools will include design for recovery (failure mode and effect analysis

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[FMEA], quality function deployment [QFD]) , qualitative and quantitative tools in the manufacturing phase (statistical process control [SPC]) and planning and modelling efforts (online and offline simulation) relating to recovery activities.

16.1

The product design phase

Striving for sustainable production and closing the manufacturing loop implies introducing a new set of requirements into the product design phase. Environmental requirements (including energy and material usage) should be included in the deliberations in this phase and should be treated equally to conventional requirements, such as business economic constraints and market characteristics. Specific aspects of sustainability should be addressed in specific stages of the design process, as shown in Table 16.1 (de Ron 1999). DESIGN PHASE

Problem-defining stage Procedure-determining stage

Environment

Energy

Raw materials

Environmental burden Energy usage

Forming stage

Materials choice

Table 16.1 Design stages: addressing sustainability aspects The environmental burden directly associated with the production and usage of a certain product should be addressed in the problem-defining stage. After all, the decision to start production of a certain product clearly implies some sort of environmental consequence. The future presence of the product will have a disadvantageous influence on the environment, involving energy consumption and raw material consumption of some type and amount. Therefore, from a sustainability viewpoint, it is extremely important that only products with a real demand in the market and a reasonable chance of success are actually designed and taken into production. Although this statement appears simple and obvious enough, research indicates that only 20% of all products brought on the market prove to be successful in the end. This simple fact alone means that 80% of all products ever designed and produced have a superfluous negative environmental impact and that raw materials and energy carriers are consumed without any clear functional benefit. Moreover, this 80% represents costs that will never generate any profit. Therefore, striving for sustainability and closing the manufacturing loop, which should result in the avoidance of losses and waste, requires addressing these considerations in the product design phase. The decision to start production of a certain product should always be preceded by an in-depth market investigation to ensure that that particular product has a realistic chance of success on the market. One of the main decisions in the procedure-determining stage is assessing the installed power of the product. Therefore, decisions in this stage have a major impact on

16.

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245

the total energy consumption in the usage phase. Let us illustrate this with a simple example: if the product requires the heating ofwater, and ifin the procedure-determining stage the designers indicate that this heating has to be executed in a very short time, the installed power of the product has to be rather large. At first glance, a large installed power requirement might not necessarily result in higher energy consumption than a smaller installed power requirement, since the time needed to heat the water will be proportionally shorter. However, a large installed power requirement will result in larger energy losses and will therefore result in larger total energy consumption for producing the same end result. This simple example clearly shows the major influence on the consumption of energy carriers of the choice between two seemingly equivalent alternatives in the procedure-determining stage. The forming stage of the product design process is closely related to the resulting consumption of raw materials, because this stage will determine the materials (type and amount) that will be used. From a sustainabilityviewpoint, the central theme in this stage is material reduction. This can be achieved by: • Keeping the material content per product as small as possible (often this will result in a lighter product, which could also result in a reduction in environmental load) • Striving for an optimal (not maximal!) product life-cycle (see the next section) • Ensuring optimal recovery opportunities for the product and its parts In order to ensure minimal material content and therefore minimal raw material consumption, a number of general design rules (Cramer 1996; Penev 1996; Warnecke and DUll 1996) can be applied: • Use small dimensions for the product •

Minimise the number of parts

•

Minimise resulting material losses during production by addressing this issue in the design phase

•

Minimise the number of processes needed to produce the product

• Standardise and simplifY the materials and components • Apply parts and materials indicators •

Apply a minimum number of different materials that can be separated easily

• Avoid additives to plastics • Apply product structures and connections that ensure easy disassembly

16.2

Optimal life-cycle and design for recovery

In the previous section we mentioned that the life-cycle of products should not be maximised but optimised. Products in areas that are subject to fast technological changes

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GREENER MANUFACTURING AND OPERATIONS

should have short life-cycles, otherwise they will be discarded for reasons other than technical failure, resulting in waste and losses that could have been avoided if the product were designed with an optimal life-cycle in mind. Moreover, if designers aim at maximising the product life-cycle, products could stay in operation beyond their technological life-cycle, which could then result in undesired environmental consequences. A widely known example of this principle is that of cars. Cars that last for more than a decade can have quite a negative effect on the consumption of fossil fuels and the amount of car exhaust, as newer cars usually need far less fuel and are much cleaner (de Ron 1999). Designers could apply a number of different methods and techniques to ensure an optimal life-cycle for the product. First, FMEA techniques can be applied to estimate the failure behaviour of products and suggest how the design can be adapted if necessary. With such an analysis, available experience and knowledge is used to determine and show the results of potential failure, with the aim of reducing the occurrence of such a failure. As an example of the way this technique can be applied, Table 16.2 shows an FMEA for a pump (Lockyer IT al. 1988).

Component Cams

Bearings

Valve holder

Failure mode

Effect of failure

• Fatigue • Cracking

• Loss of power • Complete functional failure

• Cracking across bridge

• Cosmetic oil seepage

• Erosion in bore

• Blockage • Loss of

performance

Cause offailure

P

S

3

2

• Nozzle blockage • Dirty or no oil • Poor surface finish

0

C

Corrective action

54 Determine failure

9

definition, change operating pressure

2

3

10

60 Redesign die case pumps

• High flow rates

4

4

9 144 Sa m pies to be tested and redesign initiated

• Cavitation

if necessa ry

Valve

• Consistency • Loss of engine • Assembly wear performance • Adjustment • Delivery balance • Poor filter • Water

4

9

5 180 Full machine test and examination of system deta iI

Valve springs

• Fatigue, • Erosion . Wear

• Loss of engine performance

• Hydraulic duty

4

Peg

e Wear • Fracture

e Loss of engine performance

e Hydraulic duty

3

5

2

Plunger

• Slot polishing

• Seizure leading to functional failure

• Erosion of pump body

1

9

10

P = 'probability' of occurrence 5 = severity offailure = difficulty of detection

o

3

3

36 Specification detail to be examined

30 Adjust injection rates

90 Change procedure for hardening and grinding, to be reassessed after tests

C = criticality index (C = PSD) Values of P, Sand D range from 1 to 10

Table 16.2 Failure mode and effect analysis of a pump

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247

Another possibility is to design in modules. This approach ensures that technological innovations do not automatically result in discarding the product, because the module containing an 'old' technology could be exchanged for a new 'up-to-date' module, thereby upgrading the product to state-of-the-art technological status. An additional benefit of modular design is that the product assortment can be extended considerably with a relatively small number of different modules. This will result in cost reductions, because the number of different parts that have to be produced is relatively small; also, learning effects, larger production series and easier maintenance activities can ensure further economic advantages. The design phase should also specifically address the end of the life-cycle of products and recovery opportunities and possibilities at that point. Specific attention should be directed towards introducing recovery requirements into the design phase of products, based on an analysis of the specific features and characteristics of discarded products and recovery processes. These activities could be referred to as design for recovery and require the application of additional tools to generate specific process-related product requirements and technical specifications ensuing from these requirements. QFD matrices can be used to translate the requirements of specific recovery processes into product characteristics. An example would be a separation process that uses the specific gravity of materials in order to separate them. A reverse QFD 3 matrix would in this case be a very useful tool to assist designers. Instead of translating product specifications into process characteristics (the 'normal' way of applying a QFD 3 matrix), a reverse QFD 3 matrix would imply considering the process characteristics as the input for that design step and the appropriate (with respect to those characteristics) product specifications as the output. In this example, a reverse QFD 3 matrix could be applied in translating the separation process characteristics into specifications for the materials and shapes to be used in the designed product (Melissen and Schippers 2000). Standard QFD matrices can also be used to introduce recovery requirements into the design phase of primary products. The separation requirements will form part of the functional specifications, which will then be translated into technical specifications with use of a QFD 2 matrix. These requirements can be integrated into the product definition process (QFD I and QFD 2: to translate requirements into functional specifications, and functional specifications into technical specifications) and into the definition ofproduction methods (QFD 3) (Melissen and Schippers 2000). A recovery process-oriented product FMEA can be used to evaluate the suitability of a designed primary product for a specific recovery process, thus evaluating specific product features that could lead to disturbances in the recovery process. This can be done both for the new product (as delivered to the customers) and for the product after it has been used by customers (as delivered to recovery processes). A recovery process-oriented product-use FMEA can then be used to assist in analysing what could happen (go wrong) in the use phase of a product, leading to the end-of-life product being less suitable for inclusion in a specific recovery process. The outcome of these analyses might be to change certain product features during the design phase: for example, to make the product more robust for misuse or to append a specific instruction for users to prevent misuse (Melissen and Schippers 2000).

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16.3 The manufacturing phase The occurrence of waste and losses in the manufacturing phase can generally be ascribed either to the complete absence of production control or to insufficient production control. Therefore, the optimal application of quality tools and techniques will play an important role in reducing losses and waste and therefore in closing the manufacturing loop. The application of qualitative (quality) tools and techniques will be essential in creating an organisation and production conditions that enable control of production processes. Most companies will have built up prior knowledge and experience with these techniques, and some of them will be Iso-certified (ISO 9000). However, it is important to note that, up until now, in many companies this has not yet resulted in optimal application of available tools and techniques, even though they form an essential step in improving processes and will be indispensable in realising sustainable production. Therefore, we would like to stress the importance of focusing on down-to-earth, inexpensive and already available qualitative methods-such as 'foolproof' tools and use of the Poka-Yoke system (Shingo 1986) or simple experiments to determine optimal settings (Montgomery 1997)-as a precondition in striving for closed-loop manufacturing. In fact, in most cases the application of these methods will require some minor investments but will generate considerable cost reductions and avoidance of waste and losses. The application of quantitative (quality) tools, such as SPC (Gitlow et al. 1995), may result in improvements that could also contribute significantly to realising sustainable production and closed-loop manufacturing, by: • Significantly reducing losses and waste • Producing products that are more homogeneous • Anticipating process disturbances • Using materials more efficiently •

Having tolerances that are more rationally determined

The most important step (especially from a closed-loop perspective) in applying SPC is determining an optimal out-of-control action plan (OCAP; Cantello et al. 1990; Gitlow et al. 1995). In fact, the quality (and sustainability) of most processes is (are) completely dependent on the quality of affiliated OCAPs. All possible disturbances need to be addressed in setting up an optimal OCAP, and the proposed actions have to result in renewed control of the processes and removal of superfluous environmental load while minimising the extra energy and materials needed to solve the problem. The following example based on our own experiences illustrates clearly the importance of appropriate improvement actions in the manufacturing phase (in striving for sustainable production). We have been involved in a project at a company in the Netherlands that initially had additional costs arising from production losses and waste, amounting to about u% of the total production costs. The management team of the company decided to initiate improvement plans and actions to reduce these losses and waste. The mission statement for the project was 'realise a 50% reduction of these costs within a three-year period'. This goal corresponded to yearly savings of up to US$15 million and would clearly have a major impact on the company's profit and its competi-

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249

tive position on the market. In the long term it should result in further growth of the company's market share and additional profit. Initially, people in the company did not quite understand the problem or how to tackle it, since the n% of total costs related to losses and waste had been a normal situation to them for many years, and the common belief was that losses and waste are simply unavoidable. Nevertheless, the management team was able to initiate a number of quality programmes and action plans, and this soon resulted in a shift in the company's culture towards an ambition to achieve zero losses and waste. With simple and available quality tools and techniques (along with some design efforts as discussed above) a number of problems and their causes were detected, and this work was followed up with reduction and elimination programmes. Some of the causes and solutions are summarised in Table

r6+

Causes for losses and waste

Possible solutions

Bad skills

Training. consciousness programmes

Inefficient techniques

Quality improvement programmes. training

Suboptimal product and process design

Integral (re)design

Manufacturing problems related to materials

Material substitution. design for manufacturing

Systematic pressure during manufacturing

Cell layout

Possible disturbances of processes

Preventative maintenance

Uncontrolled process variations

Statistica l process control

Table 16.3 Causes for losses and waste, and possible solutions The project turned out to be a success and the initial goal was achieved: a 50% reduction oflosses and waste-related costs well within three years. In retrospect, most problems were quite trivial and almost all solutions involved the application of known and available tools and techniques, and no major investments were required. Besides the cost reductions related to minimising losses and waste, the programme resulted in some considerable additional benefits: • Overhead costs were reduced by 50% • Delivery reliability went up from 80% to 93% •

Added value improved by 50%

• Labour productivity increased by 20%

16.4 The recovery phase Truly closing the manufacturing loop requires companies to seriously address the recovery phase of products. Regulatory developments and consumer pressure reinforce

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the need to address this issue. Examples of such legislation are the Dutch rules with respect to the responsibility of manufacturers for their products at end of life. This implies that a manufacturer is responsible for the environmental friendly processing of their discarded goods and that they must fulfil some prescribed requirements for the mass fraction of the recovered materials and parts that will be re-used. The Dutch are front-runners in the world with respect to this type oflegislation, but similar laws will soon be introduced in other countries. The European Commission, for instance, is preparing such legislation now and it is expected that product responsibility will be introduced in all EU countries within a few years (Ee 1998). Although many companies still consider product responsibility as a threat, it can also be regarded as a major business opportunity. For instance, companies such as IBM, Xerox and Oce have been engaged in recovery activities for several years now and have proven that one can set up recovery activities in such a way that they are profitable. Not only are purchasing costs reduced, because of remanufacturing of used components, such components and parts can also be used for after-sales service activities. Also, used goods can often be reconditioned in such a way that they fulfil 'as-new' specifications. These products can be put on the market again, in some cases a different market, and provide additional revenue. The key issue in turning recovery activities into a success and a benefit to the company is careful planning and control of these activities. Much too often management is under the impression that recovery activities pose a burden and should be contracted out or handled with minimum effort and investment. This approach will undoubtedly result in missed opportunities. To illustrate this point we include an example in this section that clearly shows how accurate planning and some basic modelling efforts can help companies to take full advantage of the opportunities in this field.

16.4.1 Example: a priori modelling to support

the decision to set up recovery facilities 1 We have been involved in a project, in collaboration with the internal consulting department of a major company in the Netherlands, aimed at developing a decision-support model devoted to setting up recovery activities. Based on the outcome of the project a model was developed. The outcome of the model is a prediction of the economic feasibility of the recovery of products or parts that could be re-used. The total model can be divided in three sub-models, as illustrated in Figure 16.1. With regard to the initial feasibility of setting up recovery activities, a minimum fraction (yprod) of the total demand for reprocessed products (Dprod) needs to be fulfilled, as well as a minimum fraction (Ye) of the total demand for remanufactured components of type c (Dc)' Therefore, the initial feasibility depends on the demand for recovered products or parts and components and on the supply of discarded goods. If the demand or a meaningful part of the demand cannot be fulfilled because of a lack of supply, it makes no sense to continue the feasibility study. Therefore, the setting-up of recovery activities is 'initially feasible' if the total number of supplied goods (Sgood) exceeds the minimum This example is taken from Dural et aI.

2000.

J6.

Sub-mode/I: initial feasibility

~

Not feasible

TOOLS FOR CLOSED-LOOP MAN U FACTU RI NG de Ron and Me/issen

----..

Sub-model 2: technical feasibility

----..

~

Not feasible

Sub-model 3: economic feasibility

~

251

----.. Feasibility of recovery activities

Not feasible

Figure 16.1 The three sub-models

demand for reprocessed products and the minimum number of goods that are processed to fulfil the demand for components of type c:

[16.1]

In this equation, nc is the number of components of type c in a discarded good. The technical feasibility deals with the quality and reliability of the goods (and their parts) supplied and the required quality and reliability of products and parts or components demanded. Setting up recovery activities is 'technically feasible' if the quality requirements for the products and the components are fulfilled. Therefore, the number of qualified supplied goods (supplied goods ofadequate quality) must exceed the number of reprocessed products that must be supplied to the client (Sprod), and this supply still has to exceed a minimum fraction of the demand: [16.2]

In this equation, qprod represents the fraction of supplied goods that fulfils the quality requirements. Consequently, the surplus of supplied goods can be used for component recovery. The number of components of type c in the qualified surplus of supplied goods will need to exceed the number of components of type c that has to be supplied to the client, and this supply must still exceed a minimum fraction of the demand: [16.3]

In this equation, qc represents the fraction of components of type c of the supplied goods that fulfil the quality requirements. IfInequality [16.2] is not fulfilled, the setting-up of product recovery activities may not be feasible, but component recovery activities might still be feasible (see Inequality [16.3]). In that case we set Dprod = 0 and qProd = 0 in Inequality [16.2] and all the following equations. To determine the economic feasibility, the revenues and costs resulting from the recovery processes need to be calculated. The setting-up of recovery activities is 'economically

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feasible' if the financial result fulfils the financial requirements made by the company or other actors in the chain. The different revenues and costs can be expressed as described below. The financial result (RF) is the difference between the total revenue (R tot ) and the total costs (C tot ): [16.4]

The total revenue is obtained from the revenue received from reprocessed products (RProdsrrod) and the revenue received from all recovered components (sum of ReSe over

all component types): [ 16.5]

The total costs (C tot) are determined by the collection costs (C eol ), the processing costs (C proe ), the disposal costs (C disp ) and the logistics costs (Clog): c tot

C eol + C proc + C disp + Clog

=

[16.6]

The collection costs depend on the purchasing price (pgood) for supplied goods: [16.7]

The processing costs (C proe ) consist of the processing costs of reprocessed products (c repro ), the inspection costs (C insp ) for the remaining goods and the recovery costs (Ce ) for components that will be recovered and supplied to the client summed over all components: C proc

=

srrodcrepro + (minimum{qProd Sgood, sdemand} - Sprod) C insp +

L SeCe e

[16.8]

The disposal costs are determined by the weight (wg ood ) of the remaining goods, minus the weight (We) of the components that are recovered and the landfilling costs (c land ): C disp

=

[(Sgood - srrod)W good -

L (WeSe)]cland e

[16.9]

The logistics costs depend on the total weight of the goods, products and components that need to be transported, the distances the products need to be transported (d(rp-c) is the distance from the recovery process to the client, d~g-rp) is the distance from the location of supplied goods to the recovery process, and d ~rp-c) is the distance from the recovery process to the client for the recovered components), and the costs for the different types of transportation to be used (air freight [Caif), rail freight [C rail], sea freight [csea] or road freight [C road]): clog

= sgoodwgoodd(sg-rp)(&aircair

srrodwgoodd(rp-c)(&aircair

+ &railcrail + &seacsea + &roadcroad) +

+ &railcrail + &seacsea + &roadcroad) +

L (SeWe d~rp-c))(&aircair + &railc rail + &seacsea + &roadcroad) e

[16.10]

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In this equation, (5 is a decision variable (value 0 or 1) for the type of transportation indicated by the superscript. All the above calculations were included in three versions of the model to enable companies to determine the economic feasibility of product recovery, component recovery or the recovery both of products and of components. The basic steps in applying these sub-models (initial steps, technical considerations and the economics of recovering products, components or products and components together) have been incorporated into a clear manual (Melissen and de Ron 1999). Two examples of important steps described in this manual and that have not been mentioned as yet in this discussion are: design of the recovery process steps, and design of the logistics process. At this point we will not go into any further detail about this model, but it has proven to be very helpful in practice. It was first applied in a pilot project at a Dutch company in the medical systems sector. This company had been encountering major problems in its service department, mainly because of a lack of replacement components. We assisted them in using the model to determine the (technical and economic) feasibility of solving this problem by means of component recovery. Analysis of the situation by using the model revealed that the service problem could be resolved by setting up component recovery facilities. Furthermore, these recovery activities have also turned out to be quite profitable. If a company has decided to set up recovery facilities and to get involved with product, component or material recovery, these activities need to be executed in a controlled manner to generate maximum profit. Again, some basic online decision-support models can assist companies in achieving effective and efficient recovery activities. We have been involved in a project aimed at developing such a model for a company dealing with the recovery of discarded personal computers. The goal of the mathematical model that was derived was to support the company during the execution of recovery activities in deciding whether or not to re-use specific components. The model determines which recovery practices for a supplied batch of computers will result in maximum revenue (Melissen and de Ron 1999). These examples show that some basic modelling efforts can contribute to the planning and control of recovery activities in order to maximise profits and minimise losses, waste and costs. In fact, a number of other helpful models and tools are available in the literature to assist companies in setting up effective and efficient recovery activities, especially in the area of reverse logistics. Looking at all these tools and methods, one can distinguish three major subjects (Fleischmann et at. 1997) that are addressed extensively: • Reverse distribution, which may be defined as the collection and transportation of used products and packages. Some important contributions in this area are those from Guiltinan and Nwokoye (1975), Pohlen and Farris (1992), Jahre (1995) and Salomon et at. (1996). •

Inventory management. Some key contributions in this field are those by Thierry (1997) and Ferrer (1997), but many more authors have contributed material over the past few decades.

•

Production planning, focusing specifically on the re-use of products, components and materials. Authors such as Lund (1984), Guide et at. (1996) and Penev and de Ron (1996) have addressed a number of specific topics in this area.

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At this point we will not go into more detail about this wide variety of methods and tools. For a more elaborate overview of this area we refer the reader to the work of Fleischmann et al. (1997). Of course, quality tools and techniques can also play an important role in designing and optimising recovery processes, as they do in the design and manufacturing phases. For example, experiments can be designed to determine the optimal settings for recovery processes (e.g. to determine temperature settings for separation processes or cutting times and speeds for shredding processes). Experiments can also assist in determining optimal material mixes (e.g. for upgrading processes). Analysis of incoming goods is another important step in improving and (re)designing recovery processes. To predict the suitability of incoming goods for specific recovery processes, tools such as multiple regression analysis and multi-vari charts are very useful, as are techniques such as paired comparisons, for linking the characteristics ofincoming goods or primary products to their recoverability and suitability for specific recovery processes. A recovery process FMEA can be used to analyse the weaknesses of specific recovery processes (termed a disassembly process FMEA). This tool enables the analysis of problems that may arise from weaknesses in the disassembly procedure, such as the use of too much force by operators in the disconnecting of joints, thus damaging re-usable parts. An example of an improvement following from such an analysis might be the introduction of a drill that will slip at a predetermined maximum force, thereby protecting recoverable products and components. It is also possible to use a process FMEA that is focused specifically on possible problems caused by specific characteristics of the incoming materials. This type of process FMEA could be referred to as a use-oriented recovery process FMEA, to some extent resembling the UMEA (user mode and effects analysis) tool suggested by Penev (1996). (For a more elaborate discussion of the quality tools and techniques available that can be applied to the recovery phase, we refer to the reader to Melissen and Schippers 2000.)

16.5 Summary and conclusions In this chapter we have described the subjects that need to be addressed to close the manufacturing loop and in the search for sustainable production. Companies must focus on all phases of the life-cycle of their products. In the design phase, closing the manufacturing loop implies introducing a new set of requirements. Environmental requirements (including energy and material usage) should be included in deliberations in this phase and should be treated equally to conventional requirements, such as those relating to business economic constraints and market characteristics. We have discussed why the life-cycle of products should be optimised and not maximised and have addressed the possibilities of applying known and widely available tools and techniques, such as FMEA and QFD, to realise these objectives. In the manufacturing phase, the optimal application of quality tools and techniques will play an important role in reducing losses and waste and therefore in closing the manufacturing loop. The application of qualitative (quality) tools and techniques, such

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255

as Poka-Yoke and experimental design will be essential in creating an organisation and production conditions that enable production processes to be controlled. The application of quantitative (quality) tools, such as SPC, may result in further improvements that could contribute significantly to minimising loss of money and materials and to preventingwaste. We also discussed that truly closing the manufacturing loop requires companies to seriously address the recovery phase of products. The key issue in turning recovery activities into a success and a benefit for the company is careful planning and control of such activities. Much too often, management is under the impression that recovery activities are a burden and should be contracted out or handled with minimum effort and investment. This approach will undoubtedly result in missed opportunities. The main conclusion must be that companies really have an abundance of aids available to them to set up effective and efficient-and in most cases even profitable-recovery activities. In other words, there really is no excuse not to do so. Following on from all the above, the most important conclusion is that closing the manufacturing loop does not have to result in large investments and completely new ways of doing business or running a company. In fact, realising this goal is best achieved by optimal application of known and available tools and techniques and by attention to some basic planning and control efforts. The introduction of environmental requirements does not represent a threat or a disaster; it represents major opportunities and challenges for every company in today's marketplace. We have shown that closing the manufacturing loop is a realistic aim for every company and that it will in all likelihood result in some considerable additional benefits. The aids for realising this goal are already known and available to almost all companies, so the real question is: will companies make the best of the opportunities that come their way?

ID RECOVERY STRATEGIES AND REVERSE LOGISTICS NETWORK DESIGN Harold Krikke* Erasmus University, the Netherlands

Reverse logistics concerns the management of returned products and packages for which an original equipment manufacturer (OEM) is responsible. Recent developments in marketing and environmental legislation have increased the volume of return flows greatly. At the moment return volumes are about 5% of yearly sales, but this is likely to go up to 25% or more in future. This chapter presents a methodology, making use of analytical models, that gives decision support for the set-up of a reverse logistics system for durable consumer products. Two major research questions are addressed: • How should one organise the recovery of products and materials from return flows? In a recovery strategy one determines to what degree discarded products should be disassembled and which re-use, recycling or disposal options should be pursued. A recovery strategy thus describes which disassembly, recovery and disposal processes should be applied to the return flows. •

*

Once the recovery strategy is known, where should the various recovery and disposal processes be installed and at what capacity? Reverse logistics network design concerns determining the locations and capacity levels for processes as well as optimising the flows of goods between the processes at the various locations.

I was able to carry out this research as part of my phD project at the Department of Management Science, Faculty of Technology and Management, Twente University of Technology, Enschede, the Netherlands, under the supervision of A. van Harten and P.C. Schuur. A full copy of the original thesis can be obtained on request from the author.

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This study is focused on Europe, where legislation imposes producer responsibility or product stewardship on OEMs. However, the results and lessons learned are also very relevant for the USA and Asia.

17.1

Reverse logistics developments in Europe

Owing to increased competition and new European environmental legislation, the volume of consumer products that is returned to the manufacturer will increase dramatically. Increased competition causes shorter economic life-cycles, resulting in return flows of unsold, relatively young, products. Environmental legislation within the European Communities is based on (extended) producer responsibility (i.e. on making the OEM responsible for take-back and recovery of discarded products). The management of returns confronts OEMs, or their service providers, with a set of new managerial problems. This new management area is called product recovery management (PRM). Good recycling solutions can be found only if the entire life-cycle of the product is considered. For example, recyclability of products in their disposal phase depends on the product design, which is determined by research and development (R&D). Thus, PRM takes into account business functions such as R&D, marketing, information, organisation, finance and (reverse) logistics. Hence, reverse logistics is part of PRM, although reverse logistics is often used to define the broader managerial area, here referred to as PRM. Within reverse logistics in the narrow sense, relevant issues include the adaptation of manufacturing control systems, production and inventory control, disassembly optimisation and also the set-up of a reverse logistics system. Typical characteristics of reverse logistics systems include uncertainty of supply and demand, a push-pull nature, an increased number of interactions between goods flows, and the integration oflogistics and environmental performance requirements. These characteristics lead to complex logistics planning and control problems, both on the strategic level and on the operational level. An important issue at a strategic level is the set-up of the reverse logistics system (i.e. the design or blueprint of the reverse logistics system). This involves: •

Step I: the determination of a recovery strategy (involving an optimal degree of disassembly and optimal recovery and disposal options for the product or its released components)

•

Step 2: the determination of a design for the (geographic) reverse logistics network (including the optimal locations for and capacities of the processes as well as the optimal flows of goods between these locations)

Note that Step I corresponds to the 'How to do it?' question and Step 2 corresponds to the 'Where to do what?' question in the logistics system set-up. The recovery strategy serves as input for the logistic network design. Prior to this, we need to forecast the quantity, quality, timing and composition of supply and demand as well as cost and revenue functions as (data) input for both Step I and Step 2.

258

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GREENER MANUFACTURING AND OPERATIONS

Research design and methodoiogy

Our research is design-oriented: that is, we aim to develop models that give decision support in designing a product recovery strategy and its corresponding reverse logistics system. Our research questions were identified on the basis of interviews with senior researchers and consultants in the field. Models based on operations research techniques are developed and implemented through use of appropriate software. We first analyse their effectiveness and efficiency by means of computer-generated data sets. We then test the practical viability of the models in two business cases. To study recovery strategies, we conducted a study at Roteb, a municipal waste company in Rotterdam. To study network design we conducted a study at Oce, a copier firm in Venlo. This validation involved a conceptual mapping of the model onto the case-study problem as well as a comparison of optimised solutions with current practice, using practical data. Conceptual mapping is used to validate our original theoretical problem definition and to discuss the model adaptations needed to enhance the practical use of the model in a business setting. The practical optimisation is done to illustrate the potential benefits to business to be obtained from applying our theoretical models in practice. Figure 17.1 illustrates the methodology.

~

Expert interviews

~

Computer-generated data sets

~

Business case situation

Business potential

conceptual adaptations and further research OR = operations research

Figure 1].1 Methodology

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RECOVERY STRATEGIES AND REVERSE LOGISTICS NETWORK DESIGN

Krikke

259

Our 'end-product' is thus: (a) a set of models, implemented by means of computer software, giving decision support in the key research areas concerning recovery strategies and logistics network design. With this software, which we use in the case studies, we find (b) conceptual adaptations and issues for further research and (c) we can illustrate the business potential of applying the modelling in practice.

17.3 Modelling recovery strategies Formulating a recovery strategy means formulating decision rules with respect to determining an optimal degree of disassembly for return products and assigning optimal re-use, recycling and disposal options to the product (in the case of no disassembly) or its released components (in the case of disassembly). Thus, there is a clear conceptual distinction between decisions on disassembly and the assignment of recovery and disposal (RD) options. The recovery decision process is shown in Figure 17.2. Product return

t Test and classification

t Release of components

I

Decision

•

I

Disassembly to lower level (if possible)

Processing of product or component by optimal recovery and disposal option

Figure,].2 Structure of the recovery decision process

In this chapter, we apply a two-step procedure for optimising a recovery strategy for durable consumer products in a multi-product situation. We assume that the various types of return products belong to one product group (e.g. electronic products or cars). The main goal is to maximise net profit from recovery. However, many constraints, for example environmental laws, must be taken into account. In general, the formulation of a recovery strategy is based on technical, commercial and ecological decision or feasibility criteria, which express the technical, commercial and environmental feasibility for application of RD options. The feasibility of RD options is assessed not only for the product as a whole but also per individual component, leaving the choice on the eventual level of recovery to the decision-maker. Examples of feasibility criteria include material

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composition, return quality, Ire-use' end-market demand, costs and revenues, and environmentallegislation. The feasibility criteria are applicable at two levels: the product level and the product group level (Krikke et al. 1998b). For example, on the one hand, the technical state of a return assembly is a factor to be considered at the product level, because it determines the feasibility of re-use options for a particular product (or parts released from it after disassembly). On the other hand, criteria such as legislative recovery targets are often defined for entire product groups (e.g. electronic products). The main difference between the two levels lies in the possible synergy or competition between individual products at the product group level. Let us look at an example. Within Dutch environmental legislation, freezers and refrigerators are placed in one product group for which a recovery target of 75% material recycling is set. Suppose freezers are easier to recycle than fridges. For example, let us assume that for fridges it is possible to realise a 70% recycling score at reasonable economic cost and that for freezers an 80% score is possible at reasonable cost. In case of a 50:50 share of each type, we can still meet the recovery target, because the ease of recycling of the freezers compensates for the less easy recycling of the fridges. This is an (artificial) example of potential synergy. In contradiction, at the product group level different product types compete for disassembly and recovery capacity, because reverse logistics facilities may be used for multiple product types. The distinction of two decision levels for product type and product group is therefore quite natural as a form of hierarchical decomposition. For this reason, optimisation is performed in a two-step procedure. In the first step, we determine a so-called product recovery and disposal (PRD) strategy at the product level; in the second step we discuss a group recovery and disposal (GRO) policy at the product group level. A stochastic dynamic programming (DP) model is developed to determine a PRO strategy for one product type with maximal net profit, taking into account relevant technical, ecological and commercial feasibility criteria (constraints) at the product level. As a case example, we determined a profit-optimal strategy for a television, named TV-X, of which the disassembly tree is shown in Figure 17.3. This tree is a representation of the disassembly structure of a product, where each disassembly step breaks down an assembly and simultaneously releases a set of subassemblies. Assemblies released after the same number of disassembly steps are at the same disassembly level, even though they may have different parent assemblies. The term 'assembly' refers to products, units and parts. level = 0: product

2. Casing I

7. Tube

level = 1: modules level = 2:

parts Trafo

=transformer; PCB =printed circuit board; CPU = central processing unit

Figure 17-3

Disassembly tree of TV-X with nine assemblies and three levels

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This disassembly tree consists of nine assemblies in three layers, where each layer reflects a disassembly level. Each assembly j can be found in quality class q E Q(j). For example, Q(j) = (1, 2) means j can be found in class q = 1 (good quality) or q = 2 (bad) with a certain probability. These probabilities are conditional: that is, the chance Pk(q\1 q) of finding an assembly k in a certain class q[ depends on the class q of the parent assembly j. For instance, if the parent assembly j is returned in good quality, one is more likely to find the children k of this assembly j in good quality than when the parent is of poor quality. Thus, the model requires a disassembly tree, a quality classification scheme and conditional probabilities as input. Feasible RD options, r, belong to a set RU,q). Moreover, disassembly costs D jq and revenues w/r I q) ofRD options r (both also conditional on classes q) are additional input parameters. Kj is the set of subassemblies k of parent assembly j. In the optimisation, the assignment of optimal disassembly and RD options is now dependent on the quality classes, hence a PRD strategy is formulated as a set of conditional assignment rules to support disassembly and RD decisions. The following stochastic dynamic programming model optimises the overall net profit. Basically, it compares, for every class q ofj, the estimated profit of processingj by the RD option with the expected profit of disassemblingj. The DP phases are equivalent to the disassembly levels I, the states are defined by the pairs U, q). Let w(x, j, q) denote the maximal estimated profit for processing (x = 1) or disassembly (x =0) andflU, q) the maximal overall attainable estimated profit of j in class q. For the lowest-level assemblies (which cannot be disassembled), we get the following recursive relation:

flU, q) =

w(l,j, q)

[17 .1]

For the other assemblies (which can be disassembled) we obtain:

flU, q) =

maximise w(x,j, q) x~o,

[

[17.2]

with w(l ,j, q)

=

maximise wj(r I q)

[17.3]

r,f" 1,rERU,q)

and [17.4]

A backwards recursive algorithm solves the problem to an optimal solution. A profitoptimal PRD strategy for our case example is shown in Figure 17+ Besides an expected net profit, the output consists of an expected rate of disassembly, recovery and disposal operations. Although the PRD strategy of Figure 17-4 optimises net profit, it may be less preferable in view of other criteria, such as environmental recovery targets. An alternative 'ecological' strategy, with a higher recovery score-and probably less profit-may be desirable. This may go for other decision criteria as well; examples include alternative PRD strategies that use less disassembly capacity or generate secondary products for other, nonsaturated, secondary markets. We use a heuristic procedure to modifY the sets of allowed

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GREENER MANUFACTURING AND OPERATIONS

r Test TV 1

.

q=l

Upgrade TV

q=2

~ Disassemble TV

Release casing - - . Separate aluminium - - - - - J .. ~ Pyrolyse casing Release wiring - - . Separate aluminium and copper - - . Pyrolyse wiring .. Separate aluminium, iron, copper

Release trafo - - . Shred trafo Release tube - - . Dispose tube Release battery - - . Dispose battery Release PCB - - . Test PCB

I--"'----J~

q=l

I-......C---J~

Shred PCB --. Separate platinum and glass Disassemble PCB

Release CPU ~Separate glass and aluminium~ Pyrolyse CPU Release chip ~Upgrade chip

q quality (q =', good quality; q = 2, poor quality) Trafo transformer PCB printed circuit board CPU central processing unit

Figu re 17-4 Profit-optimal product recovery and disposal strategy for TV-X

recovery, disposal and disassembly options R(j, q) to improve the performance on various group-level decision criteria and we repeat optimisation at the single product level with the stochastic DP model. The overall idea is to determine mUltiple PRD strategies for every product type returned. The resulting set ofpRD strategies forms the input for the second optimisation step, the GRD policy, where PRD strategies are assigned to the individual product types of the same product group. In a GRD policy, some product types will be processed by the profit-optimal PRD strategy, others by some alternative strategy. In this way, synergy and competition effects are taken into account for decision criteria at the group level. We develop a mixed-integer linear programming (MILP) model, which gives decision support in assigning PRD strategies in a GRD policy. For brevity, we do not present this MILP model. In Figure 17.5 we summarise the two-step procedure. For more background on the models we refer the reader to earlier publications (Krikke et 01. 1998a, 1998b).

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263

Generate alternative PRO strategies per product type

Set of PRO strategies per product type Assign a PRO strategy to each product type in the product group

GRO policy

PRD

= product

recovery and disposal

Figure 17-5 Two-step optimisation procedure to determine the group recovery and disposal (GRD) policy

17.3.1 Case study of recovery strategies:

recycling of personal computer monitors at Roteb

The full scope of modelling regarding recovery strategies is applied in a business case at Roteb. Roteb is one of the larger waste management companies in the Netherlands. It is active mainly in Rotterdam and the surrounding area, called the Rijnmond. It employs about 1,200 people and has a yearly turnover of about 300 million Dutch guilders (NLG). The company is involved in a broad range of activities, such as waste collection, street cleaning, waste processing, management of the sewerage system, energy recovery and water management. Over the past few years, Roteb has also become involved in recycling. The company plans to enter the material recycling market by offering recycling services for various waste-streams, including consumer electronics. In order to keep the pilot study manageable, we limit ourselves to one return flow: monitors from personal computers (pes). We have chosen this flow, because it is representative of electronics products in terms of construction and composition and is relatively easy to deal with regarding technical complexity and data acquisition. The reverse chain for consumer electronics recycling is illustrated in Figure 17.6. The collection occurs through three collection channels: deposit systems, retailers and Roteb services. After collection, the consumer electronics are transferred to the chemical depot, where four disassembly lines are installed. After disassembly, the released components are transported to various material-processing firms, which take care of the actual recycling. Since products are collected from households, the return flows are of a wide variety. The monitor return flow already consists of up to 50 different types of monitor. Our model optimises a PRD strategy per product type, which implies that we have to determine a very high number ofpRD strategies. In our view, this requires too much effort and can be avoided by formulating a typology of monitors. The typology is based on two aspects:

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GREENER MANUFACTURING AND OPERATIONS

Processing firms

Figu re 1].6

Reverse chain for consumer electronics recycling at Roteb

namely, the intelligence level of the monitor, which can be low, medium or high, and the type of screen, which can be colour or monochrome. These two aspects explain the presence or absence of certain valuable parts, the material composition of assemblies and the disassembly structure of the monitor. These characteristics are essential in determining PRO strategies. Thus, we obtain six pseudo-types of monitors, which all represent a larger group of more or less identical monitors (see Table I7.I). Now, for each pseudo-type an optimal PRO strategy will be determined. Disassembly trees are determined per pseudo-type. In general, three disassembly levels are distinguished: product, electronic unit and parts. An example of a disassembly tree is given in Figure I7. 7.

Low intelligence

Medium intelligence

High intelligence

Colour (C)

CI

Cm

Ch

Monochrome (M)

MI

Mm

Mh

Table 1].1 Typology of pseudo-type monitors

Next, feasible RO options are determined. For monitors, only material recycling applies, for which there are two main options: mix or separate. Mix options are applicable to the product as a whole and to the electronic units. The product or units are shredded, after which materials are separated for low-grade recycling or disposal. Separate options apply to the individual parts, which are sorted by material composition (e.g. into plastics, ferrous metals and non-ferrous metals), and are mostly high-grade recycling options. All mix and separate options are sufficient from an ecological point of view, but separate options are to be preferred. In a PRD strategy one determines the optimal degree ofdisassembly and the related mix or separate recycling options. As we have already explained, optimality may depend on

17.

RECOVERY STRATEGIES AND REVERSE LOGISTICS NETWORK DESIGN

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265

Monitor MI

I

I

Foot network

PCB

B

Electronic unit

[EJ EJ PCB

-I

Chassis

r-I

Power PCB

'-I

Trafo

I

I

Electron gun

Tube and wiring

B

= printed circuit board; Trafo =transformer

Figure'7-7 Disassembly tree of monitor MI (monochrome, low intelligence) the (quality) classes in which assemblies are found. In the original DP model, we assume that the return quality is the classification factor. However, in contradiction to RD options concerning re-use and remanufacturing, the feasibility of material recycling is generally not quality-dependent, at least not at Roteb. It can be applied to all returned monitors or their components, regardless of their quality. However, there are other feasibility criteria for which classification is necessary: namely, the expected disassembly time of product and units, the material composition of the components and the presence or absence of certain components. These aspects are taken into account in the classification by using the stochastic DP model. Now, let us compare two pregiven GRD policies, a and b (GRD-a and GRD-b, respectively). In GRD-a, the GRD policy assigns a profit-optimal PRD strategy a (PRD-a) to all pseudo-types. PRD-a is optimised over all mixed and separate options, allowing for partial disassembly. In GRD-b, the GRD policy assigns an alternative PRD strategy (PRD-b) to all pseudo-types. GRD-b resembles current practice, with full disassembly and separate processing of parts only. Thus, we do not need to optimise the GRD assignments. However, there is one critical aspect at the group level: namely, competition for disassembly capacity and, related to that, the coverage of fixed disassembly costs. All five pseudo-types are disassembled on the same disassembly station and hence efficiency is important. Optimisation results indicate that GRD-b has a cost price ofNLG 1.01 per kilogram (kg-I) and GRD-a has a cost price ofNLG 0.75 kg-I. The difference ofNLG 0.26 kg- I is partly a result oflower variable costs (NLG 0.06 kg-I) and partly a result of a better coverage of fixed costs (NLG 0.20 kg-I). The latter is the result of the higher turnover that can be realised, because the average disassembly time is shorter (given fixed capacity and assuming sufficient supply). The amount of'mixed' recycling is 9% in GRD-a and complies with Dutch regulation. No computational problems were experienced. In Table 17.2 we compare the results of both GRD policies for all pseudo-types involved. A detailed description of this case study can be found in an earlier publication (Krikke et al. I999C).

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Pseudo-type

Net profit (NLG kg-I) GRO-a

Disassembly time Amount of (minutes per monitor) mixed processing (kg)

GRO-b

GRO-a

GRO-b

GRO-a

GRO-b

4.00

0.4

0

MI

-0.28

-0.36

2.54

Mm

-0.26

-0.31

4.09

5.37

1.2

0

Mh

-0.10

-0.10

9.00

9.00

0

0

(I

-0.24

-0.35

4.12

7.19

1.3

0

(m

-0.15

-0.18

4.30

6.22

1.0

0

Weighted average

- 0.24

- 0.30

3.54

5.24

0.8'

0

Including fi xed costs

-0.75

-1.01

• = 9 g of I total weight processed

For a typology of pseudo·types, see Table 17.1.

Ta ble 1].2 Comparison of results for group recovery and disposal (CiRD) policies a and b

17.4 Modelling logistics network design In the next part of this chapter we present a model for (geographic) reverse logistics network design. After having determined how to handle forecast return flows in recovery strategies, we now determine where to do what. In other words, we choose efficient locations and capacities to install disassembly and recovery processes and optimise goods flows between the chosen locations. This is depicted in Figure 17.8. In order to implement the recovery strategy properly, we use graphs. A processing graph is used to represent the recovery strategy (for each product) and a transportation graph is used to represent the available locations and transport links between those locations. The processing graph(s) and transportation graph are mapped into a network graph, which represents the 'maximal' reverse logistics system (i.e. it incorporates all assignments of processes to locations as well as transportation links allowed by the processing graphs [recovery strategy] and the transportation graph [available locations and transport links]). For brevity, we omit a formal discussion of graphs. The examples given below should explain their use. As an example, we show a network graph of a two-product problem situation with four supply points, three demand points and four recovery processes, as illustrated in Figure 17.9. We are able to formulate a MILP optimisation model to determine which facilities k in the network graph will actually be opened and, if so, at what capacity level. We also need to determine which transportation links in the network graph will actually be used in the reverse logistics system and which goods flows are transported via these links. In this model, the installation of sufficient disassembly and recovery capacity is guaranteed; hence the recovery strategies can be implemented. In addition, while traditional (forward) operations research models focus on one of the stages in the supply chain (procurement, production or distribution), in reverse logistics the full reverse chain is integrally optimised. Because of the complexity of the problem, we develop heuristics to

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FORWARD CHAIN

~

Consumer locations Predetermined recovery strategies

Sales locations

EXTERNAL MARKETS

~

Material-recycling market locations Disposal locations Reverse logistics system

Collection stations

External/internal secondary market locations

Figure 17-8 Reverse logistics network design problem

Collection

SUPPLY POINTS

Disassembly

Intermediary

Repair

Processing Facilities

Cleaning

DEMAND POINTS

Re-use k1-k s =facilities 1-8

51-54

Recycling

= supply pOints 1-4

Disposal

d1-d 3 = demand pOints 1-3

Figu re 17.9 Representation of a reverse logistics network design problem

as a network graph

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compute different solutions and test robustness for different scenarios. For a discussion on modelling, we refer to our original thesis and to earlier work (Krikke et al. 1999a).

17.4.1 Case study of a reverse logistics

network for the (re)design of copiers: Oce

Oce is an international firm active in 80 countries. It has a yearly turnover of more than NLG 4 billion. It has headquarters in Venlo (the Netherlands) and employs about 16,500 people worldwide. Oce develops, produces and sells high-quality copying, printing and plotting systems as well as consumables and imaging supplies for these systems. Also, servicing and financing (leasing) are part of the product range. The main markets are the office market and the drawing-table market. The company aims for a prominent position in these markets by producing advanced products of excellent quality, reliability, durability and environmental friendliness. Here, the design and development of the products plays a key role. Therefore, Oce invests about 7% ofits turnover in research and development (R&D). Moreover, Oce co-operates with co-developers and suppliers, thus strengthening the technology base. The technology base enables high-level recovery of products and components, which is an important ingredient of the business strategy. Let us now describe the reverse chain for copying machines. The return process of machines can be divided into two stages. In the first stage, customers return a machine to the local operating company. Oce machines are returned from the market at the end of lease contracts or are actively bought back because of market demand for recovered machines. The operating company is allowed to refurbish the machine and put it back into the market. If operating companies themselves are not interested in refurbishing the item, they return the machine to one of Oce's recovery locations, for which they receive a fee. The machine then enters the second stage, in which it can be recovered by means of three strategies: •

Revision strategy (X ---- X+) - A returned machine X is disassembled to a fixed level and is cleaned New or repaired parts, that are the (sometimes improved) equivalent of the released parts, are built in - The new machine X+ is thus an upgraded version of the returned machine.

• Factory-produced new model (FPNM) strategy (X ---- Y): a returned machine X is converted into a new model Y that contains all the features and functions of the old model and adds new ones. The return process is basically the same as for revision, except that not only released parts are replaced, but also entirely new parts and units are added to provide additional functionality. • Scrap strategy (X ---- parts and materials): the returned machine X is recycled to the material level. This case study concerns remanufacturing according to an FPNM strategy for the HV02machine. This machine is the result of remanufacturing a HV01 machine. The second stage in the HV02 FPNM process is as follows. Operating companies return machines to asset recovery departments. They are stocked in returned machine stock. If there is a demand for HV02-machines, HVo1-machines are

'7.

RECOVERY STRATEGIES AND REVERSE LOGISTICS NETWORK DESIGN

Krikke

269

actually taken from stock and dismantled. Here, machines are disassembled to a certain fixed level. A predetermined standard set ofcomponents (parts and modules) is removed. Released parts are inspected. Approved parts are restocked directly or after internal or external repair. Disapproved parts are recycled or disposed of at specialised firms. The removed (finished) module is inspected and if approved is recovered for re-use in other product lines. Also, toner is removed and recycled at the original plant after a cleaning process. Now, the remaining carcass is cleaned before entering the next process, that is, preparation carried out by Oce Manufacturing. Here, it is assessed whether the carcass should be further disassembled on quality criteria. Hence, the degree of disassembly is not predetermined but depends on the state of return of the incoming machines. Bad or suspicious parts are replaced. Released parts are recycled at specialised firms. After preparation, the carcass goes into reassembly, also carried out by Oce Manufacturing. This process is similar to the assembly process in regular production. Here, an HV02machine is assembled from the HVOI carcass, a new (finished) module produced at a factory location in Pardubice (Czech Republic) and parts purchased from external suppliers in the area ofVenlo. The assembled machines are tested and packaged and are put to stock (finished machine stock) before being delivered to the operating companies. Several processes, such as transportation, stock-keeping, (external) repair, recycling and disposal support the above processes. The central parts-and-materials stock is located at Oce Manufacturing, the finished-and-returned machine stock is located at a separate location not far from Oce Asset Recovery. The network is shown in Figure Il.1O. In our research we assume that the supply processes as well as dismantling processes are fixed and that locations and goods flows must be optimised for preparation and reassembly. Both processes are the responsibility ofOce Manufacturing. There is a choice of two locations in Venlo and one in Prague, assignments being subject to managerial constraints. A processing graph and transportation graph were formulated and mapped onto a network graph, depicted in Figure Il.Il. We optimise the total operational costs

Asset recovery

Factory location

opca Germany

OIl(

"

;:

""""'" .J

opca England

OIl(

External Manusuppliers .. ---- ~ facturing More OPCOs

Carcass or product flow Material, part or module flow RMS

= returned machine stock; FMS = finished machine stock; OPCO = operating company

Figure '].10

Reverse chain of copier manufacturing at Oce

Customer sales

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GREENER MANUFACTURING AND OPERATIONS

(Oce Asset Recovery, Venlo) SUPPLY POINTS

o o o (Central stock, Venlo)

(Factory location, Pardubice)

POTENTIAL FACILITIES

(R, Prague)

DEMAND POINTS

o

(Scrap firms, Netherlands)

(Scrap firms, Czech Republic)

o

(FMS HV02 machine, Venlo)

P = preparation ; = R = reassembly; FMS = fin ished machine stock

Figure 1].11 Network graph for the HV02 machine sub-network redesign problem over all options and compare three pregiven managerial solutions (network designs) for three scenarios. Note that we redesign only a sub-network of the entire FPNM chain. One of these managerial solutions-installing all processes in Prague-appeared to be the overall optimum concerning operational costs. However, this solution also requires the highest level ofinvestment. The results are summarised in Table 17+ In addition, sensitivity analysis was done on some critical parameters, such as market volume. Note that for confidentiality reasons the monetary unit is not disclosed. In general, differences in economic costs were very small; hence installing recovery activities in Prague for the HV02 machine must be well motivated from a strategic point of view. Moreover, we argue that, besides cost minimisation, Oce should include performance indicators, such as JIT, reliability, in logistics optimisation to support its quality-oriented business strategy. Also, we argue that in a redesign situation, such as the case here, an integral redesign of forward and reverse chain is favourable , because the interactions between reverse and forward processes strongly affect overall optimality. More information on the case study can be found in Krikke et al. 1999b.

'7.

RECOVERY STRATEGIES AND REVERSE LOGISTICS NETWORK DESIGN Krikke

Yearly cost

Design Scenario 0'

Scenario It

271

Investment costs Scenario 2'

1

2,184,698

2,184,698

2,394,190

0

2

2,215,213

2,248,288

2,391,850

299,000

3

2,083,091

2,128,678.5

2,227,390

655,000

• 1998

t

1998 and 1999

Note: For reasons of confidentiality, monetary units are not disclosed.

Ta ble 17-3 Results of reverse logistics sub-network redesign

17.5 Main findings 17.5.1 Modelling recovery strategies Compared with models found in the literature, our approach distinguishes itselfparticulady by optimisation at the product and group level and by the inclusion of stochastics in quality classes and transition probabilities. There are models that explicitly include the sequencing of disassembly (Fleischmann et al. 1997) (i.e. the optimality of the sequence in which parts are released in the disassembly process). In future research, both approaches should be integrated. Our model proved to be sufficiently conceptually sound to be applied in a business case (Roteb), although we had to adapt our modelling in two respects. First, a typology of pseudo-types was added, and PRD strategies were determined per pseudo-type instead of by technical product types; second, the classification of assemblies was based on disassembly times, presence of parts and material composition instead of on return quality.

17.5.2 Modelling reverse logistics network design In contrast to other location-allocation models found in the literature, our model deals with two specific characteristics. First, a processing graph must be implemented in the network design; second, reverse logistics systems cover a higher number of echelons than does the forward system, leading to higher computational complexity. The concept of graphs, such as the processing graph, transportation graph and network graph and fast heuristics were developed to deal with this. The basic concepts of our model have proven to be applicable in the Oce copier case. However, partial redesign may lead to suboptimality, hence an integral approach of forward and reverse network (re) design is preferable. Moreover, as well as costs, logistics and environmental performance should be optimised. In our current approach, they are seen too much as side constraints.

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GREENER MANUFACTURING AND OPERATIONS

17.5.3 Business potential Application of our models at Roteb and Oce produced cost improvements of 25% in recovery strategies and 5% in reverse logistics network design. The big difference between the improvements experienced by the companies can be explained in terms of the substantial differences in experience with return flows management. In general, our models give decision support in setting up reverse logistics system that is both economicallyand ecologically sound. Different solutions (e.g. use of outsourcing or ofin-house systems) can be compared for various scenarios.

17.5.4 Further research Below, we list a number of interesting issues and areas for further research. The models could be extended to: • Forecast return flows and secondary markets • Model recovery strategies with flexible disassembly sequences, depending on classification scheme, economy-of-scale effects, the trade-off between using old and new components and geographical differences • Provide reverse logistics network design modelling with environmental and logistics performance indicators, efficient algorithms for integral models and the set-up of collection systems • Integrate stochastics in location network models, instead of using traditional concepts such as scenario analysis, in order to deal with uncertainty in supply and demand • Include the effects of sub-aspects of product recovery management (e.g. product design, financing or strategic alliances) on the set-up of reverse logistics systems With ever-increasing return flows, both commercially and legislatively driven, the relevance of reverse logistics concepts is growing. This chapter is an attempt to contribute to the subject.

1m A FRAMEWORK FOR HIERARCHICAL PLANNING AND CONTROL FOR REMANUFACTURING V. Daniel R. Guide Jr and David W. Pentico Vaidy Jayaraman Duquesne University, USA

Washington State University, USA

Recoverable product environments are environmentally conscious systems where products are returned from end-users to be re-used (see Fig. r8.r for a supply chain incorporating reverse flows of materials) . Re-use options include value-added recovery (i.e. repair and remanufacture) and material recovery (i.e. recycling) (Thierry et al. 1995). These options prevent waste by diverting materials from landfills and conserve natural resources (energy and materials). Recoverable product systems are also profitable. In the

, ,.

'_____~--~I . .------------M-a-re-ri-al-S--------~'-----~--~ Supplier

Manufacturer

Customer

. _

Recycling

Products, components, spare parts

................ .. ... ......... .. , , -- - ' -----,

,--_c_o_lIe _ct _o_r-; ' --" ..................................

.... . .. . . . . . . . ....... . . . . ... .. ..... . . . . . ... +

l

Products, components and parts , Landfill • In the case of overstocks and warranty returns, the retailer may act as the collector.

Figure 18.1 The supply chain with forward flows and backward flows (dotted lines)

related to product and material re-use

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GREENER MANUFACTURING AND OPERATIONS

USA there are over 70,000 remanufacturing firms with total sales ofus$53 billion (Lund 1998). These firms directly employ 350,000 workers and average profit margins in excess of 20% (Nasr et al. 1998). Traditional supply-chain literature rarely considers the effects of return flows of materials. Firms must first determine if re-use activities are profitable in-house, or if partnerships should be made with third-party logistics providers and remanufacturers. Products must be obtained from the end-user and returned to a facility for final disposal (repair, remanufacture or recycle). The proper choice for product re-use is a matter of economics, since a rational manager seeks to maximise shareholder wealth. The profitability of remanufacturing operations depends, to a large degree, on reducing the high amounts of inherent variance. This requires unique planning and control decision-making tools, and this is the focus of our framework. There are alternatives for obtaining used products from consumers for re-use. The waste-stream approach relies on diverting discarded products from landfill by making producers responsible for the collection and re-use of their products. In this situation, firms passively accept all product returns from the waste-stream. The market-driven approach relies on end-users to return their products to a firm specialising in the re-use of those products. End-users are motivated to return end-of-life products by financial incentives, such as deposit systems, credit toward a new unit or cash paid for a specified level of quality. Firms are able to control the level of quality of returned products since acceptance of returns is conditioned by standards. No matter how product returns are generated, the primary problem in designing an effective logistics system is a high degree of variability inherent in a recoverable product environment (Guide et al. 2000). The quantity, timing and quality of used products are highly uncertain. The high variability possible in inputs to the system make other logistics tasks, such as production planning, replacement material procurement, costing and resource planning, difficult. There is a growing need for a new, integrated, approach to logistics planning and control for recoverable products. We present here a framework for a hierarchical planning model for remanufacturing. The framework shows a planner how to investigate which methodes) of product returns is the most profitable. The returns process is an endogenous variable in our framework. This represents a significant change in the way re-use operations are planned and controlled. The framework uses a three-stage hierarchical approach to planning (see Fig. 18.2). The first stage addresses the problem of product acquisition management, the second stage uses the outputs of Stage 1 to build operational plans and cost the re-use activities, and the third stage evaluates various pricing alternatives and the associated demands for the products. The framework is closed-loop since it allows multiple iterations if the overall profitability is not acceptable. This allows a planner to determine how profitable re-use activities will be and examine alternatives to change the profitability. The framework also allows for the control of the variance in the timing, quantity and quality of used products. We next present a brief overview of the relevant literature on logistics for re-use activities.

'S.

HIERARCHICAL PLANNING AND CONTROL FOR REMANUFACTURING

' ' p',bl" 'hi If total profit not

a new acquisition strategy

....

Profit, price and demand

Stage 3 Pricing and demand management

Guide et al.

275

Stage 1 Product acquisition

distribution of ~m,",'

quality and quantity

Adjust profit margin within search space Material and resource costs

Stage 2 Operational planning and costing

Figure 18.2 Three stages in the hierarchical framework

18.1

Research literature

We refer the reader to Fleischmann et al. (1997) and Guide et al. (2000) for complete literature reviews. We note that previous research concerned with re-use activity focuses on a particular functional area or activity, such as network design, shop-floor control or inventory control (see Table 18.1). The research literature has a number of restrictive assumptions. First, many of the models assume that product returns are an exogenous process. Second, when product returns are explicitly considered, return rates are assumed to be independent of sales rates. Third, return rates are assumed to be outside the control of the firm. Last, although several authors have called for a more integrated approach to logistics planning no such research has appeared. Under the classic assumption of exogenous, uncontrollable return rates and quality, there is research showing that remanufacturing operations are more complex to plan, manage and control (Guide and Srivastava 1998; Guide et al. 1997). The primary reason for this complexity is the high degree of variability in the quality of used products that serve as raw materials for the production process. Since the condition of used products may vary widely, the tasks of materials planning, capacity planning, scheduling and inventory management are complex and difficult to manage. Managing this high degree of variability is expensive for the firm since decoupling the system requires higher investments in materials, equipment and labour. We also note there is evidence that remanufacturing firms actively control the quality, quantity and timing ofproduct returns (Guide 2000). This evidence shows that the classic assumption that a firm must passively accept product returns with no ability to influence returns quality, quantity and timing is not valid. Given the high cost of complexity, it is

276

GREENER MANUFACTURING AND OPERATIONS

Assumption

Major focus of research

EXOGENOUS PRODUCT RETURNS?

RETURNS INDEPENDENT OF SALES?

FORECASTING

Re-usable container returns Kelle and Silver 1989

Yes

Time-lagged

Yes

Yes

Yes Yes

Yes

Krikke et al. 1999b Spengler et al. 1997

Yes

Yes

Guide and Srivastava 1998

Yes

Yes

Scheduling and shopjloor control Guide et al. 1997

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

REVERSE LOGISTICS

Literature review and problem structure Fleischmann et al. 1997 Network Design and collection strategies Krikke 1998

Yes

PRODUCTION PLANNING AND CONTROL

Disassembly operations

INVENTORY CONTROL AND MANAGEMENT

Periodic review systems Inderfurt h 1997

Continuous review systems van der Laan 1997

Mixed remanufacture and new van der Laan et al. 1999

Table 18.1 Remanufacturing literature and product return assumptions

logical that firms need to develop efficient methods for controlling the product return process. In our approach we relax these restrictions and present an integrated approach to logistics planning. In the following section we present complete details of the proposed model.

18.2

A framework for a closed-loop hierarchical planning model

The framework is a three-stage hierarchical process (see Fig. I8.2). The goal of the model is to allow a planner to evaluate how profitable a set of decisions will be. We base the framework on the observation that each decision sets the starting conditions for the next decision. Before we discuss the specifics of the framework, we present details of the economics of re-use. In the following sections we discuss the specifics of each stage.

f8.

HIERARCHICAL PLANNING AND CONTROL FOR REMANUFACTURING

Guide et al.

277

Several authors have cited a need for careful economic analysis of the potential benefits of environmental activities (Esty and Porter 1998; Reinhardt 1999). Firms are often encouraged to offer environmentally friendly products (i.e. recoverable products) as part of corporate citizenship-being a good citizen environmentally. However, this is an unrealistic expectation since a rational firm will engage only in profitable venturesthose that increase shareholder wealth. Further, it may not be reasonable for every original equipment manufacturer (OEM) to engage in re-use activities. The fastest-growing firms in electronics and telecommunications may need all the available capital to invest in core activities. In addition, the stock market is expecting high returns from these sectors, and firms may require a high return on capital expenditures or favourable economic value analyses. It may be rational for an OEM to not engage in re-use activities, to subcontract the re-use operations or encourage the start-up of corporate spin-offs to assume the responsibility. The decision whether or not to engage in re-use activities directly, indirectly or not all should be driven by a thorough economic analysis of the costs and benefits of such a programme. Despite the potential profitability of re-use and the legislative requirements, there are no integrated decision frameworks to advise decision-makers about the economic viability of various re-use options. We seek, in part, to develop the foundation for analysing the potential profitability of re-use options. 18.2.1

Stage 1: product acquisition management

Before any re-use activity can begin, used products must be obtained from the end-user. Product acquisition management focuses on this. Products are generally offered for re-use only when the end-user no longer receives utility from the product (or receives insufficient utility, as with a television set that works but with poor colour). Each individual end-user must decide when there is insufficient utility remaining in the item, which is a highly personal subjective decision. Therefore, product returns, with respect to timing, quality and quantity, are difficult to predict. Rather than focus on attempting to predict return rates we have chosen to focus on how firms may elect to influence product returns, if at all. A related problem is one of balance; ideally, return rates of used products should equal the demand rates for re-used products. In the past, the European Union (EU) has consisted of a diverse set of differentiated markets driven by many different cultures and tastes. This market segmentation has made product re-use difficult because of the lack of volume of standardised consumer goods. However, with the adoption of the euro as a common currency, the EU is rapidly changing to large, unified markets in some sectors that are not cultural (e.g. consumer electronics [personal computers (pes), cellular telephones, personal stereos] and automobiles). The consumer electronics markets have the greatest growth potential for re-use activities since volumes are high and product life-cycles are short. In general, several trends have made producer responsibility legislation increasingly popular. Millions of products are produced annually with shorter product life-cycles, and this leads to a huge number of obsolete products entering the waste-stream. The final disposal of these products poses an enormous problem for the environment and a large potential stream of used products for re-use operations. Legislation in the USA tends to encourage, rather than mandate, re-use activities. The recycling industry in the USA is an example of such a system where legislation encourages

278

GREENER MANUFACTURING AND OPERATIONS

re-use via tax credits, or municipalities assume collection responsibilities. However, individual states have banned the landfill of cathode-ray tubes and some electronics equipment, and the number of states banning specific types of product from landfill is expected to grow. There are two primary systems for obtaining used products from the end-users for re-use: the market-driven system and the waste-stream system. The waste-stream system relies on diverting discarded products from landfill by making producers responsible for the collection and re-use of their products. A market-driven system relies on financial incentives to motivate end-users to return their products to a firm specialising in the re-use of those products. In the waste-stream system, firms passively accept all product returns from the wastestream. Unable to control the quality of returns, firms often consider the large volumes of returns a nuisance and naturally tend to focus on the development oflow-cost reverse logistics networks. In the EU a number of recent legislative acts, known as producer responsibility laws, require manufacturers to assume responsibility for the end-of-life disposal of their products (Guide et af. 2000). The requirements for firms doing business in the EU are clear, and these regulations may act as entry barriers for firms not aware of the changes required for reverse logistics activities. The result of the product returns mandates and policies is a large uncontrolled volume of used products flowing back in increasing volumes to the OEMs. Firms are ill prepared to cope with the complexity of product returns and end-of-life disposal and are seeking ways to minimise their losses. In a market-driven system end-users are motivated to return end-of-life products by financial incentives, such as deposit systems, credit toward a new unit or cash paid for a specified level ofquality. Firms are able to control the level of quality of returned products since acceptance of returns is conditioned by standards. Market-driven systems are common in the USA because of the profitability of remanufacturing (Guide 2000). Firms using a market-driven approach for product returns focus mainly on high-value industrial products (Guide 2000; Nasr et af. 1998). However, there are exceptions: the system for remanufacturing automotive parts has been well established since the 1920S. A growing number offirms are interested in the consumer electronics segment, and this is the largest growth area in remanufacturing in the USA. A combination of the market-driven and waste-stream approaches is also possible. Product returns may be mandated or encouraged by legislative acts, but firms may still encourage the return of products in known condition by offering incentives. A firm using a pure waste-stream approach or a pure market-driven approach will have facilities with different operational characteristics and managerial control problems. In contrast, the two systems result in extremely different views of re-use activities. In the waste-stream system cost reduction is encouraged and the fundamental issue is to minimise the amount of money the firm loses. The market-driven system views re-use as a profitable economic proposition. Past research has focused almost exclusively on the waste-stream approach to re-use activities and it is logical that the modelling efforts are aimed at cost minimisation. The cost of product acquisition may be expressed as:

crcq = prcq + clog where

[18.1]

'S.

HIERARCHICAL PLANNING AND CONTROL FOR REMANUFACTURING

ctcq Ptcq

clog

Guide et al.

279

is the cost of acquisition of product type i is the price paid for a unit of product type i is the logistics cost (collection, transportation, storage, sorting) for a unit of product type i

Our function for the cost of product acquisition will work for market-driven and wastestream returns, or a mixture of both systems. In a market-driven system the price paid for a unit may be high, but the logistics costs may be minimal since the end-user will be motivated to return the product directly. In a waste-stream system the price paid for a product will be nothing, but the associated logistics costs may be quite high. The firm must examine all the possibilities in order to obtain the products desired for the best overall cost. We also recognise that the price paid for a product return may influence the quality of the product. In fact, offering a premium for the return of a product may encourage endusers to return products of very low quality in order to receive a cash reward. Inspection systems serve as a screening mechanism and may be used to set a specific price for a specific set of quality attributes. In the used automobile market in the USA prices are listed in terms of mileage driven and of physical condition and age of the automobile. Similar metrics can easily be devised for other products and as the value of end-of-life items go up the incentive to develop such systems becomes greater. We hypothesise a given price yields a distribution of nominal quality of the returned products. There is evidence that product returns have a distribution of nominal quality (Krikke et al. 1999b). The nominal distribution of quality may be conditional on the acquisition price paid for the used product. A simple discrete distribution of nominal quality may be expressed as: Qj

I

pr

cq

=

{inferior, average, superior}

This distribution of nominal quality, Q j the input to the second stage. 18.2.2

I Pfcq,

[18.2]

is the output of the first stage and serves as

Stage 2: operational planning and costing

The distribution of nominal quality is an input to the operational planning and costing process (Stage 2). Basic operational planning issues include calculating the expected material recovery rates (R MR ), the expected set of replacement parts and materials, the expected costs of the replacement parts and materials and the expected workloads at resource centres. Material recovery rates may be calculated in a number of ways, but all express the expected yield rate of a particular part or component from the disassembly of a used product, where 1.0 is a perfect material recovery rate. Material replacement quantities may be derived as (1 - RMR) multiplied by the number of remanufactured items to be offered. Workloads are also a function of the material recovery rates. If a planner knows the expected recovery rates and the number of units scheduled for disassembly in a given planning period, the expected arrival rates to key resources are easily determined. Total labour hours required are then a function of the number of units input into the system and the material recovery rates. All of these values are conditional on the level of nominal quality of used products. We formulate a linear programming model, RAPP

280

GREENER MANUFACTURING AND OPERATIONS

(remanufacturing aggregate production planning), to mllllmise the total cost per remanufactured unit given the incoming distribution of nominal quality. We present a preliminary version of such a model below. Descriptions and definitions of parameters and variables are given in Table r8.2.

The remanufacturing aggregate production planning model

18.2.2.1

The objective function, V, is given as: V= ~

+ ~ eft~s Ni1~' + ~

elftV I Nif/I

i,k,t

i,k,t

+ L~

~ edisp2Ndisp2

L

jt

jt

j,t ~

L

e?k(pi Ni1~spl

+ ~

i,k,t

einv3Ninv3 jkt

jkt

j,k,t

+ L~

efz:nanl

Mfrmanl +

i,k,t

einv2Ninv2 jt

jt

j,k,t

+ L~

eacqNacq ,kt

,kt

+

j.k,t

epurch NPurch jt

j,t

[18.3]

]I

subject to invl - N invl N ikt ik(t-I)

ret + Nacq + N ikt ikt

N inv2 = N inv2

+L ~(NlieldNdis) + NPurch j,kt lkt jt

jt

j(t-l)

dis - N ikt'

V I, .

k ,

t

[18.4]

_ Nreman2 _ N dis p2 jt

jt"

VJ' t

[18.5]

i.k

inv3 - N inv3 N ikt ik(t-l)

~ TdisN~is S ,kt lkt

L

i,k ~

L

i,k

\...I + Nremanl ikt ,v

lkt

~ TdisPNdispl S

L

,kt

lkt

k,t

Lt dis V t '

TremanNremanl < Lreman lkt

•

I,

-

[18.7]

t

'

Ldisp

Vt

t'

[18.6]

Vt

[18.8]

[18.9]

i,k

[18.10]

[18.11]

and dis Ndispl Nremanl Nacq NPurch Ndisp2 Nreman2 N invl N inv2 N!nv3 N ,kl' lkt ' lkt ' lkt' jt 'jt 'jt ' , k t ' jt ' lkt

;:: 0, Vi, k, t The objective function for this RAPP model is to minimise a combination of:

[18.12]

,s.

HIERARCHICAL PLANNING AND CONTROL FOR REMANUFACTURING

Guide et al.

281

Indices Index representing the set of products

j

Index representing the set of modules

k

Index representing the incoming nominal quality level

Index representing the time-period

Input parameters Unit cost to acquire core type i with nominal quality level

k in time-period t

Unit cost to disassemble a core of type i with nominal quality level Unit cost to dispose of core type i with nominal quality level Cdisp2 JI

k in time-period t

k in time-period t

Unit cost to dispose of modulej in time-period t Cost to hold a unit of core type i in inventory at end oftime-period t

CJIinv2 C inv3

Cost to hold a unit of modulej in inventory at end oftime-period t

cpurch

Unit cost to purchase modulej in time-period t

Cost to hold a unit of remanufactured core type i with nominal quality level inventory at end of time-period t

j kl

JI

k in

Unit cost to remanufacture a core of type i with nominal quality level k in timeperiod t Demand for remanufactured core type i in time-period t Total labour hours available for disassembly in time-period t L~ iS p

Total labour hours available for test and disposal in time-period t Total labour hours available for remanufacturing in time-period t Number of units of cores of type i with nominal quality level period

k returned

in time-

t

N yield

Number of units of modulej yielded by the disassembly of one unit of core type i with nominal quality level k in time-period t

di s Tikl

Time required to disassemble a core of type i with nominal qua lity level period t

jikl

k in time-

Time required to dispose of a unit of core type i Treman ikl

Time required to remanufacture a core oftype i with nominal quality level k in timeperiod t

Decision variables Number of units of core type i with nominal quality level k acqUired in time-period t

N d ispl ikl

Table

18.2

Number of units of core type i with nominal quality level period t

k disassembled in time-

Number of units of core type i with nominal quality level period t

k disposed of in time-

Indices, parameters and decision variables for the RAPP (remanufacturing aggregate production planning) model (continued over)

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GREENER MANUFACTURING AND OPERATIONS

Decision variables (cant .) N dis p2 Number of units of module} disposed of in time-period t JT

k

invl N ikT

Number of units of remanufactured core type i with nominal quality level remaining at end of time-period t

N. inv2

Number of units of module} remaining in inventory at end of time-period t

inv3 N ikT

Number of units of remanufactured core type i with nominal quality level inventory remaining at end oftime-period t

NPurch

Number of units of module} purchased in time-period t

Nremanl

Number of units of core type i with nominal quality level period t

Nreman2

Number of units of module} remanufactured in time-period t

Table 18.2

(continued)

JT

jT

ikT

JT

k

k remanufactured in time-

• The cost to hold one unit of inventory • The cost to disassemble, dispose of and remanufacture one unit of the core • The cost to dispose of one unit of module • The cost to hold one unit of remanufactured core in inventory as well as the cost to hold one unit of module in inventory •

The cost incurred to acquire one unit of the core

• The cost to purchase one unit of the module The first constraint (Equation [18.4]) ensures that the inventory of cores that remain at the end of time-period t is a combination of the inventory of cores carried over from timeperiod (t - I) plus the number of units of core i returned in time-period t and the number of units of core acquired in time-period t minus the number of units of core i disassembled in time-period t. The second constraint (Equation [18.5]) balances the inventory of modules that remain at the end of time-period t with the inventory of modules carried over from the previous time-period, plus the number of units of module} extracted by disassembly of one unit of core with a certain nominal quality level k multiplied by the number of units of core with nominal quality level k. The resulting quantity is then added to the number of units of module purchased in that time-period minus the number of units of module remanufactured and disposed of in time-period t. The third constraint (Equation [18.6]) balances the inventory of remanufactured core remaining at the end of time-period t with the inventory of remanufactured core that is carried over from the previous time-period plus the number of units of core remanufactured in time-period t.

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283

The fourth constraint (Inequality [rS.7]) refers to the total labour hours available for product disassembly. In this constraint the time required to disassemble one unit of a core with a nominal quality level k in time-period t multiplied by the number of units of that core with the same quality level disassembled in that period must be less than or equal to the total labour hours available to disassemble the product in time-period t. Similarly, the fifth and sixth constraints (Inequalities [rS.S] and [rS.g], respectively) ensure that there are sufficient total labour hours available for product remanufacturing and for testing and disposing of the product in the given time-period. The seventh constraint (Inequality [rS.ro]) ensures that the total number of units of a core with nominal quality level k disassembled in time-period t exceeds or is equal to the sum of the number of units of that core with nominal quality level k that is remanufactured in that period and the number of units of that core tested and disposed of in the same period. Further the total number of units of a core with nominal quality level k disassembled in time-period t cannot exceed the number of units of that core with quality level k returned and acquired in time-period t. The eighth constraint (Inequality [rS.n]) is the demand constraint where the demand for remanufactured core with a quality level k in time-period t cannot exceed the number of units of that core remanufactured in the same period. This constraint ensures that we can always meet the demand for remanufactured core with a certain nominal quality level in that period. The final constraint (Inequality [rS.I2]) ensures the decision variables are nonnegative. Successful implementation of the RAPP model, whether it is based on heuristics or commercial mathematical programming software, requires that a number of costs be considered. This includes inventory, disassembly, disposal and remanufacturing costs incurred to handle cores, modules and remanufactured products. However, all these costs can be captured from a remanufacturing operation and the objective of the linear programming model is to minimise the total cost per remanufactured unit given the incoming distribution of nominal quality. An important goal for this research is to find an optimal solution to the RAPP model. In our study of companies that carry out remanufacturing operations, it is typical for them to be dealing with five product types, three types of module and three nominal quality levels over a span of three time-periods. This example problem represents a linear programming model with over 400 decision variables and 600 functional constraints. Our current focus is to develop an efficient procedure to find an optimal solution to the RAPP model. The solution to this model is important input to the next stage of our problem. In the following, we provide an optimal solution to a sample problem. The input data captures a range of parameters that we obtained from a survey of production planning and control practices for remanufacturers (Guide 2000). For this sample problem we consider two products, two modules, three nominal quality levels (inferior, average and superior) over two time-periods. Remanufacturing firms may estimate the average nominal quality distribution by grading units obtained from the various suppliers and maintaining the grades in a database. Most firms stated that suppliers tend to have consistent distributions of nominal quality over time as the customers returning the products were stable in their usage patterns. The other parameters required for input for the model may be gathered from a number of internal sources of information. For example, the disassembly centre should track the yield of parts and components from

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products and maintain the data in a material database. The model is data-intensive; however, with the prevalence of bar-coding systems and the availability of inexpensive data storage, this should present no real challenges for remanufacturers. We used the add-in solver in Microsoft® Excel™ to obtain an optimal solution to the sample problem. We considered various scenarios of input data, including cases where demand exceeded supply and where supply exceeded demand. The input data for the sample problem is provided in Table 1803The optimal solution provided for each given time-period: •

The number of units of cores, of a given quality, disassembled

• The number of units of cores, of a given quality, remanufactured •

The number of units of modules remanufactured

• The number of units of cores, of a given quality, that remained in inventory at the end of the time-period Tables 18-4-18.8 show non-zero sample output obtained for the input values given in Table 18.3. As already discussed, the solution to this model is important input to the next stage of the problem. The data output values may be used to calculate the expected remanufacturing costs for a given range ofinput values. We hypothesise that the cost to remanufacture a used product i (Creman ) is a function of the cost of acquisition, f(Cacq ), which in turn is a function of the price paid to acquire the product (P/c q ) and the logistical costs of retrieving the product (Clog) (see Equation [18.1]), because the quality of the used product will determine the amount of material replacement and labour content. The cost to produce a remanufactured unit of a product is thus given by: [18.13]

This information also serves as the input to the next stage of the model.

78.2.3 Stage 3: pricing and demand management The pricing and demand management module is the point at which a planner can set the profit desired for a product and determine the selling price: [18.14]

where S{eman

is the selling price for remanufactured product type i (upper bound, selling man ) price of a new unit of product type i; lower bound,

Creman

is the cost to remanufacture product type i

IIi

is the profit for product type i (upper bound,

Cr

S{eman;

lower bound, 0)

The planner may define a search space (upper and lower bounds on the profit per unit) so that a range of selling prices may be examined. There will be a unit demand generated

'S.

HIERAR CHICAL PLANNING AND CONTROL FOR REMANUFACTURING Guide et al.

Range-

Input parameter Unit cost to acquire core type i with nominal quality level period t (Cit~q; $)

k in time-

Unit cost to disassemble a core of type i with nominal quality level s; $ h- I ) in time-period t

(ct

Unit cost to dispose of core type i with nominal quality level spl ; percentage of core cost) period t

(ct

Unit cost to dispose of module} in time-period of acquisition cost)

[21,102, 141,061] (37,048)

k

[8,25]

k in time-

3

t (Cj~isP2; percentage

Cost to hold a unit of core type i in inventory at end oftime-period V' ;percentage of core price)

(Cit

Cost to hold a unit of module} in inventory at end oftime-period

1

t

[5,20] (10.75)

t

[5, 20] (10.75)

(cj,nv2; percentage of selling price) Cost to hold a unit of remanufactured core type i with nominal quality level k in inventory at end of time-period t (CJk~3; percentage of selling price) Unit cost to purchase module} in time-period acquisition price)

[5, 20] (10.75)

t (Cf,urch; percentage of

Unit cost to remanufacture a core of type i with nominal qual ity level in time-period t $ h- I )

(ct:;nan;

Demand for remanufactured core type i in time-period

[25,50]

k

t (Di , )t

[10,35] Demand> supply Supply> demand

Total labour hours available for disassembly in time-peri od t (L~is)

[14,000, 18,000]*

Total labour hours available for test and disposal in time-period

t (L~iSP ) [14,000, 18,000]*

Total labour hours available for remanufacturing in time-period

[14,000,18,000]*

t

(L ~e m an )

Number of units of cores of type i with nominal quality level returned in time-period t (Nt:: )

k

[600,2,000]*

Number of units of module} yielded by the disassembly of one unit of core type i with nominal quality level k in time-period t (N y'~ld , t )

[0.13, 0.95]

Time required to disassemble a core of type i with nominal quality level k in time-period t (Tit;; weeks)

[0.031, 6.25] (0.381)

Time required to dispose of a unit of core type i (TidiSp; h unit - I)

[3, 8]

Time required to remanufacture a core of type i with nominal quality level k in time-period t (T/ftman ; weeks)

[0.1, 16.] (3.4)

• The range is shown as [lowest value, highest value] . The average value, where applicable, is given in parenthe ses. Either case is equally probable.

* Uniform di stribution

Table 18-3 Parameters for the sample problem to be solved by the RAPP

(remanufacturing aggregate production planning) model

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Inferior quality

Average quality

Superior quality

Pe riod 1

646

646

646

Period 2

574

574

574

Period 1

843

1,012

1,766

Period 2

931

471

479

CORE TYPE

1

CORE TYPE

2

Table 18-4 (N/!1~); number of units of core type i with nominal quality level k

disassembled in time-period t

Inferior quality

Average quality

Superior quality

Period 1

646

545

646

Period 2

572

574

576

Period 1

821

843

1,766

Period 2

931

476

474

CORE TYPE

-

-

CORE TYPE

1

2

Table 18.5 (N{:-:nanl); number of units of core type i with nominal quality level k remanufactured in time-period t

Period 1

Period 2

° °

Module type 1 Module type 2

2,873 6,451

Table 18.6 (Nj~eman2); number of units of module} remanufactured in time-period t

CORE TYPE

2

Period 1 Period 2

Inferior quality 121

°

Average quality

°

507

Superior quality 87 495

Table 18.7 (Ni~tVI); number of units of remanufactured core type i with nominal quality

level k remaining in inventory at the end of time-period t

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HIERARCHICAL PLANNING AND CONTROL FOR REMANUFACTURING

Guide et al.

Inferior quality

Average quality

Superior quality

Period 1

843

821

842

Period 2

479

471

476

CORE TYPE

2

287

Table 18.8 (Nif~3): number of units of remanufactured core type i with nominal quality level k remaining in inventory at the end of time-period t

by a specific selling price. All possible values for the selling price may be examined to find the selling price that maximises overall profit. In the event the overall profit is not acceptable, the process may be restarted by selecting a new acquisition price. The process may be simplified by using cues to price changes that will enable a planner to recognise whether the price offered for acquisition should be increased or decreased.

18.2.4 Advantages to a closed-loop model There are a number of advantages to the model proposed. First, the model recognises the financial nature of business and allows a planner to determine the most profitable strategy for a firm interested in re-use. Second, the model allows a firm to actively manage the quality of returned products (if this is the most profitable option). Third, the model provides an integrated approach to planning and control activities and requires few assumptions about the external environment. Finally, the model may be automated to allow a planner to examine a large number of scenarios quickly.

18.3 Conclusions and areas for future research The model framework described is presently under development at the modelling stage. We have provided a framework for the development of a working prototype of the model. Presently, the model is being developed in steps for each of the three stages discussed. Areas for future research questions concern the need to: • Determine starting points for the initial prices offered for used products • Construct generic methods for determining and rating the quality of used products • Determine the resulting distributions of nominal quality •

SpecifY the cost of remanufacturing a product as a function of the price offered

• Examine the implications of our model for channel choice co-ordination Finally, the complete details of our example, including a case study and specific data, are available on request from [email protected] or [email protected].

Part 4

CASE STUDIES

1m DESIGN FOR ENVIRONMENT AT SONY

'Incorporating a sound respect for nature' Shane J. Schvaneveldt

Hidetaka Yanagida and Akira Isobe

Weber State University, USA

Sony Corporation, Japan

The name 'Sony' ranks among the world's most recognised brand names, with an enviable record of success in creating innovative products such as the Walkman™ personal stereo, the first transistor television, the first video cassette recorder (VCR) for home use and the 8 mm camcorder. Building on its base in audio and video electronics, the Sony Group's major business areas also include personal computers (PCs), communications products, game consoles and software, motion pictures and music entertainment. Its annual revenue of US$58 billion places Sony among the Fortune Global 50 largest companies, with over two-thirds of its revenue derived outside Japan and with 181,000 employees worldwide (Sony 200Ib). Recognising its responsibilities to global society, Sony has placed increasing emphasis on improving the environmental performance of its products and business processes. This chapter examines Sony's environmental initiatives with a focus on its approaches for designing environmentally conscious products. The remainder of the chapter is structured as follows. Section 19.1 provides an overview of Sony's corporate-wide environmental activities. Section 19.2 focuses on Sony's approach to designing green products. Section 19.3 explains the major areas of emphasis in reducing a product's environmental impact. Section 19.4 highlights the tools used by Sony to facilitate design for the environment, including its Green Product Check Sheet. Finally, Section 19.5 provides some concluding comments.

'9.

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Overview of Sony's environmental initiatives

Sony's explicit attention to environmental management dates back to 1976 when it formed an Environmental Conference, chaired by the company's president. Early efforts focused on pollution, hazardous waste, and health and safety-related issues. Starting in 1990, responsibility for environmental issues has been realigned over time into multiple committees. Under the present committee structure, corporate-wide environmental measures are formulated and co-ordinated by the Sony Environmental Conservation Committee based at Sony's Tokyo headquarters. This headquarters committee, in turn, interfaces with environmental offices within the business units and with five regional Environmental Conservation Committees for Japan, the Americas, Europe, China and Asia (other areas). A regular schedule of conferences and meetings at the corporate, regional and business unit levels facilitates the open exchange of information and best practice. Through this combined global and local committee structure, Sony is able to respond flexibly to the unique competitive and legislative environments of each business and region, while also maintaining co-ordination and standardisation of environmental efforts worldwide. As a guideline for environmental management activities worldwide, Sony announced in October 2000 a reformulated environmental vision towards sustainability. The vision statement describes three driving forces for achieving sustain ability: (I) creating technology and products that reduce impacts on the global environment; (2) pursuing business models and systems that contribute to the long-term sustainability of the environment and society; and (3) educating employees and stakeholders to be eco-literate and to translate awareness into action. Sony's goal is to raise its eco-efficiency (a measure of sales divided by environmental impact) by a factor of 1.5 by 2005 and by a factor of 2 by 2010 in comparison to fiscal year 2000. To achieve this goal, Sony has devised a new environmental action plan labelled Green Management 2005 (Sony 200Ia). It sets forth specific goals and guidelines for realising Sony's environmental vision with special emphasis on energy conservation, resource conservation, waste reduction and product recycling. Examples of environmental indicators and targets set by Sony in its action plan include the following (expressed as the targeted improvement over fiscal year 2000 levels to be achieved by FY 2005): • Reduce energy usage of business sites by 15% or more relative to sales • Reduce energy consumption of products by an average of 30% • Reduce usage of paper by 20% relative to sales and achieve 100% use of recycled paper • Reduce product weights and/or number of parts by 20% • Reduce the volume of water usage by 20% relative to sales • Reduce total weight ofwaste generated at business sites by 30% relative to sales • Use environmentally conscious materials, such as recycled products, for all packaging

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• Create a collection and recycling plan for major products • Publish environmental reports annually with quarterly updates to environmental performance information • Provide environmental training to all management staff by FY 2002 Sony's environmental management system (EMS) is based on the international standard, ISO 1400I, of the International Organisation for Standardisation. As an integral part of Sony's corporate management structure, it provides the fundamental means for carrying out environment-related activities and improving environmental performance at each operation. Group member Sony Kohda became the first Japanese electronics manufacturer to attain ISO (DIS) 14001 certification in May 1995, while Sony Deutschland Service Division became the first of Sony's non-manufacturing units to be certified in July 1996. Every manufacturing site in Japan was ISO 14001-certified by February 1999. Sony's goal is for all business sites worldwide to obtain certification, with newly established sites to obtain certification within two years of establishment. As one means to promote and recognise superior achievements in environmental performance, the Sony Environmental Award was initiated in 1994. It is open to group members worldwide. Award categories include the Technology Prize, Product Prize, Management Prize (for environmental conservation activities in business operations and with local communities) and the Grand Prize for the most outstanding achievements. The annual competition typically draws over a hundred applications, and the president of Sony presents the winners with their awards. In addition, regional award programmes for the Americas, Europe, Japan and Asia have subsequently been established. Though beyond the scope of this chapter, Sony also actively pursues a variety of other initiatives, including environmental accounting and reporting, environmental auditing, green purchasing, closed-loop/zero-landfill manufacturing, product take-back and recycling, development of environmental technologies, and environmental education and ttaining (for further information, see Sony 1994,1997,1999, 200Ia). In recognition of its environmental efforts, Sony received the loth Global Environmental Award Grand Prize in April 2001, an award sponsored by the Japan Industria[JournaL

19.2 Creating environmentally

conscious products at Sony As previously noted, Sony has designated the creation of environmentally conscious products as part of its committnent to environmental sustainability. Although the environmental load of a product has to be considered throughout the product's life-cycle, the magnitude of that load is largely determined at the product planning and design stage. There is very little that an individual consumer can do, for example, to improve a product's energy consumption, materials usage or recyclability beyond the performance level that it was originally designed to have. Clearly, the design stage is the point of greatest leverage for improving a product's environmental performance.

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Besides meeting important societal obligations, designing environmentally conscious products also can be good business practice for the bottom line. Sony learned this lesson in the mid-1990s through its experience with colour televisions for the European market. At that time, a Sony model received a 'reasonable buy' rating from a Dutch consumer magazine, in part because its environmental performance was below that of competitors. After that report, the Sony model experienced an II.5% drop in market share in the Netherlands, and the two competing models that had received 'best buy' ratings garnered gains of 57% and IOO% (WBCSD et at. 1997). This experience spurred Sony Europe to redesign its colour televisions to be more environmentally friendly. By its second generation, Sony's Eco TV had improved its environmental performance in a number of ways and had regained positive ratings in the consumer test magazines. The new design reduced plastics content by 52%, used less material overall, increased recyclability to 99%, eliminated several materials with high environmental impact and decreased disassembly time significantly. Side benefits included reduced materials cost, reduced assembly time and lower production costs (Rowledge et at. 1999). In 1991, recognising the crucial role of the product planning and design stage, Sony formulated a policy for product assessment. Initially, product assessment efforts involved mostly design engineers and focused on end-of-life treattnent issues. Good results were readily achieved on such items as implementation oflabelling for battery recycling and plastic types, but progress in other areas was less than dramatic. In order to increase the scope and pace of environmental design efforts, Sony realised that personnel from product planning and marketing needed to be more closely involved. To facilitate this, Sony created Green Guideline handbooks, with different versions targeted at product planners and designers. These guidelines have greatly facilitated communication and joint efforts among all parties (Yanagida 1995). Product assessment at Sony involves specialists in the various product design sections and other related groups such as materials. These specialists develop product assessment standards tailored to their particular section's activities and participate in a monthly meeting to exchange information. In addition, company-wide product assessment guidelines are established regarding: • Design standards to minimise the environmental impact of each product throughout its life-cycle • Verification that the prototype meets these standards • Further verification that the product meets these standards in full-scale production • Methods of handling the results of verification • Clarification of responsibilities throughout the assessment process In order to ensure that environmental considerations become a part of the everyday working life of those employees involved with creating products, Sony initiated the company-wide Greenplus Project in May 1994. Led by a Sony corporate director as the project manager, it involves representatives from all Sony Group companies. This project reinforces Sony's existing product assessment efforts and has the goal of reflecting environmental considerations in the design of every product. To achieve this, selected product models have been targeted for breakthrough improvements in environmental

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performance. These environmental design successes are then deployed to other product models and product categories. With the inclusion of environmental items in standard product planning documents since I998, a system has been created to better verify environmental performance early in the design stage.

'9.3 Emphasis areas for design of environmentally conscious products As part of its guidelines for environmentally conscious products, Sony has established multiple areas of consideration, including environmental impact of materials, energy efficiency, resource conservation, environmentally conscious packaging, environmentally conscious accessories, product recyclability and reduction of environmental impact during the production process. With the adoption of these guidelines, Sony Group companies worldwide have uniform goals for environmental performance. Examples of Sony's initiatives in these areas are highlighted below (see also Sony I994, I997, I999, 200Ia, n.d. a, n.d. b, n.d. c).

19.3.1 Environmental impact of materials Sony has made significant progress in reducing, substituting and eliminating materials with a high environmental impact from its products and processes. As part of this effort, Sony has classified hazardous materials into four levels: Class I substances (prohibited); Class II substances (phase-out); Class III substances (reduction); and Class IV substances (control). Elimination of lead in soldering compounds is a challenge that has faced all of the electronics industry. Sony already manufactures certain products using lead-free solder and plans to extend this to all product lines by FY 2005. Overcoming initial difficulties with a germanium compound, Sony has reformulated the solder and now considers itself the industry leader in its ability to produce complex products without lead solder. As another example, Sony has eliminated the use of chromium oxide in its audiotapes. Although chromium oxide itself is not harmful, under certain circumstances it can be transformed into a highly toxic substance. Consequently, Sony determined to develop chrome-free alternatives for its product line of audiotapes. Also, as incorporated into its Green Management 2005 goals, Sony plans to eliminate halogenated flame-retardants from all products marketed worldwide by FY 2005 and has already made partial progress in making certain European and Japanese models halogen-free.

19.3.2 Energy efficiency The vast majority of an electronic product's environmental load over its lifetime results from its consumption of electrical energy while in the possession of the customer. Therefore, designing products to be more energy-efficient is an important task for Sony and other electronics manufacturers. As most electronic products have a standby mode for enabling remote-control functions and for retaining memory settings, product

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designers face the dual challenge of reducing energy consumption during active use and during standby mode. Since most electronic products have a standby mode for enabling remote-control functions and retaining memory settings, product designers face the dual challenge of reducing energy consumption during active use and during standby mode. In fact, analysis of certain products such as VCRs has shown that more energy may be used during standby than in actual operation. Sony has improved its products' energy efficiency in a number of innovative ways. The DHC-MD777 mini audio system incorporates supplemental circuitry that ensures that power is sent only where it is needed during standby mode. By bypassing the main power transformer, standby power consumption is reduced from 16 W to less than 3 W, and to only I W when the clock display is switched off. As another example, a camcorder has been designed incorporating an improved driver algorithm for more efficient start-up of its motor. As a result of this and many other improvements, camcorders and Walkman™ products require 50%-90% less power than previously. Television energy consumption has been reduced by over 22% overall. In particular, the KV-2IMFI model, which was introduced to the Japanese market in early 2000, requires only 0.1 W on standby and has an energy-saving mode that can reduce energy consumption during usage by up to 23%. Sony's accomplishments have been recognised by several awards, including the Energy Conservation Centre Chairman's Award in 1997 from the Energy Centre Foundation, and an Energy Star Partner of the Year Award in 1999 from the us Environmental Protection Agency (EPA).

79.3.3 Resource conservation Conserving the resources used in a product can be achieved in many ways. The most direct way is simply to design the product so that it requires less material resources. This can be done through simplification, miniaturisation, parts count reduction and other approaches. Utilisation of re-usable materials also contributes to the goal of resource conservation. Yet another way is to improve the reliability and repair services of products so that their useful life is extended. Product designs with reduced materials usage are now becoming common. To illustrate, the 2000 model of Sony's MD Walkman™ had one-third the mass (grams) of the 1996 model. In the mid-1990s, all car stereo systems were redesigned to require only half the number of mechanical components, half the solder points and half the polystyrene foam packaging previously used. Another example is the development of reloadable print media to replace integrated ribbon cartridges that were discarded whole after use. The new design features a re-usable ribbon holder, with only the ribbon unit requiring replacement. Over time, this results in a 50% reduction in use of plastics. Furthermore, owing to their smaller size, the replacement ribbon units can be shipped with use of half the previously required packaging materials and at half the former transportation energy cost.

79.3.4 Environmentally conscious packaging To improve the environmental performance of product packaging, the Sony departments responsible for product planning and distribution are co-operating to develop improved

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packaging materials. In this effort, they focus on the four Rs of packaging: (1) reduction of packaging materials; (2) replacement of packaging materials with low environmental impact materials and materials for which a recycling infrastructure exists; (3) re-use of packaging materials; and (4) recycling of packaging materials. Since 1991 Sony has packaged selected products in moulds made of recycled paper rather than from styrene foam. Sony also has co-developed an innovative packaging material called Cellu Mold™. This material is made from recycled paper and has shockabsorption and durability characteristics equivalent to styrene foam. Another innovation has been the co-development of a one-piece box that requires no styrene foam. Made from a single sheet of cardboard with intricately folded compartments, the one-piece box has been successfully used for VCRs sold in Japan and Europe. Both Cellu Mold™ and the one-piece box are recyclable and were recognised with the World Star Prize in 1996 and 1998, respectively.

79.3.5 Environmentally conscious accessories Rather than being an afterthought, accessories such as power adapters, remote controls and manuals require the same environmental design considerations as the products that they accompany. As examples of Sony's efforts in this regard, a compact, card-shaped remote control for camcorders uses 41% less plastic materials than its predecessor. Also, by reducing their power requirements, television remote controls have been developed that can operate with one battery. As a result, material usage for batteries, as well as disposal needs for the used batteries, have been cut in half compared with conventional two-battery units. Notable improvements have also been made in product accessories such as owner manuals. In addition to utilising recycled paper, through redesign and reformatting of the contents the manuals now require up to 50% less paper than before.

79.3.6 Recycling To improve recyclability, product designers can consider several issues, including: reducing the variety of materials used; avoiding composite materials; labelling of plastic types, battery types and circuit board materials; reducing product dismantling time; and so forth. The design of Sony's Eco TV illustrates several of these points. The variety of materials used in the main body was reduced from eight to two, with no composites included. Recycling of plastics was facilitated by moulding the main body together with the speaker grills (previously made of metal) into one uniform piece. Disassembly was made possible with use of only two standard tools, and screws were eliminated from the speaker box and their total number reduced. With regard to recycling technologies, Sony recently developed a plastic identification system capable ofidentirying even black-coloured plastic materials and detecting flameretardants contained in plastics with an accuracy of over 99%. As another example, Sony has developed proprietary technology for the efficient recycling of styrene foam into polystyrene for re-use. This unique technology was recognised in 1998 with the Nikkei Environmental Technology Prize.

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19.4 Support tools for design for environment Several design tools are used by Sony in support of green design efforts, including design for assembly-disassembly cost-effectiveness (DAC), life-cycle assessment (LCA) and the use of Green Product Check Sheets. Developed in-house by Sony, DAC is a software-based system for evaluating quantitatively the ease of assembly and of dismantling for a given product design. The results of this analysis can be applied to improve a product's design in terms of physical structure, components used, connections, production processes and so on. In the future, Sony plans to develop a network system that brings together DAC evaluations and design information, as well as three-dimensional computer-aided design (CAD) capabilities. Sony also uses LCA for product planning and evaluation. In addition to continuing development of its own combined DAC-LCA system, Sony has participated in a Japanese industry-wide consortium to develop a comprehensive LCA database. An example ofLCA results can be found in Figure Ig.I(a), which shows the amount of carbon dioxide (C0 2 ), a greenhouse gas, that is emitted at each stage of the life-cycle of a 28-inch television (Sony 200Ia: 60). Sony calculated these amounts based on the use over 10 years of a 28inch screen television, taking into consideration the use of fossil fuels, electricity and other energy sources required for the manufacture, transportation, use and disposal of

Disposal 0.1%

\

(a)

Components manufacturing 13% cturing 1% Product transportation 1%

Operation 82%

(b)

. ..

,

Packaging 2% Other 2%

Mechanical

-

Components on circuit board 24%

..

~

Cathode-ray tube 61%

Figure 19.1 (a) CO 2 emissions during the life of 28-inch TV (by activity); (b) CO2 emissions during manufacture of 28-inch TV (by material)

298

GREENER MANUFACTURING AND OPERATIONS

the television. From this type of analysis, Sony learned that 82% of CO 2 emissions were attributable to electrical power consumption while the product is in use by the customer. As for the manufacturing stage itself, Sony determined that the majority of environmental load comes from production of the cathode-ray tube (CRT), including its materials, as shown in Figure 19.I(b) (Sony 1999: 3I). From these kinds ofLCA results, Sony engineers know the priority areas for reducing a product's environmental load. Another simple yet powerful tool used by Sony is the Green Product Check Sheet (Yanagida 1995). It has been widely used by Sony's Japan personnel since 1994. As can be seen in Table 19.I, the Check Sheet captures those environmental aspects of a product that are most actionable at the product planning and design stage. These aspects were selected from a broader matrix depicting the environmental load items encountered over the life-cycle of a product, including materials procurement, manufacture, logistics, usage and end-of-life. Although this checksheet represents a typical checksheet used at Sony, it should be noted that the various Sony Group members modifY the checksheet to suit their own situations. Indeed, Sony encourages the creative use of this and other tools, with best practice shared regularly through the product assessment meetings and other forums. The Green Product Check Sheet evaluates the degree that environmental considerations have been incorporated into a product's design. The proposed design is compared with existing models and/or company goals, and a score is assigned according to the degree of goal achievement. Although the Check Sheet's items apply fairly universally, they may be easily modified, added to or deleted to fit a particular product's characteristics. Scores for each item are typically assigned from a range of O-IO points. The score thresholds may be adjusted arbitrarily so as to reward incremental and/or breakthrough improvements. For example, a mid-range score of 5 points could be set to recognise a modest, stepwise improvement or the achievement of breakthrough performance. In general, Sony has set the full mark of IO points to represent the full achievement of stretch goals set forth in its Green Management action plan. In this way, the Green Product Check Sheet serves to reinforce and keep designers' efforts in alignment with longer-term company goals. The scoring examples shown in Table 19.1 are based on targets in Sony's Green Management 2002 action plan. Over time, the score thresholds are adjusted upwards in concert with rising performance goals. To illustrate possible scoring methods, a product design that meets Sony's own standards for materials with high environmental impact would have the corresponding box checked and will receive a score of 8 points. For disassembly time, if the proposed model's time is 3.5 min and the time for the standard reference model is 5 min, then the improvement is calculated as [I - (3.5/ 5)] x IOO% = 30% reduction. If a full score of IO points represents achievement of the company's goal of 60% reduction for this product category, then the proposed model could qualifY for a score of(30%/60%) x IO = 5 points. As a policy decision, bonus points or minus points can be allowed. Figure 19.2 provides a profile for a hypothetical product design. Each axis of this chart represents the score for one of the Check Sheet items, with the centre point indicating a score of 0 and the outer circle indicating a full score of IO. Since each score reflects the degree to which the product is achieving Sony's long-term environmental goals, this chart provides a visual progress report. The design's environmental achievements as well as items with room for further improvement are readily grasped.

'9.

DESIGN FOR ENVIRONMENT AT SONY

Schvaneveldtet al.

299

Model . . . .. . . . ... . . . . .. . . . .... .. .. .. Date . . ... . . . . Evaluated by ..... . . .. ... .. .. . .. . . . . . Evaluation method

Item Materials with high environmental impact

Disassembly time

Observes relevant national regulations : Observes higher industry standards:

7 points 8 points

High-impact materials eliminated :

10 points

Reduction in time to dismantle product

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new model, T new .. .... ........... Lmin) reference model, Tref .......... Lmin)

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Score Remarks

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new model recyclability, Rn ew ............................................. (_%) reference model, Rref ..... ..... (_%) Recycled resource usage ratio

Recycled glass usage as % of tota I glass weight: Recycled plastics usage as % of total plastics weight: Recycled paper usage as % of total paper weight:

Material resource conservation

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Warranty period

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Table 19.1 Sony's Green Product Check Sheet (continued over)

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The Plan-Do-Study-Act Cycle with potential iterative loops back through the early stages

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320

21.2

GREENER MANUFACTURING AND OPERATIONS

Applying the Deming Cycle to process improvement: a case study

27.2.7 Situation Located in a northern district of a major city in the southwestern USA, the study gypsum wallboard plant was built in the 1950S when there were no other buildings within its vicinity. As a result, even though its dust emission problem was not new, it had not been a major issue in the past. However, recent growth in the metropolitan area has surrounded the production facility with commercial and other buildings. In particular, several new developments, including office buildings and hotels, have sprung up nearby in recent years. In addition, the manufacturing site is also near the location of a major international event that annually attracts hundreds of thousands of people from throughout the world. Although dust emissions from the production facility were infrequent and consisted only of harmless calcined gypsum, the location of the plant made these emissions very conspicuous. In contrast to recently constructed facilities in its neighbourhood, this relatively antiquated plant would not be considered to be an attractive structure. Its occasional dust emissions further degraded the firm's public image and seemed to foster a growing negative public sentiment. Early in 1995, the city began writing warning citations and insisted that the plant apply for an air quality permit. Federal emissions standards were also becoming an issue. As a result, senior management at the firm decided to implement an ERO programme to address the dust emission problem. Chartered with the task of bringing the firm's dust emissions under control, the CI team decided to use the Deming P-D-S-A Cycle to structure and guide its improvement efforts. The following exposition describes the team's approach and results.

21.2.2 Plan

With representatives from the production, engineering and maintenance departments, the CI team met in June 1995 to discuss the dust emission situation. Since an air quality permit carried the possibility ofvarious sanctions, including a fine of up to US$15 ,000 per day for violations, the potential financial impact to the firm was significant. In addition, there was also a growing sense of corporate responsibility and a desire to be respected and seen as a good neighbour. These considerations motivated the team to establish a plant performance goal: namely, no calcined gypsum dust emissions would be permitted except under unforeseen circumstances such as during production process disruptions or equipment failures. A macro flowchart of the wallboard manufacturing process was constructed and used by the team to systematically structure its consideration of possible emission sources. This flowchart is presented in Figure 21.2. After careful evaluation of material flows and supplementary data available relative to the emission situation, the team decided that the main source of dust emissions came from the exhaust stack of the mill where the product's primary raw material, gypsum, was crushed into a fine powder. With the team's decision to focus on the exhaust stack of the mill, emphasis was directed toward the identification of the root cause(s) responsible for the dust emissions.

ZJ. A STRUCTURED APPROACH TO INDUSTRIAL EMISSION REDUCTION Reid

et al.

321

Reception of the gypsum

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Water

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Figure 21 .2

A macro flowchart of the gypsum wallboard manufacturing process

With representatives from various functional groups providing multiple perspectives relative to the problem, the team was able to identitY two potential root causes for the unwanted dust emissions: •

Apoorly performing or malfunctioning electrostatic precipitator (ESP)

• An overloaded ESP, resulting from an inability to effectively control air flow through the exhaust system Along with several additional potential causes determined through brainstorming by the team, these two causes were evaluated and the team agreed that they appeared to be primarily responsible for the emissions. Records containing data on emission incidents were used to validate the informed opinion that, in all probability, these two problems were the root causes of the dust emissions from the mill exhaust stack.

322

GREENER MANUFACTURING AND OPERATIONS

The next step was for the CI team to design an action plan to address the root causes. In this sub-stage, the team recognised that several options were available to meet the stated objective of zero emissions under normal operating conditions. For example, the air-flow damper in the exhaust stack could be controlled manually or through the installation of an automatic controller. In addition, the existing ESP could be replaced with either a new or a refurbished unit. The team also realised that each of these options had a corresponding cost and that each of the options varied along different dimensions, such as relative effectiveness, reliability, ease of implementation and possible disruption to the planned production schedule. In order to evaluate these different options systematically, the team opted to use a priority matrix. A priority matrix provides an objective-oriented, quantitatively based, structured approach for comparing different alternatives by weighting various criteria and evaluating each option against them (Brassard and Ritter 1994; GOAL/QPC 1995). Although there are several methods for constructing a priority matrix, the following procedure is quite common. The CI team begins by agreeing on the ultimate goal to be achieved through the use of the matrix: namely, to determine the best action plan. Then, the team brainstorms a list of potential criteria that could be used to evaluate the different alternatives. Next, using a matrix, each criterion is evaluated relative to all other criteria for the purpose of establishing its relative importance. Once the relative weights of the criteria are determined, the team systematically compares all options relative to each criterion. Finally, using a summary matrix, the team then determines the relative value of each option based on all the weighted criteria combined. The option with the highest value is considered to be the best choice among all of the alternatives considered. Since the cost of a new ESP was considered to be prohibitive, the CI team decided to base its evaluation on three options only: • Refurbish the existing ESP •

Manually control the air-flow damper

• Control the air-flow damper through an automatic controller (to be installed) The final priority matrix created by the CI team, as shown in Table 21.1, revealed that the refurbish option was the best when taking into consideration its cost, relative effectiveness, expected reliability, ease ofimplementation and potential disruption to the production schedule. Based on the insight gained from the priority matrix, the CI team developed an action plan that included the following steps: •

Investigate current ESP operations with assistance from the original vendor

• Ascertain the scope of the repair effort, based on inspection results • Order any components required for refurbishing the ESP • Schedule adequate plant downtime to repair the unit or to replace components • Conduct a thorough test of the repaired unit • Train the operators and maintenance personnel in ESP operations and repairs

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