Role of waste management in 21st century Supply Chain networks

The 21^st century has brought many opportunities for the businesses around the globe. But to capitalize on these opportunities is a totally different thing. In this century, opportunities are increasing but resources are depleting. With the decrease in the availability of the resources, the cost of the production is also going up. With the increase in the cost of production, the value added in the production and products by waste is also becoming more and more important. So at every step of supply chain, it is important to control the waste.

The Nano-based RFID tags are in fact a way to cut down the cost by using new technology. Now here you are actually cutting down the cost by replacing energy intensive silicon based RFIDs with plastic or paper based RFIDs. The other thing about RFIDs printed on paper or plastic is that they are lighter, so the cost to transport them will go down as well. So in this process you are controlling waste of energy and using that thing for your benefit. The actual purpose of any new technology, in the end, is cost saving and time saving.[1]

Similarly, Blank Label is controlling the waste in the manufacturing process by letting the customers design their products themselves. In this scenario, they don’t have to manufacture same shirt of different sizes for different prospective customers and wait for the right customer to arrive at their shop and buy the product. They reduce their investment in the manufacturing by making only things that have definite customers. When they don’t have to manufacture extra goods, their waste is zero. So they not only save on the material but also save the energy by not making customer-less products.[2]

In the study related to the resource productivity, the main thing is controlling the wastage of resources at different stages of manufacturing. This article is somehow related to the IKEA idea of saving the transportation cost by designing the  products which are easier to transport.[3] In their search for designing a cup that can reduce their cargo transportation space, they actually saved money in the manufacturing process. Their furnace bill actually went down in the process. They also highlighted the recycling of left overs in the manufacturing process. They cited examples from many industries that either saved on the cost of manufacturing by slightly changing the manufacturing environment or recycling their waste.[4]

The approach to control the wastes in the manufacturing process is a good thing. But it is too early to call the policies adopted by the industries to control the waste right. We know about the cars which use hydrogen and oxygen to run. These cars are called green cars because their byproduct is water. But from where does that oxygen and hydrogen come from. These gases are manufactured at plants and these plants are not manufacturing the gases without consuming any energy or without creating any wastes. In fact, there is a great debate about the feasibility and future of these cars owing to the role of factories manufacturing these gases.

                                                                                                                                                                    

[1]Nano-Based RFID Tags Could Replace Bar Codes

[2] Putting Customers in Charge Design By AMY WALLACE Published: May 15, 2010 The New York Times

[3]IKEA-cost-article

[4]Manufacturing resource productivity

Next Industrial Revolution

-Innovations, Tools, and Organizations, to Change the Landscape of Manufacturing Industry

Keywords: crowdsourcing, low-cost tools, partnership

Several things is changing the landscape of manufacturing industry: the brilliant idea of crowdsourcing, the availability of low-cost production tools and the gigantic online platforms  hosting millions of potential business partners.

From the view of supply chain management, these major changes ower the cost of bringing a new product to the market, and letting the inventers focusing on R&D and how to satisfy individuals’ peculiar needs. They change drastically the traditional process of designing, researching on and bringing to production, a new product.

First of all, the idea of outsourcing makes possible that customers and potential designers can easily participate in the designing a product. Online platforms like DesignCrowd.com form communities for customers and potential designers. This significantly lowers the costs of surveying customers’ needs, hiring the right designers and interacting with customers. Now, the line between designers and customers are blurred. They are all in the online community, interacting with each other, generating million dollar business ideas together. As a result, the product design fits the customers’ needs much better and the most able designer for this particular product can participate in the process. A subfield in economics, Industrial Organization, gives an excellent explanation for the advantages of this kind of organization. Due to Ronald Coase’s theory, organizations are formulated because they can lower “transaction cost”. Thus, in the old age, firms emerge because people can work closely, hence lowering the cost of communication and cooperation. However, the online communities eliminate the geographic difficulties completely. Cooperating with someone thousands of miles away is just as easy as cooperating with the guy sitting next to you. Plus, the flexible organization of online communities dramatically lowers the costs of constructing big buildings as workplaces, hiring thousands of contract employees. Thus, these online design communities become the new efficient way of organization, making large-scale companies disadvantageous. Hence, the economic drive for efficiency will make this kind of organization increasingly popular over time.

The Wikipedia definition of crowdsourcing is the practice of obtaining needed services, ideas, or content by soliciting contributions from a large group of people, and especially from an online community, rather than from traditional employee or suppliers. The word is coined by Jeff Howe in 2006. And Daren Braham defined it as “an online, distributed problem-solving and production model”. This innovative way of organization fits the new ideas of academic trends as well. The new field of online learning, bandit problem adopts the similar ideas of how to optimize the procedures to get an optimal strategy. This kind of organization is flexible, efficient and fast-moving, opening a new era of industrial age.

Second of all, the lower costs of tools make this kind of organization possible. Without a prototype, no design can be implemented into production, no matter how brilliant it is. Following the design part, the next chain of the production line is bringing out a prototype. Before, the machine which can generate prototypes usually cost millions of dollars. Thus, large-scale firms need to be formed so that large amount of capital can be accumulated for its manufacturing machines. But nowadays, new technologies have made it possible to purchase the prototype generating machines at a much lower price. For example, now you can get a 3-D printer from Bre Prettis and his team for no more than 1000 dollars. However, in the past, you cannot get anything like that for less than 12500 dollars. The reasonable costs of these prototype-making machines make possible the small-scale manufacturing style. The availability of these cheap machines affordable and sizeable in anyone’s garage makes everybody inventers if they want to be. The  rule of scale of economy loses power in face of the new technologies. When you are done with your designing and make your ideas into your prototypes, you can also easily find a business partner to bring your products into reality. You can find your own production factory online! The new practices in China reveal to the world how small shops can handle small orders in a very flexible and cost-effective way. These are brought to reality by the third component in the new industrial revolution.

Portable 3-D printer is very powerful

It is the online platform of business partners. The innovative Chinese internet company, Alibaba, has become the largest aggregator of the country’s manufacturers, products and capabilities. You search online among the millions producers to find your potential business partner. The instant message service of Alibaba makes the business opportunities just a few clicks away. As said by Ma, more than 1.1 million jobs have been created in China. And the rooted culture of “shanzhai”, a Chinese word meaning bandit, is the driving reason that the trend is going wildly in China. Not only can you find manufacturers to produce your product based on your prototype, you can find business partners to sell your products as well! There are websites like SparkFun where you can market your product to the market. And you can also set up your own e-commerce outfit through a company like Yahoo or Web Studio.

The new organization from the design, making prototype, to the production, and then marketing to the market is so cost-efficient and flexible, that a couple of innovative entrepreneurs can compete with multinational companies now. To me, the driving force behind all these is the new information and manufacturing technology as well as the innovative ideas of industrial organizations. The technologies have eliminated the information barriers caused by geographic distances, brought down the costs of designing and prototypes and making easy the process of finding business partners. The costs along the whole chain of the production are drastically lowered so that more tailored products can be invented and produced by unincorporated entrepreneurs in a much more flexible way. And since the products are much more tailored to customers’ needs, they will generate a higher margin. That’s why I figure the trend will go on and become more and more popular around the world which is really flat.

Question:

1.       Can we perfect the way of matching designers to customers, inventers to producers, manufacturers to retailers? I think we may adopt some new techniques invented in the field of machine learning to make to new form of industrial organization more efficient.

2.       Since the products are more tailored and in small amounts in the new industry form, can we build a efficient market mechanism for pricing products? How to adopt the price discovery mechanism that is developed in the traditional large-scale industry is a question worth looking into.

3.       How to build a healthy trading environment with reliable credit rating for products’ qualities and producers’ credit is another important question.

How to succeed in customization

This week’s article “Putting Customers in Charge of Design” arouses my interest to research on customization. Nowadays, doing well in customization can reinforce the competence of the company, because it usually a good way to earn more customers and build reputation of the companies. But customization is very tricky thing. Large expense on customization doesn’t necessarily bring a large customer increase. Also, customization is very consuming. I still remember when we discussed the lean manufacture of Toyota that they try everything to keep conformity in manufacture. Changing the paint color during the painting process matters a lot even, because it will decrease the efficiency of manufacture line. Then it’s very difficult to customize and keep low cost and high efficiency at the same time.

After research on the customization topic, I found an article “Customization: Impact on product and process performance”. From this article, I got some ideas about how to realize customization with lower cost.

First, customized products are very dependent on higher performance and quality of products. Another primary requirement for customization is tailoring the product to unique customer needs and make sure that is what the unique need matches with. However, it’s not that easy to satisfy these two requirements. The first obstacles is obtaining the information of customer’s requirement is not easy. Because most of time, even customer themselves can’t articulate what kind of customization they need. Second, because of the complexity of customization, it doesn’t necessary result in higher performance and customer satisfactory.

From above, we can get the critical problems to identify in customization. First, decide the optimal degrees of customization. Second, design the proper and efficient manufacture process for customized products.

To solve the first problem, the development of Internet has facilitated to solve the first problem. Companies can get customers preference from the mass audience for the customized products for free. What they should do is to analyze the data and get useful information from it. Realization of customization has a lot of successful practices in IT industry. Dell’s practice is a good example. They let customers to select what they want on internet and configure the computer of their own choice, and these computers haven’t been built at this time. After Dell receives the money, they begin to build it. Customization is easier for IT industry because the products are very flexible and easy to assemble. The example in the reading article “Putting Customers in Charge of Design” also shows a good way to facilitate customization. Customers design and choose the component of product on Internet, and then make the order. The wisdom here is that customers can only choose the customization from the one that Blank Label can provide. And this is also thanks to the use of internet. Blank Label also does well in intriguing customers on customization by sales and advertisement.

Customization has its limit to different industry. For example, in auto industry, it’s much more complex and difficult to assemble a car than a computer. Then the method of build to order approach is hard to utilize in auto industry. Doing forecast for customization is also quite difficult and can easily end in redundant inventory.

Sources:

https://www.mckinseyquarterly.com/The_false_promise_of_mass_customization_1089

http://repository.cmu.edu/cgi/viewcontent.cgi?article=1221&context=tepper

Obstacles and incentives for implementing supply circles

Traditionally, recycling has been thought of as a measure for protecting the environment.  It certainly helps the environment by keeping hazardous and unnecessary waste out of landfills.   Unfortunately, not everyone is environmentally conscious and many individuals and organizations are unable to relate to the environmental benefits of recycling.  For corporations that struggle with the concept of corporate social responsibility, additional benefits of product reuse and recycling have been recognized and can be used to incentivize sustainable practices.  Some companies are only able to think in terms of maximizing profits, even at the expense of others and the environment.  By providing more material incentives such as cost savings, we might be able to convince these companies to operate more responsibly and move towards more of a supply “circle” mentality.  As simple as this sounds, there are also obstacles created by implementing supply circles that must be reconciled from a business perspective.  This blog will address some of these obstacles and consider them from a business perspective.

In Manufacturing Resource Productivity,[1] we learn about the fundamental elements of a supply circles.  These can be depicted in the following diagram:

Source: http://www.mckinsey.com/Features/circular_economy

Repair and Maintenance:  How might this step create obstacles to a company implementing a supply circle?  Consider the alternative to repair and maintenance--replacement.  Some companies may think that it is more profitable to develop products that favor replacement over repair and maintenance.  Take consumer electronics for example.  When a device breaks it is usually much easier, more convenient and cost effective to purchase a new device.  Companies must love this because it gives them an additional source of revenue.  Why would they want to design products that can easily be fixed, especially if the alternative is selling more products?  

Recycle:  Manufacturing Resource Productivity mentions that recycling would be a good way to help companies save on materials costs, so why do major companies like Philips, JVC and Hitachi not have recycling programs?  This might be explained by examining the recycling process.  A common trend that I noticed is that companies don't perform their own recycling.[2]  This is probably because recycling is not part of their core business and it is much cheaper and more efficient for a third party to perform these tasks.  The real question is, where do these recycled materials go after they're processed?  Are they sent back to the company to be used in new products?  If so, how much cheaper is it for the company to buy back these recycled materials from the recycler?  Also, how much extra expense is incurred by adding this complication to the logistics system?  It might not be cost effective to operate under this process.  If the recycled materials aren't sent back to the company after recycling is complete, how does this qualify as a supply circle?

As you can see, there are some business related obstacles to implementing supply circles.  Depending on the organization, the costs and benefits of supply circles might vary.  Strictly from a business perspective, do you think the benefits of supply circles outweigh the costs?

References:
1.  Mohr, S., Somers, K., Swartz, S., & Vanthournout, H. (2012). Manufacturing Resource Productivity.  McKinsey Quarterly. Retrieved 13 Mar, 2013, from http://www.mckinseyquarterly.com/Manufacturing_resource__productivity_2982
2. Electronics TakeBack Coalition. (2013). Manufacturer Takeback Programs in the U.S. Retrieved 13 Mar, 2013, from http://www.electronicstakeback.com/how-to-recycle-electronics/manufacturer-takeback-programs/

Supply Circle Management by Frito-Lay

After reading an article with title “Manufacturing Resource Productivity” by Stephan Mohr, Ken Somers, Steven Swartz and Helga Vanthournout, I am learning a new concept about supply circle management. Instead of using usual phrase “supply chain”, those experts use phrase “supply circle” to emphasize continuous cycle of supply chain when materials can be looped back into the production process after they have fulfilled their utility over the life of a product. One of manufacturer examples that I have found implementing this supply circle management is Frito-Lay. Frito-Lay is the division of PepsiCo that manufactures, markets and sells corn chips, potato chips and other snack foods. The company tries to achieve sustainable manufacturing by using this supply circle management concept. 

The picture above showed how the company optimizes resource for productivity in its supply circle management concept.

1.       Solar Concentration

Use sunlight to heat liquid-filled tubes by using long rows of reflective. The heat can reach up to 500 degrees. Then the hot fluid will be converted to steam, which heats oil for cooking.

2.       Photovoltaics

The solar-cell panels to generate electricity.

3.       Water-Recovery System

Recycle wastewater from manufacturing lines into drinking-water quality by removing bits of corn and potato. By passing it through bioreactor to remove broken-down starches and sugars, then filtering and disinfecting it using ultraviolet light and reverse osmosis. The clean water is then reused again to wash potatoes, cook corn, and make snacks.

4.       Co-Generation System

Frito-Lay's Killingly, Connecticut, and Kern, California, plants operate independently of the electricity grid by using a natural-gas-powered turbine that creates electricity and high-temperature heat converted to steam.

5.       Biomass Boilers

Frito-Lay uses products from nearby industries (for example, pecan shells, cottonseed, and wood waste such as sawdust and broken pallets in its Topeka, Kansas, and Arizona plants) as fuel for its biomass boilers, which generate heat and electric power.

6.       Stack Heat Recovery

When potatoes, which are 80% water, are sliced and fried, the water escapes as steam. Equipment captures the steam to preheat wash water and warm the building in the winter. When the water condenses, it's used to clean other spuds.

7.       Packaging

Over the past five years, Frito-Lay has eliminated 150 square miles of packaging by reducing the materials by 10%. This year, it's introducing the first fully compostable chip bag with its SunChips line.

8.       Food-Scrap Recycling

Almost every piece of waste generated at the plant is reused or recycled. The 20 million pounds of potato peelings and corn husks are sent to livestock farms for use as feed, and Frito-Lay consumes 150,000 tons less paperboard each year simply by reusing its shipping cartons five or six times each.

This is the result of water, natural gas and electricity use on Frito-Lay Beloit plant. The company can reduce its water usage by 50 percent, natural gas consumption by 40 percent, and , electrical consumption by 20 percent.

Seeing the result, I think this is a good example and every manufacturer should begin to follow the same path. The question is right now, is it applicable for different industries? Is it too costly so many manufacturers may not want to implement this new concept?

 

Reference:

http://en.wikipedia.org/wiki/Frito-Lay

http://www.fastcompany.com/mic/2010/profile/frito-lay#self

http://www.greenmanufacturer.net/article/facilities/snack-maker-keeps-plant-toasty--using-heat-recovery