As today’s businesses strive to move their manufacturing hubs closer to their customers while maintaining low costs, many are looking to Eastern, Central, and Southern Europe. Its proximity to Western European markets makes for reduced shipping time and costs and greater in-region responsiveness. With so many corporations announcing carbon-reduction plans, having cost-effective manufacturing and design centers close to end customers is becoming more important. For TFI’s study Electronics Design and Manufacturing in Eastern Europe, we are investigating the viability of each country in the region for electronics design and manufacturing: infrastructure, history of electronics industry, employment figures, and which companies perform which functions there.

Here are a few interesting facts that we’ve found through our research:

- Hungary boasts 7 of the global top 10 EMS companies as well as more than 20 recycling companies in operation.
- Russia is now the world’s third biggest destination for outsourcing software behind India and China.
- Czech Republic is one of the most successful “transition” countries in terms of foreign direct investment per capita.
- Dell started manufacturing in Poland in 2006 and recently transferred ownership of their manufacturing plant to Foxconn.
- The Bulgarian Government is lowering investment thresholds and increasing incentives to electronics manufacturers investing in high-unemployment regions.
- Sony has been producing TVs in Slovakia since 1996, moving there before anyone else in Eastern Europe.
- Ukraine’s creation of free economic zones makes for tax holidays and lower import/export duties.
- Ericsson recently invested EUR 30 million for part of Elcoteq’s manufacturing process in Estonia, including the hiring of 1,200 employees.
- One-third of Serbian college graduates come from technical schools, and Serbia has the highest rate of English speaking population in Eastern Europe.
- Despite experiencing an electrical fire at its Romanian facility, Plexus management is continuing their commitment to manufacture in Romania given “growth plans in this geographically important area.”
- Foxconn has invested US$60 million in Turkey to produce 3 million computers annually for Hewlett Packard.

Other countries we are researching for the study include Latvia, Lithuania, Romania, Moldova, Slovenia, Macedonia, Croatia, Belarus, and Albania.

There is a lot happening in these countries as it pertains to electronics companies (OEMs, EMS/ODMs, suppliers, and recyclers) that many of us do business with each day. We look forward to uncovering more information about these countries in the coming weeks. Let TFI know if you’d like to be a recipient of these insights, and if you have any industry tidbits of information about these countries you’d like to share, please reply to the survey or to this blog.

Having lived in the San Francisco Bay Area since age 6 (except for a recent year in EMEA), I am accustomed to seeing innovation initiate waves of economic vitality. Growing up in Silicon Valley in the late ‘60s and through the ‘70s, I always thrilled at driving past the Stanford Linear Accelerator on the way to San Francisco. We passed by Apple Computer’s headquarters on just about every family errand. My classmates’ parents were patent holders at IBM, HP, Intel, and (in the case of my father) Lockheed.

But no innovation wave has pleased me more than the Cleantech companies springing up here – not only for the geeky-smart, environmentally-conservative innovations that I love, but also for their socially- and environmentally-responsible supply chains. Solyndra (maker of cylindrical solar-energy systems) is building a huge factory in Fremont. Bloom Energy manufactures 100% of its energy-efficient fuel-cell generators in Sunnyvale, proximal to its many California customers. Tesla Motors just took over a portion of the Fremont-based NUMMI plant in partnership with Toyota to build Tesla’s full-electric sedans (I have one on order).

Not all Cleantech companies have sufficient scale or funding to manufacture in-house. Efficient-lighting company Redwood Systems is going the manufacturing-outsourcing route for their electronic controls, but chose a nearby Silicon Valley EMS facility (Creation Technologies’ California operations).

So, why haven’t these Cleantech executives been deterred by conventional arguments that wages in California are ridiculously high to be competitive? How are these execs thinking that the stiff environmental regulations in California can be good for business? Have they somehow missed the fact that China has become the world’s manufacturing center?

No. These executives choose in-region and often in-house manufacturing because of their more complete calculations of “lowest cost” and realization that corporate and consumer customers are savvy enough to notice their responsible supply chains. And the Cleantech industry’s success – as measured by the plenitude of capital investments and long line of customer orders — is already legendary.

What do you think? Will the Cleantech companies’ in-region, often in-house manufacturing strategies lead them to financial ruin, or create a trend?

A Taiwanese friend whom I met in Israel had me read Prosperity Without Growth: Economics for a Finite Planet, by Tim Jackson. Jackson is Economics Commissioner on the Sustainable Development Commission, the UK Government’s independent adviser on sustainable development. He lays out rational reasons why economic growth a la the past century cannot – alone – guarantee prosperity, and how flourishing within limits is a sounder formula for prosperity to come. TFI clients experiencing rebound growth from the recent economic contraction will find insights on strategies for assuring success even when growth is not assured.

TFI Logistics Consultant Jon Gilbert dug into his bookshelf to recommend a logistics “cookbook” comprising well-written advice and “recipes” for managing outsourcing of logistics. Self published by Cliff Lynch, Logistics Outsourcing – A Management Guide, 2nd Edition is a good read and valuable tool that Jon uses frequently as he advises clients.

Kim Allen, TFI Environment Consultant, recommends Profit Beyond Measure, by H. Thomas Johnson and Anders Bröms. This gem of a book offers a simple but radical solution to operational waste that has been realized by two major manufacturers: Toyota and Scania (a Swedish truck maker). The waste reduction method elegantly eliminates the traditional structures that supposedly “manage” waste, such as complex forecasting techniques and theoretical models. Instead, intelligence is created throughout the entire system, and practical understanding by those “on the floor” is used to improve efficiency. This system mimics a natural ecosystem, and was the basis of Toyota’s market value rising above that of the “Big Three,” as well as Scania’s stability for more than 65 years.

We are lucky enough to have Ben Marshall as a summer intern; he is a mechanical engineering student at UCLA and is helping our clients with design-for-environment. The two books he recommends are Right Relationship, by Peter G. Brown and Geoffrey Garver, and Just Good Business, by Kellie McElhaney. Right Relationship is, as he describes it, about helping our economy fit into the earth’s structure, as opposed to the other way around. Just Good Business is a guide to branding a company’s corporate social responsibility efforts.

TFI Environment Consultant Nikki Pava recommends Thriving Beyond Sustainability by Andres R. Edwards (who also wrote The Sustainability Revolution). Edwards describes how we can go beyond “sustainability” and attain “thrivability.” This book features examples of people and organizations that are creating positive transformations in all areas of sustainability. The frameworks outline areas such as regenerative design, community activism, and going “glocal,” which encapsulates the “think globally, act locally” world view. Thriving Beyond Sustainability provides inspiration and optimism that we all need today.

Finally, my colleague Pam Wiseman (TFI Operations and Supply Chain Consultant) shares that she is immersed in Theory U, about transformational leadership — creating the future and pushing beyond the constraints of the past. It’s especially pertinent in a complex and fast changing world with serious problems that need new and innovative solutions. Sustainability, climate change, terrorism, and our dependence on fossil fuels are a few examples of the complex and difficult problems that we face. Leaders need new ways of thinking and impetus to drive change. This framework can help drive transformative thinking.

Many thanks to the TFI team for their recommendations — I’ll load the books I haven’t yet read on my electronic reader before vacation. What are you reading that you believe will foster the TFI community’s success in business and in the world?

In the May 21st TFI Friday Best of Blogs, we pointed to the electronic-product companies’ (OEMs) complete swing from vertically-integrated manufacturing in the 1980s, to outsourcing the entire supply chain a decade later. In the current outsourcing model, it is necessary for OEMs big and small to ensure that the materials in their products are from ethical sources, that all companies they work with uphold fair labor standards, and that they do everything possible to avoid being connected with a disreputable supplier with egregious environmental violations. Having your supply chain and operations be as transparent as possible to customers, investors, and non-government organizations is one of the best ways to reduce risk.

Fostering transparency are many frameworks that a technology company can use, depending on the aspect of sustainability goals and objectives. For example, electronics companies have settled on using LEED as the framework for green buildings and the Carbon Disclosure Project for reporting their carbon emissions and plans to reduce them. Many companies involved in electronics supply-chain management are ISO 14001 certified, addressing continual environmental improvement of operations.

I consider the Global Reporting Index (GRI) to be a particularly effective framework, because it helps management to ensure that a wide spectrum of business decisions lead to continuously improving sustainability performance. Companies within the electronics supply chain — including OEMs, contract manufacturers, and component/materials suppliers — could greatly benefit from this recognized, public sustainability-reporting framework. Notable large players in the electronics industry, including Samsung, Applied Materials, and IBM, all reported to the GRI in 2009.

When a company publicly shares all of its sustainability information, it demonstrates management’s commitment to pursuing sustainable business practices. The GRI makes the information public, so potential customers or investors have quick access to this information. Additionally, as more companies are putting more scrutiny into the types of suppliers they select, they look to create relationships with companies that have similar values. Thus, by using the GRI reporting framework, management can quickly assess other companies’ environmental performance, human rights record, and regulatory actions before collaborating with them.

There are two parts to the GRI: first, it’s a “network-based organization that has pioneered the development of the world’s most widely used sustainability reporting framework, and is committed to its continuous improvement and application worldwide.” Second, the framework itself is a set of indicators and principals that companies can use to measure all parts of their business operations (economic, environmental, and social performance). The framework allows for comparisons between companies, as well as for benchmarking and informed target setting.

If you would like to learn more about the GRI and become a Certified Training Partner in the USA, I recommend that you attend the upcoming conference hosted by the ISOS Group and Triplepundit. It will take place at the Faculty Club at the University of California Berkeley, on July 29-30. Please let me know if you would like to register: NPava@TFIenvironment.com.

What do you think: does public sustainability reporting truly benefit supply-chain management? Please reply at the bottom of the blog.

From the reporter’s questions about business repercussions from worker-rights violations, I got a sinking feeling: Will the raging sales of Apple’s iPad dip perceptibly based on the now widely known string of suicides at their manufacturing supplier, Foxconn? Or will there be no business impact at all? In other words, are name-brand (OEM) companies’ sales less impacted when egregious violations of employee rights occur at their contract manufacturers as opposed to at their own sites?

(As for the underlying reasons for the suicides, see an upcoming article by TFI Shanghai-based Analyst Fanny Lee and me in SMT magazine.)

Certainly Nike shoes were boycotted years ago after the Vietnam-based employee treatment was made public. And Kathie Lee Gifford worked to counter sweat-shop abuses after a human rights group reported in 1996 sweatshop labor conditions in Honduras where Gifford’s line of clothing was made. Today, some drivers are at least thinking about choice of gas / petrol stations in light of the BP oil spill.

But is knowledge of worker rapes (as was brought out a few years ago in Mexican contract manufacturers), suicides, illegal overtime, and age violations at contract manufacturers — which granted are seen as one step removed from the name brand company — spurring corporate and consumer customers to make different choices in name brand purchases? And if not, why not?

I’d like to hear your thoughts. Please reply at the bottom of the blog.

Think about IBM’s vertical-integration model through the 1980s — designing and making semiconductors (IBM still designs), fabricating bare printed-circuit boards and component packaging (now Endicott Interconnect Technologies), assembling the components (for example in Toronto, which became (Celestica), and building personal computers (Lenovo). IBM and many other electronics companies at the time controlled product-concept design through decisions about raw materials, and product manufacturing through end of life. Today it’s hard to find vertically integrated hardware companies. Recent capital-venture-funded tech companies have outsourced manufacturing (or even much of product design!) from the beginning. Nokia has been one of the few companies hanging onto manufacturing — sometimes more and sometimes less (announcing “more,” this week).

Raw materials are sourced so far up their supply chains that supply-chain managers can’t begin to control substances’ composition, origins, and working conditions during extraction. It’s too much to ask of especially mid-sized and smaller companies to staff the number of product stewards needed to continually track global requirements for substance-restriction, energy consumption, and reuse/recycling and align their own product roadmaps accordingly.

It’s ironic, but meeting today’s environmental requirements for products would have been easier back in the vertically-integrated past than in today’s outsourced, long-supply-chain reality. Nonetheless, here are ways to meet and stay ahead of environmental requirements, cost effectively.

First, because decisions about design, manufacturing, and compliance are spread out across company departments, gain top-level executive support to make lasting and successful Design-for-Environment (DfE) processes and sustainability programs. Next, plot on a 5-year DfE roadmap the likely environmental regulations from customers, regulators, and standards committees that will affect your individual company’s product lines. Finally, proactively design to those requirements to avoid costly and iterative emergency reactions and having products blocked from an increasing number of markets.

Easy, right? Frankly, today’s changing nature and expanding scopes of global environmental-protection requirements can be overwhelming to designers and supply-chain managers.

So, after that DfE Workshop, Mike and I developed a customized service that applies TFI’s success rate at training engineers in DfE and getting buy-in from corporate executives, along with DCA’s continual tracking and influence of global regulations and standards, to individual clients’ product roadmaps. We realized that we are well positioned to customize 5-year DfE roadmaps for individual companies’ product lines, and to recommend how to systemically and cost-effectively execute the plan. Our DfE Process Integration Roadmap aligns those long supply chains with holistic product-compliance plans, avoiding costly and arduous sequential changes in reaction to new requirements.

Mike likes to use the image of a tsunami to describe the overwhelming number of environmental requirements rushing in — sometimes with little warning and from distant shores. I like to think of the challenge facing all of us to strategically prepare for environmental requirements as yet another fiercely competitive element of excellent supply-chain management. It’s not as much surfing treacherous waves as building a strong infrastructure with insights into the future and with unwavering executive support.

If you’re curious about building supply-chain processes that indeed align with current and upcoming environmental requirements, grab your surfboard and reply below.

The market for manufacturing services and support is moving east in Europe. Leaders are already creating and implementing sound strategies for design and manufacturing in Eastern Europe. Last week Texas Instruments’ CEO Rich Templeton said that his eyes are on markets in Eastern Europe for semiconductor sales.

Contract electronics manufacturing in Europe is expanding and changing, which affects decisions about electronics manufacturing services (EMS) companies, design in the region, component and material supply, logistics, recycling, and after-market service. The world’s largest electronics contract manufacturer Foxconn (HonHai) is building HP computers in Russia (near St. Petersburg) and is the second-largest exporter in the Czech Republic.

The European Union economy (GDP) is ranked #1 and the manufacturing center has shifted to Eastern Europe; being “absent” from this region is not an option.

Eastern Europe is not one market — it is a dozen or so markets defined by varying levels of economic vitality, socioeconomic slices, languages, business customs, quality of infrastructure, and laws. To succeed in the region, it’s essential to gain insights about each market and choose the best ones for design, manufacturing, sales, and services.

Environmental regulations in Europe are on the forefront globally and in continual progression. One must take into account how current and future regulations will affect the way the industry designs, produces, ships, reuses, and recycles products.

Recent global current events (Icelandic volcano, tainted products from China, a well-spring of corporations publicly announcing carbon footprint and reduction plans) underscore the imperative of exploring close-to-customers manufacturing strategies. So many of our tech clients generate 25% to 50% or more of their revenue from Europe. We say it’s critical to understand how best to serve customers there.

For these reasons, TFI is launching a study called Electronics Design and Manufacturing in Eastern Europe. Huge thanks go to our Founding Clients for supporting this research. Let us know if you’d like to become a Founding Client for first access to the insights, or would like to be interviewed by the TFI research team for the study to receive a complimentary executive summary.

I invite you to reply at the bottom of the blog regarding your views on Eastern Europe as a strategic venue for electronics design and manufacturing.

What should you look for in your recycler? Most of TFI’s community members have global customers, so having global coverage is advantageous not only for ease of doing business but also to reduce the ridiculous expense and amounts of carbon emissions from shipping end-of-life or second-life product across oceans for “environmental benefit.” Plus, regulations in the wings will require responsible recycling in the region of the product’s use.

Also, find out the exact path of your specific products from when they leave yours or your customers’ premises through the time when they become raw materials available for another supply chain. Choose only those recyclers that accurately document product outcome and be wary of too many subcontracting relationships; with more than 2 degrees of separation it’s nearly impossible to ensure that the people actually treating your products are doing so responsibly. The defense, “But it wasn’t the recycler I hired who sent the products to the Ghana,” won’t count when photos capture brand-name products in tragic “digital dumps” there (where customers’ data are at risk as well.)

Finally, create additional revenue streams by designing your products and processes for responsible additional “lives.” Find a recycler excellent at triage — determining which of your once-used products are appropriate for refurbishment and data cleansing, warranty replacements, resale, or mining for workable sub-modules or valuable components. (This recommendation is sure to spark replies from people uncomfortable with selling second-hand electronics, though it is a common practice around the world and it should be done with full disclosure.)

If you want hundreds of times more insights on choosing and auditing electronics recyclers than space allows in this blog, come to the International Electronics Recycling Conference and Expo in San Francisco May 26-27 (at which I am keynote speaker, and several TFI clients are presenting).

Conference Director Ismail Oyekan said it well: “A huge majority amongst businesses of all sizes do not realize the liability, environmental impacts, and financial costs associated with improper electronics waste management. Electronics waste is now the fastest growing waste stream and information-technology asset managers, manufacturers, and others in the electronics supply chain can learn about the process of selecting a qualified electronics recyclers for their end-of-life and surplus assets.”

OK, who wants to comment about electronics reuse?

One San Francisco Area-based client found out this morning that her flight this week to Europe has been canceled. One European-based EMS company reported its inability to meet product shipments. A European conference and expo scheduled for later this month and early next is sure to be lightly attended, because the exhibitors are supposed to ship their booth and demonstration equipment this week and attendees’ travel plans are in question while wondering if the event is still on.

Regional strategies for manufacturing, sales, and customer support — as well as using travel-alternatives such as web- and video-conferencing — are about reducing risk, expense, and environmental impact. No one would have asked for a volcano to further illustrate the strategic importance of reducing movement of product and people around the planet, but now that we have this one we can connect the dots.

What else do you think it will take for industry executives to markedly reduce travel of people and product around the world?

ISO 14001 is certainly not new. As shown in TFI’s electronics-industry environmental timeline, as far back as 1996 North American companies were implementing environmental management systems and certifying to ISO 14001, driven largely by European corporate customers’ demands. Nearly all 17 electronics manufacturers profiled in my book Lean and Green had certified to ISO 14001 by the end of the 1990s — including Celestica, which was the first major electronics contract manufacturer to certify.

But until recently, most technology companies that do not manufacture hardware opted out of the ISO 14001 track. The position at many electronic-product companies with a 100% manufacturing-outsourcing strategy was, “Most of our contract manufacturers are certified, so we don’t need to be.” Most software companies — even many large ones — did not certify.

Why now are many non-manufacturing electronics companies and software firms opting in to creating an environmental management system and certifying to ISO 14001? It’s mainly because corporate customers not only in Europe and Japan but also in North America are starting to demand to see suppliers’ environmental programs, with a specified requirement or “bonus given” for ISO 14001 certification.

The good news is that if you have been creating and executing a strategic, profitable environmental roadmap at your company (like many of our clients do), you may be closer than you think to honing your processes and documentation resulting in an environmental management system that independent auditors will certify. And the requirements for non-manufacturers are, in some areas, lighter than for manufacturers. In fact, the process of certification will make your sustainability roadmap even more successful in terms of continually reduced environmental impact and more cost savings.

So, whether you work for an EMS or are writing an EMS, move steadily forward in certifying to ISO 14001. Life is better when you can reply to customers’ requests for proposals: “Yes, we are certified to ISO 14001.” (Hear about ISO 14001 and other voluntary and required environmental standards in the electronics industry at the April 7th Design-for-Environment Webinar.)

If your company has already been certified, what advice would you give to those companies considering or going for certification now? (Please reply below.)

Many companies have begun working on environmental initiatives within their own four walls by increasing energy efficiency and reducing waste. It seems that everyone’s favorite these days is to remove single-use cups with forever-use ones. This internal focus is natural because it is where managers exert the most control, and it is where clear metrics can be established. (Let us know if you’d like to receive our new data supporting that ceramic cups are best for reducing costs and environmental impact.)

Going much deeper into the supply chain
But companies are interactive entities, part of a larger system. Sustainability managers quickly discover that fulfilling environmental objectives – especially in the areas of product design, distribution, or procurement – means working with suppliers and customers. A seemingly simple task such as reducing the packaging on a component can involve lengthy communications and negotiations with a surprising number of people both inside and outside the company. (We recently helped a client create an efficient packaging solution when the prior method used four times the packaging necessary!)

Sustainability in the supply chain is increasingly important because of regulations also. For instance, the REACH Directive requires companies to know (and register) the chemical contents of their products in far greater detail than ever before. They are reaching back into their supply chains for basic information, which can lead to collaborative product redesigns to avoid harmful chemicals.

Insights from the CDP
The folks at the Carbon Disclosure Project have been working to ease the transition to sustainable supply-chain operations by creating a network of member companies called the CDP Supply Chain. As stated in the flagship 2010 Supply Chain Report, “The CDP Supply Chain is a collaboration of global corporations who have extended their climate change and carbon management strategies beyond their direct corporate boundaries to engage with their suppliers via CDP’s annual Information Request. …This year, 44 member companies reached out to 1,402 of their suppliers, and 710 (51%) responded to the request.”

The report summarizes the findings. Members of the CDP Supply Chain are intent on reducing the carbon emissions from their supply chains, and are working on the challenges that currently hinder progress. Some challenges involve education of suppliers, who are generally at an earlier stage of sustainability planning than members; 56% intend to deselect suppliers who fail to meet carbon management criteria in the future. Some challenges will improve with clearer communication. Collaboration and sharing of best practices is a key priority at this time.

Although the CDP work involves manufacturing supply chains, there are other efforts afoot in the world of sustainable supply chains also. The first-ever Forest Footprint Disclosure report looked carefully at forest practices among companies in that industry. Ceres issued a report on corporate water-risk management based on disclosure data from 100 large companies. And other groups (ForestEthics, Earthworks, and OxFam America) are beginning to ask questions about “dirty resources” – raw materials like metals and minerals that are often acquired at considerable environmental and human expense.

Focus Questions for VP Operations & Supply Chain
TFI recommends that VP Operations / Supply Chain as well as Sustainability Executives ask themselves these five questions, toward creating supply-chain sustainability strategies:

o Where are the potential hot spots in our supply chain for illegal or unethical labor practices, or for irresponsible treatment of electronic waste (e-waste) and emissions to air, soil, or water?
o Which of my contract manufacturers (electronics manufacturing services (EMS) and original design manufacturers (ODM)) have made visible to us as much information about their suppliers’ labor and environmental practices as we need to reduce risk of being complicit in violations and bad publicity?
o Have we reduced the mass (weight, bill of materials, unnecessary components) of our products and packaging sufficiently for economic and environmental advantage, and which of our suppliers have been most proactive in this continuous Design-for-Environment (DfE) improvement?
o How are our internal supply-chain managers and buyers rewarded – through cost savings alone or also for reducing the company’s risk from associating ourselves with suppliers violating law or engaged in unethical labor and environmental practices?
o How many times do our products circle the globe from raw materials through product usage through end of life? Have we measured the wasted time, expense, CO2 emissions, and risk in transport, compared to a using a regional-manufacturing, logistics-efficient strategy?

How prepared are you to discuss these deeper levels of your supply chain? And what do you still need to understand in order to make it more sustainable?

Quite a few years ago I had the pleasure of living in Europe, Asia, and the United Arab Emirates. My work took me to the offices and boardrooms of some of the largest companies in the world, many with annual revenues larger than those of some countries.

Each day I interviewed managing directors and presidents about their company policies and economic outlook. Often, I was greatly impressed with their overall vision and their ability to lead large groups of people toward a common goal. However, in many cases I was disheartened at the responses from these business leaders when I asked about their company’s manufacturing policies — particularly the social and environmental elements. During the course of these visits, I also toured the factories, met with some of the workers, and analyzed the network of distributors, suppliers, retailers, and wholesalers that helped bring their products to market. Some companies implemented impeccable processes. Sadly, I also witnessed subpar standards that had me question many of these companies’ practices.

It was then that I realized that the best way for the world to change was for business to change. As a result, I began to direct all of my efforts and energy to create awareness for more sustainable business practices, including supply chains.

Since the days of my global CEO meetings and factory tours, I completed an MBA at the Presidio School of Management, a traditional business school that threads sustainable values into every aspect of the curriculum. Additionally, three years ago I co-founded a company called EcoTuesday, which brings sustainable business leaders together in cities across the USA. I now am honored to work with Fortune 500 companies, start-ups, and non-profit organizations by developing strategic plans and coordinating teams to reach specific, measurable goals. It’s great meeting more and more of TFI’s clients and witnessing their clear understanding between sustainable supply-chain practices and robust company performance.

My international business experience and the formal education I received at the Presidio have provided me with the tools needed to help TFI clients transform their businesses by increasing efficiency, decreasing waste, and saving money within all points of their supply chains. I look forward to using my skills and insights to support our clients in being financially successful and highly competitive in their industries. Additionally, it is important to me that all of our clients are in compliance with applicable product-and-manufacturing regulations and that all of their stakeholders are in alignment with the company’s vision.

Do you believe any business could truly transform without a thorough examination of its own supply chain? (Please reply at the bottom of the blog.)

Celestica, in response to the Montreal Protocol phasing out ozone-depleting substances was the first electronics contract manufacturer to leap-frog from cleaning printed-circuit-board assemblies with CFC (ozone-depleting) solvents to the no-clean process. In doing so, Celestica leaped over the aqueous-cleaning technique requiring costly capital equipment, floor space and power for the equipment, labor hours, and disposal of heavy-metal water with permits and treatments. I interviewed the parties responsible for this change a few years afterward (for my book Lean and Green: Profit for Your Workplace and the Environment), and the smarts behind the leap-frog move were motivated by environmental conservation and competitive savings of time, cost, real estate, and more.

HP, anteing up for a package-reduction challenge by Walmart, did not do as most of its competitors did — incrementally or even substantively reducing the size and weight of the packaging surrounding the products. One HP employee had the idea to make the packaging part of the product itself. The notebook computers, cables, and accessories were packed in attractive over-the-shoulder “messenger” bags — three to a cardboard shipping box without any other packaging material. In one fell swoop, this leap-frog move resulted in 97% reduction of packaging, conservation of fuel, and reduction of CO2 emissions by removing the equivalent of one out of every four trucks previously needed to deliver the notebooks to Walmart and Sam’s Clubs around the USA.

I encourage you to take advantage of the New Year to use leap-frog thinking — in your companies’ manufacturing strategies, supply-chain and logistics designs, Lean programs, sustainability programs, and every other aspect of your workplaces. Make it easier for yourself! Raise up your company’s efficacy 4-5 steps at once instead of inching upward — facing organizational resistance to change each time. Leave the arduous step-by-step improvements to your competitors, who will arrive at the finish line much later and with far more cost.

Will you face more organizational resistance to this one leap-frog improvement than to a more routine change? Perhaps yes. But if you are like me, one of the reasons you get up in the morning and head to your desk is to make your organization and the world better places.

Do you want to try on some leap-frog ideas with the TFI and TFI Environment consultants and/or community (reply below)?

When the CFO at furnishings company Herman Miller became the CEO, the director of Environment, Health, and Safety Paul Murray felt nervous. Murray had convinced the CFO to allocate $40,000/month to invest in resource efficiencies for the company. When Brian Walker moved from CFO to CEO, he asked to meet with Murray. At that point, Murray feared that a CFO-turned-CEO would nix the investment altogether. To Murray’s surprise and relief, Walker suggested increasing the monthly investment to $50,000! Walker explained that while he was CFO he witnessed that the return on investment (ROI) from the environmental investments was simply excellent. In fact, Herman Miller ($2 billion in revenues) not only makes smart investments to reduce its own environmental footprint, but also the company is a design-for-environment leader for office chairs (I’m sitting on one) and other furnishings, and – through subsidiary Convia, Inc. — helps to reduce energy consumption of customers’ buildings with energy-management tools. CEO Walker says, “Sustainability is becoming as prevalent in customer requirements as quality was 10 or 15 years ago, and we’re at the tipping point of this movement where our customers, at least, are no longer saying it’s nice to know you do it. It’s a requirement” (Industry Week, Sep. 2009, p. 24). By the way, 20% of Walker’s compensation is based on the company’s environmental performance.

Last month, a CFO-turned-CEO at a TFI electronics-company client reviewed the High-ROI Environmental Roadmap we had prepared in concert with a multifunctional green team. The roadmap listed a half-dozen Lean and Green initiatives along with their financial and environmental benefits (cost reductions, new revenue, carbon emission reductions, and less use of paper, water, and energy). From reviewing both the environmental and financial ROI, the CEO’s response was immediate: he said he’s one-hundred percent behind one-hundred percent of the projects as outlined.

Another high-tech company CFO (not yet a CEO!) uses his sharp focus on ROI to support his company’s environmental program, with this advice: Determine priorities for the environmental initiatives according to greatest reduction of environment impact and the highest monetary ROI. For example, if you had $500,000 to spend, what projects would you choose to most efficiently maximize the environmental and monetary savings? “It’s important to prioritize in this way,” he said, “because the environmental program could be one of 50 initiatives all fighting with each other for resources. List the overhead, capital, and expense investments separately. Get on the executive agenda and carve out the initiative — just like any other business function.” The CFO added that environmental programs – like training – need to be elevated to the executive level for planned investments, because they span all company departments; the executive staff needs to dedicate funding to be appropriated to the departmental budgets in a way in which the funds cannot be “cannibalized.”

So, if you are running (or starting) your company’s strategic environmental initiatives, don’t tippy-toe around your CFO. Enlist him or her in sharpening the ROI and advocating in the executive suites for these surprisingly large-return programs.

All CFOs (and other financially-minded) readers are welcome to weigh in. (Leave a reply at the bottom of the blog.)

And the networking industry has responded by using more efficient power supplies. But this is an incremental improvement. Significant market growth is available to companies disrupting the way that networking equipment consumes power through alternative designs and innovative power management.

So, this is a call-to-action for network-equipment designers everywhere, as well as to innovative software and parts suppliers serving the networking industry. Let’s discuss ways you’ve considered power reductions and together create a roadmap of likely alternatives for growing up while powering down the networking industry.

Here are some ideas to get us going, so we can discuss these approaches’ benefits from a Design-for-Environment (DfE) perspective and discuss any downsides of using these for standard product operation:

- Solid state drives
- Low Power Dual Quad Core processor and chip set
- A rack that can better manage power efficiency and have the power redundancy at the rack level rather than the system level
- Smart cooling: Fan-less, fewer variable speed fans, liquid cooling, or Pulsed Air Jet Cooling (liquid-cooled racks can reduce the amount of cooling required to keep the environment around the systems at around 25 degrees Celsius)
- Developing an idle mode for systems that currently run 24/7 — while still supporting customers applications and traffic
- Scalable or dynamic power supplies that monitor actual usage and only turns on the power needed
- Active power management with monitoring system vitals
- Use of ultra-capacitors instead of a Lithium button cell batteries
- Modular design for power supplies that grows with additional hardware

And to make our roadmap as Lean and Green as possible, we’ll discuss business questions such as…

- Under which circumstances or application does a power supply with a 90%-and-higher-efficiency rating provide enough savings over a standard 80+ power supply to justify the significantly higher investment cost?
- How do you convince your own company’s management to invest in more efficient designs / components (80+ GOLD power supplies, active power management, solid state drives, de-materialization, fan-less design, etc.) given that it’s the customer and not the OEM that saves money and carbon footprint?
- What are the affects of delivering systems with 1-2 dozen-drive capacity (and power ratings accordingly) initially populated with just a handful of drives from Design for Environment (DfE) perspective, and what alternate techniques can be used to minimize this impact?
- How can we influence regulators around the world to develop highly technical-and-cost savvy (e.g., through EuP study groups)?

Reply below or write to me (PGordon@TFIenvironment.com) to let me know you are interested in creating, exploring, and sharing ideas that will help address one of the most pressing issues today and tomorrow for networking equipment — vital to corporate customers, to cost reductions, and of course to reducing global Greenhouse Gas emissions. I look forward to the challenge!

If you frequent TFI’s Friday Best of Blogs, then you know that we recommend changes to profitably streamline tech companies’ product design, supply chain, product movement, and other operational functions. Our clients know that change is necessary, otherwise they would not have engaged us. But often they need help in overcoming their teams’ or managers’ resistance to change. Organizations have an unfortunate habit of acquiring blockages that impede progress and stymie performance.

Managers can regularly embark on search-and-destroy missions to root out barriers and obliterate them. These barriers can be difficult to find, because they morph into familiar forms and hide in plain sight. If you look carefully, you can uncover these barriers to change:

1. EXCUSES — When you start hearing excuses for why things can’t change, you have encountered a blockage.
2. FEAR — When people get scared, they freeze and plug up everything they are involved in.
3. SECRETS – This is a sure sign of a dysfunctional organization.
4. INSECURITY — When people are in over their head, they know it and their main purpose in life becomes trying to make sure other people don’t figure it out.
5. POSTURING — When people fixate on their image, you are in the presence of a blockage.
6. ROUTINES — Doing things the same way for too long creates “comfort zones,” which are places where fearful, insecure, posturing people go to avoid detection.

By contrast, positive change thrives in healthy organizations, characterized by:

1. Strong, enlightened, progressive, free-thinking, open-minded LEADERSHIP.
2. An appreciation of the value and importance of SETTING AND ACHIEVING GOALS.
3. An atmosphere of HIGH-ACHIEVEMENT, where good enough is not good enough.
4. FULL DISCLOSURE and a willingness to share virtually all information.
5. Employees who understand WHAT IS EXPECTED and WHAT THEY WILL GAIN when they achieve it.
6. A sense of TEAMWORK where everyone believes they are working for the benefit of all, not enriching the few.
7. The ability to EMBRACE CHANGE and LEARN FROM MISTAKES.
8. The capacity to GET THINGS DONE.

How many organizations truly possess all of these attributes? Precious few. The first step to positive change is creating the right conditions for improvements to exist. Life on earth didn’t emerge until there was an oxygen-rich atmosphere. The Renaissance couldn’t happen until dogma gave way to enlightened thought. And an organization plugged with barriers cannot strategically progress.

We at TFI have succeeded in having upper and middle management and all employees understand the imperative of positive change. How? We gain enthusiastic buy-in through addressing key leaders’ business and budgetary goals, inspire people through real-life examples of other companies’ success, show how it’s good for business, educate about the cost of wasted materials/processes, and tie compensation to results. We use a host of approaches depending on the company’s culture. It’s very rewarding.

How have you removed barriers to change in your company? (Please reply below.)

This week I had the pleasure of meeting a CEO whose vision is driving him to move manufacturing from Southeast Asia to Midwest USA. But this was no shock to his COO (sitting with us at the coffee house), because this company — Vista International — is founded on CEO Johan Smith’s bold vision to power a cleaner world and to “Reducing carbon footprint one step at a time” (trademarked). Vista, headquartered near Denver, Colorado, is a technology holding company in the renewable energy industry. During the past 20 years the company has acquired technologies as diverse as energy-efficient lighting for facilities, converting waste to high-octane fuels, high-efficiency wind and hydro turbines, and higher-BTU coal with less pollutants.

Though Smith has lived and worked in several countries and has advised government officials in China, Mexico, St. Lucia (Caribbean), Bulgaria, and Israel, he wants to build the company’s largest-yet production facility in the Midwest USA, serving both domestic and international customers. He mentioned tactfully that he is not entirely comfortable with manufacturing in China. It’s likely also that the energy-efficiency investment portion of the American Recovery and Reinvestment Act of 2009 strengthens his decision.

The return to regional manufacturing — making products close to customers — is a strategy TFI has been recommending to clients brave enough to counter a trend. The benefits include meeting regional customers’ requirements more quickly and precisely, mitigating risk compounded across multiple national borders, and reducing carbon footprint — the latter being more visible these days to investors and corporate customers. The CEO must share this vision because an operational shift this far-reaching is rarely championed by a singular manager outside the executive suite.

The electronics contract manufacturing industry is full of CEO visionaries who dictated manufacturing locations: former Flextronics CEO Michael Marks envisioned complete supply-chain campuses in Mexico and Eastern Europe to serve customers on those continents. Former Sparton Electronics CEO David Hockenbrocht foresaw that keeping manufacturing in North America would appeal best to his regulated-industry customers; then in the last years of his tenure he pioneered (amongst his EMS peers) the building of a facility in Vietnam (when I asked why, he spoke about the comparatively high education and low labor rates there; I always wondered if his reasons came from his values as well).

I invite you to comment (below): Has your company’s CEO been instrumental in determining manufacturing locations? Does your company’s manufacturing-location strategy prioritize cheap labor rates or a regional strategy emphasizing customer responsiveness, risk mitigation, and smaller carbon footprint?

Myth #1: Employees will resent travel reduction. If because of business travel you have ever (1) missed your kid’s graduation or performance, (2) not registered for an evening course that requires steady attendance, or (3) felt reluctant to book vacation in a fabulous distant place because flying has worn you down, then you know to question this myth. We begin customizing a client’s travel-reduction program by interviewing frequent travelers; these interviews quickly reveal that most travelers would like to curb non-essential travel.

Myth #2: The Sales Department must be insulated from travel-reduction programs, to prevent sales erosion. We used to go along with this view: after all, no consultant wants a client to experience lower sales based on a cost-savings recommendation. But then the evidence starting flowing in, such as from Oracle’s Green Sales program, which has the sales force reduce travel via web-based demos and reduce the number of demos needed based on consultative insights. For example, instead of sending about 5 sales-related people to a customer’s site, they’ll send 1-2 and have the others participate by the web. And what was the affect on company performance? –Profits up and sales decline (owing to the economy) lower than anticipated. For effective travel reduction in the Sales function, conduct objective interviews with Sales as well as customers to uncover non-essential travel, and provide easy-to-use travel-avoidance tools.

Myth #3: Travel reduction is only about reducing airfare. Corporate expenditures on airline tickets can be only 40% to 60% of total business-travel expenses, which include steep costs for rental cars, ground transportation, parking, lodging, and meals. When you capture all travel-related costs and carbon emissions, the significant savings may surprise you.

Myth #4: Travel is a long-term strategy for integrating combined business units. Travel can help bring acquired-companies’ employees into the parent-company culture, but frequent travel is not necessary for the long term. Our research has shown that “internal meetings” is the business-travel category that travelers report they can reduce most readily — even at companies that have grown recently through acquisition. Company culture is driven in large part by the CEO, who — along with other top executives — can regularly address employees using video recordings, video-conferencing, web-conferencing, conference calls, employee newsletters, monthly “What’s on my mind” emails, and other inspiring travel alternatives. This sends a strong message that employees can likewise work productively with off-site employees without traveling each time.

Myth #5: We’ve already reduced business travel as much as we can. Owing to the economic climate many companies have recently reduced business travel. By analyzing why employees travel — through interviewing frequent travelers and requiring all travelers to specify how the trip contributes to corporate objectives — we discover process changes that render classes of business travel unnecessary.

It is undeniable that sometimes face-to-face meetings are best. Having lived and worked a year in EMEA and now back in the San Francisco Bay Area, I can attest to the value and enjoyment of having met with TFI’s EMEA clients in-person during the past year, and now reuniting with my Silicon Valley clients and colleagues. But by using a green lens to re-look at conventional business processes, we find new ideas for savings. And instead of finger-wagging employees (“Don’t spend so much money!”), we inspire them to improve the quality of our lives and the environment.

What travel purposes are sacrosanct at your organization, and should they be? (Please leave a reply below.)

This month Mark wrote in his newsletter the Marbridge Daily about China’s “Old-for-New” recycling program. In short, residents and organizations can trade in old consumer electronics and receive a 10% subsidy on the selling price of new consumer electronics. The program makes sense to me, and yet in China fashion the regulation is different from those in all other global regions. In fact “Old-for-New” is an even greater departure from the European Union’s WEEE Directive (reuse/recycling) than was China’s substance-labeling program from the EU’s RoHS Directive (substance restriction).

I asked Mark about China’s bold new law, and Mark said, “China is gradually working to improve the environment, both through recycling programs like the ‘Old for New’ program for consumer-electronics recycling, and also through use of more energy-efficient products, like “green” mobile-telephone base stations.”

Then he proceeded to give one person’s view of the impact of these laws, from the streets of Beijing: “We’ve had one of the most hospitable summers in my 7 years here – neither too hot nor humid and more blue skies than I ever thought possible for Beijing. I thought the clearer skies might be due, at least in part, to some improvements in environmental policy, such as replanting of forests between here and the Gobi Desert in the north, and even-odd license plate regulations. But the other day someone reminded me that one potentially major contributing factor is the economic downturn, which has seen a lot of factories reduce output (and the accompanying pollution).”

By the way, Friedman’s chapter “China for a Day” also reminded me of my 2004 visit to China (meeting executives at EMS and ODM companies in Shanghai and Suzhou), when with no apparent warning the Central Government banned filter-less cigarettes — without years-long deliberation by politicians in tobacco states or investments by the tobacco lobby. I found it both impressive and scary.

What do you think about China’s environmental policies and the way they are created?

At home, you likely have already experienced the benefits and fun of locating used items through online forums, rather than spending time and (too much) money shopping for them new. Freecycle, Zwaggle, and of course Craig’s List have saved people millions of dollars while simultaneously benefiting the environment through avoided production, shipping emissions, and landfill burden.

Smart companies are starting to realize that they can profit from the same concept within their four walls.

Why purchase a new stapler when an employee upstairs has ended up with three in his desk drawer? Why order new equipment for the test lab when the research lab has a spare one used last year that is no longer needed? A glance at the monthly spend of a typical company for office supplies, equipment, and research materials will convince any manager that this type of sharing and swapping is tremendously beneficial to the bottom line, not to mention conserving the Earth’s resources. The question is, how to set it up practically?

Luckily, most companies already have all the tools they need to create their own “swap meet.” The corporate intranet is a natural place to set up a forum for posting “offers” and “needs.” It can be done through most types of collaboration platforms, discussion boards, or common drive spaces that all employees can access and search.

One example is the Cisco® Resource Exchange and Disposal Online (CREDO) program. Program manager Gideon Schroeder explains that CREDO is “an in-house virtual equipment exchange” that also helps Cisco handle its scrap. “The ultimate goal is to prevent any Cisco equipment or parts from ending up in landfills.” The system – which is ISO 14001 certified – is saving company money and employees’ time, and diverting electronic waste from landfills.

CREDO is for equipment. Another tech company, a TFI client in the electronic hardware business, is setting up an online swap site that will include standard office supplies, monitors, printers, chairs, and other items that tend to accumulate in people’s cubes. It is one antidote to purchasing departments’ practice of blithely buying a fresh set for every new hire.

But how do you actually get employees to use the “swap meet” when they are accustomed to ordering something new, and how do you quantify the monetary and carbon-emission savings from the program? We recommend the following four steps (which we customize for each client according to their company culture and accounting systems):

(1) Generate interest and educate employees on how to use the system, emphasizing the time-saving benefit.
(2) Give employees incentives to track their swaps. To measure the monetary and environment-footprint savings, it is critical to know what swaps have been completed. If employees swap items by walking down the hall, they need a reason to record the transaction online. One way is to reward both the giver and the receiver with “points,” redeemable for rewards or recognition.
(3) Track transactions using categories that match purchasing or accounting conventions. In particular, it is critical to know when an asset item (as opposed to an expense) has been transferred between departments.
(4) Show progress: Create a graphic for the intranet and company newsletter that shows how much money or waste has been saved to date. Also, make it easy also for employees to suggest how to maximize the program’s utility.

Has your company benefited from an internal swapping system? Let’s make this an “information swap” — please send us your comments!