LESSON 0 15th February date for presenting group details, send email to Roberta Pisani LESSON 1 The need of a new Renaissance. Why? Characteristics of Renaissance: - The use of linear centric perspectives and of the vanishing point - The attention paid to the human being, as individual - The research of the synthesis and the essentiality There is a link among: - the awareness of the centrality of the human being regarding knowledge and nature - the aim of painting to reproduce the relationship between external environment and individual through Perspective (use of Euclidean geometry, represented by reducing artificially on a bidimensional surface a visual experience in 3D) - the essentiality, to represent the reality as it is At a macro level the social capital of a territory is a relevant intangible asset that can be leveraged for developing local policies and attracting external capital to focus on areas in which the social goodwill enables better conditions for an economic and social development. The pictures on slides there is a line that divides the poverty world and the rich one. At a micro-level the social capital of a company must be a driver for designing appropriate organizations and policies. Examples of best practices (key factors in the entrepreneurial success in Italy): - Social cohesion - Roots in the territory - Risk sharing between entrepreneur and workers - Solidarity with the local environment Without the creation of social capital, is difficult to create economic capital. An example in Italy is Luxottica, or Ferrari. 1. Luxottica builds social capital with OneSight foundation, scholarships, welfare program for the employees. 2. Brunello Cucinelli builds Social Capital with: cucinelli foundation (promotion of any form of arts and culture), restoration of the old Solomeo Village, continuous research of well-being and high-quality life in working environments. 3. Ferrero group builds social capital with Ferrero Foundation, social policy for employees, social companies. These companies are related by achieving great success, growing despite past crisis, leaders in their own markets, with an increasingly significant presence in the international landscape. They are companies focused on innovation, sustainability, and human capital. They strongly believe in the need of creating optimal living standards – internally and externally – for their employees, for the territory in which they are operating and for Society at large. They all put the human being at the center of the company. Is a good economy a necessary condition for a good society or is a good society a necessary condition for a good economy? People makes the difference. Three important points: Human being (centrality of individuals); perspective (relationship with the outside world); essentiality (respect for the environment and solidarity). Global responsible leadership GRID. LESSON 2 WEEE is electronic waste (Waste of electronic and electrical equipment). Let’s introduce Sustainability from a different perspective. According to Global E-waste Monitor 2020 (U.N.), WEEE: - Asia: 24.9 billion of tons/year (Total) - Europe: 16.2 kg/person - Italy: 17.2 kg/person (Only 17.4% of the total WEEE are collected and recycled) - At worldwide level, only 4 mil. Tons of precious metals (gold, silver, copper, steel, …) are recycled for a value of 10 million dollars. The potential is about 57 billion dollars (higher than the GDP of some countries) According to the International Solid Waste Association (U.N.), WEEE are growing three times faster than the world population and 13 times faster than the world GDP in the last five years. The big issue that we are facing now is the rapid depletion of natural resources: - Food and water scarcity - Impact of climate change - Impact of megatrends In 2030 about 1,5 Bil. People will access to new consumptions, this will impact on scarcity of food and water, 1 kg of beef meet consumes 15.500 liters of water. Today 1,5 planets/year is destroyed; In 2030 3 planets /years consumptions are forecasted. In 2025 3 Bil. people will lack of enough water. Impact on Co2: 1 degree temperature growth move the ecosystem to Nord of 150Km. Substituting 1 kg of rice with 1 kg of beef meet generates a consumption of resources expressed in Virtual Water Content 4,5 times higher, in Carbon Footprint 6,7 times higher and in Ecological Footprint 9 times higher! Now we are consuming more than what the planet can restore, if we are not able to change our behavior, we will need 3 planets in 2030. Today: 1.3 billion tons/year of food is wasted along the process of conservation, transformation, distribution, and consumption. Distinction between: - Food losses (upstream processes) take place at production, postharvest and processing stages in the food supply chain. Food losses, mainly in poorest countries. - Food wastes (downstream processes) occurring at the end of the food chain (retail and final consumption) which relates to retailers’ and consumers’ behavior. Food wastes, mainly in the richest countries. The quantity of food waste land filled in richest countries (220 million tons) equals the food production in the Sub-Saharan Africa (230 million tons). New Megatrends. Will affect our life from any point of view, economic, behaviors, consumptions. In the next 10-15 years new mega trends will affect our world. Mega trends (or Global Forces) are global macroeconomic forces of development impacting the world - Affecting businesses, economy, society, culture, and personal life - Redefining the world According to recent studies there are 12 mega trends. Among these mega trends we focus on the ones potentially relevant for our industry and competition (important mega trends): - Urbanization. o Mega Cities. Over half of the world’s population is currently residing in urban areas; by 2020+20% to over 4.2 billion people (80% in developing countries). A mega city is a City with a Minimum Population Of 8 million and GDP of $250 Billion (13 Mega Cities in 2011 and 25 Mega Cities in 2025). There aren’t mega cities in Europe now. There are basically two problems in terms of logistics: too much waste and provide water for everyone. - - o Mega regions: Mega Regions are Cities Combining with Suburbs to form Regions (Population over 15Million). Amsterdam-Rotterdam, Ruhr-Cologne, Brussels-Antwerp, and Lille: 59.2 million people and producing nearly $1.5 trillion in economic output (more than Canada’s and as well as China’s or Italy’s). Greater Paris, a mega-region of 14.7 million people accountable for $380 billion. Tokyo alone is almost 2% of world GDP. o Mega corridors: Corridors connecting two or more major cities or mega regions, 60 km or more apart, and with a combined population of 25 million or more. Example Mega Connection: India to see 8 Mega Corridors by 2021 Including the World’s Biggest 1500 Km Mega Corridor. o Mega slums: are the impact of the mega cities, regions, corridors. A mega slum is 1 million urban poor people live in an area measuring just 1.5 square miles. Slum is the Brazilian favela. Also, Detroit, that was the capital of automotive industry, is a huge slum. o What are the micro implications of the urbanization? High Economic Power With 85% of Scientific and Technology Innovation from These Cities; Hub and Spoke Business Model will evolve with Logistics, Healthcare, Retail, and many other industries; Transit oriented development and zoning and the extension of transit lines to the suburbs will move businesses out of the central downtown to the suburbs (Corridors); New Mobility Solutions like Bike and car sharing, Integrated Door-to-Door Solutions. Until few years ago companies only grow in Europe, USA, or China, now in very different mega cities, that are key towns because are very concentrated. It was China, now is Shanghai, for instance. CITY AS A CUSTOMER CONCEPT WILL GROW. Smart products and services leveraging technology. For instance, the impact of industry 4.0 (ripassa GTIO nel caso). For instance, Yumi Co-Robot ABB. Two sides of the coin, on one hand technology will improve sustainability (for instance, electrical engine has 50% less of materials than the normal one), but also there is an impact in terms of unemployment in the short period of course, also the batteries will pollute. Also, the electrical energy comes from carbon and gas. Technology in farming can help us to consume less water, in this field technology can impact significantly. Changing Demographics. The symbol of the flat world, such as everyone wants to consume the same thing in the world, is the big mac. But nowadays also the big mac is very differentiated in different countries. worldbirthsanddeaths.com. In the next century the population probably will go down. Because of, for instance, women will work more and will have less time to grow a child. It is not because they don’t have money, but because will be a change of cultures. China stable, Europe and Japan shrink, Africa and India growth. The working population (aged 15-65) will start shrink in EU and Japan in this decade and by 2020 in China. Number of people aged 65+ will double to 1 billion by 2030. Aging issue: older people save less (decline in wealth accumulation) and consume more public spending. Demographic alone explain 60% of the GDP growth (40% labor productivity growth). Global Population in 2025: Out of 2.72 billion Gen Y Population, around 52% from Asia Alone. Impact on companies: opportunities to create new business. We expect increasing life expectancy and product innovation to continue to drive demand for prescription medicines and related healthcare services. At the same time, we believe that a growing customer focus on personal - wellbeing will drive demand for health and beauty consumer products and related services. Alliance Boots is Europe's foremost international pharmacy led health and beauty group, with two core business activities, pharmacy-led health and beauty retailing and pharmaceutical wholesaling and distribution. Emerging new consumers. The rise of developing countries (Asia, Eastern Europe, Africa) is creating a new class of consumers: o Growing discretionary spending o Different needs from consumers in the west (adapt offerings and adopt lower-cost business models) o 300 million new middle class / upper-middleclass households (+ 80% in 10 years) In the upper-middle category (40 million households) 40% from Eastern Europe and 20% from China. The number of new households able to afford cars will grow by 180% (130 million). From “value for money” to “value for any”. Watch video “Chotukool – ‘Innovating for a better tomorrow series – Ideas that empower India’”. How to leverage opportunities: - Deeply understand which megatrends can impact on your business and market: Some have horizontal impact (mega region, corridors, technologies, etc.); some of them have locally differentiated impacts (demography, aging, urbanizations, etc.) - Segment by sub-trends and define priorities - Build scenarios and analyze the impact on your sectors, markets, companies: Evaluate the implications and impact on existing business or prospect ones; Evaluate impact on technologies and products/services - Identify opportunities and unmet needs - Define a short list of 4-5 projects and perform a first analysis of the impact on your business - Identify priorities and deploy a detailed analysis - Develop a strategic plan to implement the New Business Development opportunities - Create/adjust organization, processes to enable these new competitive advantage sources We can use for example swot analysis to define projects priority, always focusing on triple bottom line (people, planet and profit). Case Study IWasASari. Old machinery to make Sari. Production still basic. Difficult to think the value that can be create in the life of the production women. Equilibrium.gucci.com, collaboration with Gucci. The women are also partially owner of the idea, creating a shop that is partially of them. One part of the business model Canva is more commercial, how we create revenues, than the other there are core structures. In the middle value proposition. Look at the slides to understand what the group work is. Problem statement means the reason why. Look at the I Was a Sari_Introduction to the case slides to understand better. Understanding the value proposition is very important. Guarda video business model. Why use business model: easy to understand, focused, flexible, customer focused, shows connections, easy to communicate. On the left side of the business model Canva there are costs for the business, right side revenue for the business. Teamwork IWAS a Sari: we have to write value proposition ideas in the business model Canva. Value proposition describes the value you deliver to each customer segment. Describe the value you are delivering to your customer (e.g., newness, performance, customization, “getting the job done”, design, brand/status, price, cost reduction, risk reduction, accessibility, convenience/usability). Key questions: What is the value you deliver to your customers? What is the customer need that your value proposition addresses? Is IWAS scalable worldwide? There will be more indirect and direct costs. IWAS also considered sustainable profit as a key factor. Strong connection between partnership and steps in life cycle. SESSION 3 Sustainable Development can be defined as “meeting the needs of the present without compromising the ability of the future generations to meet their own needs” (Brundtland, 1987). Principles of sustainability also apply to: - balance in time-perspective: between present and future needs - balance in space-perspective: among regions and populations 3P paradigm: People, Planet, Profit. Sustainability: in time and in space if this paradigm is respected. At corporate level, the application of SD to business is often referred to as Corporate Sustainability. CSR is a concept with the aim of: - Maximizing the creation of shared value for their owners/shareholders and for their other stakeholders and society at large - Identifying, preventing, and mitigating their possible adverse impact The effective implication of corporate sustainability creates two different impacts: At macro level: policy makers; And micro level: management best practices. Why should companies address this point of CSR? There are different payoffs: - financial payoffs - consumer related payoffs - operational payoffs - organizational payoffs Two paradigms in the anti-environmental posture in management (priority in the business profitability): - “Crisis-oriented” environmental management paradigm - “Cost-oriented” environmental management paradigm Why sustainability? 5 reasons: - Legal constraints and government regulations - Compliance with accreditation systems and certifications (such as ISO certifications) - Maintain positive community relations - Increasing revenue or reducing costs - Satisfy moral obligation There are 3 drivers of sustainable initiatives: - Enforcement: compulsory / external driver (eg. Government regulation) - Compliance: voluntary / external driver (eg. Certification programs) - Innovation: voluntary /internal driver (eg. New practices and procedures) 3 stages in adopting principles of sustainability: 1. Sustainability involves “common sense” measures: recycling in bulk, shutting off lights, teleconferencing, etc. 2. Sustainability is instantiated in operations: implementing lean, changing product design, optimizing distribution, etc. 3. Sustainability treated as practical sense: third-party audit document, compliance to all standards, etc. Implementation of sustainability usually happens incrementally. - - - Cradle‐to‐Gate, if the effects caused along the life cycle from the extraction of raw materials to the production, packaging and distribution phases are evaluated. In this case, impact is evaluated up to the release of the product by a company to its transfer to other actors downstream or its introduction to the market. Cradle‐to‐Grave, when the phases linked to the usage cycles of the product in question by consumers in the primary and secondary markets are added to the previous phases, until its end‐of‐life and disposal. Cradle‐to‐Cradle, in the cases where, as mentioned before at the end of its life cycle, either a part of or the entire product can become a useful component in new life cycles of the goods it generates. SESSION 4 – Sustainable Sourcing Operations and Supply Chain Management. - Operations are the set of activities that a company carries out to transform inputs into an output valuable for the customer. Traditional operations’ performances are: Cost, Time, Quality, flexibility. - A supply chain consists of all parties involved, directly or indirectly, in fulfilling a customer request. They interact exchanging information and materials with each other to get what they want (raw materials, semi-finished products, end products), with the quantity and timing desired. To develop the Sustainable Operations and Sustainable Supply Chain Management, companies must integrate the traditional goals of Cost, Quality, Flexibility, Time with social and environmental priorities (3P PARADIGM. The trend toward outsourcing and the increasing relevance of procurement. Outsourcing is becoming more and more popular among companies due to: - Need to focus on core activities and competencies - Technological innovation and lack of technical experience within the company - Increasing cost of materials and components In most industries, a major part of the product value is determined by the value of bought-out materials. Given the increasing relevance of outsourcing in modern companies, how should sustainability issues be embedded into purchasing processes? 4 stages: Stage 1 - Identifying needs and defining specifications: a. Reducing consumption: the opportunity to address overall consumption should not be overlooked. Reduce total quantities (e.g., giving priority to suppliers with a lower scrap rate); Reduce excessive stock (which generally results in higher obsolescence rate) b. Challenging repeat purchase: do you really need to buy that specific material? c. Identifying alternative solutions: the opportunity to buy a service that delivers a function rather than a product should be considered. E.g. rental and/or car sharing d. Specifying greener products: the company can set environmental requirements for the selection of bought materials. E.g.: Procuring greener pieces of equipment; Prefer renewable energies; Avoid hazardous substances; Avoid ozone-depleting substances; Prefer certified products/suppliers (ISO140001, EMAS). e. Identifying needs and defining specifications: Product design and development: companies could encourage the use of techniques as Design for Environment or design approaches that are more eco-friendly. SESSION 5 - The role of purchasing in delivering sustainable solutions. Stage 2 – Vendor pre-selection a) Preselection: several techniques can be used at this stage to identify the best possible supplier: supplier questionnaires; supplier visits. The output is the accreditation of the supplier. Some of the information we can collect from the preselection process are public, but also some other information not public. With these types of information, we can use supplier questionnaires and supplier visits. After we collected all this type of information, we can say “yes, this is a supplier that we can buy from”. The output, in fact, of this process is the accreditation of the supplier. How can sustainability improve this process? With a Supplier sustainability questionnaire. Examples: UNICEF, Nordic investment bank, Volkswagen (links in slides). Most of the questions are qualitative, about waste, Co2, resources consumption, social accountability, children rights; and some other questions are quantitative. Volkswagen also puts some minimum requirements for supplier, in terms of sustainability also, such as code of conduct, some policies about many different areas. Certifications and standards (that we can use in the preselection process) - ISO14001: ISO14000 is a series of international standards of environmental management. It provides a framework for the development of an environmental management system and the supporting audit programme. ISO14001 specifies a framework of control for an Environmental Management System against which an organization can be certified by a third part. With this certification we can say that the organization is keen on sustainability issues. This certification is applicable to any organization that wants to improve its sustainability results. Every year we need to set some targets and check them every year if we reach them or not. It is a certification that states that we have an organization good on environment. - EMAS (Eco-Management and Audit Scheme). The EMAS is a management tool for companies and other organizations to evaluate, report and improve their environmental performance. - ISO50001: it is specific to energy efficiency. It states that our organization want to reduce its energy emissions. - SA8000: It is on the area of social sustainability, on social accountability - OHSAS 18001 (Occupation Health and Safety assessment series): another certification on social sustainability Code of conduct: It is a set of rules that describe the responsibilities and the practice of an organization to pursue a sustainable and ethical conduct. It doesn’t come from a third-party organization. Apple, for example, has a supplier code of conduct, and Volkswagen also. Apple is committed to respecting the highest standards of labor, human rights, environmental, and ethical conduct. Apple’s suppliers are required to provide safe working conditions, treat workers with dignity and respect, act fairly and ethically, and use environmentally responsible practices wherever they make products or perform services for Apple. Apple requires its suppliers to operate in accordance with the principles and requirements, as applicable, in this Apple Supplier Code of Conduct(“Code”), and in full compliance with all Applicable Laws and Regulations. Stage 3 – Tender evaluation and vendor selection In this stage we need to compute the vendor rate. To build the vendor rate, we need to consider: - The cost of the products - The quality of them - The time performance (speed and dependability of delivery) - Social and environmental features. The output of this process is the vendor rate assigned of each supplier, which finally drive the supplier selection. With this process we select our final supplier. The vendor rate is a sort of weighted average of all the features we want to consider. Example Disney on slides. In this example we can see that there are a lot of information and features that we need to consider having an overview on our different potential suppliers. All this performance dimensions have also to be weighted to compute the vendor rate. In this image we have upper the standard vendor rate, and down the modern one, that includes also environmental and social performance. Challenges to compute vendor rate: 1. Decide the right weight for each performance: the decision about the weight must be taken by the management. For example, if we buy paper for the printing paper, the most important criteria is the cost (50% for example). If we consider leather for luxury handbag the most important criteria is the quality. If we consider packaging, probably we consider environmental performance. So, depending on the features of the product that we buy, we set the weights. 2. How can we measure cost, quality, and time: for example, we can consider quality in terms of scrap rate. Dependability is on the percentage of on time deliveries. 3. What type of environmental and social performance we decide to consider Stage 4 - Vendor control and Contract Management. At this stage, the company has to manage the relationship with the suppliers for the lifetime of the contract. During this period, the company: Periodically measures the ex-post performance of the supplier; Can set more challenging goals with the supplier, in pursuit of a continuous improvement approach; Promotes continuous improvement through workshops and conferences with suppliers. Ethics in procurement. The risk of unethical behaviors can arise among buyers, thus most professional associations and companies have issued their own code of conducts. The following areas are the most important to a buyer: Conflict of interest; Gifts and gratuities; Bribery. Case Study T-shirt. T-SHIRT A Unit cost Delivery time Scrap rate Environ sus MARK 1 More than 12 More than 3,5 weeks More than 8% No one 2 10 < x < 12 2 < x < 3,5 3,5 < x < 8 ISO 14000 3 Less than 10 T-SHIRT B Unit cost Delivery time Scrap rate Environ sus MARK 1 More than 8 More than 3,5 weeks More than 8% No one 2 7<x<8 2 < x < 3,5 3,5 < x < 8 ISO 14000 3 Less than 7 weights 0,15 0,55 0,15 0,15 Supplier A 0,15x2 = 0,3 3x0,55 = 1,65 0,15x2= 0,3 0,15x3= 0,45 Supplier B 0,15x3= 0,45 0,55x2 = 1,1 0,15x3 = 0,45 0,15x2 = 0,3 T- SHIRT A Unit cost Delivery time Scrap rate Environ. Sus TOT: 2,7 T- SHIRT B Unit cost Delivery time Scrap rate Environ. Sus weights 0,25 0,25 0,25 0,25 Less than 3,5 ISO 5001 Less than 2 weeks Less than 3,5 ISO 5001 TOT: 2,3 Supplier A 0,25x2 = 0,5 3x0,25 = 0,75 0,25x2= 0,5 0,25x3= 0,75 Supplier B 0,25x3= 0,75 0,25x2 = 0,5 0,25x3 = 0,75 0,25x2 = 0,5 TOT: 2,5 TOT: 2,5 SESSION 6 – Physical distribution Strategic choices: The main criteria are related to: - Total Logistic Cost: o Transportation costs Less than 2 weeks - o Holding costs: It is related to the perishability of the product (e.g.: a laptop after one year stored in a warehouse is way lower than its original value). It is also related to the financial cost: a product stored in a warehouse is a product that it has not been sold (no positive cash flow generated) but it has been produced (it has already generated a negative cashflow). To produce it, the firm might have asked a loan to the bank, which has an interest rate. Interests mut be given back to the bank, weather the product has been sold of not. o Warehouse costs: It is related to the cost of managing the building itself: electricity, rent fees… o Administrative costs Service Level: bundle of logistic performance offered to the client when making a delivery: o Speed o Dependability: ability to delivery on time. It is particularly important for e-commerce businesses and industrial sector. o Physical availability o Completeness: being able to deliver jointly all the products required. A poor level of completeness it is related to a poor level of stock availability. o Flexibility: ability of the supplier to change/modify an order composition (different quantity, different type of goods ordered…) CO2 emissions in transportation depend on 4 variables: - Quantity of goods delivered: the higher the quantity the higher the emissions. - Distance covered for the delivery. - Modal split, size, and saturation of the vehicle. - Consumption and type of fuel. Then there are determinants, endogenous and exogenous factors. Endogenous factors: - structural factors: centralized or decentralized. Under in the page there is an example. - strategic and commercial factors: in what factor we want to be the best, time, costs, CO2 emissions… - operational and functional factors: what type of vehicles for instance - product-related factors: dimensions and weight of the products. Exogenous factors: not under the control of the company - fuel cost: - technological innovation: - economic and fiscal policies: fiscal help in some country, such as Switzerland - macro-trend of the national economies: wars or pandemics The best organization is the decentralized organization from the view of co2 emissions. With high centralization we have, for instance, some direct lower areas. In low centralization we have two direct sub areas, that have other areas each. The first route (from the head to the sub area) in the low centralized is long, the second route is short, and we can use other vehicles less bad on co2 emissions. In the high centralization we have one long route, difficult to have efficient, and more co2 emissions. Carbon footprint Auditing. First, we need to know what the total amount of CO2 emissions is. All the Green House Gases (GHG) will be measured, and then transformed in CO2 equivalents. Relevant issues in carbon footprint auditing are: - - - Organizational boundaries: this issue refer to the identification of the activities that can release emissions and that the company is responsible for. Two situations can be observed: o the company owns 100% of its operations: it is responsible for all GHG emissions released by its operations. o The company holds a share of its production (for instance 51%) and there are two approaches: equity share approach (51%); control approach (100% because of most of the share). Operational boundaries: This issue concerns the scope of the measurement process, which involves the identification of the source of direct and indirect emissions of GHG that must be considered for the reporting process: o Scope 1: it refers exclusively to the direct emissions relative to the GHG covered by the Kyoto Protocol, which are released by sources owned or controlled by the company. o Scope 2: it refers to the indirect emissions due to the production of the electricity bought by the company for its own use. o Scope 3: it covers the indirect emissions that are a consequence of the company’s interaction with other entities and that are produced by sources not owned or controlled by the company itself. Scope 3 includes 1 and 2. Measurement process: It refers to the activity of quantifying the total amount of GHG emitted within a selected operational boundary (or Scope). Emissions to be reported: Carbon dioxide (CO2), Methane, Nitrous oxides, Hydrofluorocarbons, Perfluorocarbons, Sulphur hexafluoride. All of them must be converted into CO2 equivalents, i.e. the equivalent quantity of CO2 that has the same global warming potential over a period of 100 years. 1 ton of methane is equal to 21 tons of CO2. Organizations can collect primary or secondary datas. o Primary data: fuel-based approach. The amount of fuel used is multiplied by the standard conversion rate for each type. The total amount can be obtained by: Fuel receipts; Financial reports on fuel expenditures. For instance, 1 liter of petrol is equivalent to 2,2144 Kilos of CO2. o Secondary data. We can use some calculator to estimate the CO2 emissions on transportation. Example www.ecotransit.org. There are three different measurements: WTT: Well to Tank (dal pozzo alla tanica). Scope 1 approach generally. Production and distribution of fuel. TTW: Tank to wheels (dalla tanica alle ruote). The one for the user, burn fuel in vehicle. WTW: all the emissions, well (pozzo) to wheels. Scope 2/3 approach generally. Steps to eliminate travel and transportation waste. 1. 2. Identify activities in the process that require transportation. There are two kinds of transportation: External transportation that takes place outside the organization Internal transportation to move products within the organization, from one area to another. Select one or more of the following solutions: a. Local sourcing: Local sourcing (or production) involves a reduction of the average number of kilometers to be travelled to reach the customer. This solution is consistent with several remarkable trends: Reshoring/nearshoring; Creating a stronger contact with clients; Satisfy the need to recover and leverage local traditions and know-how of local communities; Deal with «Made in…» legal issues. Technical feasibility and economic convenience of this choice must be analyzed. b. Delivery planning and service level agreements: A condition to use bigger vehicles with a higher degree of saturation in a lower frequency of shipments. c. Fleet management: It is about selecting the most appropriate mode of transport. To make the modal shift viable, some enabling conditions must be met: short loading/unloading operations in ports and rail stations, which involve relevant investments in up-to-date materials handling equipment; presence of third-party logistics providers capable of supporting such shift with appropriate solutions. d. Carbon offsets: Activities to counterbalance the negative effect of transportation: Building wind and solar farms; Reforestation projects. Useful only for temporary usage. Mineral Water case. In my opinion the option to reduce the service level is the better. In the reality this company established a new location in Sicily, with more transportation on train. SESSION 7 – GREEN PACKAGING Packaging hierarchy of functions: The first two functions of packaging have to do with physical distribution. Packaging is important for protection; transportation; storage; marketing; communication… It is important to make the product easy to handle at a reasonable cost, and attractive for purchase. It has also the function of Display information, relevant for important information to be known by the consumer. For instance, in cosmetics the packaging plays an important role. Packaging is a big point for the sustainability viewpoint, plastic waste, and transportation. Packaging can’t be eliminated many times, and it can have an impact on customer satisfaction. Packaging is a big issue; it has a lot of environmental impact. There could be a problem of space and shape, circular products cannot fit well in a box. There will be empty space in a box, inefficiency. Green packaging is the future. Packaging wastes along its life cycle: - Use of raw materials and production resources: new solid shampoo to avoid use of plastic packaging. Also, during the production process of the packaging there is pollution. - Transportation to the client’s premises: high emissions - Possible negative effect on the value density of the product: there is the risk of the creation of waste for the shape or material used in the packaging, as said before (empty spaces in box). - Environmental degradation due to landfills: where is the packaging put in the end of the life of the product. Moving towards green packaging: 4R approach - Reduce packaging, through design solution that minimize its size and weight. - Reuse packaging. Organizations can take full responsibility for taking the packaging from the customer, with a closed-loop supply chain approach. - Recycle packaging, to recover the material packaging is made up of, when the organization cannot take it back due to the nature of the product. Recycling is better than landfilling, but is not perfect, still generate some pollution in the transportation and during the process. - Reform packaging. This involves understanding how the same function can be fulfilled by alternative greener solutions (e.g., biodegradable (neutral, disappear in the ground) or compostable (in humid waste, better for the ground, it has positive impact on the ground) packaging). GRADED ASSIGNMENT 1. one strategy or more, describe the improvement of our idea. Also, graphical representation of the idea. Specific aim: does the packaging has a better impact on the environment? Also, to be consider the cost of the packaging. The aim is to develop an idea and then to test it, the process is important. The final format Is pdf. SESSION 10 – Chapter 7 (recordings 7/3 and 22/3) Definition of reverse logistics: “....is a broad term referring to the logistics management and disposing of hazardous or non-hazardous waste from packaging and products. It includes reverse distribution ... which causes goods and information to flow in the opposite direction of normal logistics activities” (Kopicky et Al. 1993) Definition of reverse supply chain management: “The effective and the efficient management of the series of activities required to retrieve a product from a customer and either dispose of it or recover value” (Prahinski and Kocabasoglu, 2006) There are several distinguishing elements that, irrespective of the defining distinction between reverse logistics and reverse Supply chain: 1. the physical flow moves in an opposite direction to the traditional logistics flow and involves a series of specialized players; 2. the fundamental objective lies in the recovery, and if possible, creation of differential value; 3. the process must be managed along the entire supply chain while attempting to optimize overall costs efficiently, and must also take the induced external effects into consideration; 4. the possibility of creating value by exercising the most appropriate recovery options is linked to the most complex choices of Supply Chain Management, namely product design and the underlying purchase, production and distribution processes, one of which we have defined as Reverse Logistics. Definition of closed-loop supply chain: “indicates a supply chain where there is a combination of forward and reverse flows, such that these two types of flows may impact each other, and may thus require some level of coordination” (Souza, 2012) The distinction between Reverse Logistics Management (or Reverse Supply Chain Management) and Closed Loop Supply Chain Management refers to three aspects: 1. the scale of the phenomena included in the examined perimeter 2. the strategic design intentions that lead to the design of reverse flows 3. the last targeting of the designed logistics architecture Forward flow is a one-to-many process; reverse flow is a many-to-one process. TEST: in the Reverse Logistics process the TEST Phase helps to identify at which phase a particular recovery option enters in the forward logistics chain. Main differences in reverse flow management: 1. uncertainty regarding quantity, quality, and timing of physical flow: uncertainty regarding reverse product quality and condition, quantity, and timing; return forecasting is an even greater problem than demand forecasting 2. uncertainty regarding consumer behavior: the consumer must initiate the return as opposed to simply disposing of the products; the consumer has to accept, and purchase recovered and refurbished products; the price offered, and value placed by consumer on returning or recycling goods is not clear 3. uncertainty regarding the characteristics of the product and of the infrastructure used for managing it: the number of collection points, their location or viability are uncertain and there may be delayed uplift of products as time is not critical, i.e. no time compression; returned products often have poor packaging and small consignment sizes, and information, traceability and visibility may be poor; inspection and separation of products are necessary and are very labor-intensive and costly. The longer it takes to retrieve a returned product, the lower the potential value. Time Value Depreciation (or Marginal value of Time for Return). To maximize value recovery options companies must design Closed-loop SC able to manage the trade-off between speed (related to TVD) and cost. Two Major options: - Products with low time value depreciation: Centralized Efficient (Cost Effective) Return Systems - Products with high time value depreciation: Decentralized Responsive (Time Effective) Return Systems CENTRALIZED EFFICIENT RETURN SYSTEM: - Postponement of testing (inspection, sortation, disposition) - Economies of scale in a centralized facility - Optimizing transportation of multiple products to the central testing facility. Example: machine tools, equipment. DECENTRALIZED RESPONSIVE RETURN SYSTEM: - Preponement of testing managed directly by retailers and resellers - To quick contrast the reduction of value, time prevails on economies of scale. Example: Laptops, PC, mobile phones R3 EXERCISE To understand the complexity and the relevance of Closed-loop Supply Chain focus on: - Why: o Driving forces (why-drivers): Why drivers are the driving forces to implement CLSC. Some examples of Why drivers: Government policy and legislation (Packaging Ordinance in Germany, German Recycling and Waste Control Act, Waste Electrical & Electronic Equipment (WEEE) in EU, RAEE in Italy, Take-back programs in some states of USA); Economic considerations (Rapid depletion of landfill space and usage cost; Search of profitability through reverse logistics recovery processes (automobile parts, copier machines, computers, tires, etc.)); Reputation and stakeholders relationship (Consumers, local community, etc.); Environmental considerations (Values, social responsibility). o Return reasons (why-reasons): Why reasons are the main motivations to implement CLSC. Some examples of why reasons: Consumer return (Defects, repairs, warranties, end-ofuse/end-of-life, (example: E-commerce impact)); Marketing or Distribution returns (Logistics compensation policies, end-of-seasons recall, channel cleaning, phasing-out product recall for new product launch, etc.); Asset Return (In B2B, machinery, containers, reusable packaging, racks, etc.); Product or Manufacturing recall (Safety and severe quality issues, need of reworking, authority policies, etc.); Environmental return (Compliance, opportunity of value creation through recovery options). Return VS recycling logistics flows. - Who: Open-loop systems; Closed-loop systems. Who means the main actors involved in the reverse flow. Two main ways: o Open-loop systems: Different operators between forward and reverse flows (collectors, secondary markets) o Closed-loop systems: Same operators manage forward and reverse flows cycling products and components (chemical companies, electronic components, logistics providers, etc.). - What: What is related to: Products and components; Packaging. Three perspectives: o Composition (number and variety of components and materials used): Range and deep of BOM; Heterogeneity of materials (monstrous hybrids, multi-materials, etc.). o Deterioration (residual functional capacity): Homogeneous vs non-homogeneous deterioration; Technological and economical obsolescence. o Use pattern: Location, intensity and duration of use impacting on collection phase(how); Individual vs Institutions (Bulk-use). - How: Recovery options. How means the best way to recover value along the reverse flow. The process is made by the following stages: Gatekeeping, Collection, Inspection or testing, Sortation or selection, Disposition, Recovery. The recovery options are: o Resale (as is) and Reuse if a secondary market for used products /components or packaging exist o Remanufacturing or refurbishing (products or sub-systems) o Part harvesting (cannibalization) (components recovery) or Recycling (material recovery) o Disposal, with or without energy recovery: Incineration (with); Land filling (without) o Resources reduction (design for....) o Responsible consumption (consumer behavior) RESALE: the recovered product is resold “as-is”: - sell as new: overstock in outlets, discount (Clothing, furniture, etc. - resale in secondary market (Car, books, etc.) REUSE: the recovered product is used again for a purpose like the one for which it was originally designed. E.g., reusable packages and products after simple operations of inspection and cleaning (bottles, pallets, containers, furniture, etc. REMANUFACTURING: reducing a product into its constituent parts (disassembly) that can be reused in the assembly of new products. It is the process of restoring a used product to a common operating and esthetic standard. Remanufacturing is appropriate for products whose largest life-cycle environmental impacts occur during raw material extraction and manufacturing. That is where remanufacturing provides most of the savings (in terms of energy and materials). It is not always advantageous to design products easy to remanufacture. PART HARVESTING and RECYCLING: collecting and disassembling used products, components and materials and separating them into categories of like materials (glass, plastic, etc.) and then: Using as spare parts after reconditioning; processing them into recycled materials. DISPOSAL: With energy recovered: Incineration / thermo-valorization/ Biogas. Without energy recovered: landfilling. It is clear that the most important choice we can make in an environmental perspective is resource reduction (same product with reducing the consumption of some resources). It is an issue of research development, define the production process or logistics in another way. At the second stage we have the recovery option, such as resell or reuse the final product. Remanufacturing is the second layer, can be done with some modules. Recycling, harvesting with the single component. Then disposal with energy recovery, where we are destroying value. SESSION 11 – Case Study session Jeans vs winter jacket Professor Pietro de Giovanni speech. The worst in terms of sustainability is hands under dryer. The best is the high-speed hands-in dryer. The problem is also the correct usage of the models. The impact might depend on the time, or on the number of papers. Defining LCA (Life Cycle Assessment): a process to evaluate the environmental burdens associated with a product, process, or activity by identifying and quantifying energy and materials used and wastes released to the environment; to assess the impact of those energy and material uses and releases to the environment; and to identify and evaluate opportunities to affect environmental improvements. The assessment includes the entire life cycle of the product, process, or activity, encompassing extracting and processing raw materials; manufacturing; transportation and distribution; use, re-use, maintenance; recycling and final disposal. Elementary flows: energy, material, and waste. This are related to scope 1, 2 or 3. For these things the company can’t do nothing. LCA Definition o LCA is a methodology: it helps to select the best sustainable strategy to be applied to product (it is one of the different methodologies) o It applies to products, processes, and activities o It identifies and quantifies the product impact on the environment Two elementary flows are taken into account Energy usage Material usage and waste released to the environment The evaluation, however, may be difficult The model relies on assumptions It uses a simulation-based approach o It assesses the impact of those energy and material used and released to the environment o The assessment takes into consideration the whole life-cycle of the product, considering the whole supply chain Direct supply chain and reverse supply chain (Reusing, Remanufacturing and Recycling) The problem might be everywhere in the supply chain because the number of relationships is huge and impact any level of the chain The variables are many and the calculations might be very complex: moreover, when the product is out in the ecosystem it is very difficult to track them and assess their impact o Future challenge is to find a way to follow the product outside the manufacturing process of the SC and into the ecosystem and waste management processes (maybe with future IT systems) The LCA should be implemented following the following scheme: o System environment: it includes all the activities bringing value to the product, generating any kind of impact. o System boundaries: it includes only the activities considered in the specific LCA assessment o Unit of analysis: the single product taken into consideration Insights: o The way of designing of a product should rely on the LCA analysis, which comes BEFORE the production o When running into radical innovation of the product, it might be needed to change drastically the production process. Thus, a new LCA assessment might be redone from scratch o The LCA is a very comprehensive methodology that takes into considerations different aspects, not only limited to CO2 and Climate Change but also taking into consideration other variables such as PM emission, Ozone formation, impact on human life and health… The LCA is the most relevant tool to assess the sustainability of a product and choose the best sustainable strategy to adopt SESSION 12 – Chapter 3 From reactive to proactive. Design for Environment as a fundamental lever to answer the dilemma of the trade-off between: - Need to offer prosperity to the Population growth - Need to preserve the planet’s resources Circular Economy. A circular vision of the life cycle of goods. The need to improve the up-cycling logics. The need to think in terms of resources effectiveness and not just efficiency. The incentive to use renewable resources. Distinction between: - Biological Nutrients: increase the value through cycles of Cascade of Processes - Technical Nutrients: increase the value through lengthening the life cycles LCA – Life Cycle Analysis (and Assessment): it evaluates the type and quantity of products inputs and the products outputs along the life cycle. Cradle-to-Grave VS Cradle-to-Cradle. Product down-cycling VS Product up-cycling. In Product Life Cycle and related Process Life Cycle, there are two perspectives: - PLC – Physical Life Cycle - BLC – Business Life Cycle DFE - Design for Environment. From Design and Manufacture products for a single life cycle: - Minimizing materials and energy use (variable costs) - Aim at discarding upon failure or obsolescence rather than being repaired or reused To DFE, designing products that minimize environmental impact throughout their life cycle until the end-oflife stage. Main areas of attention: - Materials choice - Easy of disassembly - Minimize energy consumption - Minimize solid residues (process, products, and packages residues) - Minimize liquid residues - Standardization and modular design - Use of recycled materials and recyclability of materials Some examples. Patagonia Clothing. In 1993 Patagonia became the first company to use post-consumer recycled materials in their products. Patagonia Capilene fabric garments contain 54% recycled polyester content and are 100% recyclable through Patagonia’s take-back system. Stokke Tripp Trapp Chair. Peter Opsvik (for Stokke, 1972) designed the award-winning Tripp Trapp chair to grow with the child, increasing the effective lifetime of the chair. Dunlop Recycled Wellington Boots. Dunlop Wellington boots are made from polyurethane, PVC, and rubber. Dunlop developed a line of recycled boots. Dunlop takes back used Wellingtons from customers. Old boots are re-ground and re-manufactured into new boots. Freitag Bags. Freitag reuses: truck tarps, inner tubes, and seat belts to create new bags. Nike Considered Design. New products are designed using environmentally preferred materials. The materials analysis tool evolves to reflect best practices and Nike’s changing environmental values. Nike’s goal is for all new products to be developed using its Considered Design standards: footwear by 2011, clothing by 2015, equipment by 2020. DFE - Design for Environment. Definitions: “DFE means designing products that minimize environmental impact throughout their life cycle, including raw material extraction, transportation, manufacturing, packaging and distribution, use by consumer, and end-of-life” (Souza, 2012). “DFE is the systematic consideration of design performance with respect to environmental, health, safety and sustainability objectives over the full product and process life cycle” (Fiksel, 2012). Three main elements: - Evaluate the impact of design choices along the overall product life cycle(s) - Introduce it systematically in the culture, mind-set and design routines of designers and company goals - Evaluate the impact of these choices in the managerial processes of purchasing, manufacturing, packaging, transporting, etc. DFE is the systematic consideration of design performance with respect to environmental, health, safety and sustainability objectives over the full product and process life cycle. The 7 principles: 1. Embed life cycle thinking into the product development process: think beyond the cost, technology and functional performances of the design and consider the broader consequences at each stage of 2. 3. 4. 5. 6. 7. the value-chain. In the design stage, usually about of 90% of cost and impact along the product life cycle is fixed. Evaluate the resource efficiency and effectiveness of the overall system: Every product, process, service is part of a larger economic system, so try to understand how different design can influence the overall environmental performance of the system. a. Eco-efficiency concept: It combines economic value creation with environmental resource protection. It is essentially a resource productivity measure and, so, is correlated with profitability. It can be scaled to any system boundary, from a specific process to a full life cycle. b. Eco-effectiveness concept: Doing better rather than less bad and working in harmony with the natural systems. C2C is inspired by the existing cycles in nature where “waste is food”. DFE Notion of eco-efficiency: improve the existing designs and processes as to reduce the product’s environmental impact through its life cycle “less is better” (in terms of bad inputs). C2C Notion of eco-effectiveness: products should be designed in a way they eliminate environmental impact. “More is better” (in terms of good outputs). Select appropriate metrics to represent product life-cycle performance. To guide product development decisions, identify environmental KPIs and metrics that are aligned with evolving customer needs and corporate sustainability goals. Designing KPIs and Reporting Systems: Look back or look ahead orientation; In enforcement, compliance, and voluntary contexts; Connected (integrated reporting systems). o Define relevant high-level environmental indicators to send signals to engineering and manufacturing staff (e.g., 50% solid waste reduction) o Decompose metrics into quantitative parameters that can be estimated and tracked for a particular product design (e.g., Total kg of solvents purchased per unit of production) Maintain and apply a portfolio of systematic design strategies. Assemble a portfolio of design strategies that can be codified, communicated, and systematically applied to your design teams. Prescriptive and suggestive guidelines: a. Design for Dematerialization: minimize the material throughput as well as the associated energy and resource consumption at every stage of the life cycle. Dematerialization strategies are the best solution to decouple planet economic growth and resources depletion b. Design for Detoxification: minimize the potential for adverse human or ecological effects at every stage of the life cycle. Detoxification strategies minimize environmental impact but not necessarily the resources depletion. c. Design for Revalorization: recover residual value from materials and resources that have already been used in the economy, thus reducing the need of virgin resources. Revalorization strategies have the same goals of dematerialization in decoupling growth and resources depletion. d. Design for Capital Protection and Renewal: assure the availability and integrity of human, natural and social capitals. Capital Protection and Renewal strategies (in a large meaning) are aimed at maintaining or enhancing assets (human, natural and social capitals) Use Analysis methods to evaluate design performances and trade-offs Provide software capabilities to facilitate the application of DFE Seek inspiration from nature for the design of products and systems: a. In shapes (examples): water drop: optimizing aerodynamic; honeycomb: minimizing materials b. In structure (examples): Velcro: insects’ feet; Turbine blades: flippers of whales c. Two types of materials: Biological nutrients (biodegradable) and technical nutrients (upcylable) Herman Miller’s Environmental Goals. Perfect Vision 2020. Zero landfill, zero hazardous waste generation, zero air emissions (VOC), zero process water use, 100% green electrical energy use, 100% of sales from DFE products, Company buildings constructed to a minimum LEED Silver certification. Setu Multipurpose Chair: Environmentally friendly and non-toxic materials, use of recycled materials, less material content, easy to disassemble, recyclable, production line uses 100% green power, no air or water emissions released in production, returnable and recyclable packaging. Three challenges of product design: 1. eliminate the use of non-renewable resources (materials and energy) 2. eliminate disposal of synthetic and inorganic materials that do not decade quickly 3. eliminate creation of toxic wastes that are not part of natural life cycles Steven Eppinger (MIT – Sloan); A pragmatic approach: - Frame design and product innovation for environmental sustainability as a materials problem - How much material is used is less important than what material is used - Don’t try to eliminate environmental impact all at one - Try to get a little better each time you design any product SESSION 14 - Materiality matrix It is important to check what materials are important for stakeholders and for all the society. The aim of this tool is to try to represent what are the current and the future impact of a company or an institution. The purpose is to access csr issues in terms of their importance to stakeholders and to an organization’s success. The matrix is important to rank a company’s csr issues. These issues are ranked in order of priority and by topic. It is a tool to investigate the main issues considered relevant to all categories of stakeholders, distinguished between internal and external. Hot to build it. Steps: 1. Identify the relevant stakeholders a. Internal: employees, shareholders, board members b. External: suppliers, customers, investors, local community 2. Interview representatives of stakeholders and define the important materiality issues of the company a. Utilize the internal guidelines (Global Reporting Initiative, Sustainability Accounting Standard Board, SDG Compass, etc.). b. Start with interviews to top management, or shareholders, asking them what the most important elements and materials are now and in the future. Then is important to develop a list of relevant materiality issues and most important SDGs, related to the company/institution activity (with chapters environment, economic, social, governance) 3. Develop a questionnaire to be addressed to all stakeholders categories a. Define a balanced sample of all stakeholders categories (or use the population according to its size) b. Identify the best way to clarify the meaning of each item c. Prepare questions related to the relevance in the “current” and “future” time d. Define a Likert scale to measure the relevance of each item (e.g., Most relevant – less relevant) e. Deliver several questionnaires with an introduction letter highlighting the importance of each individual response f. Define a due date to stop the collection of data 4. Collect and analyze the data a. Group the results according to the different Internal and External categories b. Compute the average scores for each item c. Compare the results between them and specifically between the Top management (or shareholders), Employees view and the other Stakeholders view d. Compare the results between “current” and “future” status e. Identify the most relevant topic highlighted by the different categories of stakeholders using for examples the SDGs (very useful to develop the goals of a sustainability plan) 5. Map the result in a Matrix to highlight the priorities for internal and external stakeholders. Utilize a visual Map to represent the different relevant items associated to Internal and External stakeholders distinguishing between (Business or organizational Impact and Stakeholders Impact). 6. Communicate the results and integrate them in the sustainability report (or integrated report). Utilize the outcome to communicate the results: Internal meetings with management; Meetings with stakeholders; Publish on website; Send newsletters. Why the materiality matrix matters. - It allows evaluating and analyzing each subject in question to minimize costs and increase the organization’s market share; - The identification of socio-environmental issues relevant to the business can help your company to attract investments and ensure a good reputation; - The materiality matrix helps in risk management and generates business opportunities by identifying relevant topics such as services and models that can improve factors related to profit margin, price, etc.; - It provides the framework for a focused annual report and allows organizations to concentrate their efforts on better resource allocation; - It increases the chances of better meeting stakeholder expectations. Monitor: no investments, no impact for company or stakeholders. Maintain: little investments because stakeholders are interested in Grow: very important and high investments Understand: why we have these different perspectives The development of a Sustainability & Impact Plan is based on a set of: Goals; Indicators; Targets; Risks related to the target achievements; Actions Plans (and Risk Mitigation plans); Impacted SDGs. SESSION 14 - Benefit corporation A purpose must consist in a: - Concrete goal - with a social, ethical, and cultural meaning for the society at large - that goes beyond mere profit and thus protecting this corporate mission in the long-term. A purpose is authentic if a company is willing to invest on it even at the expense of short-term profitability Social-purpose company Benefit Corporations or BCorp B_Corp have been originally created by B Lab, a US not-for-profit, to protect managers and shareholders from legal actions developed by other shareholders if they are not primarily focus on profit. B_Corp off-set this risk by explicitly declaring in their statute environmental and social goals. To become B_Corp, companies must be certified based on an articulated set of certification standards (Review every 3 years) In order to achieve certification, a company must: - Demonstrate high social and environmental performance by achieving a B Impact Assessment score of 80/200 or above and passing the B lab risk review. Multinational corporations must also meet baseline requirement standards. - Make a legal commitment by changing their corporate governance structure to be accountable to all stakeholders, not just shareholders, and achieve benefit corporation status if available in their jurisdiction. - Exhibit transparency by allowing information about their performance measured against B Lab’s standards to be publicly available on their B Corp profile on B Lab’s website. B-Impact assessment (BIA) standards: 1. Governance: To evaluate the degree of transparency and responsibility of the company in pursuing the common benefit objectives 2. Workers: To evaluate the relationships with employees and collaborators in terms of salary, benefits, training and opportunities for personal growth, quality of the work environment, internal communication, flexibility, and job security 3. Community: To evaluate the relations of the company with its suppliers, the region, and the local communities in which it operates 4. Environment: To evaluate the impacts of the company, in terms of use of resources, energy, raw materials, and production processes. If you adopt a specific legal form, you can be a società benefit, but if you want to be certified by b-lab, you can become a b-corp. More than 6400 companies globally are b-corp, 220 b-corp in Italy in 60 different industries. SESSION 15 - Sustainable production The design of the production process. A production process is a set of activities that transform inputs into an output of greater value to the client. The design of a production process involves choices about the following areas: - Hardware levers: location, production capacity, vertical integration, level of automation etc. - Software levers: production planning, stock management, quality control, etc. Manufacturing Performances: Cost; Quality; Time (Speed and Dependability); Flexibility. - Cost: typical manufacturing performance that need to be considered and, in some industries, it is very important (low margin and price competing products → commodity industry) - Quality: characteristics of a product that makes it objectively well produced → CONFORMANCE TO SPECIFICATION = ability of production process to meet the specification and standard defined by the designing process → when it is not the product is SCRAP/DEFECT Might be a problem with subcontracting - Time: o Speed o Dependability: ability to provide services that can be trusted within a time-period - Flexibility: ability of the production system to start different processes when required Each market can have specific: - Order qualifiers: they are performance attributes required for the product to be considered by the client. They are prerequisite for entering the business - Order winners: they are performances thanks to which the company will win the bid The rationale behind the design of the production process builds on the concept of strategic alignment. Social and environmental wastes of a production process. Production processes are often affected by several inefficiencies, so-called «wastes», which refer to the social and environmental dimension: Energy waste; Water waste; Physical waste; Emissions; Noise; Land contamination and biodiversity - Energy: Industrial activities necessarily imply the consumption of energy, thus giving rise to significant environmental effects, especially in the case of the use of fossil fuels (such as oil, gas, and coal), which produce polluting emissions. In Europe the manufacturing sector is the second for consumption of energy. - Water: The impact that industrial manufacturing has on water is two-fold: Water pollution and Water consumption. In both cases relevant improvements have been observed: o on a European level, for example, most countries recorded a reduction in the emissions of heavy metals in the period from 2004 to 2012, while enjoying an increase in the Gross Value Added o average reduction in the consumption of water of 81.8% in Eastern European countries and 9.9% in Western European countries during the period from 1990 to 2007 - Physical waste: it concerns (solid or liquid) substances that cannot be reused at the end of their life cycle and whose disposal has a negative impact on the environment. To deal with this type of waste it is necessary to identify the type and quantity of input and output in the transformation processes and describe the degree of danger through the analysis of the chemical composition of each single component of the product. - Emissions: manufacturing activities typically carried out in industrial enterprises are among the main sources of pollution, due to the release of a high number of substances, which include: - - o carbon dioxide (CO2): it is emitted primarily by fuel combustion (oil, coal, natural gases, and biomasses) and originates from industrial and domestic activities as well as from transportation o air pollutants: as ammonia (NH3), nitrogen oxides (NOx), non-methane volatile organic compounds (NMVOCs), particulate matter (PM10) and Sulphur oxides (Sox) o heavy metals: arsenic (As), cadmium (Cd), chromium (Cr), lead (Pb), mercury (Hg) and nickel (Ni), which are toxic for several eco-systems; o organic micro-pollutants: these include benzene, dioxins and furans, and polycyclic aromatic hydrocarbons (PAHs)The lean toolkit: some tools and principles Noise: the phenomenon of noise disturbance is highly significant due to the number of persons affected. In European cities with more than 250,000 inhabitants, at least 67 million people are exposed to average intensity noise of more than 50 dB within the timeframe of 24 hours. Land contamination and biodiversity: this type of waste is caused in particular by demographic trends, which lead to the steady growth in the so-called land take. It refers to urbanized areas and the areas used to meet food requirements through farming and livestock-breeding. In Europe, manufacturing and logistic facilities represent 15.5% of the total of new buildings. Waste of poorly designed and managed production processes. Production processes are often affected by several inefficiencies, so-called “wastes”. The most recurrent types of waste are: Overproduction (often caused by batch size constraints); Unnecessary inventory (mainly due to poor production planning and MTS approach); Over processing; Defects; Waiting (idle people and machines); Unnecessary transport; Unnecessary motion. Wastes and their environmental impact. - Overproduction, over processing, Inventory and Defects: More raw materials, water and energy used to produce unnecessary products; More obsolescence of unsold goods and consequent waste of materials, water and energy embedded into obsolete products; Packaging materials to store WIP and finished products; Obsolescence of WIP and finished products; Energy for heating, cooling, and lighting of warehouses - Waiting: Energy for heating, cooling, lighting during production downtimes; Potential materials and components damages causing waste - Transportation and Motion: Emissions; Energy; Noise; Pallets; Packaging materials for protecting components during movements; Damages during movements. How to eliminate wastes? Most companies improve their overall manufacturing performance through the implementation of Lean Management. Lean management consists of a set of practices and tools suitable for addressing the main wastes of production processes. The Lean principles: - Value and value stream mapping: identify value-added activities, map the “current state”, and eliminate not-value adding ones - Flow: once not-value adding activities have been eliminated, all the others must work without interruptions - Pull: each phase of the process must be carried out only if its client places an order - Perfection: strive for continuous improvement The Lean Toolkit: some tools and principles: - Value stream mapping: A Value Stream Map is a graphical representation of the activities carried out to produce an item (or deliver a service). Activities can be classified as follows: o Value added activities (VA), for which clients are willing to pay, as transformation o Not value added (NVA), for which clients are NOT willing to pay as waiting, transportation, quality control etc. - - - - - o Business not value added (BNVA), for which clients are NOT willing to pay but necessary for legal, accounting, regulatory purposes, as preparing financial statements Pull processes and set-up reduction: How long does it take for these clients to be served? How long does it take for one of these detergents to be produced? Why is it good to reduce Manufacturing Lead Time? In order to adopt a Make to Order production (MTO) rather than a Make to Stock one (MTS). MTO = Pull production system; MTS = Push production system. A Pull production system eliminates all inventories and related costs. Furthermore, a short Manufacturing Lead Time enables a quicker feedback about quality problems and leads toward a scrap rate reduction. (Studied in GTIO) Layout redesign and balancing: spaghetti chart; U-shape layout (advantage on the efficiency of the transport of material; problem on then interaction between all colleagues, but you can see what’s going around; one worker can easily go out from the line and can be replaced by another colleague; another issue is the difficult to balance the time through all the workers) 5S: it is a system of procedures that are used to organize and arrange the workplace to optimize performance, cleanliness, and safety. Seiri (sorting), seiton (set in order), seiso (shine), seiketsu (standardization), shitsuche (sustain). Total production maintenance: developed in the 80’s. Lean companies delegate maintenance to direct workers, who perform this activity on a regular basis with a preventive approach. This leads toward a superior Overall Equipment Effectiveness (OEE). OEE = utilization x efficiency x conformance rate. Continuous improvement: all lean companies sustain their practices through a continuous improvement approach, or kaizen. This means that the whole organization is committed to the systematic identification of any problem that affects the production process and to the definition of appropriate improvement actions. Over time, the sum of all these improvements can determine remarkable performance gaps against competitors. SESSION 16 - Measuring sustainability Two perspectives: Macroeconomic and Corporate A Macroeconomic Perspective. Until a few years ago, the wealth of a country was measured only in economic terms, through the GDP (Gross Domestic Product) or GNI (Gross National Income). However, the real conditions (freedom of expression, quality of the environment etc.) as well as the potential for growth of a country rely also on other conditions, which cannot be easily measured in economic terms. GDP is a proxy of how much economic agents can consume immediately or invest for future consumption, but it suffers from several methodological problems, some of which are related to: - assessment of public services: if a product/service does not have a market price, it is conventionally valued by taking the resources used to produce/provide it into consideration, as is the case for many public services. In 2012 US spent 16.4% of their GDP in health, while Italy spent 8.8%; but the life expectancy at birth in US is 78.8 years, in Italy it is 82.3 years. - evolution of the quality level of products: many products are significantly improved over time, guaranteeing standards of quality and features that are clearly higher than they were in the past, such as consumer electronics, for example. At the same time, especially due to technological innovation and the increasing efficiency of production systems, the costs of these goods are reduced. - increase in GDP because of inefficiencies of the system: it may be the case that the higher expenditure of companies or individuals (and therefore their contribution to GDP) is linked to the need to cope with various forms of inefficiencies that can be observed in some countries. - transactions for consideration as a value driver: the GDP of a nation grows depending on the number and value of business transactions. It can, however, be easily verified that not all of them lead to an improvement in the wellbeing of the community or the individual. Thus....How to improve national accounting systems? How to measure human wellbeing? Measuring human wellbeing: the human development index (HDI). Computation of HDI: I = (actual value – minimum value)/ (maximum value – minimum value) HDI = cubic square of I life x I education x I income. It is used by the United Nations to measure and compare the wealth of countries in an international perspective. UN produces the Human Development Report on a yearly basis, which provides useful insight about long term trends and about their drivers. When dealing with performance measurement, two main issues have to be addressed: - Single metrics, to be used to quantify performance attributes - Performance Measurement System, to identify cause-effect relationship among indicators Most companies that draw up sustainability reports refer to the model proposed by the Global Reporting Initiative (GRI). GRI is an international not-for-profit organization; it promotes the use of sustainability reporting as a way for organizations to become more sustainable and contribute to sustainable development. Companies that adopt this framework to draw up their sustainability reports can also voluntarily publish them on the GRI website, which, consequently, acts as a repository. More examples on slides. SESSION 17 – AMBROSOLI FOUNDATION AND EXAM’S TIPS Ambrosoli foundation has a hospital in Uganda, Kalongo. The nearest hospital is about at 2:30 hours by car. The district is very poor, and the expectancy of life is less than 54 years (83 in Italy). The Ambrosoli foundation use the funds that raises to help the hospital, with managerial support, direct financing of medical activities, staff capacity building, drafting and implementation of medical, structural, and training projects. Over 5.6 million euros has been invested since 1999. There is also a school that trains women to be independent and change their mindset. About sustainability: the mission is to achieve most of the sdg goals set by un. The challenges to have environmental sustainability: high prices for green products and limited resources; unavailability of green products locally and high CO2 emission for transport; difficulty on transport due to the remoteness of the Hospital; limited know-how on the ground. They also work on malnutrition, training and help the staff of the hospital to allow the students to train parents. Exam structure and rules. 22/5 at 14 o’clock. Time 50 to 60 minutes. Total points 31. Two open questions with 3.5 points each (max 500 words). 16 multiple choice question with 1.5 points each. No penalty points. Examples on slides. Possible questions on Cariplo only on the first introductory part.
