Asian firms go green to go west

special report Manufacturers and logistics providers embrace green as it makes good business sense if they want to position themselves for U.S. and Europe markets.
Written by Sol E. Solomon, Contributor

Green is increasingly becoming the color of choice among manufacturers and logistics providers in Asia, especially those with the goal of establishing themselves in the West.

Saj Kumar, vice president of SAP Asia's discrete manufacturing industry solutions group, noted that Asia-Pacific manufacturers the likes of Lenovo, Asus and Acer, want to establish their brands in the the U.S. and European markets.

"As a result, they're doing a lot of work to make sure they're products are green," Kumar told ZDNet Asia in an interview. "For them, it's part of their marketing message. They try to position themselves as an eco-friendly company."

He also noted that shareholders have had a pressurizing effect as they, too, are concerned about their companies' environmental initiatives.

However, compliance does not come cheap, he said. "It's typically about 1 to 2 percent [more in cost] for most electronics companies, in terms of being able to comply with European Union regulations. But there's also an ongoing cost, it's not a one-time cost. As you continue to release products, it possibly would add 10 to 11 percent of costs as well."

Dan Miklovic,
A well-maintained plant generally is more efficient and hence pollutes less than a poorly maintained plant. Any tool that supports lean manufacturing contributes to greenness as well. Lean is green. When you remove waste from a process you are almost always making it greener.

This may account for why formal green IT strategies are still "few and far between" among manufacturing and logistics organizations in the region, said Jonathan Silber, research manager for vertical markets at Springboard Research.

That said, "the encouraging news" is that 52 percent of such firms recently surveyed by the analyst firm plan to implement a green IT strategy in the next 24 months, Silber told ZDNet Asia in an e-mail interview. Springboard polled more than 1,200 such companies across the Asia-Pacific region to find out about their green IT adoption and purchasing decisions.

"Despite the fact that only a slim margin of manufacturing and logistics firms have implemented formal green IT strategies, most firms have implemented green business practices," he said. "The most common initiatives include general power-saving policies such as adjusting the setting for PCs in idle mode, implementing a videoconferencing solution to reduce travel, and server consolidation."

Moreover, 33 percent of manufacturing and logistics companies surveyed plan to implement virtualization initiatives by the end of 2009, according to Silber.

Dan Miklovic, vice president of industry advisory services at Gartner, noted that for manufacturing, green starts with the product itself. "By choosing non-polluting raw materials, one can impact green."

Another way is to lighten the product so it uses less energy to ship, Miklovic said in an e-mal. Manufacturers can also get a product to be "greener" by incorporating recycled material in the product and making it recyclable, he added.

A manufacturer can further design its product so the production process for the product consumes less energy, uses less hazardous material and produces less scrap, he suggested.

Jasbir Singh, Asean senior director, supply chain management, product and solution consulting at Oracle, said manufacturers in Asia are also embedding environmental considerations into all aspects of their operations.

Those focused on green initiatives are additionally redesigning their supply chains to reduce their environmental impact, cut costs, increase efficiencies and reduce waste. This ranges from resource utilization and manufacturing processes through to transportation management and product end of life.

"Information technology, particularly software solutions, plays a large role in helping manufacturers manage, execute and measure their green initiatives," Singh told ZDNet Asia in an e-mail.

For example, product lifecycle management (PLM) tools that include design-for-environment functionality help manufacturers make environmental compliance a design constraint throughout the entire product lifecycle--from concept through launch, and into retirement.

"Manufacturers using effective PLM solutions are able to implement 'cradle-to-cradle' product design processes that assume no waste at all," Singh noted. "This enables them to accelerate product innovation and maximize product profitability by managing product information, processes and decisions throughout the product lifecycle and across the global product network."

Adding to this, Miklovic said some PLM tools today also offer the ability to accurately simulate a product in 3D in a process called virtual prototyping. "It contributes to greenness by eliminating all the wasted material and energy used to test the product design. Other PLM tools have databases of materials that include the environmental impact quotient of the constituent materials," he said.

Other applications, such as enterprise resource planning (ERP), manufacturing execution system (MES) and enterprise asset management (EAM), can also impact the "greenness" of a company, Miklovic added.

Responsible thing to do
David Hope, Lawson Software's Asia-Pacific managing director and vice president, said being green is part of the broader corporate social responsibility (CSR) concept.

To manage their CSR programs, many organizations are starting to implement integrated systems comprising spreadsheets, applications and databases, Hope said in an e-mail. As these systems are often integrated and enterprise-wide, ERP can form the foundation to manage these programs.

"It is clear that organizations are looking to their ERP vendor for solutions. Dashboards are commonly identified as a key tool to help managers view CSR information and improve decision-making", he said.

Oracle Asean's Singh added that business process automation and paperwork reduction are also critical transformations in enabling green manufacturing and making processes more flexible, responsive and competitive.

"An integrated supply chain management (SCM) solution complemented by back-end ERP will help ensure the smooth flow of information throughout the enterprise and extended supply chain," he said.

Beyond only allowing a company to input manufacturing costs in monetary terms, Miklovic said some of today's SCM applications also enable the input of costs in terms of the carbon footprint as well.

For goods requiring conditioned environments during storage, the environmental impact can be improved by carrying a smaller inventory. This requires better planning tools, he said. "So the planning function in some SCM applications needs to be able to include the 'total' cost of warehouse space (both economic and environmental), when trying to determine optimum inventory levels.

"A well-maintained plant generally is more efficient and hence pollutes less than a poorly maintained plant. Any tool that supports lean manufacturing contributes to greenness as well. Lean is green. When you remove waste from a process, you are almost always making it greener," Miklovic said.

Singh noted that Asian manufacturers have embraced the concept of lean manufacturing for years. "Today, they have integrated the principles of lean with another set of initiatives--green--to create an environmental stance that is a driver for reduced costs and risks, increased revenues, and improved brand image," he said.

External pressures
He said environmental regulations such as the Restriction of Hazardous Substances (RoHS) and the Waste Electrical and Electronic Equipment (WEEE) directives, as well as the Restriction, Evaluation, and Authorization of Chemicals (REACH) regulation, have forced Asian manufacturers to re-examine the entire lifecycle and environmental impact of their products.

In fact, Kumar of SAP said, with a majority of high-tech products being produced in Asia from locations such as China and Taiwan, manufacturers of such products in the region have been "on the forefront of green for at least the last five years".

Apart from directives by regulators, he said various other forces too have encouraged Asia's manufacturers to go green. For one, customers are pressuring them to ensure environment-friendly compliance.

On top of that, "their competitors are doing it, so they're being forced to do so, too," Kumar said.

There is also pressure from environmental activists. "Greenpeace often publishes reports on green practices and where [a manufacturer] stands. And they evaluate products on how green they are. That's a big push for companies [to ensure] they are compliant," said Kumar.

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