The Foundations of a Sustainable Business

The ABCs of Structured Maintenance, a recent post to this blog, emphasized the importance of maintenance as a foundation for viable manufacturing operations. The following updated version of Cultivating Disciplined Operations, a post from October 2015, expands on the necessity for structure and discipline. — C.H.


Cultivating Disciplined Operations

In order for an organization to function effectively in a competitive world, a culture of disciplined operations is necessary. This does not mean the imposed discipline of a military boot camp. Rather, it means a voluntary coordination of efforts among all involved. As an ideal, consider a symphony orchestra, where a group of highly skilled musicians coordinate their personal talents to a mutually understood and desired end. Yes, a conductor does arrange the music and does direct the tempo. But it is the blended performances of the musicians that work the magic.

Cultivate Text Box“Cultivating” is the right word here. A voluntary coordination of efforts comes about through a culture of mutual respect, directed toward a mutually desired end. It is that culture that needs to be cultivated. Here, “mutual respect” means a sincere regard for the interests and aspirations of everyone involved, diverse though those interests and aspirations may be. “Mutually desired end” refers to a condition in which everyone involved can prosper indefinitely.

An initial assessment of how closely a given organization’s culture approaches one of mutual respect, directed toward a mutually desired end is pretty easy. Employee turnover rates, absentee rates, equipment downtime rates and OSHA recordable safety incidents can readily be compared with relevant norms. Apply Pareto’s rule: if your organization isn’t comfortably in the top 20% for each of these, your competitive posture is at risk. [1] Even if your numbers are all in the top 20% — or even the top 1% — remember that everything and everyone can always improve. Including your competitors, today and tomorrow.

Here are some areas that require constant cultivation:

>> Safety: In manufacturing, a top notch safety program is essential. The benefits of a pain free working environment are immediately clear to everyone. Cultivation of safe operating practices is fundamental to the cultivation of mutual respect. [2]

>> Maintenance: Equipment and facilities need be designed for operability as well as for throughput. Poor working conditions and dysfunctional equipment are antithetical to the cultivation of mutual respect.

>> Training: It is not reasonable to ask anyone to participate in manufacturing operations absent a clear understanding of what that individual is to do and how to do it safely and effectively. My personal preference is that written work instructions be used as a basis for training materials. Trainers should be trained in how to train others. Understanding should be confirmed by demonstration.

>> ISO 9001: The ISO 9001 Standard for Quality Management Systems provides a systematic framework for disciplined operations. It is worth studying, even in part. Implementing systems compliant with the ISO 9001 Standard is a substantial undertaking. However, the cultivation of disciplined operations that occurs while doing so is a substantial reward for everyone and a substantial step toward an organization that can prosper indefinitely. [3]


Chuck in FranceThoughtful comments and experience reports are always appreciated.

…  Chuck Harrington (Chuck@JeraSustainableDevelopment.com)

 

This blog and associated website (www.JeraSustainableDevelopment.com) are intended as a resource for smaller manufacturers in the pursuit of Sustainability. While editorial focus is on smaller manufacturers, all interested readers are welcome.


[1] For more on Pareto and operating performance, see Operational Excellence – The Performance Curve, this blog, http://jerasustainabledevelopment.com/2012/05/24/operational-excellence-the-performance-curve/

[2] For more on safety and its importance, see On Safety and Sustainability, this blog, http://jerasustainabledevelopment.com/2013/10/24/on-safety-and-sustainability/

[3] For more on the ISO 9001 Standard and its application, see What’s Wrong With ISO?, this blog,  http://jerasustainabledevelopment.com/2012/07/05/whats-wrong-with-iso/  and Keeping Up With ISO, this blog, http://jerasustainabledevelopment.com/2014/08/28/keeping-up-with-iso/

Another Look at Continuous Improvement

Dreamstime - Crystal BallEverybody knows that the reality of globalized manufacturing is a continuous spiral of faster, better, cheaper. Regardless of how good your processes, practices and products are, it is essential to keep improving. On Continuous Improvement, a post from November 2015, takes a pragmatic look at continuous improvement, with some thoughts on how that might actually be accomplished. Another look at On Continuous Improvement is always timely. — C.H.


On Continuous Improvement (from November 2015)

Remaining Competitive

Everybody understands the need to be truly competitive in this globalized economy. What’s more, since everybody knows, everybody is trying to improve – so the bar is continually being raised. The 5th of Dr. Edwards Deming’s famous 14 points is characteristically blunt: [1]

“Improve constantly and forever the system of production and service.”

In practice, there are two ongoing modes of improvement. The first mode consists of numerous incremental improvements to existing products, processes and practices. The second mode involves fewer, larger improvements such as new products, new equipment, or R&D advancements. This essay focuses on the first ongoing mode of improvements.

What to Improve Continuously?

Rereading Deming’s 5th point clearly answers the “what to improve” question: “the system of production and service”. The “system of production and service” means the entire assemblage of manufacturing and processes, procedures and practices, along with their interactions and inter-dependencies, through with your organization functions. It is necessary to appreciate that Deming’s use of the term “system” is not an accident.  A “system”, as Deming intends that term, is assembled in order to serve a specific purpose (Deming prefers the term “aim”, rather than “purpose”).

Deming says that the aim (purpose) of a business is to “stay in business, create more and more jobs”. To me, that means a sustainable business that can continue to grow indefinitely.

To be more specific, it is necessary to constantly improve our products, our manufacturing processes, procedures and practices; as well as our business processes, practices and procedures. Further, it is necessary to do so in a manner that advances the overall aim of the system. Improvement in one component of the system at the expense of another component is counterproductive. Usually, most improvement efforts focus on diminishing variation and waste.

How to Improve Continuously?

Deming tells us that wanting to improve is not sufficient. It is necessary to have a method for doing so. Fortunately, there are several methods that are widely used by manufacturers, each with many books, publications, courses and consultants ready to assist. Generally speaking, my personal preferences are Lean Manufacturing (especially for reducing wastes), Shewhart Cycles with control charts (for reducing variation) and Theory of Constraints (for prioritizing improvement efforts).

Lean Manufacturing

Competitiveness starts with the systematic elimination of waste in all of its many forms. “Waste in all of its many forms” includes losses due to hazardous working conditions, unsafe work practices, emissions to the environment, inefficient use of energy, and on and on. Lean Manufacturing provides a proven, readily available means to do that.

Lean Mfg Text Box

Just about everybody in manufacturing has heard about Lean Manufacturing, or about the stunning success of the Toyota manufacturing system, which serves as Lean’s global model. The fact is that Lean Manufacturing is good sense, systematically applied. Lean doesn’t require computers, robots or big capital outlays. It does require access to the know-how, a willingness to apply that know-how, and a person experienced with Lean implementations to lead the effort.

Shewhart Cycles

Dr. Deming was a statistician. Early in his career, Deming met Walter Shewhart, a pioneer in statistical quality management. He learned of Shewhart’s work with control charts and PDCA improvement cycles. Control charts provide a ready method to plot process outputs and, importantly, to distinguish variation due to the process itself (common causes) from variation due to other causes (special causes).

Variation can be reduced by identifying and eliminating special causes. Shewhart Cycles, more commonly called PDCA Cycles, provide a way to do that. Shewhart Cycles consist of four steps:

Deming PDCA CycleStep 1: The first step is to study a process, to decide what change might improve it. Organize an appropriate team. Do not proceed without a plan.

Step 2: Carry out the tests or make the change, preferably on a small scale.

Step 3: Observe the effects.

Step 4: What did we learn? Repeat the test if necessary. Look for side effects.

Theory of Constraints (TOC) [2]

TOC regards a manufacturing facility as a system consisting of interacting and interdependent processes. Those processes are not all equally important to increasing throughput. A few, usually one, process limits — constrains — the system. TOC focuses on identifying the limiting process and addressing that limitation. “Addressing that limitation” means increasing the capacity of that process, such that it no longer bottlenecks the facility. In addition, TOC uses a buffer before the constrained resource and a raw materials release system to prevent overproduction at non-constrained resources.

Once a constraint is addressed and throughput increases, another constraint will be revealed — otherwise, throughput would be unbounded. So, TOC is an ongoing process of identifying and addressing constraints. As production capacity increases, the constraint to increasing revenues eventually moves from the factory to the market or to some business practice or policy.

Concisely, Theory of Constraints provides a convenient way to prioritize opportunities for improvement so as to improve the aim of the system.

Chuck - Red Rocks3Thoughtful comments and experience reports are always appreciated.

…  Chuck Harrington

This blog and associated website (www.JeraSustainableDevelopment.com) are intended as a resource for smaller manufacturers in the pursuit of Sustainability. While editorial focus is on smaller manufacturers, all interested readers are welcome.

Image: PDCA Cycle ID 46845201 © Raducomes | Dreamstime.com


[1] Understanding continuous improvement starts with Dr. Deming. For those not familiar with Deming’s work, I suggest Mary Walton’s The Deming Management Method, Perigee Books (1986)

[2] To learn more about the Theory of Constraints, see Appreciating the Theory of Constraints, this blog, http://jerasustainabledevelopment.com/2015/06/27/appreciating-the-theory-of-constraints/

Radical Uncertainty

Sustainability and Uncertainty

A Sustainable business, says Adam Werbach, is one that is able to thrive in perpetuity. [1] The same definition also applies nations, civilizations and even humanity as an entirety. The term “perpetuity”, however, involves anticipation of the future, so that appropriate actions can be taken in the present.

“Prediction is very difficult, especially about the future” – attributed to Niels Bohr, (or maybe Yogi Berra).

In some circumstances, prediction is not so difficult. For example, it is easy to predict that a roll of two dice will result in an outcome between 2 and 12, and the probability of each outcome (from 2 to 12) is readily calculated. Insurance companies prosper because probabilities of morbidity, mortality and other risks within suitably defined groups can be reliably estimated.

However, prediction becomes increasingly difficult as situations become increasingly complex and the set of possible outcomes becomes less well defined, as they do in the real world. Uncertainty prevails. And it gets worse:

“Radical uncertainty refers to uncertainty so profound that it is impossible to represent the future of a knowable and exhaustive list of possibilities to which we can attach probabilities… when businesses invest, there are no dice with known and finite outcomes on the faces; rather they face a future in which the possibilities are limitless and impossible to imagine.” [2]

The concept of “radical uncertainty” originated in macroeconomics. [3] Macroeconomics, of course, deals with the aggregate economic behaviors of large groups of people, their enterprises and their governments. Aggregated economic behaviors can be viewed as systems that can, at least in principle, be modeled mathematically. Such systems are usually complex, with components that interact, time dependences and feedback loops. When complex systems are perturbed, outcomes can be quite surprising. This applies to macroeconomic systems and to other complex system, especially those where human behaviors are involved.

Here are several examples where complex systems might well threaten a firm’s, a nation’s, or even humanity’s ability to thrive in perpetuity in today’s globalized world:

>> Climate Change – As a recent post to this blog explained, the term “Climate Change” refers to a set of negative effects expected from warming of the Earth’s atmosphere due to human – induced increases in the concentration of greenhouse gases — especially carbon dioxide – in the atmosphere. The atmosphere and its behavior as expressed in weather patterns is a complex system indeed. The nature, magnitude and timing of effects (changes in weather patterns) due to increases in greenhouse gas concentrations remain to be seen.

>> World Financial System: Over the last half century or so, the American economy has experienced recession about once a decade. Over that time, the financial systems that support national economies have globalized and changed in very significant ways. In 2007 – 2008, a major disturbance occurred that, we are told, very nearly resulted in total collapse of those financial systems. Instead, we experienced about seven years of pernicious recession.

However, very little has been done to make those financial systems more robust to future disturbances. The periodic occurrence of recessions suggests that the financial system is not stable. If the episode of 2007 – 2008 very nearly resulted in total collapse of the world’s financial system, worse may well be in store in the future.

>> Global Epidemic: The 20th century witnessed a dramatic reduction in epidemic outbreaks of communicable disease. In the aftermath of World War I, an outbreak of “Spanish” influenza resulted in more deaths than the war itself. “Childhood diseases” including mumps, chicken pox and measles (along with many other once common diseases) have all but disappeared.

However, a recent outbreak of Ebola fever in Africa emphasized the ease with which today’s global transportation system can change a local outbreak into a global catastrophe. Further, science has learned that pathogens can evolve rapidly into new forms that require new vaccines or new treatment techniques – which may require considerable time to find, prove, and distribute.  

>> Black Swans: Nassim Taleb teaches us of the ubiquity of Black Swans:

“A Black Swan is an event, positive or negative, that is deemed improbable, yet causes massive consequences”

“… the world is far, far more complicated than we think, which is not a problem, except when most of us don’t know it. We tend to ‘tunnel’ while looking into the future, making it business as usual, Black Swan free, when in fact there is nothing usual about the future.” [4]

What to Do?

The world, then, may well be “far, far more complicated than we think”. Radical uncertainty may be considerably closer to the norm than we appreciate. If so, how does an individual, a firm, a nation, or humanity as a whole best approach the future? Look for some thoughts on that in the next post to this blog.

Chuck - SedonaThoughtful comments and experience reports are always appreciated.

…  Chuck Harrington (Chuck@JeraSustainableDevelopment.com)

This blog and associated website (www.JeraSustainableDevelopment.com) are intended as a resource for smaller manufacturers in the pursuit of Sustainability. While editorial focus is on smaller manufacturers, all interested readers are welcome.


[1] Adam Werback, Strategy for Sustainability (2009), Harvard University Press, page 9

[2] Mervyn King was Governor of the Bank of England during the financial crisis of 2007 – 2008. This quotation is from his 2016 book The End of Alchemy – Money, Banking and the Future of the Global Economy.  This book includes a full chapter entitled Radical Uncertainty: The Purpose of Financial Markets.

[3] Dr. Frank Knight, often referred to as the “father of macroeconomics”, introduced the concept of radical uncertainty in a 1921 academic paper, Risk, Uncertainty and Profit, University of Chicago.

M. Keynes, likely the most influential economist of the 20th century, devoted Chapter 12 of his best known work, General Theory of Employment, Interest and Money (1936) to the concept of radical uncertainty. (Keynes, incidentally, did not hold a degree in economics, doctorate or otherwise. He studied mathematics, emphasizing probability, at Cambridge.)

[4] These quotations are from Nassim Talib’s New York Times bestseller The Black Swan (2016) Talib and his book are both engaging, as well as perceptive.

What the Frack?

On January 17th of this year, the Annual Energy Outlook for 2017 (AEO 2017) was published by the Energy Information Agency, part of the U.S. Government.[1] The AEO examines U.S. domestic energy production and consumption, with extrapolations[2] into the future. Information from the AEO 2017 provides information and insights relevant to business management. This post focuses on petroleum and natural gas production through hydraulic fracture and directional drilling techniques (“fracking”).

America and Petroleum

The graphic labeled “Energy Consumption” is from the AEO 2017. The brown line indicates that petroleum and related liquids fuels about 35% of America’s energy current energy consumption.[3] Further, it indicates little change in annual petroleum consumption over the next 24 years, given the assumptions used to extrapolate the AEO’s “reference case”.

Over the past several decades, the U.S. has consistently consumed considerably more petroleum than it has produced. The difference has been imported, much of it from the Middle East. Since imports must be paid for, petroleum imports have resulted in a substantial drag on the U.S. economy. Further, securing continuing petroleum supplies from overseas has been a major determinant of U.S. foreign policy.

The graphic labeled “Net Energy Trade” illustrates that, in the years around 2006 – 2008, the U.S. imported amounts of petroleum equivalent to over 25% of its entire annual energy consumption, net of any petroleum exports!

Then something dramatic happened. U.S. domestic production increased rapidly from about 2010, resulting in a major decline in global petroleum prices. Accordingly, retail gasoline prices declined by about half during the last six months of 2014, resulting in boost to the U.S. economy that, in my opinion, triggered in the end of the Great Recession. Think of it this way: when a boatload of crude oil arrived in 2013 at $100+ per barrel, the U.S. shipped a boatload of greenbacks overseas in payment. By 2015, the price of crude was less than $50 per barrel and the number of boatloads imported dropped sharply. So, the U.S. shipped many fewer greenbacks overseas in payment. The rest stayed at home, within the U.S. economy. Since we are talking about millions of barrels every day, the difference really matters.

The Fracking Revolution

Fracking – petroleum and natural gas production by directional drilling plus hydraulic fracturing – is a truly remarkable technological innovation. Look again at the graph labeled “Energy Consumption”. Notice the rapid increase in natural gas consumption from 2010. That too is due to fracking. As a fuel, natural gas is complementary to petroleum. Petroleum fuels primarily transportation. Natural gas fuels mostly stationary consumption, including industrial uses, commercial and residential heating, and especially electric power generation.  

Natural gas is difficult and expensive to transport, other than by pipeline. Fortunately, the U.S. already had a domestic pipeline network in place as the huge increase in natural gas production due to fracking became available. Prior to the advent of “fracking”, global natural gas prices generally followed petroleum (crude oil) prices. The increase in natural gas supply in the U.S. resulted in natural gas prices that are not pegged to petroleum, and that are considerably lower than natural gas prices elsewhere.

Implications, Domestic and International

>> Energy Independence: Due to increased U.S. domestic production of petroleum and natural gas, the AEO 2017 projects that U.S energy exports will exceed imports by 2026, using “reference case” assumptions. That means that, if necessary, U.S. energy production would be sufficient to satisfy America’s energy requirements, without relying on OPEC or anybody else.

>> Industrial Economics: U.S. domestic prices for natural gas are substantially lower than elsewhere in the world. This provides U.S. industry with two competitive advantages in global trade. First, energy costs are low. Second, many important petrochemicals can be produced from natural gas, resulting in lower raw materials cost for many products.

>> Petroleum and Natural Gas Reserves: Fracking is used in geological formations that are different from those where conventional petroleum and natural gas production methods are used. That means energy production becomes possible in geographic areas where it is otherwise infeasible. It also means that the world’s potential reserves of petroleum and natural gas have increased substantially.

>> International Development: Fracking technology can and will be applied in other countries. Correspondingly, many nations that lack conventional petroleum or natural gas production may be able to become producers, thus reducing dependence on foreign sources and gaining a degree of freedom from global energy prices.

>> Cleaner Fuels: Petroleum produced by fracking is generally light and sweet. That means it is easy to refine, with few byproducts such as sulfur or heavy metals. Refining light, sweet crudes is relatively energy efficient. Accordingly, less carbon dioxide is produced when light, sweet crude is produced and consumed. Natural gas is even cleaner.


There is a lot more information worth discussing in the AEO 2017. Look for more posts on other AEO 2017 in the future.

Chuck - Blue SweaterThoughtful comments and experience reports are always appreciated.

…  Chuck Harrington (Chuck@JeraSustainableDevelopment.com)

This blog and associated website (www.JeraSustainableDevelopment.com) are intended as a resource for smaller manufacturers in the pursuit of Sustainability. While editorial focus is on smaller manufacturers, all interested readers are welcome.


[1] The AEO 2017 is available for free download on the Energy Information Agency’s website, www.eia.gov

[2] I use “extrapolations” rather than “forecasts” to emphasize that the AEO is projecting present and recent past information into the future based on certain assumptions. The “reference case” refers to a “business as usual” set of assumptions that do not anticipate government policy changes or technological innovations, other than those already in place.

[3] Note: U.S. annual primary energy consumption is about 100 quadrillion BTUs.

 

Knowledge Workers and Tomorrow’s Jobs

President Obama, in his 2015 State of the Union address, proposed that America’s community colleges be made tuition free.[1]  With advancing technology, including on-line instruction, that seems to me to be a sensible step. But only a step. America’s education system needs a comprehensive overhaul in order to educate enough people rapidly enough to meet the rapidly changing demands of the 21st century, rather than those of the 20th.

Peter Drucker discussed this need for what he termed “knowledge workers” and provides his usual profound insight to the matter. Here is a post from a year ago that discusses Drucker’s ideas. It is well worth repeating.    — C.H.


Peter Drucker and the Knowledge Worker (from 10 January 2016)

Peter Drucker is arguably the most widely respected of the 20th century management consultants. Drucker wrote over 30 books on management, which are largely focused on human behavior. His 1999 book, Management Challenges for the 21st Century, offers a forward looking assessment of what demographics suggested would be the key problems facing manager in the early decades of the 21st century. Drucker’s concept of a knowledge worker – those whose work is focused on knowledge and its applications – is central to this book. He contrasts knowledge workers with manual workers – those whose work is essentially focused on things and the manipulation of things.

The Knowledge Worker

With his characteristic bluntness and surety, Drucker states:

“Knowledge-worker productivity is the biggest of the 21st century management challenges. In the developed countries it is their first survival requirement. In no other way can the developed countries can the developed countries hope to maintain themselves, let alone to maintain their leadership and their standards of living.”

Drucker credits Fredrick Taylor’s “scientific management” for the awesome improvements in manual worker productivity that characterizes 19th and 20th century industry and agriculture in the developed countries. According to Drucker, those increases in productivity have been the primary source of incremental wealth in the developed world.

The industrial engineering concepts that constitute “scientific management” are quite portable, so they can be quickly applied anywhere, using workers with little education or training. Developing countries have lots of people, many with rudimentary educations at best, who are willing to work for close to pre-industrial wages. Developed countries have aging populations and declining birthrates, hence much higher wage expectations.  

The bottom line is that labor intensive, repetitive manufacturing in the developed countries simply isn’t competitive in this globalized world, a few special cases excepted (at least for a while). Developed countries need sophisticated work based in knowledge, rather than in method. Economies in developed countries need knowledge workers. As Drucker puts it:

“The only possible advantage developed countries can hope to have is in the supply of people prepared, educated and trained for knowledge work. There, for another fifty years, the developed countries can expect to have substantial advantages, both in quality and quantity”.

What To Do?

There have always been knowledge workers, so much is known about knowledge work. Much can be learned about knowledge worker productivity from professional firms such as surgical practices, legal firms, architectural firms and accountancy firms. Today’s medical practices, for example, have several types of knowledge workers – specialized nurses, radiological technicians, physician’s assistants and such – that enhance the productivity of physicians, the practices’ key resource..

For manufacturing firms that intend to become and remain Sustainable, significant changes in organizational practices and organizational structure will be needed. This means new and innovative business models. Obviously, doing all of this will require study, careful thought and even more careful implementation. There isn’t any real alternative to embracing the change. Start by reading (or re-reading) Peter Drucker’s Management Challenges for the 21st Century !

Chuck - Austrian AlpsThoughtful comments and experience reports are always appreciated.

…  Chuck Harrington (Chuck@JeraSustainableDevelopment.com)

This blog and associated website (www.JeraSustainableDevelopment.com) are intended as a resource for smaller manufacturers in the pursuit of Sustainability. While editorial focus is on smaller manufacturers, all interested readers are always welcome.


[1] For more on my thoughts on President Obama’s proposal, see: http://jerasustainabledevelopment.com/2015/01/24/tomorrows-talent/

 

Idiocy Squared?

15 January 2017

Yesterday (14 January 2017), I watched SpaceX launch a cluster of ten communications satellites into precise orbits, while returning the launch vehicle to an autonomous barge in the Pacific Ocean. I’ve been following rocket launches since I saw the first Vanguard rocket self destruct on its launch pad in December, 1957, to the chagrin of the entire nation.[1] Yep, I’m a technology buff. Technology fascinates, amazes and delights me. Maybe that’s why I became an engineer.  — C.H.


Elon Musk and the Vision Thing

Elon Musk is an interesting man. He envisions the future. Then he acts on that vision in a systematic (and courageous) manner. Actually, he goes beyond “systematic” – he insists on thinking from first principles,[2] rather than on starting with the present art. At the same time, he remains focused on his vision, to the consternation of many.

This post focuses on two of Musk’s businesses – SpaceX and Tesla — and examines the visions they embody, with examples of initiatives in place to realize those visions.

SpaceX’s Vision:

SpaceX designs, manufactures and launches advanced rockets and spacecraft. The company was founded in 2002 to revolutionize space technology, with the ultimate goal of enabling people to live on other planets.

That’s right – Musk’s vision for SpaceX is nothing less than colonizing Mars.[3] The purpose of SpaceX’s commercial launch program is to fund the development of the technology necessary to do so. That technology is complex and its development will be enormously expensive. Keep in mind that SpaceX is already doing things that only governments have done before (and some that nobody has done before). Also remember that the Apollo program that sent astronauts to visit moon – but not live on the moon – was, at its peak, consuming about 4% of the entire federal budget!

Here is some of the technology currently under development:

>> Advanced rockets and spacecraft: The Falcon rocket and the Dragon spacecraft are both original designs, developed from first principles as steps on the way to Mars.[4]

>> Reusable launch vehicles: Yesterday’s SpaceX launch vehicle was safely landed, joining launch vehicles from about a half dozen earlier SpaceX launches. The objective is to reuse them. Reusable launch vehicles are the key to sharply reduced costs. Imagine the cost of an airline ticket if the airplane could only be used once. Look for a SpaceX launch using a previously used rocket within this year.

>> The Falcon Heavy: With three times the lift capacity of the current Falcon 9, the Falcon Heavy is scheduled to test launch this year. Trips to Mars will require massive lifts into orbit.

>> The Raptor engine: SpaceX has test – fired a new rocket engine that will burn liquid methane instead of kerosene. Liquid methane will provide considerably more thrust per unit of mass than does kerosene. Methane is also available on Mars, so methane refueling on Mars could facilitate return trips!


Tesla’s Vision:[5]

The point of all this was, and remains, accelerating the advent of sustainable energy, so that we can imagine far into the future and life is still good. That’s what “sustainable” means. It’s not some silly, hippy thing — it matters for everyone.

So, Tesla is about accelerating the advent of sustainable energy. Wind energy, solar energy and hydroelectric energy are all potentially Sustainable, but none of these are directly applicable to vehicles. However, if the vehicle is powered by electricity, all of them are applicable. So, Tesla makes electric vehicles. Tesla also recognizes that it cannot, of itself, make enough electric vehicles to make electric vehicles the world’s standard. There are many constraints to doing that.

Here are a few of them:

>> Vehicle performance: Drivers expect electric vehicles to perform at least as well as petroleum fueled vehicles. Hence Tesla’s emphasis on acceleration, comfort, handling, safety and related matters.

>> Style: Drivers like cool, classy, functional cars. Tesla vehicles turn heads.

>> Range: Drivers expect electric cars not to strand them. That requires that vehicles have a range between fueling that compares their current vehicles, and that refueling be available almost anyplace. That’s why Tesla cars have 250 – 300 mile range between recharging, and why Tesla is so intent on building recharging facilities worldwide. Tesla is not waiting for somebody else to do it for them.

>> Batteries: Over 15 million new cars were sold in the U.S. in 2016, and several times that many worldwide. For electric vehicles to become a substantial portion of those numbers, a ready, reliable source for suitable batteries is necessary. That’s why Tesla is building a giga-factory – the largest factory in the world – to produce the batteries. Again, Tesla isn’t waiting for somebody else to do it for them.

>> Update 1/19/2017 : Tesla just announced that it will increase its investment in the giga-factory by $350 million in order to manufacture electric motors and drive trains for Tesla automobiles. Yet again, it appears that Tesla sees a need to produces hundreds of thousands of 200 – 400 horsepower motors that meet their requirements, rather than wait for somebody else to do it for them.

>> Price: In order to sell enough vehicles to even begin to make a difference, Tesla has to produce vehicles that sell at mass market price points. Hence the coming Tesla Model 3.

>> Production Technology: In order to meet drivers’ expectations at a mass market price while generating a reasonable profit, Tesla is re-inventing vehicle production technology from first principles. It will be interesting to see just how the Model 3 is produced.

>> Marketing and sales: Tesla regards the existing authorized dealer model of vehicle sales as inefficient. Instead, Tesla wants to use Amazon – style sales methods. Not surprisingly, existing dealerships are resisting fiercely.

>> Self-driving vehicles: In 2015, there were 35,092 people killed in traffic accidents in the U.S. alone.[6] Tesla believes that self driving technology can reduce that figure by at least a factor of ten. Accordingly, all Tesla vehicles produced right now come equipped with the necessary equipment to do this. As self driving technology becomes more commonplace (and traffic regulations change), insurance costs most drop sharply, not to mention the reduction in human suffering. This technology addresses the human side of triple bottom line Sustainability, as electric power addresses the environmental side.

>> Critical mass of vehicles: To make a real difference, electric vehicles have to become a significant fraction of the world’s fleet of vehicles. Tesla cannot even hope to produce anything close to the number of vehicles needed to do that. That’s why Tesla made its large body of patents available without charge to all manufacturers that want to produce electric vehicles.


Elon Musk says that starting an automobile company in the U.S. is “idiotic”, and that starting an electric vehicle company is “idiocy squared”. Chuck says that if Tesla is idiocy squared, then SpaceX is exponentially so. But I like the way Elon Musk thinks. He reminds me of Henry Ford. The world needs people like them — people whose vision and actions transcend accepted bounds. Musk may be idiotic, but I do own some Tesla stock.

Chuck - Red RocksThoughtful comments and experience reports are invited and appreciated.

…  Chuck Harrington (Chuck@JeraSustainableDevelopment.com)

This blog and associated website (www.JeraSustainableDevelopment.com) are intended as a resource for smaller manufacturers in the pursuit of Sustainability. While editorial focus is on smaller manufacturers, all interested readers are welcome.


[1] For those who were not around in 1957, the U.S. and the U.S.S.R. were heavily engaged in the Cold War. The U.S.S.R. shocked the U.S. by launching the Sputnik 1 satellite in October 1957. The clear implication was that the U.S.S.R. was ahead of the U.S. in rocket technology, hence had an important military advantage. Catching up with the Soviets was so important that the Vanguard launch attempt was televised live.

[2] Nobel Prize winner Daniel Kahneman explains thinking from first principles and why it is so uncommon in his bestselling book, Thinking, Fast and Slow, Farriar, Straus and Giroux, New York (2011)

[3] For more and SpaceX and for a presentation on the Mars project, see SpaceX’s website at https://www.spacex.com

[4] In contrast, the Atlas V launch vehicle, which is used to compete with SpaceX for commercial launch business, is the latest in a series of Atlas rockets that began in 1957. The original Atlas was, in turn, a descendent of the German V-2 rocket from World War Two.

[5] For more on Tesla and on Elon Musk’s vision for Tesla, see: https://www.tesla.com/blog/master-plan-part-deux

[6] Traffic fatalities figure from: https://en.wikipedia.org/wiki/List_of_motor_vehicle_deaths_in_U.S._by_year

Advancing Global Competitiveness

The HBS Report

The Harvard Business School conducted a study on America’s competitiveness within the global economy. The study defines competitiveness this way: [i]

A nation is competitive to the extent that firms operating there can compete successfully in domestic and foreign markets while also lifting the living standards of the average citizen.

One way to measure a nation’s competitiveness is by following that nation’s balance of trade – the difference in value of that nation’s exports and imports. An excess of exports over imports yields a positive balance, while an excess of imports over exports yields a negative balance, or “trade gap”.

The Bureau of the Census has this to say about America’s balance of trade: [ii]

The trade gap in the United States increased to $42.6 billion in October 2016, up $6.4 billion from a downwardly revised $36.2 billion in September. Exports recorded the biggest decline since January due to lower shipments of food, industrial supplies and materials, automobiles, consumer goods and soybeans while imports reached the highest in 14 months. Balance of Trade in the United States averaged negative $13.521 billion from 1950 to 2016, reaching an all time high of positive $1.946 billion in June of 1975 and a record low of negative $67.823 billion in August of 2006.

This graphic puts that into rather vivid perspective:

U.S. Balance of Trade Graph

As you can see, America’s balance of trade was roughly even from 1950 until 1975, when the balance turned sharply negative following a rapid increase in imported crude oil prices. Matters got much worse after about 2000.

To beg the obvious, America’s persistently large and negative trade gap, especially since the millennium, indicates that America does not “compete successfully in domestic and foreign markets”. Accordingly, “lifting the living standards of the average citizen” has not occurred. This is not surprising, since a trade gap is paid for by exporting cash in lieu of goods, bleeding the U.S. economy. Quite obviously, this is not sustainable.

It is my personal conviction that the dramatic decrease in the price of crude oil experienced in the latter half of 2014 is the key trigger to the relative improvement in the performance in the U.S. economy since that time. That reduction in international crude oil prices is directly attributable to the corresponding sharp increases in U.S. crude oil production, due to “fracking”.

What to Do?

Crude oil imports are an important part of America’s trade gap, but only a part. Manufactured goods are another major portion. Many other economically developed countries have positive balances of trade in the manufactured goods sector – it is not impossible. Nor is it easy. Action is needed at all levels, from individual manufacturing firms to the federal governments. Many earlier posts to this blog address competitiveness, especially for smaller manufacturing firms, as will future posts.

The Harvard study mentioned above offers an eight-point plan for policy improvements at the federal level. That plan, believe it or not, strikes me as a starting point that the incoming Trump administration might actually find actionable:

Eight-Point Plan

  1. Simplify the corporate tax code with lower statutory rates and no loopholes
  2. Move to a territorial tax system
  3. Ease the immigration of highly-skilled individuals
  4. Aggressively address distortions and abuses in international trading systems
  5. Improve logistics, communications and energy infrastructure
  6. Simplify and streamline regulation
  7. Create a sustainable federal budget, including reforms to entitlements
  8. Responsibly develop America’s unconventional energy advantage

Thoughtful comments and experience reports are always appreciated.

…  Chuck Harrington (Chuck@JeraSustainableDevelopment.com)

This blog and associated website (www.JeraSustainableDevelopment.com) are intended as a resource for smaller manufacturers in the pursuit of Sustainability. While editorial focus is on smaller manufacturers, all interested readers are welcome.


[i] Michael E. Porter et al, Problems Unsolved and a Nation Divided  – A Harvard Business School Survey on U.S. Competitiveness, Harvard Business School, Cambridge MA, September 2016. The study is available for download at: http://www.hbs.edu/competitiveness/research/Pages/research-details.aspx?rid=81. It is well worth reading.

[ii] This quotation is from www.tradingeconomics.com/united-states/balance-of-trade (a service of the U.S. Bureau of the Census, accessed 31 December 2016). In the interest of clarity, some figures have been restated from millions to billions and the terms “negative” and “positive” have been substituted for the corresponding “-“ and “+” symbols.

On Exponential Growth

When Technology Goes Viral, a post to this blog from May 2015, is reprised below. That post describes technologies that grow at such rates that they disrupt, or at least redefine, entire industries – or create new industries. When Technology Goes Viral, however, didn’t mention the element of surprise that so frequently accompanies viral growth. Take LEDs for example, which are currently disrupting the lighting industry. Or Facebook and other on-line media which just this month redefined American elections process. Take a fresh look at When Technology Goes Viral, this time with the element of surprise in mind.


 When Technology Goes Viralfrom 23 May 2015

Going Viral

Most of us have heard of a Facebook post or a YouTube video that “went viral” on the internet. Like a virus multiplying, one person sees the Facebook post or watches the video, then sends it on to several friends, who see the post or video, then … exponential growth. [1] Contrast that with the incremental way we normally expect growth to occur.exponential Growth Graph

This graph shows just how dramatic exponential growth can be. >>>

It’s not just videos. It is not uncommon for entire technologies to grow in an exponential manner for years or even decades. Here are some examples:

20th Century Examples

>> Electrification: In the United States, the first public electric generation and distribution facility began operating in New York City in 1882. By 1950, electrification was essentially complete across this country, serving a population of about 150 million people. Electric lighting was the original application, followed by a multitude of manufacturing opportunities like toasters and vacuum cleaners. Factories switched from prime movers and leather belts to electric motors.

>> Automobiles: Only a few hundred true automobiles existed in the entire world at the beginning of the 20th century. A century later, about 226 million were registered in the U.S. alone. [2] Ubiquitous personal rapid transportation redefined lifestyles and spawned more business models and value chains than I can count.

>> Cell Phones: The first cellular telephone was invented in 1973. Less than four decades later, in 2012, the number of cell phones in the U.S. alone was about 310 million, [3] a figure which approximated the total U.S. population.

>> Moore’s Law: In 1965, Gordon Moore, one of the founders of Intel, observed that the number of transistors on an integrated circuit every year. Ten years later, he raised that to doubling every two years. That amounts to 50 years of exponential growth – 50 years of relentlessly increasing computing power and 50 years of plummeting cost. Good-by IBM 1620. Hello iPhone 6.

Current Prospects

Abundance: The Future Is Better Than You Think, a recent book that one reviewer called “a godsend for those who suffer from Armageddon fatigue”, [4] describes eight technologies that may be on exponential growth paths just now. I’ve chosen a few of those technologies as examples that appear to be especially relevant to manufacturers:

>> Biotechnology: The current issue of Fast Company magazine named their choices for the 100 most creative people in business. Fast Company chose Charles Arntzen as the #1 most creative. Arntzen is a professor at Arizona State University. Using DNA structuring technology, he “engineered” a variety of tobacco plant to produce the medicine that successfully fought the Ebola outbreak in Africa in 2014. [5] Bio-based technology promises new and innovative routes to new fuels, industrial feedstocks, and agricultural products, not to mention medicines. The Department of Chemical Engineering where I trained has been renamed The Department of Chemical and Biomolecular Engineering. Biotech and its potential is that important.

>> Networks and Sensors: The internet of things is really coming. In manufacturing, that means real time information on all equipment and all work in process. Then, connect across the entire value chain so that everybody (man and machine) has actionable information on the current status of everything. Defect rates vanish. Efficiency soars. Inventories shrink.

>> Digital Manufacturing: I have heard 3-D printing described as “neat, but not really useful”. Hmmm. 3-D printing allows products to be manufactured “hands off”, directly from AutoCAD drawings, with no materials waste. Today, cycle times are too long and equipment costs are too high for most routine production – although that is changing fast. For prototypes and complex special orders, not so; especially when exotic materials are involved.

SpaceX Dragon

This photo shows the Space-X Dragon manned space flight vehicle and two of its Super Draco rocket motors. The rocket motors are produced by 3-D printing. >>>

So What?

Exponential technologies offer untold opportunities to create new products, new efficiencies and new markets. At the same time, exponential technologies disrupt. Case in point: cell phones have exploded, while hardwired telephone services are wondering what happened to their market. These opportunities and threats of disruption apply all along your value chain. That’s one more reason why today’s manufacturers need to maintain a fully zoomed out assessment of the entire globalized context within which your business operates.

Chinese character - Crisis

 

<<< The Chinese character for “crisis” combines the characters for “opportunity” and for “danger”.

 

Chuck at the PacificThoughtful comments and experience reports are always appreciated.

…  Chuck Harrington (Chuck@JeraSustainableDevelopment.com)

This blog and associated website (www.JeraSustainableDevelopment.com) are intended as a resource for smaller manufacturers in the pursuit of Sustainability. While editorial focus is on smaller manufacturers, all interested readers are welcome.

Image credits: Exponential growth graph – creative commons via Wikipedia, Dragon spacecraft photo – SpaceX (creative commons), Chinese character – creative commons via Wikipedia


 

[1] For more on exponential growth, see http://en.wikipedia.org/wiki/Exponential_growth

[2] Automotive stats from http://www.statista.com/statistics/183505/number-of-vehicles-in-the-united-states-since-1990/

[3] Cell phone stats from www.pewinternet.org/fact-sheets/mobile-technology-fact-sheet/

[4] Diamandis, Peter and Steven Kotler, Abundance: The Future Is Better Than You Think, Simon & Schuster (2012), especially Part 2, page 49f

[5] “The 100 Most Creative People in Business in 2015: #1 – Charles Arntzen, For Fighting Ebola With Tobacco”, Fast Company, June 2015 issue, page 47f

Energy Utilization Efficiency and LEDs

Energy Utilization Efficiency

AEO 2015 Figure 19The graph labeled “Figure 19” [1] projects energy use in the U.S. per person (blue line) and per dollar of GDP (green line). The right hand portion of the graph (2013 – 2040) projects that annual energy consumption per American will remain rather constant, although well below consumption in 2005. Annual energy consumption per dollar of GDP, on the other hand, is projected to continue to decline. If this projection holds, only half as many watts of energy will be required to produce a constant dollar’s worth of GDP in 2040, as compared to 2005. Said another way, American energy utilization efficiency is projected to double over the period 2005 – 2040!

This improvement is a global phenomenon. The International Energy Agency (IEA) states its importance this way: [2]

“Energy efficiency in IEA member countries improved, on the average, by 14% between 2000 and 2015. This generated energy savings of 450 million metric tons of oil in 2015, enough to power Japan for a full year. These savings also reduced total energy expenditure by 540 billion United States Dollars in 2015, mostly in buildings and industry.”

$540 billion in efficiency savings sounds pretty good to me. But that’s for the whole world. Here is a more up close and personal example of what energy utilization efficiency can mean:

Lighting Industry Disruption

I have recessed lighting in the kitchen of my home. There are three ~ 5” diameter (BR-30) recessed fixtures and ten ~ 2.5” diameter (GU-10) recessed fixtures. I replaced the three 75 watt halogen bulbs from the larger fixtures and the ten 50 watt halogen bulbs from the smaller fixtures with size – equivalent LED bulbs. The larger LED bulbs each draw 9 watts, while the smaller bulbs each draw 5 watts. Right: a total of 77 watts of power draw replaces a total of 775 watts – nearly a 10 to 1 improvement.

LED Lighting DisplayActually, there is a lot more to LEDs beyond reducing your electric bill, welcome as that is. The LED value proposition offers at least these features:

  • Bulb prices are now competitive with older technology. [3]
  • Bulb service life expectancy is several times longer than older technology.
  • Significantly lower power requirements.
  • Much less heat generation.
  • Bulbs are readily available in many form factors.
  • Available in several color spectra.
  • Available with an increasing number of intelligent control alternatives – bulbs and fixtures.

The case for LEDs is so strong that Greentech Media, [4] referencing a report from Goldman Sachs, says:

“The financial institution calls LEDs one of the fastest technology shifts in human history. While wind and solar are challenging the traditional electric generation sector, they have not upended it yet the way LEDs have overtaken the lighting industry. By 2020, LEDs will make up 69% of (lighting) sales and close to 100% by 2025, up from nearly nothing in 2010.”

Best of all, LEDs are an emerging technology, which will continue to evolve. Expect continuing improvements in energy utilization efficiency (it can, and will, get considerably better than the 10 to 1 improvement in my kitchen lighting). Even more importantly, expect completely new ideas as LEDs evolve from replacements in existing sizes and forms to become the creative media of the lighting industry.

Thoughtful comments and experience reports are always appreciated.

…  Chuck Harrington (Chuck@JeraSustainableDevelopment.com)

This blog and associated website (www.JeraSustainableDevelopment.com) are intended as a resource for smaller manufacturers in the pursuit of Sustainability. While editorial focus is on smaller manufacturers, all interested readers are welcome.


[1] “Figure 19” is from the 2015 Annual Energy Outlook, published by the Energy Information Agency, a service of the U.S. Government.  www.eia.gov

[2] Energy Efficiency Market Report 2016, International Energy Agency, page13. https://www.iea.org/eemr16/files/medium-term-energy-efficiency-2016_WEB.PDF

[3] As the snapshot of an LED retail display at my local Home Depot indicates, common residential replacement bulbs are readily available for a few dollars.

[4] See www.greentechmedia.com/articles/read/led-not-solar-have-transformed-their-industry , which refers to a Goldman Sachs report at www.goldmansachs.com/our-thinking/new-energy-landscape/future-of-clean-energy/index.html

The People Puzzle – Part 2

Education and the Future

Robot businessman imageThis essay is Part 2 of The People Puzzle, a continuing discussion about finding (or creating) a future where “life is still good” for everyone, in the post – industrial economy. Part 1 of The People Puzzle presented a few of the pieces to this puzzle. Those pieces seemed to fall into three primary areas: demographic changes, advances in technology and education. In this essay, we look at education.

Part 1 offered three puzzle pieces especially related to education: (1) a report that over 99% of the 11.6 million jobs created (or recovered) by the U.S. economy in the years 2010 – 2015 went to people with t least some college education, (2) a question about what people whose jobs are eliminated by technology or economics should be re-educated to do, and (3) author Daniel Alpert’s contention that globalization has unleashed a hoard (literally billions) of under-educated people, all looking for a better life.

Here are two more puzzle pieces, all specific to education:

Girls and Boys >> The U.S. Department of Education has reported that 4 out of every 7 American college degree recipients in 2014 were female. [1]

The Cost of College >> The cost of attending college has skyrocketed. A CNBC report advises that tuition and fees in 2014 ran about $9,139 at public, four year schools, compared to less than $500 in 1971. The high cost of college has resulted in more than $1.2 trillion in student debt! [2]

Tomorrow’s Jobs Outlook [3]

This is how American workforce is employed now:

Farming, forestry and fishing –                                           0.7%

Manufacturing, mining, transportation and crafts –       20.3%

Managerial, professional and technical –                         37.3%

Sales and office –                                                                24.2%

Other services –                                                                  17.6%

Looking ahead to the next 35 years or so, it is difficult for me to imagine that employment in farming, forestry and fishing will increase. “Manufacturing, mining, and transportation” jobs will continue to be under heavy pressure from automation and lower wage workers elsewhere, as will “sales and office” jobs. Competition for “managerial, professional and technical” jobs will continue to increase globally as emerging economies produce more and more educated people (South Korea, for example). “Other services” jobs should be OK, to the extent that they serve protected niche markets (hair stylists, for example, serve a local customer base).

Putting the Pieces Together

It seems clear enough to me that tomorrow’s personal occupations are similar to today’s businesses, to the extent that differentiated talents, know-how and skill sets are increasingly necessary. It is education’s task to prepare an entire population for the employment that the emerging 21st century global economy demands.

For the U.S., that means rethinking education from first principles. America’s educational systems have evolved from providing basic literacy for everyone to primary and secondary education for almost everyone. 21st century occupations will require highly individualized – and highly relevant – primary, secondary and tertiary education (or skills acquisition training) on a continuous, life-long basis for everyone, all provided at a much lower cost to those being educated (or trained). Emerging technology will need to play an important role. Existing educational institutions will face extensive change or, in many cases, extinction. Fierce and persistent resistance to the necessary changes can be expected, if not guaranteed.


In Monet's GardenThoughtful comments and ideas on the structure and content of occupations – oriented 21st century education are invited and appreciated.

…  Chuck Harrington

(Chuck@JeraSustainableDevelopment.com)

This blog and associated website (www.JeraSustainableDevelopment.com) are intended as a resource for smaller manufacturers in the pursuit of Sustainability. While editorial focus is on smaller manufacturers, all interested readers are welcome.

Image: Robot and Puzzle – licensed through www.dreamstime.com


[1] https://nces.ed.gov/programs/digest/d15/tables/dt15_301.10.asp?current=ye

[2] http://www.cnbc.com/2015/06/16/why-college-costs-are-so-high-and-rising.html

[3] CIA World Factbook, www.cia.gov (yes, that CIA). Figures are from 2009, the latest available. Should be close enough for our purposes here.