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Training Manual for Resource Efficiency in Automobile Component Manufacturing Companies in India

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Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH

Registered offices: Bonn and Eschborn, Germany

Fostering Resource Efficiency and Sustainable Management of Secondary Raw Materials B-5/1, Safdarjung Enclave New Delhi 110 029 India T: +91 11 49495353 E: [email protected] I: www.giz.de

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Mr. Uwe Becker E: [email protected]

Authors

TERI Keerthika Mandava, Ganesh Chandra Mouli, Prahlad Kumar Tiwari, Dr. Shilpi Kapur Bakshi, Souvik Bhattacharjya Advisors: Dr. Suneel Pandey, Dr. Malini Balakrishnan

Reviewers

VDI ZENTRUM RESSOURCENEFFIZIENZ GmbH (VDI-ZRE) Manuel Weber

GIZ Uwe Becker, Dr. Poonam Pande, Manjeet Singh Saluja

Knowledge Partner

New Delhi, India

March 2017

Disclaimer: All information/data contained herein is obtained from authentic sources believed to be accurate and reliable. This report is based on data and information gathered by conducting consultation with stakeholders and experts, data made available by government agencies, and industry/industry associations, as well as secondary desktop research, on-ground survey, and analysis. Reasonable skill, care and diligence have been exercised in carrying out analysis and report preparation. This report should not be deemed as an undertaking, warranty or certificate. It is prepared solely for Deutsche Gesellschaft fur Internationale Zusammenarbeit (GIZ) GmbH and its knowledge partners, and should not be used, circulated, quoted, or otherwise referred to for any other purpose, nor included or referred to in whole or in part in any document, without prior written consent.

Training Manual for Resource Efficiency in Automobile Component Manufacturing Companies in India March 2017

Training Manual for Resource Efficiency in Automobile Component Manufacturing Companies in India 2

Table of Contents List of Tables ........................................................................................................................ 3 List of Figures ...................................................................................................................... 4 List of Abbreviations ............................................................................................................ 5

Preface ................................................................................................................................. 7

Module 1: Automotive Sector and Resource Efficiency ...................................................... 8 1.1 Automotive Sector in India and the Resource Challenge ........................................... 8 1.2 Understanding Resource Efficiency ......................................................................... 13 1.2.1 Existing Policy Framework in the Context of RE in Automotive Sector ............... 14 1.2.2 Measuring Resource Use ...................................................................................... 14 1.2.3 Importance of Developing Benchmarks ................................................................ 15 1.2.4 Conclusion ........................................................................................................... 16

Module 2: Tools for Resource Efficiency ......................................................................... 17 2.1 Resource Check ....................................................................................................... 18 2.2 Material Flow Analysis ............................................................................................ 19 2.3 Energy Auditing ...................................................................................................... 23 2.4 Theory of Constraints ............................................................................................. 27 2.5 Cost Calculator ....................................................................................................... 31 2.6 Financial Calculations ............................................................................................. 32 2.7 Whole Person Process Facilitation (WPPF) ............................................................. 33 2.8 Instruments Required for on-site Measurements ...................................................... 35 Module 3: Resource Efficiency Assessment ...................................................................... 37 3.1 Data and Information Collection for Baseline Analysis ............................................ 37 3.1.1 Procedure ............................................................................................................. 38 3.1.2 Outcomes ............................................................................................................. 39 3.2 Baseline Analysis ...................................................................................................... 40 3.2.1 Procedure ............................................................................................................. 40 3.2.2 Outcomes ............................................................................................................. 42 3.3 On-site Visit for Resource Efficiency Audits ............................................................ 42 3.3.1 Procedure ............................................................................................................. 42 3.3.2 Outcomes ............................................................................................................. 44 3.4 Interventions and Prioritisation ............................................................................... 44 3.4.1 Procedure ............................................................................................................. 44 3.4.2 Outcomes ............................................................................................................. 46 3.5 Implementation and Follow-up ............................................................................... 46 3.5.1 Procedure ............................................................................................................. 46 3.5.2 Outcomes ............................................................................................................. 48

Module 4: Learning from Best Practices .......................................................................... 49 4.1 RE Implementation: Global Examples ..................................................................... 49 4.2 RE Implementation: Indian Examples ..................................................................... 52

Conclusion ........................................................................................................................ 55 References .......................................................................................................................... 57


List of Tables Table 1 List of major automobile manufacturers in India ................................................. 9

Table 2 Indicative list of questions as a checklist for a press parts manufacturing unit .... 18

Table 3 A step-by-step protocol for conducting a detailed energy audit .......................... 24

Table 4 Checklist of measures to be taken for auditing different electrical and heating systems .................................................................................................. 25

Table 5 Differences between Lean Manufacturing and Theory of Constraints ................ 30

Table 6 Sample resource list of a company ..................................................................... 39

Table 7 Snapshot of a filled baseline data sheet ............................................................... 40

Table 8 Sample progress monitoring sheet for implementing recommended resource efficiency measures ............................................................................... 45

Table 9 Sample filled in assessment data sheet ................................................................ 47

Table 10 Sample overall savings of a company ................................................................. 48

Table 11 Estimated savings at Walzwerke Einsal GmbH .................................................. 52


List of Figures Figure 1 Trend in automobile production in India (in millions) ........................................ 8

Figure 2 Finished materials applications for light vehicles ................................................ 10

Figure 3 Value chain of India’s automobile industry ........................................................ 11

Figure 4 Total demand for key resources in India’s automobile sector 2016 – 2030 ....... 12

Figure 5 Benefits from adoption of Resource Efficiency measures .................................... 13

Figure 6 Implementing benchmarking concepts in India ................................................. 16

Figure 7 General tools for Resource Efficiency ............................................................... 17

Figure 8 Examples of flow charts for material flow analysis ............................................. 22

Figure 9 Sankey diagram of a furnace indicating the input, output and losses of energy .. 25

Figure 10 The five focusing steps based on process of on-going improvement (POOGI) ... 28

Figure 11 Drum-Buffer-Rope Production planning ........................................................... 29

Figure 12 Steps in Genuine Contact™ Program ................................................................. 34

Figure 13 Sequence for an RE study .................................................................................. 37

Figure 14 Sample process flow chart for a rolling mill ...................................................... 38

Figure 15 Sample baseline data graphs ............................................................................... 41

Figure 16 Sample resource checklist summary ................................................................... 41

Figure 17 Sample Sankey diagram of a resource (powder in powder coating process) ........ 43


List of Abbreviations ACMA Automotive Component Manufacturers Association of India

BEE Bureau of Energy Efficiency

BMUB German Federal Ministry for the Environment, Nature Conservation, Building and Nuclear Safety

BREF Best Available Technology Reference (document)

CAD Computer-Aided Design

CCPM Critical Chain Project Management

CFRP Carbon Fibre Reinforced Plastic

EC European Commission

ELV End-of-Life Vehicle

FAD Free Air Delivery

FOM Focused Optimization Management

FRP Fibre Reinforced Plastic

GARC Global Auto Research Centre

GDP Gross Domestic Product

GIZ Deutsche Gesellschaft für Internationale Zusammenarbeit GmbH

INR Indian Rupee

IR Infra-Red

IRR Internal Rate of Return

IT Information Technology

LED Light Emitting Diode

MFA Material Flow Analysis

MoEFCC Ministry of Environment, Forest and Climate Change, Government of India

MoHI Ministry of Heavy Industry, Government of India

MSME Micro, Small and Medium Enterprises

NATRiP National Automotive Testing and R&D Infrastructure Project

NPV Net Present Value


OEM Original Equipment Manufacturer

OTIF On Time In Full

PBT Profit Before Tax

PID Proportional Integral Derivative (controller)

POOGI Process of On-Going Improvement

PPE Personal Protection Equipment

PPM Parts Per Million

PVC Poly Vinyl Chloride

R&D Research and Development

RE Resource Efficiency

RoI Return on Investment

SIAM Society of Indian Automobile Manufacturers

TERI The Energy and Resources Institute

TOC Theory of Constraints

UNEP United Nations Environment Programme

USD US Dollar

VDI-ZRE Verein Deutscher Ingenieure – Zentrum Ressourceneffizienz

VFD Variable Frequency Drive

WIP Work in Process

WPPF Whole Person Process Facilitation


Preface This manual has been prepared as part of the Indo-German bilateral cooperation project “Fostering Resource Efficiency and Sustainable Management of Secondary Raw Materials” (in short: Resource Efficiency), funded by the German Federal Ministry for the Environment, Nature Conservation, Building and Nuclear Safety (BMUB) under its International Climate Initiative (IKI). The project is being implemented by Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH, in cooperation with the Ministry of Environment, Forest and Climate Change (MoEFCC), Government of India. One of the important areas of focus of this project is the automotive sector. The Energy and Resources Institute (TERI), as the leading knowledge partner in this sector, developed this manual in collaboration with the Association of German Engineers - Center for Resource Efficiency (VDI-ZRE).

The automotive sector is not only very important to the economy in terms of GDP and employment, but also in terms of resources consumed. Due to rapid current and projected growth rates, resource needs for the sector are expected to multiply many times in the coming decades which, absent mitigation steps, may lead to supply constraints and negative economic impacts on the sector, in addition to negative environmental impacts arising from resource extraction and use. Therefore, resource efficiency improvements can help to promote economic viability, competitiveness as well as innovation in the sector, in addition to reducing its environmental impacts. The experience from best practice leaders around the world, especially Germany, shows that resource efficiency improvements produces significant gains for industries in the long term.

The biggest potential gains in resource efficiency can be achieved in automotive component manufacturing, especially for small and medium manufacturers who may not have access to state-of-the-art best practice processes and technologies. The manual was developed with primarily this audience in mind. Best practice tools developed by VDI-ZRE, tailored to small and medium component manufacturers in India, have been used extensively in the manual. In India, most automotive components are manufactured by companies who are members of the Automotive Component Manufacturers Association of India (ACMA), and this organization can play a pivotal role in promoting resource efficiency in this sector. ACMA has already collaborated with GIZ and its partners in implementing pilot interventions in a few selected member companies, and successful lessons from these pilots have informed the development of this manual. The ACMA Centre for Technology (ACT) can use this manual for capacity development among ACMA member companies; however this easy-to-use manual can also be used beneficially by non-member companies who are automotive component manufacturers. This manual will make a useful contribution to promoting resource efficiency in the automotive component manufacturing sector in India in the years to come.

Uwe Becker Project Director Fostering Resource Efficiency and Sustainable Management of Secondary Raw Materials GIZ-India (New Delhi, March 2017)


1.1 Automotive Sector in India and the Resource Challenge In the context of addressing the broader sustainability related challenges of an economy, mobility has a very important role to play, and India is no exception in this context. With growing population, migration and rapid urbanisation, demand for mobility has experienced phenomenal growth over the past few decades, accompanied by substantial transformation, particularly in urban mobility practices. Increased personal ownership of two wheelers and cars has resulted in severe traffic congestion, high levels of air pollution and other challenges. The automotive industry plays a very important role in providing options through different types of vehicles like passenger cars, light, medium and heavy commercial vehicles, multi-utility vehicles such as jeeps, scooters, motorcycles, mopeds, three wheelers, tractors, etc., to support the mobility needs of the people. It is a strong pillar of the global economy and a main driver of macroeconomic growth and technological advancement in both developed and developing countries. This industry in India, comprising of the automobile and auto component manufacturers, is one of the key segments of the economy, having extensive forward and backward linkages with other segments of the economy. It has grown 10% over the past decade (Figure 1), making India the world’s sixth largest producer of automobiles in terms of volume and value.

Figure 1: Trend in automobile production in India (in millions)

(Source: SIAM, 2016; Government of India, 2016)

Module 1: Automotive Sector and Resource Efficiency


With more than 35 automobile companies manufacturing in the country (Table 1), the industry contributes 7% to India’s GDP and accounts for 7-8% of India’s total employed population (GIZ, 2015).

Table 1: List of major automobile manufacturers in India

Passenger cars and commercial vehicles Two and three wheelers

Ashok Leyland Electrotherm

Force Motors Suzuki Motorcycle India

VE-CVs Eicher Yamaha

Swaraj Mazda Hero Honda Motors

JCBL HMSI

Asia Motor Works TVS Motor Company

Kamaz Vectra Motors Royal Enfield

Hindustan Motors Bajaj Auto

Premier Automobiles Mahindra Auto

Tata Motors LML

M&M Kinetic Engineering

Maruti Suzuki India Maharashtra Scooters Ltd

Volkswagen-Audi Harley-Davidson India

Skoda Auto India KTM India

Mercedes-Benz India

Ford India

Honda Siel Cars India

Hyundai Motors India

Toyota Kirloskar Motors

Fiat India

BMW India

Mitsubishi

General Motors India

Volkswagen India

(Source: Authors’ compilation; KPMG, 2010)

Today, India has become the outsourcing hub for several global automobile manufacturers, not just for low-cost manufacturing, but increasingly as a source of higher value innovation. India has a well-developed, globally competitive auto ancillary industry for auto component parts and has established automobile testing and R&D centres. The automobile sector in India is engaged in manufacturing passenger motor vehicles (passenger cars, utility vehicles and multi-purpose vehicles), commercial vehicles (medium, heavy and light commercial vehicles), two wheelers, and three wheelers. The Indian automotive industry has attained a turnover of INR 1.6 trillion (equivalent to about USD 34 billion) and has provided direct and indirect employment to 13.1 billion people in the country (GIZ, 2015).

An automobile is composed of various components, which are produced by utilising a wide variety of technologies to satisfy customer needs, safety and environmental norms. These components are manufactured from different materials such as various steels (e.g. conventional


steel, high strength steel, stainless steel), iron, aluminium, rubber, plastics/composites, glass, copper and brass, zinc, etc. (Figure 2).

Figure 2: Finished materials applications for light vehicles

(Source: Estimates based on ELV pilot 2016/171)

The supply chain of India’s automotive industry is quite complex. An average vehicle may comprise up to 20,000 components with about 1,000 sub-assemblies or modules. Many of the resources that find application in manufacturing these components are imported. For example, India is heavily dependent on imports for resources like rubber, copper (mostly ores), nickel, tin, chromite, etc. Hence supply disruptions and price fluctuations of these resources will have significant impact on India’s engineering industry where auto component industry has an important share. The semi-finished materials from processing industries are procured by the component manufacturers (or, at times, directly by original equipment manufacturers), for making automotive components. These are largely carried out by Tier 1, Tier 2 and Tier 3 suppliers. In the past, automobiles largely composed of iron and steel. Steel has remained a raw material for manufacturing automotive components because of its structural integrity and ability to maintain dimensional geometry throughout the manufacturing process. In response to increasing demands for more fuel efficient cars, the past ten years have seen changes in the composition of materials used in automobiles. Share of iron and steel use has declined, because of use of better and more compact steel components in recent years, (e.g. use of high strength steel plate), as well as increased use of lightweight materials like plastics, carbon fibre reinforced plastics (CFRP) and aluminium. Their use is rapidly increasing as a means to reduce car body weight; in some types of automobiles, they are used for more than 50% of the car body. Aluminium and plastics are valuable car components not only for their lighter weight, but also because of their inherent corrosion resistance. Figure 3 presents the value chain of the automobile sector in India and potential opportunities for resource efficiency along the chain.

1 End-of-Life Vehicle Dismantling pilot project was undertaken at Mayapuri, New Delhi, by TERI during 2016-17, under the BMUB supported Resource Efficiency project being implemented by GIZ in cooperation with MoEFCC.

5.27%

69.42%

4.21%

1.04%15.84%

0.82% 2.24%0.29%

0.88%

Plas1c

Steel(MS+HSS)

Rubber

Foam

Aluminium

Copper

Glass

Other

Synthe1c


The dealers and workshops are entities in the supply chain that cater to the requirement of the end consumers through sales and services of products. At the end-of-life stage of a vehicle, the consumers heavily depend on the services provided by the informal sector for vehicle dismantling. While some of the non-critical components procured from dismantling ends in the secondary component market, the remaining is down-cycled or dumped at landfills.

Figure 3: Value chain of India’s automobile industry

(Source: Authors’ compilation)

The manufacturing processes used to produce thousands of discrete parts and accessories vary depending on the end product and materials used. Different processes are employed for production of metal and plastic components. Typical processes include casting, forging, moulding, extrusion, stamping, welding, electroplating, etc.

The components industry in India, which is an important part of the automotive sector, comprises about 500 firms in the organised sector and more than 10,000 firms in the unorganised sector. The auto component industry has been one of the fastest growing segments of Indian manufacturing and one of the few sectors in the economy that has a distinct global competitive advantage in terms of cost and quality. The advantages of sourcing auto components from India include low labour cost, raw material availability at affordable prices, presence of skilled and semi-skilled human resources and quality assurance. An average cost reduction of nearly 15-20% has attracted several global automobile manufacturers to set up base in India since the early 1990s. India’s process‐engineering skills, applied to redesigning of production processes, have enabled reduction in manufacturing costs of components over the years (GIZ, 2015).

According to industry statistics compiled by the Automotive Component Manufacturers Association of India (ACMA), engine parts form the largest segment (31%) of the auto


components industry followed by drive transmission and steering parts (19%). Suspension and braking parts, and body and chassis account for 12% each in the entire product range, followed by equipments accounting for 10% (GIZ, 2015).

Meeting future demand will require substantial amount of materials. Estimates from a 2016 analysis (GIZ, 2016) reveal that material demand for the automotive sector over the next 15 years would increase from 14 million tonnes to almost 102 million tonnes. Figure 4 presents the total demand for major resources in India’s automobile sector from 2015 to 2030. The estimated total demand for iron and steel in 2030 is 80.7 million tonnes, followed by aluminium (10.9 million tonnes), plastics and composites (8.3 million tonnes), copper (1.6 million tonnes), and zinc and nickel (0.6 million tonnes). As mentioned earlier, India is import dependent on many of these resources. Further, the price volatility, procurement challenges, and increased transportation costs would increase the final factory gate cost of materials thereby putting pressure on the bottom line of the component manufacturing companies and hence the original equipment manufacturers.

Figure 4: Total demand for key resources in India’s automobile sector 2016 – 2030 (in million tonnes)

(Source: GIZ, 2016)

This situation therefore calls for adoption of efficient shop floor practices that would improve direct and indirect resource consumption patterns and enhance material productivity thereby increasing competitiveness of the automotive industries in the coming years.


1.2 Understanding Resource Efficiency Although the concept of resource efficiency is quite old, United Nations Environment Programme (UNEP) was a key global institution that introduced the concept to the larger stakeholder community in a concrete way. It defines resource efficiency from the life cycle perspective. The objective of resource efficiency is to reduce environmental impact of production and consumption of goods and services, from raw material extraction to final use and disposal (UNEP, 2010). Resource use optimisation largely includes reuse of raw materials from other products and processes, making newer products from rejects, and making products more durable.

The European Commission (EC) defines resource efficiency as means of using limited resources in a sustainable manner that minimises the impacts on the environment. It helps in creating opportunities to produce more with less and to deliver greater value with less input. The German Association of Engineers (VDI) embraced resource efficiency as a cross-sectional topic and developed a set of guidelines towards increased resource efficiency which popularly came to be known as the VDI Guideline Series 4800, where Resource Efficiency is defined as: benefit (product, function)/effort (use of natural resources).

Needless to mention, improving resource use efficiency will benefit businesses and the environment in many ways. These include reduced cost of purchased metals and other raw materials through process improvements (e.g. fewer offcuts and rejects), minimising waste treatment and disposal costs, reducing environmental impacts associated with mining, processing, waste disposal, and consumption of limited resources (e.g. by reviewing purchasing practices or testing the suitability of recycled or non-composite materials that can be separated and recycled if they meet customer specifications and requirements), improving the reputation of businesses and employee satisfaction through promoting an environmentally responsible image and providing a safer and more comfortable workplace. Figure 5 presents the benefits arising from resource efficiency interventions.

Figure 5: Benefits from adoption of Resource Efficiency measures


Benefits

Reduc1onincostfor

disposalofwasteand

treatmentofemissions

Reducedcostforcompliancewrtwaste,

emissions,theuseof

chemicals,etc.

REmeetscustomerdemandforsustainablebusinessprac1ce

Reduc1onincostformaterials,

chemicalsandenergy


1.2.1 Existing Policy Framework in the Context of Resource Efficiency in Automotive Sector

Resource efficiency in manufacturing processes makes all the more sense as the government is currently championing programs like “Make in India” which will have huge implications on demands for resources, imports, and the environment in general. The automobile industry in India, typically driven by material costs, is gradually realising the importance of resource efficiency. Though not widespread, certain companies are developing or adopting methods to utilise material resources more efficiently and/or to minimise wastages.

Vehicles that can no longer be used on roads are potential sources of secondary resources like steel, iron, aluminium, etc., as well as some critical resources like copper, zinc, and platinum. Even though end-of-life vehicle (ELV) handling in India is not properly regulated, the issue has been gaining prominence. Currently, retired vehicles in India usually end up in the unorganised sector where after dismantling, the auto components are either refurbished or sent for recycling. Not surprisingly, the efficiency of material recovery is quite low, since the workers are not adequately trained and lack proper equipment to dismantle and recycle auto components. Further, lack of space and inability to procure capital equipments used for dismantling make recovery more challenging.

In 2015, the Government of India launched the automotive industry standard for scientific dismantling and recycling of used vehicles that have reached the end of their life2. The Ministry of Heavy Industry (MoHI) and the Society of Indian Automobile Manufacturers (SIAM) have made efforts to promote resource recovery from ELVs. An automobile dismantling centre - Global Auto Research Centre (GARC), under the National Automotive Testing and R&D Infrastructure Project (NATRiP) at Oragadam, near Chennai, has been set up. GARC is labour intensive, unlike similar units in developed countries. The objective is to promote recycling activities with significant employment and also to manage the hazardous waste and encourage recovered material reuse by the auto industry. The centre, set up in collaboration with SIAM, is also expected to train and help upgrade current units in the unorganised sector.

In the context of improving resource use efficiency in the automotive sector, there are methodologies/tools that are required to be learnt and implemented by the component manufacturing industries. These are discussed in detail in the next section. However, measurement and benchmarking are two key aspects that need to be emphasised so that implementation of interventions becomes easy and targeted.

1.2.2 Measuring Resource Use

Measurement is the first step towards assessment of any manufacturing practice and quantification will help in estimating material losses and/or material productivity. Productivity is a key indicator of measuring or evaluating efficiency in production. It can be increased only when production is carried out in a more economical manner that is “…produce more with same or less”. Measurement ‘leads to control and eventually to improvement. If you can't measure something, you can't understand it. If you can't understand it, you can't control it. If you can't control it, you can't improve it’ (Harrington, 2011). Further it is important to understand what to 2 Draft Automotive Industry Standard for End-of-Life Vehicles. Automotive Research Association of India. Retrieved from: https://araiindia.com/hmr/Control/AIS/811201443718PM3_Draft_AIS-129_F4_Aug_2014_ELV.pdf


measure, how to measure, when to measure and how to interpret and make use of the measured data as discussed in detail in module 2 of the manual.

1.2.3 Importance of Developing Benchmarks

Once resource use is measured it is important to develop benchmarks and standards that can be set internally or can be set by the original equipment manufacturers for their vendors. Here benchmarking is required in the context of improving material/resource management across the entire production chain that includes but are not confined to raw material inventory, processing and finished stock. Benchmarking is a way of discovering what is the best performance being achieved – whether in a particular company, by a competitor or by an entirely different industry. This information can then be used to identify gaps in an organisation’s processes so that it can improve and strategically realign itself in the market.

Such identification and assessment calls for a careful evaluation of the industry best practices based on secondary data collection, evaluation and thorough analysis. At the same time it has to be periodic, i.e. undertaken at regular intervals.

The objective of benchmarking can be competitive, internal or strategic. Normally, internal benchmarking is used when a company has established industry best practices and wants to share the same across its plants having old or new operations. In the case of competitive benchmarking, it is undertaken for assessing companies’ position within its industry sector. In addition, competitive benchmarking is used when a company needs to identify industry leadership performance targets.

Indian component manufacturing companies have introduced internal benchmarks for inventory turnover, delivery time, response to customer query, training to employees, etc. which varies across companies. Yet issues exist where companies are struggling to understand benchmarking concepts, identification of suitable benchmarking partner, lack of resources, lack of staff support, lack of internal expertise, etc. Enabling condition for promoting benchmarks on critical issues and in particular resource efficiency is presented in figure 6 (on the following page).

Finally, for identifying and understanding world-class performances, strategic benchmarking is used. This is particularly important for those companies that want to engage with leading multinational companies of the world and want to compete with competitors in other geographies.


Figure 6: Implementing benchmarking concepts in India

(Source: Panwar et al., 2013)

1.2.4 Conclusion

India’s growing automobile industry is providing significant economic opportunities to the economy. However, future growth and its consequent benefits can be reaped only when material resources are available readily and at competitive prices. Uncertainties and other challenges can be transformed to opportunities where resources can not only be saved, they can also help companies achieve economic returns. Extensive engagement with stakeholders reveals opportunities for improving resource efficient consumption of materials along the value chain at component manufacturing and assembly stage. The subsequent chapters of the manual provide framework and key tools for resource efficiency opportunities for companies in the sector, thereby helping them achieve economic benefits through interventions.

Developing effective benchmarking clubs & information & reference centres

Proliferating the understanding of benchmarking concepts

Approaching agencies which provide consultancy and training to implement Benchmarking reference centers

Formation of “business clusters”

Collaborations and tie ups with “best in class” manufacturers

Allocation of resources for benchmarking

Formation of in-house dedicated benchmarking teams

Introducing reward schemes to encourage and motivate staff for active and positive participation in benchmarking implementation

Increase use of modern “IT” techniques such as internet to access online resources and assistance on benchmarking


As explained in Module 1, there are a number of benefits linked to resource efficiency including economic benefits. Material use efficiency leads to lesser raw material purchase requirement for same output volume. At a macro level, the use of most accessible and low-cost resources can be extended. Further, improved material use will lead to reduction in unnecessary processing and fabrication that further reduces consumption of energy and water, among other key resources. Recycling of materials can save energy otherwise required for processing of their virgin counterpart. Increasing material efficiency will reduce the amount of waste material going to landfills or to be incinerated, thereby reducing pressure on land, water and air as well as addressing other negative impacts arising from waste handling.

There are numerous tools that can be used for measuring resource efficiency and identifying targeted interventions for improving material productivity. This module presents in detail the relevant tools that are often used across various categories of industries and in particular the micro, small and medium enterprises (MSMEs) for promoting and/or adopting resource efficiency in production chains.

The tools that are discussed in the module are shown in figure 7.

Figure 7: General tools for Resource Efficiency


Module 2: Tools for Resource Efficiency

MATERIAL FLOW ANALYSIS

ASSESSING, MEASURING & IDENTIFYING RESOURCE EFFICIENCY OPPORTUNITIES

RESOURCE CHECK

COST CALCULATOR

ENERGY AUDITING

FINANCIAL CALCULATOR

WPPF

THEORY OF CONSTRAINTS

Anal

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Eval

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Com

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Tool

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2.1 Resource Check Resource checks are modular structured checklists to support MSMEs in increasing the efficiency of production processes. They are structured into a questionnaire and a detailed checklist. Measures, tools and methods are provided for complementary support. Resource checks exist for the following technology areas: basic module, metal processing, injection moulding, extrusion, electroplating, foundry technology, painting, machining, hot rolling, cold rolling, print circuit board technology, deep drawing, and fine chemicals3.

The detailed checklists are also available as excel-sheets and can be used for deeper analysis of the technologies within the companies. Checklist questions help to identify potentials for improvements regarding resource efficiency. The assessment of the questions will indicate topics that should be considered in more detail.

Specific checklists can be developed based on the type of company to be assessed. Consider an example of a sheet metal pressed parts factory. An indicative list of questions used as a part of checklist is presented in table 2.

Table 2: Indicative list of questions as a checklist for a press parts manufacturing unit

Question Yes No

Energy Is the energy consumption being monitored with respect to production?

Is the compressed-air system aligned with the actual demand? Is it possible to reduce the primary pressure by 10% without losses in quality?

Is it possible to control the speed of drive motors in a process dependent manner?

Are batch sizes examined under aspects of energy efficiency? Are reduced energy costs to be expected with increasing batch size?

Are efficient control and regulation techniques such as frequency converters employed?

Do regulations regarding room ventilation exist? Do employees consciously switch off air-conditioning when it is not required?

Production Are the process parameters regularly checked?

Does quantitative recording and analysis of material flows take place?

Do you take optimisation measures (e.g. minimisation of waste) over the entire process chain into account?

Do you use virgin raw material for all your products?

Lighting Is it possible to use daylight fixtures?

Are the lighting systems installed depending on the individual workplace requirements (such as lux levels, attendance time)?

Water Is there any water leakage from processes/buildings?

Do you have sludge treatment facility?


3 VDI-ZRE. Resource checks. Retrieved from: www.resource-germany.com/instruments/resource-checks/


Based on the answers received from the company representative, the consultant needs to develop focus and priorities on implementation in order to achieve resource efficiency. For example, if the compressed-air system isn’t aligned with the actual demand, the existing settings need to be investigated and optimised through gradual reduction while monitoring process quality. Or, if virgin raw material is used for all the products, which products could possibly be produced by the use of secondary raw materials may be investigated. Or, if the energy consumption is not being monitored with respect to the production, the current practices of measuring and monitoring can be investigated, and the necessary recommendations can be amended in order to enable the company to monitor these parameters.

These checklists are intended to give the consultant a direction towards identifying the key requirements of the company for achieving resource efficiency.

2.2 Material Flow Analysis A material flow analysis is a systematic analytical method for quantification of flows and stocks of materials or substances in a well-defined system. The key objectives of material flow analysis include:

§ Assessing existing demand and use profile of various resources used in production

§ Identification of source of waste generation and emissions, and unnoticed leakages of critical inputs

§ Developing a framework depending on processes, inputs used, etc.

§ Develop strategies to improve throughput by addressing critical concerns.

Waste generation, resource leakage and emissions are an integral part of any production process that may occur because of many reasons. Although a part of it may arise due to unique product specification and design, wastages may arise from poor housekeeping, poor management and inefficient utilisation of inputs. Obviously this is not desirable. Hence, if a business entity wishes to identify a strategic solution to these problems, it is important to have a baseline assessment of the current situation. This is undertaken based on material flow analysis that identifies points of origin, volumes and causes of waste and emissions. Furthermore, under material flow analysis, the composition of the rejects are analysed, their economic value, reuse potential, etc. are explored and estimated.

Typically, a material flow analysis has the following steps4:

4 Resource Efficient and Cleaner Production Centre. National Technical University of Ukraine. Retrieved from: http://recpc.kpi.ua/document/Volume%203/PR-3-Textbook-heft3_14072003neu.pdf


Steps 2 to 5 are called systems analysis. Through these steps, relevant system elements are identified and their relationship is established. Each of the above steps is explained in the following sections.

Step 1: Defining objective of the material flow analysis and identification of parameters to be monitored

The starting point of the material flow analysis is the identification of goal. The goals can be:

§ Reduction of material losses

§ Substitution of materials

§ Cost reduction

§ Improvement in environmental quality

This would be followed by development of the objective statement. It is important to remember that the key objective of such an exercise is mostly to quantify flow of materials with regard to criteria like costs, volumes, disposal, risks, mostly for comparative purpose. The comparison can be between actual and planned situations, between actual situations at various times, between companies or processes, etc. The system boundary condition is developed from the objective statement which will help to focus on the system and resources of interest.

Depending on the objective, the type of indicators needs to be selected. Potential indicators are:

§ Absolute (e.g. total consumption)

§ Relative (relation of parameters, e.g. tonnes of waste per tonne of output/finished product)

§ Normalised (part in relation to the total, e.g. relation of hazardous waste to non-hazardous waste)

§ Indexed (relation to baseline, e.g. tonnes of waste in year X in relation to tonnes of waste in year Y)

An indicative list of data that can be collected for material flow analysis is shown below; however the data to be collected will largely depend on the goal and scope of the analysis:

§ Material consumption per product

§ Input of recycled material

§ Reuse of packaging material per product

§ Process material input

§ Cleaning agent input

§ Water input

§ Water recycling

§ Production of hazardous waste

§ Energy input


§ Energy input according to types of energy

§ In-house energy generation from waste

§ Energy saved through energy-saving programmes

§ Fuel consumption

§ Freight kilometres according to means of transport

§ Land use

§ Business trips

§ Number of recyclable products

§ Rejects

Step 2: Define the balance scope (either entire enterprise or specific divisions or departments)

The balance scope can either comprise the company as a whole or be limited to individual processes. Its definition depends once again on the objective of the analysis. In order to identify possible points for intervention, processes have to be divided into discrete steps.

Step 3: Identifying periods/duration

This involves choosing a specific time span for the analysis. This may be a balance year, a month, a production batch or a week of production.

Step 4: Identifying and defining process steps

Processes are divided into steps and represented in a flowchart. This flowchart should be based either on activities or on equipments, on production units or on profit centres. Normally for graphical representation, rectangles are usually used to indicate different production steps and arrows are used to indicate material flows.

Step 5: Material flows and balancing – quantitative / qualitative approach

All relevant data on material flows, such as components produced, values, volumes, data sources, material inputs, etc., are represented in the flowchart (Figure 8 on the following page). In the same way, all important data on process steps (or equipment) such as temperature and batch size have to be documented. These flowcharts can be used to draw up a waste management plan.

When drawing up a balance, the principle of conservation of masses has to be observed. This applies both to the entire company and to the system elements defined as “production steps”. In a stable system, the mass input into an element has to be equivalent to the output. All raw and process materials input into a certain element have to leave it in the form of either a product or waste/emissions.


Figure 8: Examples of flow charts for material flow analysis

Top: MFA of processes in a paint shop.

Bottom: Sankey diagrams of material losses in a paint shop.


Step 6: Interpretation and conclusions

Finally, the flowchart is interpreted. The material paths (illustration of the exact point where waste is generated, establishment of relations between raw materials and waste) are retraced and key figures in the form of efficiency ratios (cost-efficiency ratio) and performance ratios (real efficiency compared to theoretically projected efficiency) are calculated for the company as a whole as well as for the individual production steps. Based on this, suitable conclusions are drawn.


2.3 Energy Auditing Energy auditing aims to identify all the energy streams in a facility and attempts to balance the total energy inputs with its usage. It serves as an effective tool for pursuing a comprehensive energy management programme. The Energy Conservation Act, 2001, defines energy audit as “the verification, monitoring and analysis of use of energy including submission of technical report containing recommendations for improving energy efficiency with cost benefit analysis and an action plan to reduce energy consumption” (Ministry of Power, 2001).

Energy (electrical and thermal), labour and materials are widely considered to be three major operational expenses in an industry. To optimise energy usage in an industry, energy audit can be used to provide an insight about the patterns of energy and fuel consumption. It also helps in identifying the areas of energy wastages and their improvement by highlighting the importance of energy cost reduction. The primary objective of energy audit exercise is to determine ways to reduce energy consumption per unit of product output. It provides a benchmark for energy management in a facility and planning for efficient and effective utilisation of energy.

As per Bureau of Energy Efficiency (BEE), energy audit can be classified into two types, namely, preliminary audit and detailed audit.

Preliminary energy audit is a quick exercise for:

§ Establishing the energy consumption pattern in an industry

§ Estimating the potential for energy saving

§ Identifying the hotspots for attention

§ Identifying immediate and no-cost or low-cost improvements

§ Establishing an internal benchmark

§ Identifying the areas that require more detailed assessment

A comprehensive energy audit is a detailed exercise involving pre-audit, on-site audit and post-audit phases. Details of these phases are given in the table on the following page (Table 3).


Table 3: A step-by-step protocol for conducting a detailed energy audit

Plan of Action Purpose / Results

1st Phase –Pre-audit phase

Step 1 • Planning and organisation • Conducting a walkthrough

audit

• Informal interviews with personnel like the energy manager and production manager

• Resource planning and establishing an energy audit team

• Organising necessary instruments and time frame

• Collecting baseline data (suitable to type of industry) • Familiarising with processes and other plant activities

• Preliminary observation and assessment of current level of operations

Step 2 Conducting a brief meeting / awareness programme with all concerned personnel (2-3 hrs)

• Building cooperation

• Issuing questionnaires for the concerned departments

• Raising awareness

2nd Phase –On-site audit phase Step 3 Gathering primary data,

process flow diagram and energy utility diagram

• Analysis of historical data and collection of baseline data

• Preparing process flow charts

• Diagrams of all service utilities (Example: single line power distribution diagram, water, compressed air & steam distribution)

• Design, operational data and operation scheduling

• Annual energy bills and energy consumption pattern Step 4 Conducting survey and

monitoring • Motors, insulation, and lighting studies with portable instruments

for collection of data

• Confirming and comparing the operating data with design data Step 5 Conducting detailed trials for

the energy guzzlers which have been selected

• Power monitoring for 24 hours

• Trends of load variations in pumps, fan compressors, etc.

• Trials for boiler efficiency • Trails for furnace efficiency • Experiments for equipment performance, etc.

Step 6 Energy usage analysis • Developing energy and material balance and analysis of energy loss

Step 7 Identification and development of opportunities for energy conservation

• Identifying and consolidating measures for energy conservation

• Conceiving, developing, and refining ideas • Reviewing the ideas that were suggested by unit personnel

• Reviewing previous ideas suggested by energy audit, if any

• Brainstorming the value analysis techniques

• Contacting vendors for new/efficient technology

Step 8 Cost benefit analysis • Assessing technical feasibility, economic viability and prioritising implementation options regarding energy conservation

• Selecting the most promising measures

• Prioritisation based on low, medium, long-term measures Step 9 Reporting and presentation

to the company’s management

• Documentation and report presentation of the findings to the management

3rd Phase –Post-audit phase Step 10 Implementation and follow-

up • Creating an action plan with a schedule for implementation

• Assisting and implementing recommended energy conservation measures and monitoring the performance

• Follow-up with periodic reviews

(Source: adapted from General Aspects of Energy Management & Energy Audit. BEE, 2015)


For visualising energy balance, Sankey diagrams can be used as well (depicted in Figure 9).

Figure 9: Sankey diagram of a furnace indicating the input, output and losses of energy

(Source: BEE handbooks, 2015; see Reference page)

Table 4 contains a checklist of measures to be taken for auditing various electrical and heating systems at the unit. Some of the electrical systems include motors, pumps, cooling towers, blowers, lighting and compressed air systems. Furnaces are examples of thermal systems.

Table 4: Checklist of measures to be taken for auditing different electrical and heating systems

Equipment Checklist

Electric Motors

• For efficiency, size of motors should be optimised. They should be within a range of 65% to 100% of the rated load.

• Turn off the motors when not required. Schedule the operation of the motors when required. • Regular maintenance to check for loose connections and dirt accumulation inside and

outside of the motor must be carried out. • Explore the utilisation of variable frequency drive (VFD) for reducing the speed of the motor

wherever applicable. • Replace old motors with energy efficient motors. • Motors should be discarded after 3 rewindings.

Compressed Air System

• Arresting the compressed air leakages from pipelines, joints, valves, filters and process equipment will help in bringing down the energy consumption of compressor.

• Main valve on the compressed air receiver tank should be closed when compressed air is not required so that leakage losses can be minimised during the particular interval.

• Where possible welded pipe joints should be preferred over threaded pipe connections. (Continued>)


Equipment Checklist

Compressed Air System

• For maintenance, during the off hours, i.e. lunch hour, breaks, etc., listen to the sound of leaks, tag them and then plug the leaks during off days.

• Conduct free air delivery (FAD) and leakage tests on compressor and pipe system respectively, once in a month and track the efficiency of compressor and quantity of leakages over time.

• Leakages in compressed air pipelines should be minimised to below 5%.

Pumps • Check for water leakages from the pumps and repair the seals and packing. • Old pumps must be replaced by energy efficient ones. • Explore the utilisation of variable frequency drive (VFD), pump size reduction or size

reduction of the impeller in order to be energy efficient, wherever applicable. • Optimise the system flows to be as minimal as required so that the pump’s power

requirement can be reduced.

Blowers • Provide a proper enclosure for air drying of processed components (reduction in blowing time and required motor capacity).

• Provide proper drain time to minimise water blown off from the components during blowing operation.

• Collect the blown off water and reuse in process baths.

Cooling Towers

• Based on leaving water temperatures, the cooling tower fans must be controlled. • From cooling tower and chiller performance data, optimise the water temperature as

required. • Use VFD for the cooling tower fans (when few in number) wherever required; On-off control

should be provided if the fans are several in number. • For preventing fouling from algal growth, cover hot water basins. • Chemical use must be optimised. • Velocity pressure fan rings must be used. • Self-extinguishing PVC cellular-film fill must replace splash bars. • Leaking cooling tower cold water basins must be re-lined. • Water treatment of cooling tower sidestream should be considered. • Loads not in service should be shut off. • Optimise and possibly automate blow down flow rate. • When there is no water flow, interlocks can be installed to prevent fan operation. • Fan blade angle must be optimised based on seasons and/or load.

Furnaces • Optimising the height of furnace opening (if adjustable mechanism provided) as per requirement.

• The quality of insulation and refractory lining within the furnace are necessary improvement options to reduce heat losses occurring from side walls.

• If high exit flue gas temperatures persist, a feasibility study would be required for suggesting the appropriate heat recovery system.

• Optimising combustion parameters within furnace as per the product and process requirement to optimise the temperature and subsequently the gas consumption, if feasible.

• A provision for combustion control can be achieved using temperature controllers or PIDs.

Lighting System

• Switch OFF the idle running of lamps. • To rearrange the lighting fixture as per requirement or workplace. • Install voltage stabiliser. • Switching over to more energy efficient forms of lighting and fixtures as far as possible,

e.g. LEDs. • Using day lighting and north lighting arrangements to as much extent as possible.

Installing polycarbonate sheets for natural lighting.

(Source: BEE handbooks, 2015; see Reference page)


Further information on energy auditing can be obtained from Bureau of Energy Efficiency (BEE) e-books available online for free. See Reference page.

2.4 Theory of Constraints Ideally, a system should have no/minimal constraints. Presence of constraints limits a system from achieving higher performance.

Companies often try to improve utilisation and efficiency at each process. For this, they start producing in larger quantities by pulling ahead future orders. But to produce in large batches, more inventories are generated and kept in warehouses with confidence that they will secure future sales.

As one tries to reduce setup time everywhere, surprisingly, the lead time increases, the orders start going late, inventories start piling up and cash gets trapped in the form of inventories. With all these issues, quality becomes a concern and there are increased rejections, rework and scrap. Then, to compensate for the losses, more and more material is released to the shop floor, everyone is kept busy and batch sizes are further increased. This further worsens the situation. The company then undertakes cost reduction programs, people are fired, and parts or processes are outsourced.

Further, to bring down the cost per product, costly machines are kept running all the time. As the company strives for high utilisation and increased efficiency everywhere, they find that the lead time has increased further and more and more inventory has piled up. Lots of time and money are wasted on rework and scrap. Cash flow becomes a threat, customer complaints rise and profitability reduces. The company decides to work even harder and the vicious cycle continues.

In order to prevent this vicious cycle, it is essential to identify the constraint (bottleneck) in the overall production process. This could be a resource, machine, process or department that is limiting the performance. The focus must be only to fully utilise the constraint and ensure that it is never short of work. One must make certain that all other resources, machines, processes or departments are secondary to the constraint (Athavale, 2012).

According to the Theory of Constraints (TOC), a constraint (or leverage point) is something which limits the output of the entire operation. This is similar to a chain whose weakest link limits its strength. Changing any part of a system will affect its performance, but when the key leverage point of a system is identified, then managed and subsequently improved, its performance rises exponentially. A successful business must satisfy the three necessary factors – the shareholders, the market and the employees – now and in the future. Any effort at improvement must satisfy all three conditions, if it is to be considered truly ongoing and sustainable.

The general process for improving the system involves:

1) Identifying the constraints in the system

2) Deciding how to exploit these constraints

3) Subordinating everything else to the decision above


4) Elevating the constraints of the system

5) If a constraint has been eliminated during the previous steps, go back to step one without allowing inertia to create a system constraint.

Figure 10 indicates the TOC technique of five focusing steps also known as Process of On-going Improvement (POOGI).

Figure 10: The five focusing steps based on process of on-going improvement (POOGI)

(Source: Goldratt, 1990)

Figure 11 is an example of a TOC technique known as Drum-Buffer-Rope Production planning, a production planning technique based on short-term customer demand. The “drum” is the slowest operation which sets the pace at which the entire plant will process material. The “buffer” is the current work-in-process (WIP) before the drum that is sized to ensure that the drum never runs out of work. It is basically the WIP which are planned to arrive for processing for a certain period of time before the constraint is scheduled to commence working on them. The “rope”, which is synchronised with the pace of the “drum”, is the material release schedule that releases orders into the plant.


Figure 11: Drum-Buffer-Rope production planning

(Source: Athavale, 2012)

Some of the techniques for managing constraints include:

Critical Chain Project Management (CCPM) is a project management technique which exploits both resource and task dependencies so that maximum number of projects can be completed in the shortest possible time. From individual task times, the safety time is removed and accumulated into one primary project buffer. According to CCPM, in order to complete projects on time, they need to be started as late as necessary versus as early as possible so that bad multi-tasking is minimised. In CCPM, a common ‘drum’ resource is managed in order to synchronise multiple projects.

Continuous Replenishment for Distribution focuses on consumption based on replenishment where the location and amount of the inventory both within the company and across the supply chain in optimised. The inventory at the point which offers the highest protection and maximum flexibility for raw materials, WIP and/or finished goods, is located. A combination of maximum consumption, reliable replenishment time and an appropriate safety factor is used for calculating inventory size.

Thinking Process Problem Solving Techniques are methodologies for tactical problem solving and for designing business, operating and marketing strategies. Businesses can maximise the ROI of their improvement efforts by focusing on their system constraint (leverage point) by applying these tools. The “cause and effect based” thinking process tools include Current Reality Tree, Future Reality Tree, Conflict Diagram, Prerequisite Tree and Transition Tree.

Table 5 (on the following page) highlights the differences between the principles of Lean Manufacturing and TOC.


Table 5: Differences between Lean Manufacturing and Theory of Constraints

Lean Manufacturing TOC

Underlying Philosophy

The organisation is a collection of parts that can be systematically segregated, individually improved and put back together.

The organisation is a system of interconnected parts that can only be improved systemically by focusing on the constraint.

Objective Eliminate waste and reduce costs by reducing the lead time and inventory.

Increase throughput by reducing lead time and inventory to gain competitive advantage, but increasing the capacity.

Breadth of Focus

The focus here is on the process-design, order fulfillment, project management, and distribution & replenishment.

The focus here is on the business– design, order fulfillment, project management, distribution & replenishment marketing & sales, finance & measurement, and strategy.

Resource Management

Strive for maximum resource efficiency by dedicating machines and production lines to specific products.

Strive for maximum resource flexibility by segmenting the market and not the resources.

Capacity Idle capacity is considered a waste. The capacity should be balanced to the rate of customer demand.

Excess capacity is waste whereas protective capacity is good. In order to maximise the constraint output based on customer demand, capacity should be unbalanced.

Purpose of Inventory

Inventory is considered as a waste and it must be eliminated. Achieving a single piece flow with no inventory is the objective.

Excess inventory is considered a waste. The throughput is protected from the variability of supply and demand by the inventory (acts as a buffer).

Variability Focus on eliminating variability in all places by thorough error proofing, level production, kaizen, standardised work, etc.

Variability (Murphy’s Law) is always considered to exist and it is managed with the help of time buffers and by prioritising improvements (tools like Lean & Six Sigma) using buffer management.

Role of People

People should be relied upon to improve the process. The people should then be removed from the process (automation) in order to eliminate costs.

People should be relied upon to improve the process. The people must then be moved in order to grow throughput.

Measurement Traditional operational efficiency measures associated to plant performance is used. Throughput is defined in units of volume.

Traditional operational efficiency and also managerial accounting measures associated to company performance are used. Throughput is defined in monetary units.

Improvement Focus

All work centres must be improved concurrently in order to improve the entire plant.

Improvement efforts must be focused on the constraint (leverage point) in order to realise significant results.

(Source: http://www.leanproduction.com/theory-of-constraints.html)


For an in-depth understanding of TOC, a list of resources are provided in the References page. 2.5 Cost Calculator The Cost Calculator is a software tool that allows enterprises in the manufacturing sector to examine their material use to identify savings potential. The Cost Calculator has been particularly developed for small and medium sized enterprises and is to support their first step in the detailed assessment of their manufacturing processes.

The Cost Calculator is divided into three modules to allow users to obtain a most comprehensive overview of the distribution of material cost. The first module, which shows the cost structure of the enterprise, gives a first indication of possible approaches for optimisation. Significant cost drivers can be shown and can give a first indication of potential for improvement. In the second step, a material flow calculator exemplifies the material flows of the single stages of a process and points to the respective losses of material. This facilitates the identification of approaches for targeted process optimisation measures and related cost savings. The third module of the cost calculator is an investment calculator, giving an overview on the total life-cycle cost of a piece of equipment, from acquisition to disposal. The tool is available online or can be downloaded as offline version5.

5 VDI-ZRE. Cost Calculator. Retrieved from: http://www.resource-germany.com/tools/cost-calculator/

Case Study: Fleetguard Filters Pvt. Ltd. Background: Fleetguard Filters is India’s leading manufacturer of heavy-duty air, fuel, lube and hydraulic filters, filter systems and coolants. Fleetguard is a Cummins group company and a supplier to renowned automotive and industrial engine and equipment manufacturers and has its manufacturing facility at Hosur, Jamshedpur, Pune and Sitarganj. Before the implementation of TOC, compounded annual growth rate of sales was 23%, PBT was 25%, throughput 18%, productivity (throughput/operating expense) 2%, and capital productivity (Throughput/Investment) was 5%.

Intervention: Based on the TOC, key interventions taken by the company included improved operation efficiency (worker efficiency, machine utilisation, production efficiency), better logistics (reduction in freight costs), reducing expenses (e.g. travel), general – quarterly review against budgeted costs.

Outcome: The interventions saw improved On Time In Full (OTIF) increasing from 93% to 98.5%; improved throughput 48%, increased profits of over 100%, with no increased investment, throughput/investment increased significantly.

Source: http://www.goldratt.co.uk/Successes/full/fleetguard.html


2.6 Financial Calculations

Investments in resource efficiency measures are similar to any other area of financial management. The basic measures for apprising financial investment that are used are listed below.

§ Simple Payback Period is the time taken by the investment to recover the money. The simple payback period is usually calculated by:

!"#$%& !"#!"#$ !"#$%& = !"#$#%& !"#$%&'$"& !"#$!"#$%&$' !""#!$ !"#ℎ !"#$

Investments with a shorter payback period are chosen over those with a longer payback period. After the original investment cost has been covered on completion of the payback period, any positive cash flows are then profits.

§ Return on Investment (ROI) enables comparisons between various investment options. The return on investment takes into consideration the cash flows across the project life and the discount rate by converting the total ongoing cash flows to an equivalent annual amount across the project, which can then be associated to the capital cost. However, it does not consider time value of money and variable nature of annual net cash inflows. The annual return expected from initial capital investment, is equated by (in terms of percentage):

!"# = !"# !"#$%&!"#$%&'$!" !"#$×100

For example, a mechanic purchased a sparingly used motorcycle for Rs. 75,000 and invested Rs. 35,000 in certain upgrades and restorations. On sale of the refurbished motorcycle, the mechanic netted Rs. 1,30,000.

The net cash flow is going to be what the mechanic made on the sale of the refurbished motorcycle (Rs. 1,30,000) minus what was invested by the mechanic (Rs. 75,000 + Rs. 35,000), so it is Rs. 20,000.

ROI = Net Profit / Investment Cost * 100 = 20,000 / 110,000 * 100 = .18 * 100 = 18%

§ Net Present Value (NPV) measures the profitability of an undertaking which is calculated by summing all the cash flow which are discounted to their present value.

!"# = !!1 + κ ! +

!!1 + κ ! +

!!1 + κ ! +⋯⋯ − !"#$#%& !"#$%&'$"&

Where,

NPV = Net Present Value,

Rn = Cash flow occurring at the end of period “n” (n = 0, 1, 2,….),

κ = Discount rate


The discount rate (κ) evaluates the present value of the expected cash flows which should reflect the risk of the project.

For example, an initial investment of Rs. 8,32,000 on a hydraulic press is expected to generate cash inflows of Rs. 3,41,100, Rs. 4,07,000, Rs. 5,82,400 and Rs. 2,06,500 at the end of first, second, third and fourth year respectively. At the end of the fourth year, the machine will be sold for Rs. 2,00,000. Calculate the net present value of the investment if the discount rate is 18%.

Present Value Factors:

1st year = 1 ÷ (1 + 18%)^1 ≈ 0.8475

2nd year = 1 ÷ (1 + 18%)^2 ≈ 0.7182

3rd year = 1 ÷ (1 + 18%)^3 ≈ 0.6086

4th year = 1 ÷ (1 + 18%)^4 ≈ 0.5158

The rest of the calculation is summarised below:

Year 1 2 3 4

Net Cash Inflow (Rs.) 3,41,100 4,07,000 5,82,400 2,06,500

Salvage value (Rs.) - - - 2,00,000

Total Cash Inflow (Rs.) 3,41,100 4,07,000 5,82,400 4,06,500

(x) Present Value Factor 0.8475 0.7182 0.6086 0.5158

Present Value of Cash Flows (Rs.) 2,89,082 2,92,307 3,54,448 2,09,672

Total PV of Cash Inflows (Rs.) 11,45,509

(-) Initial Investment (Rs.) 8,32,000

Net Present Value (Rs.) 3 ,13,509

2.7 Whole Person Process Facilitation (WPPF) For achieving RE implementations in MSMEs, it is critical that the benefits of the recommended actions are communicated to the beneficiaries so that this leads to implementation and display of visible improvements. Effective communication and employee engagement are critical for achieving the desired results. This need not be confined within the factory gates and can go beyond while creating sensitivity and awareness among consumers/customers and vendors. Whether it is conveying information, negotiation or exchanging ideas with a client company or a vendor, the tool of Whole Person Process Facilitation (WPPF) provides the necessary soft skills required for engagement and communication. This essential communication tool can be applied during meeting with a client or meeting with other members of the same organisation. The purpose of WPPF is to create effective meetings that are highly participative, discuss and tackle challenges faced and disseminate information.

It is a holistic approach to change that fosters the shared intention, collective purpose, and vision that drive system innovation and transformation. It provides a blended, synergistic, holistic approach to change and to leadership. It is not about a big quick splash but rather about


developing the skills, knowledge, and capacity to sustain the ongoing organisational change necessary to thrive in today’s constantly changing, complex times.

This capacity to thrive in changing times is the most important outcome from using this method. The liberating structure and participative architecture creates the space for staff to be responsible, highly creative and innovative, solution focused, and productive. Managers and staff truly understand the degree of freedom that they have within a set of “givens” to do their work. All of their actions and decisions take place within these clear “givens,” fulfilling the organisational purpose and achieving its vision, strategic directions, and accompanying strategic goals.

Figure 12: Steps in Genuine Contact™ Program

(Source: www.genuinecontact.net) For capacity building on WPPF, foundational workshops can be undertaken. For further information on The Genuine Contact™ Program, visit www.genuinecontact.net.


2.8 Instruments Required for On-site Measurements This section describes the typical instruments that are recommended for conducting on-site measurements in resource efficiency studies. Simple measure instruments as scales, counter, measuring tape or chronometer, etc. can be used for measurements as well.

Temperature

Non-contact temperature indicator6

The infrared thermometer measures the surface temperature of an opaque object. The instrument optics sense emitted, reflected and transmitted energy, which are collected and focused onto a detector. The instrument electronics translate the information into a temperature reading which is displayed on the unit. The laser is used for aiming purpose only. Some instruments also have the facility of connecting contact type probe to measure the temperature. The measurement can range from -50°C to 1,550°C for non-contact measurement in high end devices. The accuracy for non-contact measurement is around ±2% of the reading. The emissivity ranges from 0.1 to 1.0.

Thermal imaging device7

This instrument forms an image using infrared radiation, operating in wavelengths as long as 14,000 nm (14 µm). The thermal imager converts the infrared energy emitted from the measured object into an electrical signal by the imaging sensor (microbolometer) in the camera. The result is displayed as a colour or monochrome thermal image on the monitor. The measurement range of the instrument can be from -20°C to 1,200°C. The accuracy of the instrument is ±2% of reading.

Flue Gas

Flue gas analyser8

This instrument provides electrochemical analysis of the flue gas. It measures oxygen (O2), carbon monoxide (CO), nitrogen oxides (NOx), oxides of sulphur (SOx), with the help of electrochemical sensors installed inside the instrument and measures air temperature, gas temperature and fine draft with the help of sensors provided with the instrument. Carbon dioxide content is calculated using internal software in the instrument. In high end instruments, the range of O2 is 0 – 25%, CO is 0 – 10,000 ppm, NO is 0 – 3,000 ppm, gas temp is 0 – 1,200°C. The accuracy of O2 is ±0.8% full scale, CO is ±5% of measured value, NO is ±5% of measured value and temperature is ±0.5% of measured value.

6 http://www.amprobe.com/Amprobe/usen/Products/HVAC.htm 7 http://www.fluke.com/fluke/inen/products/thermal-cameras 8 http://www.testolimited.com/flue-gas-analysers


Water Quantity

Ultrasonic flow meter9

This instrument works on the principle of time taken by the ultrasonic wave to travel from transmitting transducer to the receiving transducer. This total time is displayed as velocity on the flow indicator. If the diameter of pipe on which this measurement is being taken is entered, then the flow is obtained directly on the flow indicator. This instrument works best for clean raw water.

Air Velocity and Humidity

Anemometer10

The instrument measures velocity, temperature and humidity of air flowing through the duct.. The range of measurement can be from 0.4 – 45 m/sec for velocity and 20 – 60°C for temperature. The accuracy of instrument is ±3% of full scale for velocity, ±3°C for temperature and ±3% for humidity.

Electrical Measurements

Digital luxmeter11

The instrument measures lighting level with the help of silicon photodiode. Intensities of illumination is reported in unit of lux or foot-candle. The range of measurement of a device can range from 20 to 200,000 lux. The accuracy of measurement is around ±6%.

Three-phase power logger12

The instrument is used to measure single and three phase voltage, current, and harmonic frequency. It automatically calculates power and other parameters. The range of voltage can be 1 to 830 V rms, the current 0 to 3,000 Amperes, and harmonic frequency 46 to 64 Hz. The accuracy of voltage can be ±0.15% of reading, current can be ±0.1% of reading + probe specs, and harmonic frequency is ±0.2% of readings. The instrument has a logging facility to record power and associated parameters.

9 https://www.gemeasurement.com/flow-meters 10 http://tenmars.com/webls-en-us/TM-740.html 11 http://www.tenmars.com/webls-en-us/YF-170.html 12 http://www.fluke.com/fluke/inen/products/power-quality


Resource efficiency (RE) assessment at the production stage is an approach for companies to increase their productivity and contribute to social, environmental and economic sustainability.

It improves both the company’s economic performance and the sustainability of its production and consumption processes. It also addresses all three dimensions of sustainability:

§ from an economic perspective, it increases production efficiency and thereby increasing the competitiveness

§ from an environmental perspective, it minimises negative impacts on the environment

§ from a social perspective, it promotes human development.

Thus a company will notice the benefits of RE in two ways: through minimised inputs and maximised outputs.

Steps in RE study

Figure 13 indicates the sequence of conducting an RE study.

Figure 13: Sequence for an RE study

3.1 Data and Information Collection for Baseline Analysis This is the initial and crucial step for RE consulting. This gives the consultant an overview about the various facilities installed and production steps employed by the company. It also helps to understand various resources used and waste generation in the company. The details of resources and tools to be referred for this exercise are provided in the resource toolbox. The essential resource would be creating a baseline data template based on the critical resources consumed by the company for the production and the production output for a given period of time.

Module 3: Resource Efficiency Assessment


Resource toolbox

Resources Ø Baseline data template

Ø Resource list

Tools Ø Resource checks

3.1.1 Procedure

Step 1: Introduce the RE concept to the company management and explain its importance. In addition, understand the company’s policies, customers and general issues.

Step 2: Collect the process flow chart of the company. Usually, most companies have it. If not available, draw the process flow chart with clear linkages between each process and mention the specifications in each step (e.g. temperature of furnace, capacity of press, number of punching steps, etc.). However, older process flows need to be updated. An example is shown in figure 14.

Figure 14: Sample process flow chart for a rolling mill

Step 3: List the resources (energy, water, materials, etc.) utilised in each process. Categorise the resources into major and minor based on their cost or consumption. This step has to be done with help of the company management. A sample resource list is shown in table 6.


Table 6: Sample resource list of a company

Major resources Minor resources

Electricity Nitric acid

Water Rust nil oil

Light diesel oil (LDO) Kerosene

Piped natural gas (PNG) Packaging plastics

Cooling oil

Zn anodes

Step 4:

Update baseline data sheet by including all the major and minor resources from resource list.

Step 5: Choose a suitable resource check and detailed checklist (from www.resource-germany.com/instruments/resource-checks) based on the company manufacturing process.

Step 6: Provide and explain the modified baseline data sheet and detailed resource checklist to the company management and decide a deadline to provide the filled sheets. Company should assign responsible personnel for the data compilation.

Step 7: Follow-up with the assigned person though phone calls and clarify doubts if any.

3.1.2 Outcomes

§ Process flow chart of the company

§ Resource list

§ Filled in baseline data sheet

§ Filled in resource checklist


3.2 Baseline Analysis This exercise is done to verify the obtained baseline data of a particular company, understand their resource consumption patterns and arrive at focus areas for RE study. The resources and tools required are summarised in the resource toolbox below:

Resource toolbox

Resources Ø Filled baseline data sheet Ø Baseline data graphs Ø Complete resource list

Tools Ø Resource checks

3.2.1 Procedure

Step 1: Check the filled in baseline data sheet to identify gaps and missing data. A sample baseline data is shown in Table 7.

Table 7: Snapshot of a filled baseline data sheet

Company xxy Pvt. Ltd. Year 2015

Month Production


Electricity Water PNG Oil HCI

t kWh kL scm L L

January 4,567 6,756 156 421 34 150

February 2,359 6,784 123 450 23 150

March 3,948 6,537 201 434 43 150

April 3,749 6,547 176 435 34 150

May 5,432 5,768 178 490 45 150 June 4,578 5,973 154 473 34 150

July 3,987 6,935 194 456 32 150

August 4,587 6,935 212 478 43 150

September 2,748 5,890 176 429 23 150

October 2,987 6,835 187 497 44 150

November 4,567 5,874 195 429 23 150 December 3,654 6,575 185 474 24 150

Step 2: Discuss with the assigned company personnel about the gaps and missing data in

the baseline data sheet. Try to get the complete data at least for major resources. In case some data is not available for any of the major resources, then try to get an average value and make note of this in the baseline data sheet.

Step 3: Copy the data in the baseline data sheet to the baseline data graphs template to generate the graphs (Figure 15). Study these graph trends and identify abnormal trends, if any. For example: the specific consumption of any resource should be constant thoughout the year. So any increase or decrease in the graph suggests that either the process is not optimised and there is a need for improvement or the data provided is insufficient.


Figure 15: Sample baseline data graphs

Step 4: Analyse the information received in the resource checklists. Also use the Resource Check summary at http://www.resource-germany.com/ website and obtain the generated summary sheet (Figure 16).

Figure 16: Sample resource checklist summary


Step 5: After analysing the baseline data graphs and the resource checklists, go through the relevant best available techniques reference documents (BREF) at http://eippcb.jrc.ec.europa.eu/reference/.

3.2.2 Outcomes

§ Baseline data graphs

§ Identified abnormalities in the graphs

§ Summary of the resource checklist evaluation

3.3 On-site Visit for Resource Efficiency Audits On-site visit for the resource efficiency audits is heart of the RE study. This helps the consultant to identify the inefficiencies and come up with relevant interventions for the resource savings. During the on-site visits, apart from identifying the potential for RE improvements, the consultant must pose as many questions as possible to the shop floor operator and patiently listen to their answers. Listening to the shop floor operator is beneficial not only for understanding the reasons for inefficient practices but also for the possibility of obtaining ideas for implementable solutions to address the problem.

Resource toolbox

Resources Ø Resource efficiency audit checklist

Tools Ø WPPF

Ø MFA

Ø Energy audit

Ø Resource checks

3.3.1 Procedure

Step 1: Before going for the on-site visit, the consultant must be familiar with the company process flow, abnormalities in the baseline graphs and summary of the resource checklist evaluation. Along with this, the consultant must also brush-up the concepts of WPPF, MFA, energy audit, and best available techniques.

Step 2: On-site visit may take more than one day depending on the size of the company and therefore before fixing the visit dates, the consultant must make sure that all the relevant persons for the process operations are present during his/her visit.

Step 3: During the company visit, start with a discussion with all the relevant persons including company owner and explain the necessity for the on-site visit for the resource audits. Take this opportunity to inform your expectations from the company during the on-site company visit. Then discuss the abnormalities in the baseline graphs and try to understand the reason for those abnormalities. It is not


necessary to get all the answers in this session itself.

Step 4: Now visit all the processes one by one along with the process operator and make note of all the information that the operator gives about that process. Try to get all the information about that particular process, like what is happening in that process, how much time it takes for this step, what are the specifications (e.g. temperatures, chemical concentration, etc.). During this step, try to identify the inefficiencies in each process. Also take note of the personal protection equipment (PPE) and overall housekeeping standards in each of the processes or departments.

Step 5: Conduct an MFA for well-defined processes or resources. In this exercise, gather all the data for input and output analysis. Once the data is collected, make Sankey diagram for all the major resources especially for raw materials and water. From this, all the losses can be easily identified and steps for reduction proposed.

Figure 17 shows sample Sankey diagram of a resource.

Figure 17: Sample Sankey diagram of a resource (powder in powder coating process)

Step 6: Perform energy audit using the energy audit checklist. During the audit, make note of the temperature losses using IR gun, capture the thermal profiling using thermal imaging camera, flue gas analysis using flue gas analyser and load profiling using power logger.

Step 7: The collected data has to be compiled, analysed and then presented to the company. The company owners can be informed of the key observations (pain points) at the conclusion of the on-site visit. Their priorities/response at this stage would also indicate which aspects they would be interested/willing to address. This would help the consultant in preparing the recommendations.


3.3.2 Outcomes

§ List of inefficiencies (and identified potentials for improvement)

§ Sankey diagram for all the major resources

§ Filled energy audit checklist

§ Measured data from instruments like thermal imaging camera, flue gas analyser, power logger, etc. Key observations discussed with the company.

3.4 Interventions and Prioritisation Based on the data collected and discussions during the on-site visit, the consultants would make a list of interventions to be presented to the company management. The recommendations would be supported with payback calculations. This presentation will assist the company owner in prioritising the implementation measures.

Resource toolbox

Resources Ø Progress monitoring sheet

Tools Ø TOC Ø Financial calculators

3.4.1 Procedure

Step 1: From the on-site resource audits, prepare recommendations indicating suitable interventions for the company. For this, the consultant could take help from the BREF documents, BEE books and resource checklist summary.

Table 8 (on the following page) shows a sample monitoring sheet for implementing recommended resource efficiency measures.


Table 8: Sample progress monitoring sheet for implementing recommended resource efficiency measures

Observations Recommen-dations

Points brought forward by the company

Timeframe for Imple-mentation

Resources focused (Material (raw material, acid, chemicals) / Energy / Water)

Is monitoring possible? Parameters for baseline data

Incoming Raw Material Storage

Coils were lying in the open, unprotected environment which leads to rusting

Providing shade for the incoming raw material

Material Energy Water

1. Specific chemical, energy, water consumption for treating the raw material

Forging

No proper suction for fumes was provided

Implementing a better exhaust system for absorbing the fumes

Want to explore action flow fans for improving air calculation in the forging area Improving suction system may improve the air-flow.

Improved working environment

Step 2: Prepare a progress monitoring sheet covering resources that can be saved in the intervention, estimated cost of implementation and estimated savings from the intervention. Compile all the interventions in the progress monitoring sheet along with list of resources that has to be monitored to track the savings from the interventions.

Step 3: The next step is to present the prepared progress monitoring sheet to the company management for discussions and prioritisation of the implementations. It is very important for the consultants to clearly highlight the benefits in terms of the savings to be achieved by the company from recommended interventions. So the consultant has to come up with strong arguments and justifications to make the management agree to the implementation of recommended measures. This can be done by providing the estimated savings, payback period, IRR or by presenting showcases from a similar industry.

Step 4: After the company management agrees on the list of interventions they are willing to implement, the interventions have to be prioritised. The company management may prioritise list of interventions depending on various factors such as investment required, ease of intervention and payback period. TOC concept could also be used to prioritise the interventions. TOC will identify constrains in the company, which can be given priority and solved first to improve productivity.


Step 5: There might be a situation wherein some interventions may not be agreeable to the company management due to some technical or management issues or even regulatory concerns specific to that region (for example, changing requirements from State Pollution Control Boards). In such case, the consultant has to come up with alternate solutions with inputs from the management.

Step 6: The deadlines and responsible persons for all the agreed interventions have to be decided and agreed to by the company management. The consultant has to make a note of these in the progress monitoring sheet.

3.4.2 Outcomes

§ Prioritised list of interventions

§ Estimated investments and savings of the interventions

§ Progress monitoring sheet with timelines for implementing measures

3.5 Implementation and Follow-up During this stage, regular follow-ups are needed to expedite the implementation of the agreed resource efficiency measures. After an implementation is done by the company, it has to be validated. A validation would ascertain if the implementation is successful in terms of achieving savings for the company and also whether the implementation can be further improved. Some of the resources would be an assessment data sheet for compiling data relevant to the production and a final assessment template which would evaluate the performance of the company in terms of achieving savings from implementations.

Resource toolbox

Resources Ø Progress monitoring sheet

Ø Assessment data sheet

Ø Final assessment template

Tools Ø Financial calculators

3.5.1 Procedure

Step 1: The consultant has to visit the company regularly to ensure that the implementations are being made as per the agreed deadlines. It may be necessary to provide detailed information on the suggested intervention to achieve the savings. For example, a suggested measure may be that insulation has to be done to minimise heat losses from the furnace walls. But the type, density and thickness of the insulation are important parameters to increase the life of insulation and achieve maximum savings. So the consultant has to explain these details to the company management along with


the suggested intervention. Technical details can also be decided in discussions with technology suppliers.

Step 2: The monitoring sheet has to be updated after every visit to track the progress of the implementations, and the savings achieved have to be calculated for implemented interventions during the visits. Savings can be estimated by making measurements with instruments, from bills and reduction in the consumption of resources.

Step 3: The consultant should make showcases out of the implemented interventions with the savings. These serve as success stories that can be shared with other companies to speed up implementation. The permission of the company owner/management should be taken before sharing information related to the company.

Step 4: The overall savings in a company can be calculated by collecting the consumption data for that period and comparing it with the baseline data. For this, the consultant has to provide the assessment data sheet (similar to the baseline data sheet) to collect the information.

Table 9 shows sample filled in assessment data sheet.

Table 9: Sample filled in assessment data sheet

Company xxy Pvt. Ltd. Year 2016

Month Production



t kWh kL scm L L

January 5,534 6,785 189 498 47 175

February 5,678 6,578 178 478 45 175

March 5,786 6,875 197 489 46 175

April 5,876 6,467 189 497 46 175

May 5,436 6,987 179 496 46 175

June 5,457 6,457 197 492 43 175

July 5,767 6,978 194 473 46 175

August 5,976 6,987 187 489 42 175

September 5,467 6,378 168 484 46 175

October 5,798 6,875 174 495 43 175

November 5,847 6,568 185 483 46 175

December 5,849 6,548 187 487 43 175

Step 5: After getting the required data, overall savings would be estimated by putting the baseline data and the assessment data in the final assessment template. (Table 10 on the following page)


Table 10: Sample overall savings of a company

Month % change in production

% change in major resources % change in minor resources


January 21.2 17.1 18.5 2.4 -14.7 3.7

February 98.6 51.2 37.1 46.5 1.5 -5.9

March 46.6 28.2 43.7 23.1 27.0 -4.6

April 56.7 37.0 37.7 27.1 13.7 -10.7

May 0.1 -21.0 21.8 -1.2 -2.1 14.1

June 19.2 9.3 9.3 12.7 -6.1 9.3

July 44.6 30.4 42.9 28.3 0.6 -2.0

August 30.3 22.7 42.1 21.5 25.0 9.3

September 98.9 45.6 58.9 43.3 -0.1 9.5

October 94.1 48.2 59.6 48.7 49.7 -9.4

November 28.0 12.7 34.0 12.1 -56.2 7.0

December 60.1 37.8 43.6 35.8 -11.9 9.0

Average 49.9 26.6 37.4 25.0 2.2 2.4

Step 6: The overall savings would be shared with the company and can be used for disseminating purposes (with permission from the company).

3.5.2 Outcomes

§ Saving calculations from the individual interventions

§ Showcases from the implemented interventions

§ Filled assessment data sheet

§ Overall savings in the company though RE study


Simple resource efficiency strategies can result in reduced rates of extraction of natural resources, reduced energy and water demand and in turn provide a significant reduction in the total environmental impact of the global economy. A significant impact can be made if all tiers of the industry, from the OEMs to raw material providers, adopt certain basic practices to improve resource efficiency. Such measures have been successfully implemented all over the world, especially in Europe.

Most of the practices discussed in this module do not require any significant capital investment and result in tremendous savings, both in terms of resources and cost. These practices can be implemented directly in some cases and can also be used to understand the real world impact of RE.

4.1 RE Implementation: Global Examples

i. Toyoda Gosei UK13

§ Toyoda Gosei UK which manufactures rubber seals for the automotive industry adopted several measures to reduce their annual waste.

§ They started re-using uncured rubber waste, improved waste segregation, reduced the volume of plastic and metal waste using a baler and using compactor bins for general waste.

§ These simple measures resulted in over 50% reduction of waste volume and annual waste disposal cost savings of £33,500.

ii. Lindemann GmbH, Germany14

§ The company Lindemann GmbH produces elbow pipes, which are used by a wide range of industries as standard assembly parts. In the hot forming of pipes, their length differs from the actual length at ambient temperature. Therefore, the pipes are sawn with a bigger range of tolerance than necessary which results in a material loss of up to 35%.

§ After a detailed analysis, standards for the production process were established. Through manufacturing control and unitising of process steps, losses in material were minimised. The use of CAD tools helped to improve the production

13 Source: http://www.wrap.org.uk/content/resource-efficiency-case-study-toyoda-gosei 14 Source: http://www.wire-tradefair.com/cipp/md_wiretube/custom/pub/content,oid,2365084/lang,2/ticket,g_u_e_s_t/~/ The_manufacture_of_pipe_bends_using_improved_material_efficiency.html

Module 4: Learning from Best Practices


through 3D-modelling. In addition, the company invested in the modernisation of production compounds in one of their plants.

§ All these measures result in a total saving of 60 tonnes of steel pipes and 170 kg of welding electrodes per year. This leads to cost savings of 68,000 € and 120 tonnes CO2 per year.

iii. Precision Galvanizing GmbH, Germany15

§ Around 10,000 tonnes of steel are annually galvanised in a high temperature galvanisation process by the company Precision Galvanizing GmbH. Most parts that are galvanised are small components.

§ The new method of galvanisation uses inductors for the heating process instead of gas burners, which allows a constant heating for a more efficient melting process. With the generated temperatures and a special operation mode, thinner layers of zinc with the same quality are possible.

§ By galvanising 5,000 tonnes of steel, this leads to an annual saving of 64.5 tonnes zinc with a same quality of coating compared to the conventional methods. In addition, the new process doesn’t use lead, which results in a saving of 0.9 tonnes lead per year.

iv. Höfer Metall Technik GmbH, Germany16

§ The company manufactures aluminium profiles. During the manufacturing process metal waste is generated, about 50 tonnes of aluminium shavings per year. Unlike other metal waste, these aluminium chips cannot be easily melted because of their composition and the adhesive cutting fluids. The costs for the collection and removal of chips exceeded their value and reduced the profit of the company.

§ To improve profitability, the company purchased a new briquetting press. The aluminium shavings are compressed into briquettes, whereby the bulk volume is significantly reduced and the adhesive cutting fluids are almost completely squeezed out. Subsequently, the briquettes can be melted down.

§ By introducing a briquetting press, the company reduced the purchase of raw materials and saved around 35,000 € per year. Because of savings in terms of logistics and material purchase, the investment paid off after about two years.

v. Volkswagen, Wolfsburg, Germany17

§ On the suggestion of an employee at the washing plant in the paint shop at Volkswagen, Wolfsburg (Germany), the water temperature was reduced from 50°C to room temperature.

§ This simple modification reduced the site’s CO2 load by 1,500 tonnes.

15 Source: http://www.ressourceneffizienz.de/en/praxis/beispieldatenbank/prega-precision-galvanizing-gmbh.html 16 Source: https://www.mta.org.uk/sites/default/files/brochure/upload/RUF_FoundryBrochure_EN.pdf 17 Source: http://sustainabilityreport2013.volkswagenag.com/environment/production


vi. Volkswagen: Chattanooga (USA), Puebla (Mexico), Taubaté (Brazil), Bratislava (Slovakia) and Foshan, Chengdu, Nanjing, Yizheng, Ningbo (China)17

§ Volkswagen wanted to introduce some changes in their paint shops to reduce water consumption and lower CO2 emissions. It started with Puebla (Mexico) and since then many other plants have adopted newer techniques.

§ The two major process changes – dispensing with the primer coat and use of dry overspray separation – have been implemented in all these plants as part of their new paint shops. The primer function is now integrated into the topcoat, which is now slightly thicker. An important feature of the new overspray separation technique is that it makes it possible to recirculate spray booth process air, something that was not feasible using the older wet scrubbing system.

§ Using dry overspray separation it is possible to recirculate up to 80% of process air in the spray booths. Together, primerless painting and process air recirculation lead to significant savings in water consumption (for example, 30% savings at the Taubaté, Brazil plant), and a 20% reduction in energy consumption and associated CO₂ emissions. Over the complete vehicle life cycle – production, use phase and recycling – this adds up to a 60,000 tonne drop in CO₂ emissions for every million vehicles produced.

vii. Volkswagen, Genuine Remanufactured Parts Programme17

§ Remanufactured parts such as engines and gearboxes (major components) are industrially reconditioned at Volkswagen and restored to as-new quality using leading-edge technology. Remanufacturing dispenses with smelting, casting, forming and other cost- and energy-intensive processing operations required for the manufacture of a new part. Noble metals such as platinum, palladium and rhodium can be recovered from used or faulty diesel particulate filters and catalytic converters and reused in the production of new catalytic converters.

§ The Kassel plant remanufactures an annual total of 480,000 engines in 490 different versions, 60,000 cylinder heads in 220 versions and 49,000 gearboxes in 550 versions. These components conform to the same quality standards as new parts and are backed by the same warranty.

viii. Walzwerke Einsal GmbH, Germany18

§ One of the products of the company Walzwerke Einsal GmbH is cold-drawn section steel in different geometries (rectangle, hexagonal, etc.). To assure a precise section drawing process, the steel needs a special coating agent. The coating agent is kept in dip tanks at a constant temperature of 70°C. Furthermore, both ends of the steel have to be mechanically processed to fit the drawing process, which leads to loss of material. To reduce resource consumption, a new production line for cold-drawing was introduced.

§ The new production line consists of a combined process with the sequence of heating, coating and cold-drawing. The preheating is done by inductors specially adjusted to the steels dimensions, reducing the heating to a minimum. The

18 Source: http://www.ressourceneffizienz.de/fileadmin/user_upload/Englische_Flyer___Loseblaetter/efa_Loseblatt_EINSAL_engl_Web.pdf


preheated part runs through a coating chamber and receives a consistent coating for the subsequent drawing process.

§ The improved drawing process reduces the loss of material by avoiding the previous mechanical treatment. The savings are summarised in the following table 11.

Table 11: Estimated savings at Walzwerke Einsal GmbH

Savings by avoiding dip tanks for coating

Savings by avoiding mechanical processing

Energy savings of the drawing process

Energy:

~ 140,600 m³ natural gas/year

Material:

124 tonnes/year

Old process (natural gas, electricity): 482.17 kWh/tonne

Coating agent:

~ 3,504 kg/year (90%)

Energy:

59,824 kWh electricity/year

New process (electricity):

120.97 kWh/tonne

4.2 RE Implementation: Indian Examples i. Honda19

Estimates of energy savings from the use of LEDs range from 25-35% over fluorescent tube lamps and as much as 50% over ceramic metal halide lighting commonly used as floor lighting in large production facilities. When coupled with the longer life of the LED bulbs (10-15 year replacement as opposed to the 3 year life span of traditional bulbs) and the environmentally-friendly makeup of the lights, Honda is finding that there are multiple benefits in using the LED fixtures.

ii. MARUTI20

Reuse of sheet metal

The scrap generated from press shop operations is sent to suppliers for manufacturing of child parts, thus maximising steel sheet utilisation. The suppliers send back these child parts to the Company for use in vehicle manufacturing. In 2013-14, two types of material were sent to suppliers for reuse:

§ Trim scrap (very small pieces which are used for melting and made as ingots): 56,324 tonnes

§ Flat scrap (bigger pieces which are used for making child parts): 24,375 tonnes

19 Source: http://sustainability.honda.asia/downloads/FY2016_Honda%20Asia%20&%20Oceania%20Sustainability%20Information.pdf 20 Source: https://marutistoragenew.blob.core.windows.net/msilintiwebpdf/Maruti_Sustainability_Report_2015.pdf


Energy conservation efforts

During 2013-14, the Company continued its energy conservation drive with a focus on reducing energy consumption and improving efficiency through new technology and Kaizen. Energy saving initiatives in the plants helped the Company in reducing energy cost by more than 5%.

Some of the activities carried out during the year towards energy conservation are mentioned as under:

§ Use of energy efficient pumps and motors in water treatment plant and power plant in Gurgaon

§ Use of energy efficient transformers in new installations and usage of LED lighting in Gurgaon and Manesar

§ Up-gradation of cooling tower fans with aerodynamic energy efficient Fibre Reinforced Plastic (FRP) blades in Gurgaon and Manesar power plants

§ Installation of air shut-off valves in welding jigs to stop air supply during non-working hours

Result of energy conservation measures and actions

§ Re-sizing of motors and pumps rating as per process requirements in power plant and water treatment plants

§ Up-gradation of air compressors by use of high efficiency air end to reduce specific energy consumption

§ Use of no loss drain trap in compressed air handling system for reduction in power consumption

§ Use of variable frequency drives in motors of sewage treatment plant at Manesar

§ Vibration analysis of motors to replace bearings before failure

The initiatives undertaken in 2013-14 to make service workshops environment friendly include:

§ Automated oil management system: This system has been implemented in dealer workshops in order to minimise the oil spillage and to reduce the time and effort required to issue the oil which improves the overall productivity of the workshops. It provides control and monitoring of oil quantities so that wastage can be identified and controlled. The Oil Management System has been implemented in 567 workshops as on 31st March, 2014.

§ Paintless dent repair system: This system has been introduced in workshops for repairing minor dents without stripping the paint leading to an environment friendly, faster and cost effective way of repairing dents. So far 323 workshops have been equipped with paintless dent repair system.

§ Automatic car washing system: Washing quality plays a critical role in customer satisfaction. The Company has brought automation in this area by equipping workshops with automatic car washing and underbody car washing systems leading to better washing quality, faster washing and lower consumption of water (20% reduction). There


are 245 workshops equipped with automatic car washing and under body car washing systems.

§ Dry wash system: In this system, the final water wash process has been replaced with vehicle cleaning using special wash chemicals. Dry wash systems have helped in reducing the washing time, improving the final wash quality and reducing water consumption by around 5 crore litres per annum across the network. This system has been implemented in 373 workshops so far.


The mobility sector of India faces numerous challenges in the near future. The burgeoning market and increasing imports put a tremendous burden on the sector. At such a critical stage, the concept of Resource Efficiency has become increasingly relevant. Component manufacturers associated with ACMA can thus play a pivotal role in defining the future of the sector which accounts for a significant share in the country’s GDP. By taking the right steps and striving for resource efficiency, the component manufacturers can make a multitude of short term and long term gains which in turn will benefit the industry as a whole. The Training Manual introduces various tools that can be used for implementing these measures and highlights the economic, environmental and social gains that can be reaped by successful use of the same.

The manual provides explicit details about Material Flow Analysis, resource check list, cost calculator, energy auditing, financial calculator, Theory of Constraints and Whole Person Process Facilitation. These are essential tools that can help asses, measure and identify resource efficiency opportunities. Not only can Resource Efficiency help at a macro level, leading to huge material savings, it can also have a profound impact across the value chain, in particular micro, small and medium enterprises. Tools like the resource checklist, complemented with supporting tools and methods can boost the efficiency of production processes. The Cost-Calculator is an easy to implement software tool that would aid in the identification of potential savings. Energy Auditing can help reduce overall consumption and hence lead to significant saving in terms of cost. All these tools work in tandem and lead to considerable economic benefits. The financial calculator can be used to assess the implications for investors and help determine returns in short term as well as long term. Tools such as TOC have proved to be of immense use when it comes to identification of bottlenecks in production processes. Apart from the tools mentioned before, the manual also provides a detailed list of instruments that can help with on-site measurement. The instruments have multi-faceted purposes and are applicable to most industries and processes.

The manual later introduces the concept of Resource Efficiency Study which is an approach for companies to increase their productivity and contribute to social, environmental and economic sustainability. The first and most crucial step is the data collection for baseline analysis. The collection is followed by the analysis itself which is then followed by on-site visits for resource audits. Once the interventions are identified and prioritised, the implementation and follow-ups are carried out to conclude the study. The data and information collection exercise helps understand the resource use and waste generation in any company. A resource flow chart of the company can be created and the data can be used for baseline assessment as well as the resource checklist. The baseline analysis not only enables one to verify baseline data, it helps understand consumption patterns and thus pin-point focus areas for Resource Efficiency study. On-field visits allow the major inefficiencies in various processes to be highlighted. Interventions can be thus planned to counter these inefficiencies on a priority basis. The RE study enables one to compute estimated investments and savings of an intervention. Monitoring progress and staging regular follow-ups are key elements for successful implementation. The RE tools introduced earlier in the module are essential for any RE study. Using a combination of various tools and

Conclusion


instruments described in this manual, an organisation will have the ability to conduct a comprehensive RE Study and hence determine various bottlenecks.

The manual concludes by bringing to light real life practices being followed around the globe. It is evident that RE has provided massive gains in terms of realising environmental as well as economic goals. Most strategies include measures that aren’t capital intensive. Only after a high level of efficiency has been achieved through basic measures and good practices does one need to invest substantially. The practices showcased in the manual depict that very picture and provide certain guidelines that are relevant in the Indian context.


References Athavale, R. (2012). Theory of Constraints - Do It Yourself Kit for Small & Medium Size Enterprises for Projects.

Retrieved from: samples.leanpub.com/tocdiyprojects-sample.pdf

Bureau of Energy Efficiency. (2015). National Certificate Examination for Energy Managers and Energy Auditors. New Delhi.

GIZ. (2015). Market Evaluation for Resource Efficiency and Re-use of Secondary Raw Materials in the Automotive Sector. New Delhi: GIZ.

GIZ. (2016). Material Consumption Patterns in India: A Baseline Study of the Automotive and Construction Sectors. New Delhi: GIZ.

Goldratt, E. M. (1990). Theory of Constraints. Great Barrington, Massachusetts: North River Press.

Government of India. (2016). ‘Total Number of Registered Motor Vehicles in India during 1951-2013’. Retrieved from: https://data.gov.in/catalog/total-number-registered-motor-vehicles-india

Harrington, H. J. (2011). Streamlined Process Improvement. New York: Mc-Graw Hill.

KPMG. (2010). The Indian Automotive Industry: Evolving Dynamics. Retrieved from: https://www.kpmg.de/docs/Auto_survey.pdf

Ministry of Power. (2001). ‘Energy Conservation Act’. Ministry of Power, Government of India. Retrieved from: http://saeindia.org/content/mr-ivrao

Panwar, A., Nepal, B., Jain, R., and Yadav, O. P. (2013). Implementation of benchmarking concepts in Indian automobile industry: An empirical study. Benchmarking: An International Journal, 20(6), 777-804.

SIAM. (2016). Automobile Production Trends. Society of Indian Automobile Manufacturers. Retrieved from: http://www.siamindia.com/statistics.aspx?mpgid=8&pgidtrail=13

UNEP. (2010). United Nations Environment Programme 2010 Annual Report. Retrieved from: http://staging.unep.org/annualreport/2010/

Further Resources Websites

German RE Best Practices: http://www.ressourceneffizienz.de/praxis/best-practice-datenbank.html

EU Joint Research Centre: http://eippcb.jrc.ec.europa.eu/reference/

RUF Briquetting Systems: http://www.brikettieren.de/referenzen/aus-der-praxis/

VDI-ZRE RE Tools: http://www.resource-germany.com/

Genuine ContactTM: www.genuinecontact.net


Instruments http://www.amprobe.com/Amprobe/usen/Products/HVAC.htm

http://www.fluke.com/fluke/inen/products/thermal-cameras

http://www.testolimited.com/flue-gas-analysers

https://www.gemeasurement.com/flow-meters

http://tenmars.com/webls-en-us/TM-740.html

http://www.tenmars.com/webls-en-us/YF-170.html

http://www.fluke.com/fluke/inen/products/power-quality

Energy Auditing BEE Book 1: General Aspects of Energy Management & Energy Audit

http://www.em-ea.org/gbook11.asp

BEE Book 2: Energy Efficiency in Thermal Utilities http://www.em-ea.org/gbook12.asp

BEE Book 3: Energy Efficiency in Electrical Utilities http://www.em-ea.org/gbook13.asp

BEE Book 4: Energy Performance Assessment for Equipment and Utility systems http://www.em-ea.org/gbook14.asp

Theory of Constraints

§ Goldratt, E. M., and Cox, J. (1984). The Goal: Excellence in Manufacturing. Great Barrington, Massachusetts: North River Press.

§ Goldratt, E. M. (1994). It's not Luck. Great Barrington, Massachusetts: North River Press.

§ Goldratt, E. M., Fox, R. E. and Grasman, G. (1986). The Race. Great Barrington, Massachusetts: North River Press.

§ Goldratt, E. M. (1997). Critical Chain: A Business Novel. Great Barrington, Massachusetts: North River Press.

§ Goldratt, E. M. (2003). Production the TOC Way. Great Barrington, Massachusetts: North River Press.

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