Category Archives: Going Green

A Field Guide to Green Sourcing I

Environmental responsibility is no longer merely a regulatory burden, but a business imperative. As noted by Earl Sun, Jayanth Iyengar, and Max Goralnick of Deloitte Consulting in their “Practical Guide to Green Sourcing”, recently published in the Supply Chain Management Review, going green can save you green when your sourcing process capitalizes on sustainability opportunities. Energy and commodity costs may be soaring, but there are new product opportunities out there that save energy, water, and raw materials — and companies that use a green strategic sourcing process can not only identify these opportunities, but also achieve their margin improvement goals.

In their paper, the authors present a six-step green sourcing approach that is specific, actionable, and measurable in achieving financial objectives. The approach is not only designed to reduce costs, but to enhance a company’s image — which can result in increased sales from green-conscious consumers. Costs are reduced by replacing inefficient equipment and processes that, when combined, reduce energy, water, and input requirements at each step of the production process. Sales are increased by aligning a company’s corporate sustainability policy to what consumer’s want — “green” products and sustainable business practices.

According to the authors, the key to success is to translate the six-step strategic process for green sourcing into a sequence of tactical steps that can be executed successfully by your organization. This requires a focus on the keys to green sourcing, which they define as:

  • a broad focus on sustainability across all affected stakeholders
  • a recognition that complexity may increase and that the initial payback period may be longer in the short term
  • a data-driven cost-and-benefit modeling approach is required

The result of this focus is a green sourcing process that can create sustainable wins for your organization, which will result in (drastically) reduced costs in the long term, like those achieved by companies such as Adobe, Honda, HP, Interface Inc., Toyota, and Walmart. (See previous posts on Sourcing Innovation as well as Supply Excellence and 2 Sustain for details.)

Refining Sustainability, Spend Matters Style

In a recent Spend Matters Perspective, “Redefining Sustainability: Saving Money, Reducing Risk and Going Green”, my fellow blogger tackles the critical issues of sustainability and green, issues that this blog has been tackling since day one. Although there wasn’t really anything new in this perspective for someone who is well read on the subject (and who also follows blogs like 2Sustain), he did a great job of summarizing the current situation, and how most companies (responding to the headlines) tend to over-focus on (EU and China) regulatory requirements or emerging (Walmart) consumer expectations and how only those organizations that go beyond the hot-button issues and take a holistic view realize the true, quantifiable, benefits that sustainability has to offer a procurement organization – cost savings and cost avoidance.

According to Jason, despite the savings, cost avoidance and risk reduction benefits that companies stand to gain from pursuing green and sustainable procurement strategies, traditional sourcing approaches and mindsets often fall short of what’s necessary to achieve results. The primary reason is that classic strategic sourcing models — which often rely on sealed-bids, multi-round negotiations or reverse auctions — are inflexible and in fact limit the options that are on the table when it comes to achieving green and sustainable savings and returns. Furthermore,

  • Traditional sourcing approaches limit the ability of suppliers to suggest or propose alternatives to a standard specification
  • Rote process allows for limited internal analysis, brainstorming and scenario modeling outside of specific steps in the process
  • Strategic sourcing models typically — and for good reason — isolate the procurement function from the rest of the organization at specific points to enable open and transparent markets and pricing

However, cost savings and avoidance can often only be achieved through market competition in an apples-to-apples bid structure that allows the true TCO of each proposal to be calculated and understood. Furthermore, despite noting that traditional sourcing processes and tools can limit options rather than create new possibilities, Jason also notes that leaders use technology platforms to communicate information, capture data, run scenarios and weigh decisions. So obviously it’s not the tools that are flawed, since many leaders use the same tools as many followers, and it’s not the methodologies either, since leaders use RFXs, Auctions, and Scenario Optimization technology to accomplish bid collection, market competition, and true TCO analysis. So what is it? It’s the mindset, and the traditional application of the methodologies and tools by individuals who are not using the full power and extent of the methodologies and tools to “be all they can be”.

Fundamentally, good strategic sourcing can fully capture the costs and benefits of a sustainable sourcing option, compare it side-by-side with another sustainable sourcing option, and compare those costs and benefits side by side with non-sustainable sourcing options. Your processes do not have to be redefined, just refined to take a more holistic view. The first key to success is to not specify what you want, but instead specify what you want to do when composing an RFX. In other words, don’t specify the materials and fabrication process, but the desired functionality, interface, and minimum performance requirements. It’s the same approach you take when writing a good technology RFP (which DO NOT include the Spend Management RFPs that are just endless, or should I say useless, feature lists) and the same approach Tata Motors used when designing the Nano. They left the actual design and composition of all of their components to the suppliers. Instead of saying “two standard wipers, 12 inches and 11 inches, for driver’s side and passenger’s side, made of steel and teflon” they essentially said “a windshield cleaning and rain repellant system that plugs into an interface …” and instead of saying “a four cylinder 180 HP engine with … “, they essentially said “an engine capable of generating at least X HP …”. By taking advantage of supplier creativity and innovation, they were able to produce a better, more sustainable, vehicle at lower costs than they would have been able to design in-house.

The second key to success is to use a life-cycle-based Total Value Management ranking when evaluating bids that captures all cost and non-cost factors that are relevant (and that assigns each non-cost factor a virtual cost to generate traditional life-cycle TCO rankings that takes into account the non-cost factors to determine the optimal bids). It’s not just unit cost, shipping cost, duties and tariffs, and quality-related costs that come from waste and returns management, but avoided carbon-offset costs from a greener product, avoided maintenance costs because of a better product, avoided marketing costs because of a more-consumer friendly product, etc. And you look at the cost over an average product life-cycle, not just a contract life-cycle. If you plan to make, use, and / or sell the product for five years, you look at the expected costs over five years in figuring out your cost factors — not over the next six months. After all, as Jason notes, sustainability results from collaborative innovation, and this will often require longer term relationships with key supply partners and commitments to new, more sustainable, technologies and processes.

The Perspective outlines three additional strategies that leaders use to achieve sustainable sourcing results, as well as some of the cost savings that market leaders have achieved (and that they have, more or less, kept to themselves because they view it as a competitive advantage). It’s worth checking out.

A Great Solution to the Clean Energy Conundrum

According to a recent CNet Article, companies seeking to establish solar power farms, especially near protected wildlife areas, face a long, byzantine, government permit process. However, there are a large number of ideal locations for solar power farms in the south-western US which include 15 million locations contaminated by toxic waste.

The Environmental Agency, which has cleaned up 850,000 acres, has produced a map for Google Earth showing the potential for solar, wind, and biomass plants across 480,000 sites marred by toxic industrial waste and mining. It’s astonishing how many of these sites fall in excellent zones. Considering that the land, even if it is “cleaned up”, is not suitable for much else and the on-going energy crisis, which is only going to get worse, I think it’s a fantastic idea – and one of the best I’ve come across yet! So if you’re a corporation big enough to negotiate your own private energy contracts, I urge you to not only push your suppliers to move to green energy, but to consider investing in projects that use the cleaned-up sites, as such projects will likely clear red-tape faster, reduce our dependence on oil, and deliver savings to your bottom line. (After all, the land’s going to be cheaper than dirt!)

A Savings Template to Save Money Now with Green IT

During the summer slumber, I brought you two posts on how to green your data centers and keep more green in your bank acount and how to green your desktops and keep even more green in your bank account where I told you Green IT would save you bags upon bags of money. If you missed these posts while on vacation, I’d highly recommend getting to them sooner rather than later because, depending on the size of your business, you’re IT is likely costing you anywhere from thousands a month to hundreds of thousands a month more than it needs to – money you can start recapturing tomorrow by switching to Green IT today.

The simple truths of the matter are the following:

  • it costs more to power your average workstation or server over its useful life than it costs to buy it
  • your average workstation and server needs to be replaced every three years, or, at the very least, downgraded to supporting lesser intensity tasks

but, when you switch to Green IT:

  • power becomes a fraction of the cost, as a Green IT solution will normally be 60% to 90% more power efficient, depending on your needs
  • your hardware lasts twice as long – and ends up costing you much less on an annual basis (especially since green thin clients are cheaper than workstations!)

So how much will you save? It depends on how big you are and how many machines you have. The more machines, the more you save. Fortunately, it’s not that hard to come up with a high-level rough estimate. All we need to do is roughly calculate your current annual hardware and energy costs and your expected annual hardware and energy costs with a Green IT solution and calculate the difference.

We can estimate your current annual costs as follows:

  • regular_workstation_costs + regular_workstation_energy_costs +
    high-end_workstation_costs + high-end_workstation_energy_costs +
    server_costs + server_energy_costs

And we can estimate your expected annual Green IT costs as follows:

  • sunray_costs + sunray_energy_costs +
    CP20_costs + CP20_energy_costs +
    server_costs + server_energy_costs

Based on this, we can make some realistic assumptions and calculate a potential savings for an organization of 100 people with an IT staff of 20.

We’ll start by assuming we’re talking a traditional office, such as an insurance firm, where their IT needs are moderate. We’ll assume that only IT needs high-end workstations, that they are able to get by on 12 servers (which is on the low-end as some organizations have up to 2 servers per employee), and that they are located somewhere where energy is relatively cheap, at 10c/kWh (roughly the national average in the US as of June, 2008). We’ll assume that they can buy lower-end hardware and get regular workstations for 600 with low-end 10,000 hour 17″ LCD monitors for 200, higher-end IT workstations for 1,200 with mid-range 10,000 hour 21″ LCD monitors for 400, and get by on mid-range Dell servers at 3,000 a pop. Furthermore, we’ll assume more-or-less industry-average power requirements of 124 watts per hour per regular workstation, 372 watts per hour per higher-end workstation, and 638 watts per hour per mid-range server. We’ll also assume that these are good corporate citizens that turn their workstations off every night when they go home, that energy costs are only going to increase 7% per year, and that the organization gets three years of useful life out of a machine and four out of a monitor.

We’ll then assume that each regular workstation can be replaced with a SunRay thin client, and that each core on the virtualized server can support five clients; that each high-end workstation can be replaced with a CP20 thin client, and that each dual-core on the virtualized server can support five clients; and that there is a 6:1 consolidation ratio using virtualization technology. Making these assumptions, we calculate that this organization is overspending on IT by over 40,000 a year! Greening their IT would allow them to hire another office administrator or sales agent! Plus, they’re unnecessarily harming the environment! The energy used by 100 workstations in 1 year is equivalent to 88 barrels of oil or 4,318 gallons of gasoline and it’s production results in 38 tons of CO2 and 13 tons of landfill waste!

If we extend the calculation out over 3, 5, and 10 year time horizons, we see that the numbers become very significant very fast.

Years 1 3 5 10
Traditional IT Cost 61601 187642 314096 632442
Green IT Cost 21371 64654 108014 216837
Green IT Savings 40230 122989 206081 415605

And this is a low-end estimate! If the organization needs higher-end, and costlier, workstations that suck up even more energy, and its employees never turn them off, and if they can achieve an 8:1 ratio on the SunRay’s (which is obtainable if all the workstations are used for the majority of the time is word-processing and e-mail) and a 5:1 ratio on the CP20’s (which is obtainable with the right server configuration), the cost savings double to over 80,000 a year, and to almost 1,000,000 over 11 years! That’s an awful lot of green for your average small business with only 100 employees!

Years 1 3 5 10
Traditional IT Cost 107661 329552 552395 1114620
Green IT Cost 21987 66403 110883 222425
Green IT Savings 85674 263149 441512 892195

And these might even be lowball estimates for your organization, depending on your true IT needs and optimal configuration. A recent implementation by the Green Data Center reduced the total IT energy costs for a small company by 93% a year (which, for a company with 250 machines, translates into roughly 29,000 a year in energy savings)! Another study found that a local college could replace 500 machines and save 300,000 in hardware and energy costs per year! And since the implementation cost was estimated at 303,000, this organization had an ROI of only 12 months!

So how do you save money? Like I said before, you start with a green audit that results in an executable action plan that will allow you to save money as soon as you CFO gives you the green light. One company you can call is NCS Network, operators of the Green Data Center who have significant experience with Green IT and who have helped clients across North America.

Furthermore, if you call NCS Network and mention that you heard about them on Sourcing Innovation, not only will you get 10% off their standard audit quotes if you book before September 30, 2008, but they’ve guaranteed me that the first 10 callers who mention Sourcing Innovation will receive a free Green IT consultation. You can call them toll free at 1-877-GREEN-60 or send them an e-mail.

So Go Green today and save!

For you number crunching types, you can download the spreadsheet I used to do the calculations, which I’ve outlined below, and plug in your own estimates to get a ball-park of your savings potential.

The full calculation for each element of your current IT costs are:

  • regular_workstation_costs = number_of_regular_workstations * (cost_per_regular_workstation /useful_workstation_life + monitor_cost / useful_monitor_life)
  • regular_workstation_energy_costs = number_of_regular_workstations * avg_watt_per_hour * avg_hours_per_day * avg_days_per_year * avg_cost_watt_hour
  • high-end_workstation_costs = number_of_high-end_workstations * (cost_per_high-end_workstation / useful_workstation_life + monitor_cost / useful_monitor_life)
  • high-end_workstation_energy_costs = number_of_high-end_workstations * avg_watt_per_hour * avg_hours_per_day * avg_days_per_year * avg_cost_watt_hour
  • server_costs = number_of_servers * (avg_server_cost / server_lifespan)
  • server_energy_cost = number_of_servers * avg_watt_per_hour * 24_hours_per_day * 365_days_per_year * 2.22_data_center_energy_overhead_factor1 * avg_cost_watt_hour

The full calculation for each element of the green IT costs are:

    • sunray_costs = number_of_sunrays * (300_per_sunray / 7_years_useful_life + monitor_cost / monitor_useful_life)
    • sunray_energy_costs = number_of_sunrays * 7_watts_per_hour * avg_hours_per_day * avg_days_per_year * avg_cost_watt_hour
    • cp20_costs = number_of_cp20s * (600_per_cp20 / 7_years_useful_life + monitor_cost / monitor_useful_life)

    • cp20_energy_costs = number_of_cp20s * 25_watts_per_hour * avg_hours_per_day * avg_days_per_year * avg_cost_watt_hour
    • server_costs = number_server_cores * avg_cost_per_core / server_lifespan
    • server_energy_costs = number_of_server_cores * avg_watt_per_hour * 24_hours_per_day * 365_days_per_year * 2.22_data_center_energy_overhead_factor1 * avg_cost_watt_hour

 

When estimating server cores in your Green IT solution, use the following calculation:

  • server_cores = sunrays/clients_per_core + cp20s/clients_per_core + current_servers/consolidation_factor

where SunRay clients per core will usually be between 4 and 8,
where CP20 clients per core will usually be between 2 and 5,
and where consolidation_factor will usually be between 5 and 10.

Note that power for workstations can be as high as 1,000w/h, with low-end typically between 120w/h and 180w/h, mid-end between 300w/h and 500w/h, and maxed-out development or gamer machines requiring as much as 1,000w/h. Note that server power requirements generally start at around 500w/h for low end servers, 700w/h for mid-range servers, and typically go up to 1,500w/h (or more) for high-end servers. In comparison, depending on what type of processor the blade uses, and whether or not you have a rack-mount cooling solution, power requirements per core can go as low as 32w/h (using a Xeon-chip and rack-mounted water cooling).

1 In an average data center, 55% of the power utilization is due to overhead from lighting, air-conditioners, UPS, etc.

 

Green Your Desktops and Keep Even More Green in Your Bank Account

In yesterday’s post I asked you, as a supply and spend management professional, to take heed because you can save bags upon bags of money by forcing IT to Green your data centers – and please the grippies (green hippies) at the same time as you drastically reduce your energy requirements and, consequentially, your carbon footprint. But that’s not all you can do! You can also green your desktops and save more bags of money. Many more!

Even though many computer manufacturers are now releasing desktops that run on as little as 120W of power, which is much better than the 300W to 450W a workstation sucked up in years past, that’s still at least twenty (20) times as much power as a normal office workstation should be consuming when you consider that a Sun Ray 2 has a typical power consumption of 4W; and still at least five (5) times what a high-end developer workstation should be consuming when you consider that a IBM CP-20 only requires 25W. Now it’s true that these light-weight thin clients require virtualization and heavy-duty servers on the back end, but when you consider that one processor on a modern server can generally support four (4) users, and that modern servers will have four processors per core, and that mid range servers generally have four cores, that says that you can support up to sixty-four (64) users on one server! Now, it’s also true that this heavyweight server is likely to suck up 800W of power, but what’s more energy friendly: one 800W server and sixty-four 4W thin-clients or sixty-four 120W workstations? You guessed it, the heavy weight server with the light-weight thin-clients, by a factor of 86%! And if you already have a data center with under utilized servers configured for virtualization, you might not even need to add a server to replace your power-hogging desktops with light-weight thin clients.

Now I’m sure you’ve already come up with half a dozen objections (which could likely be augmented by your vendor of traditional fat-client desktops) as to why you can’t do this, including “I need my own environment“, “my data needs to be secure“, “I need fast response time“, “I need a local hard drive“, etc. but the reality is that you can do this and all of your objections are likely invalid. Here’s why:

  • you still get your own environment, it’s just stored on a server
  • your data is more secure because your server room is likely locked down tighter than most military installations, while anyone could walk in and walk out of your office with your desktop under their arm (but if they walk off with the SunRay, because it’s just a dumb terminal, they get nothing – as they can’t even access the device without an active smartcard and a connection to your network); in addition, you can lock everything down so that your employees only have access to the applications and data you allow them to access
  • modern virtualization environments allow for dedicated processor time-slices and resources to priority processes – so you can not only be guaranteed of fast response times, but more processing power than you could have on a desktop if you really do need it
  • these devices have USB ports and you can back up locally if you really need to; or, if security is an issue, you can remotely disable the capability by user account on the server and prevent data theft
  • plus, it reduces support requirements; since all workspace images are on the server, your IT can update them all at once on the server with one simple update command – no more walking around to every desktop to do an install (which is common even if you have network install capability, as a network admin will still have to go turn the machine on or reboot it if it locks up)
  • it reduces support requirements more than you think; with virtualization, the data image can be separated from the environment image, and if you mess up your environment, your network administrator can replace it with a clean copy in about 15 minutes
  • it reduces hardware requirements more than you think – as you can integrate with your VOIP-based telecom system if you desire
  • it reduces the amount of hardware you need more than you think, as you no longer need to buy your employees who need to work on the road or from home a laptop or second machine as they can pick up the thin client, take it home, plug it in to their high-speed internet connection, and connect to your network over a VPN with a properly configured smartcard; and, again, if the thin client gets stolen, you don’t lose any sensitive data as nothing is stored on the client
  • it reduces your energy requirement even more than you think, because most thin clients automatically power down to a sleep mode that requires less than 1W of power when not in use. An employee could accidentally leave one on during their month long vacation and it would consume less power than an average workstation would consume in an hour.
  • you’ll save a lot more money than you think you will; most office users only require office applications which run great on the SunRay, which can be obtained for $299; if you have developers using graphics, multimedia, or data intensive applications, then you’d need something like the CP-20 which can be obtained for $599. Compare that to an average workstation configuration of $599+ for an office worker and $1499+ for a high-end developer workstation and even factoring in the cost of a few servers, you save a bundle. Plus, you’ll get 6 to 7 years out of a thin client whereas a desktop typically only lasts 3 years.

Now, at this point, I hope you’re asking “How do I start?” and “How do I figure out how much money I really could save by helping my organization move to Green IT?. The answer is still to start with an audit that analyzes your current infrastructure and user needs and comes up with an optimal network and infrastructure design and configuration that uses best-of-breed technology to meet your current computing needs with less energy and less hardware investment then it would cost to simply keep operating on the same energy-inefficient model. Then you can replace your machines in phases, starting right away with the oldest, and watch the savings rack up year over year … as your energy and hardware costs will go down … way down!

Again, if you’re looking for someone to call on for help with this type of audit, I would again consider NCS Network. The first provider in Canada to offer a green data center solution, they have a lot of experience with Green IT technologies and have saved some clients as much as 75% on their annual IT-related costs (by simultaneously upgrading their data centers and desktops with optimal best-of-breed Green IT solutions). In one case, they reduced a client’s IT energy footprint by 94%! Imagine how fast your savings would rack up even if you were already fairly efficient and they found that efficiency could only be improved by half of that, or 47%. Run the calculations. I’m sure they’ll tell you what I’m telling you – green your IT and you will save bags of money – which is the one kind of green we all care about.

Furthermore, if you call NCS Network and mention that you heard about them on Sourcing Innovation and book an audit before September 30, 2008, they’ll give you 10% off of their standard rates.

In full disclosure, although I do not own any shares in NCS Network, or get any commission for referring you to their services, there is a partnership between NCS Network and the doctor‘s company, whereby the doctor may serve as their Chief Software Architect on a consulting basis when an NCS Network client needs a senior software architect and Emerich Winkler of NCS Network may serve as the doctor‘s Chief Network Architect on a consulting basis when one ofthe doctor‘s client needs a senior network architect. However, if you hire them, and don’t hire me, I get zip, zero, and zilch and there’s really no financial incentive for the doctor to recommend NCS Network to you.