John Deere's Next Harvest: Why You Should Be Investing in Diversity

A PENTON MEDIA PUBLICATION
NOVEMBER 2011
WWW.INDUSTRYWEEK.COM
HEAD
TExt p. 00
INSIDE:
THE HIGH COST OF
MANUFACTURING IN
AMERICA pg. 12
5 Technology
Developments
Poised to Change
Industry pg. 26
WHY YOU
SHOULD
BE INVESTING
IN DIVERSITY
pg. 32
John
Deeres
Next
Harvest
CEO Sam Allens quest for global
growth and strengthened U.S.
competitiveness pg. 22
IW0011_FC.indd 1 11/10/11 2:54:46 PM
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111IW.indd 1 11/7/11 11:22:21 AM
IW A PENTON MEDIA PUBLICATION VOLUME 260 NUMBER 11
NOVEMBER 2011
INDUSTRYWEEK/IW (ISSN 0039-0895) is published monthly by Penton Media Inc.,9800 Metcalf Ave., Overland Park, KS 66212-2216. Periodicals Postage Paid at Shawnee Mission,
KS and at additional mailing offices. Can.GST #R126431964. Canada Post Publications Mail agreement No. 40612608. Canada return address: Bleuchip International, P.O. Box 25542,
London, ON N6C 6B2. POSTMASTER: Send address changes to INDUSTRYWEEK P.O. Box 2100, Skokie, IL., 60076-7805. INDUSTRYWEEK adheres to the ethical and editorial guidelines
of the American Society of Business Press Editors (ASBPE), American Business Media (ABM) and The American Society of Magazine Editors (ASME). 2011 Penton Media Inc.
Manufacturers Agenda | By Pat Panchak ......................6
Reader Feedback ....................................................................10
Competitive Edge | By Stephen Gold ..........................12
Lessons from the Road | By Jamie Flinchbaugh .....14
Executive View | By David Peace...................................16
Leadership & Strategy | By Steve Minter .....................18
Facilities & Operations | By Jill Jusko ...........................20
Technology | By Steve Minter ........................................44
Supply Chain & Logistics | By David Blanchard .......45
Expansion Management | By Josh Cable ......................46
Ad Index ...................................................................................47
The Last Word ........................................................................48
InsideIW

GREEN TECHNOLOGY
38 I Big Green Machines
While consumer interest in alternative-fuel vehicles has been lukewarm, the commercial-
vehicle industry is shifting into high gear with green technology. I By Josh Cable

COVER STORY I COMPETI TI VENESS
22 I John Deeres Next Harvest
An enduring American icon has bold global ambitions. I By Josh Cable

TECHNOLOGY
26 I Future Now
Five technology developments changing industry as we know it. I By David Drickhamer
22
26
32
45
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V
E
R

P
H
O
T
O

C
O
U
R
T
E
S
Y

D
E
E
R
E

&

C
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.

SUPPLY CHAI N
32 I The Business Case for Supply Chain Diversity
Supplier diversity programs may offer more than a positive corporate image.
I By Jonathan Katz
2 IW I NOVEMBER 2011 I WWW. INDUSTRYWEEK. COM
IW0811_P2.indd 2 11/9/11 9:08:43 AM
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www.industryweek.com/facebook www.industryweek.com/twitter www.industryweek.com/linkedin
I guess I should have read the job
description for Offsite Tech Support
more closely.

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CONTI NUOUS I MPROVEMENT
To Get Lean in the Workplace, Get Visual VisualWorkplace expert
Gwendolyn Galsworth shares tips on developing a visual workplace.
www.industryweek.com/ReadArticle.aspx?ArticleID=25876
Whether You are Talking Lean or Continuous Improvement,
Problems are a Gold MineThey are our opportunity to get better,
says the director of lean enterprise at Greatbatch.
Six Steps Toward an Employee Recognition ProgramManufacturers
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ployee recognition.
Whats Being Done to Address the Lack of Skilled Workers?A
variety of education and training resources are currently being used in
order to fill the pipeline.

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Manufacturing Moves to Center Stage
Public-policy leaders are taking yet another look at manufacturings importance to
the U.S. economy. This time, lets make sure they get it right.
THE MANUFACTURERS
AGENDA
S
tarting my second stint leading INDUSTRY-
WEEK, Im heartened that manufacturings
importance to the U.S. economy once again
is on the public-policy agenda. It gives us true
believers an opportunity to state our case that the
idea of a new economy, one driven by some
new, breakthrough industry, does not mean that
manufacturing is any less important to the nations
economy. Itd be nice if we could convince the
public-policy makers, economists and business
leaders that the United Statesand any developed
economymust have a strong, resilient manufac-
turing sector as its foundation.
When I left IW in June 2006, too many leaders
viewed as inevitable manufacturings continued
erosion. They considered the decline a natural
next step of the U.S. economys evolution. China
loomed large. Offshore outsourcing boomed. And
the financial sector moved to the forefront as the
latest new U.S. economic engine.
It was a scenario wed seen played out before. In
the 80s, the services sector was declared to have
overtaken the manufacturing sector in importance.
Instead, manufacturers were a part of that growth,
expanding their businesses to become service provid-
ers and problem solvers, not just makers of product.
In the 90s, information technology was all the rage
but manufacturers embraced IT, deploying it in their
factories, employing it in their supply chains and
designing it into their products. In the 00s, global-
ization was to put the final nail in the coffin of U.S.
manufacturingbut manufacturers embraced glo-
balization, with the smart ones carefully outsourcing
production to offshore locations, while expanding
into new international markets.
Each of the new economy eras has been an op-
portunity for manufacturing companies in mature
industries to reinvent themselves, and leading U.S.
manufacturers have done so. Too bad many of our
public-policy leaders dont yet understand.
Which brings us to today. Time has allowed for
some earlier assumptions about the U.S. economys
evolution to play out, and its not progressing the
way many people thought it would. The financial
sectors growth has been exposed as a chimera;
the value it seemingly created has disappeared. (I
wonder: Is it a coincidence the degree to which the
financial bubble mirrors the earlier generations
Internet bubble?) The word reshoring has entered
business leaders lexicon. And Chinas destiny as
the workshop of the world doesnt seem so inevita-
ble. These realities are prompting many prominent
people to speak out about the need for a strategy to
strengthen U.S. manufacturing.
Ive been in this business long enough to know
that this recent attention on manufacturings eco-
nomic importance can be as short-lived as the many
manufacturing renaissances that preceded it.
However, Im thrilled to be leading a media group,
which from its beginnings as Iron Age and Steel
magazines, heralded manufacturings ongoing trans-
formation and stood steadfast in its belief in and
support of U.S. manufacturing. Through the years,
few organizations have been as consistent as IW has
in its message about manufacturings economic im-
portance, as well as in fulfilling its mission to find
and share the leadership approaches and manage-
ment strategies that strengthen manufacturers.
Best of all, as the new editor of IW, I will join
with other manufacturing stalwarts in the effort
to once and for all convince public-policy leaders
that manufacturing still drives the U.S. economy. I
hope youll join me.
EDITOR-IN-CHIEF
PAT.PANCHAK@INDUSTRYWEEK.COM
IW0011_P6.indd 2 11/8/11 2:24:07 PM
Reduce CO
2
emissions with
exact stops and starts
The automotive industry is constantly nding ways of
reducing CO
2
emissions, and developing more energy
efcient vehicles. One is the stop-start functionality,
where the engine automatically stops at trafc lights,
queues or stop signs and is instantly re-started at
green light.
SKF engineer Susanne Blokland and her SKF team
have made a key contribution to this technology; the
SKF Rotor Positioning Bearing. A magnetic eld from
this bearing provides the engine control system with
the rotors exact angular position, thus enabling the
engine to be conveniently re-started. The bottom
line is signicantly reduced CO
2
emissions. Up to
30 percent in heavy city trafc. And fuel consumption
may be cut proportionally.
Its another great example of knowledge engineer-
ing at work. Find out more at www.skf.com/poke
The Power of Knowledge Engineering
Stop-start functionality Susanne Blokland, SKF SKF Rotor Positioning
Bearing
111IW.indd 7 11/7/11 2:30:39 PM
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IW1011_P8.indd 8 11/10/11 2:51:57 PM
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ReadeR Feedback
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The elephanT In The Room
Re: Shortage of Skilled Workers Taking its Toll
on U.S. Manufacturers, http://www.industry-
week.com/ReadArticle.aspx?ArticleID=25820
I have seen this vein of article in the last
several years in IndustryWeek and other
places, yet nobody will address the el-
ephant in the room.
I have worked in skilled manufacturing
for 25 years and am taking college classes
to get away from a field I love. I read with
some anger when the CEOs of large corpora-
tions complain they cant find bright, good
help. Three years ago I wrote a college term
paper on executive compensation and was
appalled to find that during the prior 15
years, skilled labor gained a total of 4% wage
growth (with inflation this is a serious loss
of buying power); during the same time, cor-
porate CEOs wages grew several hundred
percent (no, I am not a socialist).
I am quite aware that when it comes to
job satisfaction, wages are not at the top of
the list, and that satisfaction is related to
retention. But why would these CEOs think
the brightest and best would want to go into
a field that loses buying power every year?
Once invested in a field, it is difficult to
start over. But if you are looking at careers
to start, you avoid fields where the upper
management continues to make huge raises
while the skilled worker moves toward
poverty.
Bret Clikeman
Via the Internet
GoInG To The Gemba
I enjoyed Going to the Gemba (Sep-
tember 2011) by Jamie Flinchbaugh. In one
organization that I was employed with for
three great years, they practiced gemba
every year for every salaried individual.
Each year I worked there, I experienced
a week in a different function. One year I
performed that task in accounting, verify-
ing accounts payable and the methodology
that they established to reduce the time in
filing receipts. The second year I worked in
the service department, servicing returned
units to correct what failed. I recorded
what failed to determine why for engineer-
ing to review and consider improvements.
The last year I was there I performed the as-
sembly of the smallest unit they produced.
While working with an individual there,
I was able to correct the problems and
thereby eliminate waste as well as increase
the productivity.
This to me is gemba. Not only walk-
ing around, but performing with a
hands on approach.
Craig Tallar
Via the Internet
IW0911_10.indd 10 11/7/11 1:43:18 PM
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Attending a Roundtable is
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111IW.indd 11 11/7/11 2:37:34 PM
The (High) Cost of Manufacturing in America
The United States is one of the most expensive places on earth to manufacture products. Heres why.
The good news is that a growing number of policymakers
recognize the significant role the sector plays and have started
talking about ways to reinvigorate manufacturing on these
shores. But political talk is cheap, and worse, it can serve as
a mere smokescreen. While American politicians point to all
sorts of challenges facing manufacturing today, they rarely fo-
cus on the factors they can most readily influence. The factors
they, in fact, have in many ways been responsible for creat-
ing. The factors that make the United States one of the most
expensive places on earth to make a product.
This fall, MAPI, in conjunction with NAMs Manufactur-
ing Institute, undertook an analysis of production costs in
the United States relative to its top nine trading partners.
We published an initial groundbreaking report documenting
these underlying structural costs in 2003, and again in 2006
and 2008. This latest effort by MAPI economist Jeremy Leon-
ard has found that despite the talk, little has changed over the
past decade. In fact, the climate has worsened.
We found that structural costscorporate tax rates, em-
ployee benefits, tort litigation, regulatory compliance and
energyare continuing to slowly eat away at the ability
of U.S. manufacturers to compete effectively in the global
marketplace. While manufacturers face a host of challenges,
the data demonstrate that domestically imposed costs by
commission or omission of governmentfurther undermine
our ability to compete by adding at least 20% to the cost of
making stuff in this country.
U.S. policymakers may pay lip service about the need to
build a better business climate for manufacturers, but theyve
allowed these underlying cost pressures to undercut U.S.
manufacturing competitiveness. Whats especially frustrat-
ing in Leonards findings is that if it werent for these struc-
tural nonproduction costs, American manufacturers would
enjoy a cost advantage over virtually all of their industrial
competitorsand would have costs on par with such mid-
dle-income trading partners as South Korea.
The single most significant drag
on manufacturing competitiveness is
the United States high corporate tax
ratean average federal-state statutory
rate of 40% that has not changed in
decades. By standing in place while
other countries reduce their own tax
rates, the United States continues fall-
ing behind. On a trade-weighted basis,
the U.S. rate is 8.6 percentage points
higher than its nine largest trading partners, a substantial de-
terioration from the 7.8 percentage-point differential in 2008
and the 5.6 percentage-point differential in 2003. This repre-
sents the single most important piece of the total structural
cost burden on U.S. manufacturers. Only Japanese manufac-
turers endure a higher corporate rate, while those producing
goods in Taiwan, South Korea and China enjoy significantly
lower rates than U.S. manufacturers.
The next largest cost burden on U.S. manufacturers comes
in the form of employee benefitshealth care costs and pen-
sions, primarily. While fiscal pressures overseas on publicly
funded health systems have over the past decade narrowed
the gap between the social insurance costs borne by U.S.
and overseas manufacturers, Leonards most recent analysis
shows that gap increasing again. Employee-benefit costs in
the United States today are 5.7 percentage points higher than
those of the nine largest trading partners, compared with 3.6
percentage points in 2008, a reflection of price increases for
health care services and insurance premiums well in excess
of overall inflation. As a percent of manufacturing compensa-
tion, health care costs have risen from 7.2% in 2001 to 9.2%
in 2007 to 9.7% this year. All this even before the Affordable
Care Act, which promises to increase prices for companies
even more, takes full effect.
In addition, the cost disadvantage with our major trading
partners in tort costs is 1.6 percentage points, and in pollution-
abatement costs is 1.8 percentage points. Only in the area of
energy costs did MAPI and NAM find a cost advantage for U.S.
manufacturers, of just under one percentage point.
If ever there were a wake-up call for U.S. policymakers
about the costs they continue to impose on U.S. manufactur-
ers, this is it.
Stephen Gold is president and CEO of the Manufacturers
Alliance/MAPI, an executive education and business re-
search organization in Arlington, Va. (www.mapi.net).
THE COMPETITIVE EDGE
B Y S T E P H E N GOL D
U.S. manufacturers were hammered in the recent Great Recession. While
the economy as a whole contracted 5.1% between December 2007 and June
2009, the manufacturing economy fell by more than 20%. And although
its sharp rebound during the initial phase of the recovery provided enough
steam to keep a struggling U.S. recovery from backsliding, the factory sector
affected by the myriad challenges that have arisen in 2011will, by the end
of this year, likely have clawed only halfway back to its prerecession peak.
IW0011_12_REV.indd 12 11/8/11 4:09:35 PM
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111IW.indd 13 11/7/11 2:41:17 PM
YOU SHOULD CONSTANTLY BE ASKING: WHAT DO WE
NEED TO ADD? What do we need to drop? What do we need
to modify?
Building Manager Standard Work
Standardization can help you free up time and use it more proactively.
Management is similar; its highly variable from day to
day, but consistency and the ability to improve are excep-
tionally valuable. Management Standard Work, sometimes
misleadingly called Leader Standard Work, can be a pow-
erful mechanism to create alignment, build consistency,
improve management and shift from reactive to proactive.
1. 5S your time. The first steps of 5S are to get rid of
what you dont need, and organize what you do need. You
should do the same with your time. Too much of your time
is consumed based on nothing more purposeful than hab-
its. We spend our time the way that we do because thats
how weve always spent our time. But know what you
would replace it with. You shouldnt replace your newly
found free time with just more email. You should be doing
something proactive with it.
2. Determine the key control points. The real
benefit of management standard work is ensuring that
were doing the proactive activities that keep us out of the
firefighting mode. We call these the control points. We of-
ten call manager standard work Control Point Standardiza-
tion. These control points are the proactive points in our
system that ensure good outcomes. To accomplish this, we
need a clear understanding of cause and effect in our sys-
tems and processes. It will never be perfect, but we must
determine the proactive checks and activities that ensure
good outcomes.
If you consider yourself as an example,
there are control points that you know are
proactive. Some of them are checks, such
as monitoring your blood pressure or cho-
lesterol. Some of them are activities, such
as exercising. Managing the right frequency
of these control points has a significant im-
pact on the overall outcome, your health.
3. Dont standardize the obvious
and routine. This is less of a task and
more of a task to avoid. However, its the
most common mistake that I see when or-
ganizations engage in manager standard
work. Dont build standards for things that are already
routine. The purpose of standard work is to help build a
consistent practice. If you already have a routine, then you
already have a consistent practice of the best kind.
You shouldnt need to put on your daily checklist to
brush your teeth. You hopefully do that without the re-
minder or paperwork. You dont need the reminder to
check your e-mail. Those would be silly, yet I repeatedly
see efforts to standardize things that are already routine.
4. Make it dynamic. The second most frequent
failure mode on manager standard work is designing
it and then leaving it alone as a static standard. Man-
ager standard work should change frequently. It should
change based on business conditions, new initiatives or
improved stability.
Something might move from a daily check, to weekly,
to monthly as it proves itself to be stable and incontrol.
If you change a process, you might add increased checks
into process standards in that area. You should con-
stantly be asking: What do we need to add? What do we
need to drop? What do we need to modify?
Manager standard work is one of the harder practices
to get right. We spend a lot of time coaching on it. Dont
start until youre ready to commit to get it right. But if you
treat the process as continuous experimentation, you can
adjust and improve and turn it into a true competitive
advantage.
Contributing Editor Jamie Flinchbaugh is a co-founder and partner of
the Lean Learning Center in Novi, Mich., and the co-author of The
Hitchhikers Guide to Lean: Lessons from the Road.
LESSONS FROM THE ROAD
B Y J A MI E F L I N C H B A U GH
Standardization is one of the fundamental elements of lean
transformation. Its often the first step of problem solvingun-
derstanding if there is a standard and if it is working. Standardiza-
tion is applied with rigor to operational processes, yet many op-
portunities in knowledge work and management work remain.
People resist building standards in knowledge work because of
natural variation. Yet if you already have variation, why would
you want to add more by having no structure or routine? No,
you cant write a standard that says, Ask question 1 of the cus-
tomer90 seconds for a salesperson, but you can build a list of
the most effective questions to be asking. Thats standardization.
IW0011_14.indd 14 11/2/11 2:11:24 PM
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things like track employee time and set schedules. Streamline HR and payroll processes. Hire better people. And make better decisions.
All the tools you need to manage your workforce, from the company that is proving workforce management doesnt have to be so hard.
TIME & ATTENDANCE SCHEDULING ABSENCE MANAGEMENT HR & PAYROLL HIRING LABOR ANALYTICS
VISIT KRONOS.COM/STORIES7
2011 Kronos Incorporated. Kronos and the Kronos logo are registered trademarks of Kronos Incorporated or a related company. All rights reserved.
PEOPLE WHO ARE WRONG
= LOTS
TO LEARN HOW COMPANIES OF ALL TYPES AND SIZES USE KRONOS TO MAXIMIZE THEIR WORKFORCE
111IW.indd 15 11/7/11 2:44:04 PM
Strategies for Success in Product Innovation
Two strategies prime your pipeline for faster, more profitable product development.
So, how does product innovation benefit a manu-
facturer? Product innovation and the developments
that flow from it enable companies to differentiate
themselves in the marketplace. Product innovation
opens the door to increased brand equity, faster tech-
nology adoption rates, larger returns and an environ-
ment primed for further innovation. It also makes
work fun. Associates are challenged, invigorated and
feel appreciated when they know their best ideas will
become realityfor everyones benefit.
Ill describe two key strategies for success in prod-
uct innovation. One, determine the relationship
between technology development and product de-
velopment in your company and how they can best
work together. And two, follow best practices in
matching technology and product development pri-
orities with customer needs.
The Yin and Yang of Technology
and Product Development
Technology development and product develop-
ment are different processes, but they are interre-
lated, interdependent and often occur in parallel. In
technology development, companies develop mul-
tiple approaches to overcoming a problemgener-
ating, evaluating and iterating ideas rapidly through
prototyping and piloting. By comparison, in product
development, a single best solution is developed
and implemented as efficiently as possible.
Both activities align with an organizations mar-
keting goals for product development. The market
aspect is important because innovation is just inven-
tion until value is realized.
The first strategy for successful product innova-
tion is establishing how technology development
and product development will best work together in
your organization. One way is to create separate but
parallel tracks for the two processes. In the technol-
ogy development track, companies explore alterna-
tive solutions for specific technological challenges.
The resulting solutionsnuggets of information
are stored so they can be drawn upon
later. In the product development track,
the company creates new products, new
product lines or enhanced products.
The two tracks must interact, with
product development engineers draw-
ing from the advancements in the tech-
nology storehouse and technology de-
velopers learning about new challenges from the
product developers. This interactive process en-
hances the time-to-market, cost effectiveness and
performance of the products.
For example, responding to a need in the semi-
conductor market, our company set out to develop
a new ultrahigh-purity diaphragm valve. Our tech-
nology development team had been working on a
variety of new assembly and sealing methods for
potential use in valves. Drawing on this work, our
product development group was able to quickly
develop and commercialize a new valve that met
market demand.
Collaboration is essential for success in the strat-
egy outlined above. For example, product develop-
ers are vital to identifying problems and opportuni-
ties for technology development. The interactive,
two-track approach recognizes the incremental na-
ture of innovation, in which major advancements
are often the result of existing technologies com-
bined in new ways.
Best Practices for Meeting
Customer Requests
Companies realize innovations through a combina-
tion of market research, internal idea generation, cus-
tomer requests and a variety of other factors. They also
frequently discover innovative solutions by chance.
Manufacturers typically maintain a balance be-
tween market- and customer-driven innovation ef-
forts. Market research will identify broad market
needs or specific market demand that will drive
innovation, and resources will be devoted to sup-
port organizational goals for product and technology
development. Customers bring specific problems to
be solvedsometimes without understanding what
the problem is or realizing a solution is possible.
Customer requests represent an external force driv-
ing innovation. Succeeding in customer-driven prod-
uct innovation can be made easier if companies fol-
low a set of four best practices centering on clear and
EXECUTIVE VIEW
B Y D AV I D P E A C E , S WA GE L OK C OMPA N Y
Ever y manuf act ur er must def i ne i t s appr oach t o i nnova-
tion. At some companies, including Swagelok Co., innovation is a
core value. The innovation mindset extends across the entire enter-
prise at these companies, from the business offices to the shop floor.
IW_16_17_47.indd 16 11/7/11 1:40:23 PM
WWW. INDUSTRYWEEK. COM I NOVEMBER 2011 I IW 17
open communication between the par-
ties. Following this disciplined process
is the second strategy in creating prod-
uct innovation that delivers results.
1. Gather all the facts. Creating a so-
lution for a customer challenge begins
with a deep understanding of the cus-
tomers needsthe real needs, not just
the stated needs. Developers should
not simply respond to the request.
They need to first ask a series of in-
depth questions to clarify the context,
which may include: Why do you need
the requested product or technology?
How does it fit into a complete system?
What processes affect its performance?
What alternatives have worked and/or
failed? Gaining comprehensive insight
may reveal that a more complete solu-
tion exists rather than one that simply
fulfills the customers initial request.
2. Get the right parties together and
on the same page. Open communica-
tion is vital to arriving at the best pos-
sible solution for customer-centric de-
velopment challenges. Often, customers
share their initial requests with market-
ing and sales contacts. It is important
for these parties to facilitate collabora-
tion between technical groups on both
sides to ensure the proper handoff of
information and encourage peer-to-peer
communication, which adds richness to
the relationship and helps to ensure the
most relevant solutions.
Engineers from both organizations
need to share detailed application in-
formation and explore technical chal-
lenges together as early in the design cy-
cle as possible. Bringing people together
who speak the same technical language
encourages information sharing, brain-
storming and efficiency, while enabling
the parties to gain as in-depth an under-
standing of the project as possible.
3. Stay ahead of the curve. Technol-
ogy developers have a greater chance of
successfully meeting future customer
requests when they proactively ex-
plore potential market opportunities
and applications. As discussed earlier,
one way to structure these proactive
efforts is to set up a technology de-
velopment track operating separately
from but parallel to product develop-
ment. Developing solutions for specific
problems within emerging technolo-
gies in advance of customer demands
ensures that developers can properly
apply those solutions when needed to
meet application requirements. In do-
ing so, developers will be able to re-
spond more quickly and effectively to
customer needs.
4. Prototype early and often. De-
veloping early prototypeseven for
individual componentsenables de-
velopers to test and refine parts before
moving too far down the product de-
velopment path. Techniques can in-
clude virtual prototyping and virtual
design analysis. Developers should test
concepts and engage in continuous fea-
sibility studies throughout a project
to determine the potential for success
or failure. Then, as development pro-
c o n t i n u e d o n p g . 4 7
IW_16_17_47.indd 17 11/7/11 1:40:24 PM
18 IW I NOVEMBER 2011 I www. INdustRywEEk. cOM
G
rowth is the magnet that is
causing U.S. manufactur-
ers to expand their opera-
tions in Brazil. Now the worlds
seventh-largest economy, Brazils
GDP in 2010 grew at a 7.5% rate.
Over the next two years, the Orga-
nization for Economic Cooperation
and Development predicts, growth
will continue at a healthy 4%
rate. A burgeoning middle class is
generating growing demand for au-
tomobiles, televisions, computers
and other products that a genera-
tion ago were out of reach for many
Brazilians.
Palladium Energy is one of the
U.S. firms benefiting from the Bra-
zilian domestic market. The com-
pany produces lithium-ion battery
packs and power adapters for
cellphones and other electronic
devices. Approximately 50% of its
business is in Brazil, where it has
been producing components for
global customers for 20 years.
We love the Brazilian mar-
ket, says Art Salyer, Palladiums
CEO. Every single product that
we make in Brazil stays in Brazil.
The middle class continues to
grow exponentially. The need for
cellphones and higher-end elec-
tronic devices is skyrocketing. It is
a very dynamic country.
At its factory in Manaus, a rural
area in northern Brazil where the
government is encouraging devel-
opment, Palladium employs any-
where from 800 to 1,200 employ-
ees. Salyer says with unit volumes
increasing 25% to 35% a year, he
expect employment to rise closer
to 1,500 in 2012.
Assembling a lithium-ion bat-
tery is a fairly complicated task.
Putting together a power adapter
with 100 or so electronic parts is
very complicated, notes Salyer.
These are high-tech, clean jobs
and all of the product goes into
the Brazilian economy.
Palladium pays close attention
to Brazilian requirements for do-
mestic content production and for
what types of components may be
imported as subassemblies or only
as individual components. Failure
to comply with these require-
ments can result in the levying of
very expensive duties. Salyer says
the companys representatives in
Brasilia have been meeting with
government officials to determine
what content requirements will
be imposed in the coming year on
tablet PCs.
On top of that, 90% of com-
ponents come from AsiaChina,
Japan, Korea, Salyer points out.
It requires enormous logistical
planning to bring hundreds of
parts across the ocean, through
customs process and meet varying
customer requirements. Supply
chain challenges are what we are
really good at.
Fueling a Growth Economy
Recent discoveries of mas-
sive oil reserves off the Brazilian
coastline offer opportunities for
a variety of U.S. companies. Esti-
mates put these reserves as high as
80 billion barrels of oil and thrust
Brazil into the top 10 nations in
terms of oil reserves.
In October, the Commerce De-
partment sponsored a U.S. pavil-
ion at the first Offshore Technolo-
gies Conference in Rio de Janeiro.
More than 80 U.S. firms exhibited
their products and services as part
of an effort to tie into the oil and
gas industry in Brazil.
Brazils growth requires con-
tinuing infrastructure improve-
ments and that also is benefiting
U.S. manufacturers. For example,
in October, Deere & Co. an-
nounced that it plans to build two
factories in Indaiatuba, Sao Paulo.
Deere will build one factory to
manufacture backhoe loaders and
partner with Hitachi Construction
Machinery on a second facility to
produce excavators. The invest-
ment will total $180 million.
Marc Ragazzi, a vice president
and operations manager for prop-
erty insurer FM Global based in
Sao Paulo, points out that as U.S.
companies build some of the most
modern factories in the world in
Brazil, they want the same levels
of property protection that they
employ in the states. That has
helped FM Globals business in
Brazil double in the last three
years. Summing up how a lot of
U.S. businessmen view Brazil,
Ragazzi observes, Its been pretty
exciting.
leadership & strategy
B y s t e v e mi n t e r
Brazil is Booming
For U.S. manufacturers, the country for the future has arrived.
IW0011_P18.indd 18 11/8/11 2:26:35 PM
Eaton
Super Charges
Performance
With ATS.
OUTSOURCING PRODUCTION MAINTENANCE TO ADVANCED TECHNOLOGY SERVICES HELPS
ACCELERATE MANUFACTURING PERFORMANCE AT EATON SUPERCHARGER FACILITY. The
global leader in superchargers for some of the most prestigious brands in the automotive industry
has reduced downtime on critical machines by over 50% since outsourcing production maintenance
to ATS. ln three short years through a proactive maintenance program, Eaton Athens has been able
to realize over $900,000 in cost savings and improve on-time delivery to its customers. Let ATS help
you drive more cost savings to your bottom line. Call 800.328.7287 for a free assessment.
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The ability of ATS to deliver increased
machine up time and a signicant
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impacted the Athens manufacturing
plants performance and bottom line.
SENIOR LEADERSHIP TEAM
EATON ATHENS, GEORGIA
The Guide
To Increased
Asset
Performance
Through Outsourcing Production Maintenance
111IW.indd 19 11/7/11 2:45:41 PM

A
bsent employees are
non-productiveand
costlyemployees. Just
look at the numbers: Incidental
and extended disability absences
add up to 8.7% of payroll, accord-
ing to a Mercer consulting group
survey conducted in 2010, while
total costs for all major absence
categories can average 35% of
base payroll. For manufacturers,
lost productivity also can
be measured in pro-
duction units not
assembled, finished
goods not loaded for
delivery, inventory
goals not achieved
and goods not sold.
Its a challenge not
lost on the Schwan
Food Co., the Marshall,
Minn.-based maker of branded
frozen food products that include
Red Baron, Freschetta and, of
course, Schwans. The company
has taken a fairly aggressive ap-
proach to its return-to-work pro-
gram following disability leave,
as well as its associated stay-at-
work component, says Norma
Streich, benefits manager.
If you have an employee you
can keep at work, whos already
trained, already knows their job
and is productive at their job,
youre way ahead versus possibly
having to bring in somebody new
or a temporary employee, train-
ing them and then waiting for
their productivity level to reach
the [level] of that other person,
she says.
The Schwan Food Co.s already
proactive approach to returning
or keeping employees on the job
needed a boost in recent years as
disability cases grew more com-
plicated. Streich says the company
determined it needed a partner in
the cause, one that could bring
new and innovative ideas, help
us look at things from a different
viewpoint. The assistance came
via insurance carrier the Standard,
which provides Schwans disabil-
ities coverage, and the Standards
Workplace Possibilities program.
Workplace Possibilities part-
ners with its customers to keep
employees at work and produc-
tive, typically placing a consul-
tant at the workplace. The spe-
cific approach and solutions are
tailored to a customers particular
needs and culture. For example,
at Schwan:
A group of employees at one
manufacturing plant had a com-
mon blood disease that put them
at risk for several complications,
particularly given that their job
required them to stand for a sig-
nificant part of their shift. They
brought their concerns to the at-
tention of Schwan, which turned it
over to the experienced consultants
from Workplace Possibilities. The
solution: The impacted workers re-
ceived special shoes and seamless,
padded socks to help with blood
circulation and hopefully prevent
the types of medical issues that
would lead to absences.
A woman with vision prob-
lems received special equipment
that allowed her to continue in her
job.
A forklift operator in a
Schwan distribution center had
neck surgery that prevented him
from turning his head. Learning
of the accommodations imple-
mented for the woman with im-
paired vision, and wanting to re-
turn to work, he inquired about
possible accommodations for his
limitations. The workplace pro-
gram developed a special helmet
with bicycle mirrors that allowed
him to return to work, and addi-
tionally addressed a safety issue,
Streich says.
Schwan began implementing
the program in 2009, taking a
phased-in approach that began
with two locations. That was
our way of proving the program,
Streich says. From April 2009
to December 2009, the locations
were able to show $200,000 in
savings, not including potential
costs associated with hiring tem-
porary employees, Streich says.
The program continues to be
rolled out at additional facilities.
The benefits manager says the
company had hoped to involve at
least 10% of its disability cases in
the Workplace Possibilities pro-
gram; the percentage has been
significantly higher. In addition,
she says, the program reviewed
one entire facility and made sig-
nificant changes that exceeded
Schwans expectations.
Streich makes clear that man-
aging disability claims was an
important, but not the sole, driver
behind the companys determi-
nation to augment its return-to-
work program. We also know
that if you have very productive,
engaged employees, they are go-
ing to stay with you longer. And
then we are not losing that expe-
rience or having that turnover,
she says.
FACILITIES
& OPERATIONS
B Y J I L L J U S K O
How Not to Lose a Productive Employee
The Schwan Food Co. finds the right recipe for driving down costs related to disability ab-
sences and keeping skilled workers on the job.
We also know
that if you have
very productive,
engaged employ-
ees, they are go-
ing to stay with
you longer. And
then we are not
losing that expe-
rience or having
that turnover.
Norma Streich,
benefits manager,
Schwan Food Co.
IW1011_facilities_20.indd 20 11/10/11 2:53:53 PM
CAUTION
!
SITE CONTAINS STRONG
LANGUAGE AND ADULT
THEMES INVOLVING
ENTERPRISE INTEGRATION
InFusionJourney.com
Join the journey
Integrate new capabilities while extending the value of current assets.
Avantis Eurotherm Foxboro IMServ InFusion SimSci-Esscor Skelta Triconex Wonderware
Copyright 2011. All rights reserved. Invensys, the Invensys logo, Avantis, Eurotherm, Foxboro, IMServ, InFusion, Skelta, SimSci-Esscor, Triconex and Wonderware are trademarks of Invensys plc, its
subsidiaries or affiliates. All other brands and product names may be trademarks of their respective owners.
Real Collaboration. Real-Time Results.
TM
111IW.indd 21 11/7/11 2:47:05 PM
As John Deere closes in on its 175th anniversary, the iconic
American brand is poised to reap rich rewards from the
global population boomwhile playing a leading role in
sowing the seeds of U.S. competitiveness.
John Deeres
Next Harvest
competitiveness
B y j o s h c a B l e
S
am Allen asserts that John Deeres portfolio of farm and con-
struction equipmentfueled by aggressive R&D investment in
recent yearsand expanded global footprint uniquely posi-
tion the company to address the worlds growing need for
food, shelter and infrastructure.
As chairman and CEO of Moline, Ill.-based Deere & Co. (which cel-
ebrates its 175th anniversary in 2012), Allen not only is leading John
Deeres charge into global markets, but he also is a central figure in
the efforts to ensure that U.S. manufacturing has the tools and
policies to compete on a global stage in the 21st century and
beyond.
Since January 2010, Allen has chaired the nonprofit
Council on Competitiveness and has been working
with other members of the councilfrom Applied
Materials CEO Michael Splinter to MIT President
Susan Hockfieldto craft a national manufacturing
strategy. The group will unveil the strategy on Dec.
8 as part of the councils National Manufacturing
Competitiveness Summit in Washington, D.C.
You couldnt have a better company leading
the [councils] 21st century manufacturing initia-
tive than Deere, says Deborah Wince-Smith,
president and CEO of the Council on Competi-
tiveness.
Earlier this month, Allen spoke with Indus-
tryWeek about John Deeres global strategy
as well as key competitiveness issues affect-
ing the company and U.S. manufacturing.
IW: One of Deeres mantras is that its
no longer business as usual for the com-
pany. What does this mean?
SA: That really comes from our re-
vised strategy that we rolled out
22 IW I november 2011 I www. InduStryweek. com
IW1011_P22_24.indd 22 11/10/11 1:13:01 PM
Now assembling
products your way.
Because we offer custom assemblies, were able to tailor our products
to give your company exactly what it needs. It might be as simple as a
routine assembly, or as comprehensive as an engineered, assembled
and tested uid system. Our drive to deliver on Innovation is why weve
invested so many resources into helping our associates understand a wide
variety of applications. So with Swagelok
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in 2010. We committed that were going to double the [com-
panys sales] in the next eight years, and we said that the criti-
cal enablers of that are the macroeconomic trends that are very
supportive of our two key businesses.
So in the [agriculture]-equipment space, we talk about the
fact that between 2009 and 2050, the world is going to have to
double food output on basically no more than 20% more land.
Thats going to require a lot of high-production, high-efficiency
agricultureand thats a Deere sweet spot.
We also talk about the fact that the worlds population will
grow to 9 billion people by 2050, and 70% of that will be in
an urban setting, a lot of that in Asia. And therefore it will need
a lot of infrastructure, which is our construction-equipment
business.
So not being business as usual means that were very fo-
cused on growth and globalizing the businessnot just being a
U.S.-centric business, if you will.
IW: To support that global strategy, Deere has made a slew
of announcements about building new factories and expand-
ing capacity in Brazil, China, India and Russia. As chairman
of the Council on Competitiveness, do you get much backlash
from this, and how do you usually respond?
SA: Let me first put it in context, because I do get this a lot.
In the last decade, 57% of our total investment has been in
the United States. And a lot of what gets lost on people is well
announce that were spending $140 million to build a new set
of factories, lets say in China. But when we announce that
were spending $140 million to completely redo our foundry in
Waterloo, Iowa, the greenfield always tends to get more atten-
tion. But redevelopment is just as important [as greenfields],
and from our perspective, we still do invest a lot in the United
States.
What a lot of people just do not appreciate with globaliza-
tion and the population growth and GDP growth thats taking
placespecifically in Asia and in Africais that if you want
to compete, if you want be a part of it, you have to be there.
Youre not going to play, for example, in the largest market in
the world, which is China, by importing everything into that
market. It isnt going to work; you cant get a competitive cost
structure.
And so its not a question of jobs here versus jobs there. Its a
question of if youre not going to set up and compete there, you
dont even have that opportunity to grow. If you dont have that
opportunity to grow, it isnt going to help you over here. And
in fact, you know that companies that are growing over there
eventually are also going to try and compete over here.
The best way Ive always found to compete against that type
of competitor is to be in their home market and win in their
home market, because if you can win in their home market,
you know you can win in your home market.
IW: Shifting back to Deeres home market, what did U.S.
manufacturers learn from the recession?
SA: Well the good news for Deere is that agriculture has
been very robust, so we really have been growing through this.
Weve had parts of the businesslike construction equip-
mentthat have definitely been impacted and are way down.
But 2010 was our second-best year ever, 2008 was our best
ever, and based on what weve said publicly, 2011 will be-
come the best year weve ever had. Were actually growing
employmentweve added 10,000 jobs worldwide over the
last two years. So were in a little bit of a different situation than
some others.
To answer your question, though, I think what we all do
when we go through these recessions or these downtimes is
you put much more of a focus on finding ways to reinvent the
business to be more cost-effective. When youre at the high lev-
els and things are going well, you try to focus on it, but youve
got so many other opportunities that you end up doing just
incremental change.
When youre in the recessionary times, when business is
down, you can focus on really making big structural changes.
And I know a number of my peers as Ive talked to them, they
clearly have done that. As an economy, I think were clearly
seeing it. Thats part of the reason why even though the econ-
omy is improving, businesses havent had to add as many
people as in previous time periods, because [companies] have
spent a lot of time focused on restructuring and how to do that
on a sustainable basis.
We saw that from 2008 to 2009 when we went through the
financial crisis, and we saw that earlier for us back in 2001 and
2002. But weve put in place a structure in which we not only
evaluate how whatever initiative were working on today is
impacting our business and enabling us to grow, but were also
evaluating if we go back into the trough, what would this initia-
tive do? Would it still allow us to compete effectively, or would
it be an overhead burden on us?
And I think that constant focus on how what youre doing
today might impact you if you go back into a trough, thats
something that helps. If you keep a focus on that, then you will
sustain your competitiveness throughout the cycle.
$0
$300
$600
$900
$1,200
$1,500
$761
$1,062
$1,166
$1,431
FY 2007 FY 2008 FY 2009 FY 2010
JOHN DEERE NET SALES IN ASIA,
AFRICA AND THE MIDDLE EAST
$ millions
To read more of this interview with Sam Allen, as well as a Q&A with Deborah
Wince-Smith on U.S. competitiveness, visit www.industryweek.com.
IW
C OMP E T I T I V E N E S S
IW1011_P22_24.indd 24 11/10/11 1:13:39 PM
SAS and all other SAS Institute Inc. product or service names are registered trademarks or trademarks of SAS Institute Inc. in the USA and other countries. indicates USA registration. Other brand and product names are trademarks of their respective companies.
2011 SAS Institute Inc. All rights reserved. S72399US.0611
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ANALYTICS
111IW.indd 25 11/7/11 3:01:35 PM
Future NOW
INNOVATION
B Y D A V I D D R I C K H A M E R
F
or researchers theres nothing like working on what
could be the next big thing. But the annals of tech-
nology development are littered with anticipated
innovations that failed to pan out or failed to live
up to commercial expectations.
When evaluating technology trends, Adam Gordon, a so-
called strategic foresight specialist and the author of Future
Savvy, cautions business leaders to beware of nearsighted
experts. Heavily invested in the current technology, experts
can be the last ones to see impending changes. Good fore-
casts, Gordon adds, consider the frictional resistance of the
status quo and how this resistance might be overcome.
None of this makes the latest innovations and discoveries
any less exciting. As is happening now with graphene
and as happened with carbon nanotubes before itwhen a
new material is discovered theres a shake-out period when
scientists test all of the potential applications before viable
commercial uses settle out. And as often as the press pits
new technologies against one anotheras is the case with
synthetic biologists splicing genes into bacteria or algae or
yeastits not so much a competition but the scientific pro-
cess of determining what approach works best for a given
application.
Taking such caveats into consideration, INDUSTRYWEEK
offers five of the latest technology developments, all of
which feature commercial products or viable prototypes,
that promise to transform industry and our lives.
CHEMICAL PRODUCTION
SYNTHETIC BIOLOGY
From nature, more or less
Synthetic biology builds on decades of genetic engi-
neering work to create biological systems not found in
nature. Synthetic Genomics, the company led by famous
geneticist Craig Venter, made headlines last year when
it used biological engineering techniques to create the
worlds first organism (one of the simplest bacteria) with
completely man-made DNA. Such capabilities have pro-
voked ethical concerns and fears of environmental dam-
age or dangerous microbes, and millions of dollars in
venture-capital investments.
A number of companies are using these techniques to
insert animal or plant genes into bacteria, yeast cells or
algae to make them produce desirable compounds. For
example, they can make ethanol and diesel fuel from CO
2
exhaust and plant sugars or plant cellulose. They also can
be used to make specialized compounds that are difficult,
and therefore expensive, to extract from natural sources or
to synthesize chemically. These low-volume, higher price
compounds include vaccines and food additives, which
are what Allylix, based in San Diego, is now producing
and marketing.
Yeast and a lot of different organisms are more geneti-
cally tractable today than they were even a few years ago,
says Rich Burlingame, vice president of R&D for Allylix.
The company has introduced genes into yeast strains that,
through proprietary fermentation processes, make terpene
compounds for use as flavors, fragrances, anti-oxidants
and other applications.
Two of its first products are nookatone and valencene,
fragrance and flavor essences derived from grapefruit and
oranges, respectively. The synthetic versions offer more
consistent quality and availability compared to natu-
rally extracted compounds, which can vary based on the
weather. A reliable and cheaper supply could expand their
use in a variety of end products. Nookatone, for example,
may be used to develop a better smelling insect repellent.
FIVE technology
developments
changing
industry as
we know it.
IW1011_26_28_30_31.indd 26 11/10/11 1:45:16 PM
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SALES FORCE AUTOMATION
LOGISTICS AUTOMATION
FIELD FORCE MANAGEMENT
GLOBAL COMMUNICATIONS
TELEMATICS
111IW.indd 27 11/7/11 3:03:24 PM
I N N OVAT I ON
The technical barriers for bringing a product to market
are much lower if you have a higher value product, adds
Burlingame. If youre making something that sells for
$1,000 per pound, you dont need as efficient a process as
something that sells for $1 per pound.
MaterIals
Graphene
From laboratory to market in record time
A revolution-
a r y ma t e r i a l
that promises to
transform every
facet of our lives
comes along once
a decade or so.
Not many years
after scientists at
the University of
Manchester (UK) first produced graphene in 2004for
which they won the 2010 Nobel Prize in physicsresearch
into production methods and potential applications has
exploded.
Graphene refers to a single layer of carbon atoms packed
together by strong covalent bonds into a two-dimensional
honeycomb lattice. Its basically a carbon nanotube thats
been unzipped and laid flat. Exceptionally thin, it is 200
times stronger than steel and an exceptional conductor of
heat, electricity and light.
Current research is focused on how to produce graphene
cost effectively and in sufficient quantities for both testing
and commercial uses. Potential applications run the gamut
from stronger and lighter composites to ultra-small transis-
tors, printed electronics, shielding, batteries and super-
capacitors, fuel cells, stronger and lighter plastics, transpar-
ent coatings, flexible displaysand the list goes on.
A lot of the hype is because theres so much research
going on now for every application, says Ron Beech, direc-
tor of sales and marketing for Angstron Materials, Dayton,
Ohio. People will try 100,000 different applications. Most
wont work out or wont be practical, but some will.
Focused on intellectual-property development, Ang-
strom and its founder, Bor Jang, have filed over 50 patents
that focus on graphene production as well as specific ap-
plications. The company also sells nano graphene platelets,
which have the consistency of flour, in a variety of thick-
nesses.
Much of the current graphene research revolves around
the ideal methods and proportions to disperse it within a
given material, possibly in conjunction with carbon nano-
tubes, to achieve the optimum properties. For example,
leveraging its electrical conductivity, one of Angstrons cus-
tomers has incorporated graphene into actuator and sensing
components.
HealtH care
Smart medical deviceS
From science fiction to your doctors office
I n t he movi e
Star Wars: The
Empi r e St r i kes
Back, Luke Sky-
wal ker has hi s
hand cut off in a
light saber duel
with Darth Vader.
A few scenes later
a droid attaches a bionic prosthesis, Luke flexes it a bit
and hes good to go. Such machine and neural tissue in-
terfacesdemonstrated by several research teams work-
ing on prototype prosthetic devices, including robotic
handsare only one area where bioengineering advance-
ments will transform the medical device industry.
These developments can seem like science fiction,
but the technology in medical devices and the sophisti-
cation of instrumentation and computing are at a stage
where this will start happening, and it already has, says
Atam Dhawan, an electrical engineering professor at the
New Jersey Institute of Technology (NJIT) and chair of
the IEEE emerging technology committee.
In addition to neuroscience developments, he points
to new optical imaging technologies and the ability of
point-of-care devices to test, monitor, transmit and ana-
lyze real-time patient data. Combined with genetic in-
formation, such data will further personalize medical
treatment, enabling the analysis of reams of physiologi-
cal information as well as environmental and lifestyle
factors.
There will be an innovative revolution in small, wear-
able and portable devices that patients can use without
much technical supervision, and which automatically
connect to their smart phones via Bluetooth connections
to a server, Dhawan predicts. Not only will the collec-
tion and analysis of such data support individual medi-
cal therapies and improve patient access to treatment
through telemedicine, it could contribute to a radical
improvement in global health care by significantly im-
proving prevention knowledge and practices, as well as
treatment.
Medical technology innovations are moving forward
faster than the ability of regulatory bodies to review and
approve new devices. The U.S. Congress is considering
no fewer than 10 bills designed to revamp the Food and
Drug Administrations medical-device review processes.
The fear is that if the FDAs processes are not modified,
the bulk of new technology development and testing
could move to countries where regulations are less strin-
gent, taking expertise and jobs with it.
tr
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111IW.indd 29 11/8/11 12:56:20 PM
I N N OVAT I ON
TRanspoRTaTion
The PowerTrain revoluTion
From the test track to your garage
With the number of
passenger cars on the
roads projected to ex-
ceed 2 billion by 2050,
a combination of new
powertrain technolo-
gies will be required
t o r e duc e c a r b o n
emissions, stabilize
atmospheric CO
2
, and reduce petroleum dependence.
The primary alternatives to internal combustion engines
include better batteries that can power longer driving
ranges, plug-in hybrids and fuel cell vehicles. The R&D
developments that keep emerging from this race to bring
next generation powertrains to market will spin off a
host of new technologies with a broad impact far beyond
the global automobile industry.
The past 12 months have marked the long-awaited
launch of the plug-in hybrid Chevy Volt, as well as the
all-electric Nissan Leaf and the $95,000-plus Fisker
Karma in mid-October. While the projected year-end
sales of the Volt at 10,000 units, and the Leaf at around
25,000 units worldwide, are a small fraction of the
global vehicle market, their introduction has further
spurred consumer interest in low-emission vehicles
first sparked by the Toyota Prius.
An in-depth review of battery, plug-in hybrids and
fuel cell technology by McKinsey & Co. projects that by
2030 such cars will be comparatively priced to internal
combustion engine vehicles without the government
tax credits now spurring purchases. Although the U.S.
government has recently shifted funding away from hy-
drogen-fuel-cell technology, Japan and some European
countries remain committed to building the infrastruc-
ture required for this zero-emission technology to com-
pete with gasoline and electrics. Hydrogen fuel cells
are already being used in commercial fleets, including
buses and forklifts, and the technology continues to get
better. Annual sales for Plug Power, a fuel cell maker ca-
tering to the North American material handling market,
are expected to double for the fourth year in a row.
Beyond incremental improvements in conventional
lead-acid and lithium-ion batteries, watch for super-
capacitors and other new energy storage technologies
that use the latest materialssuch as grapheneto dra-
matically increase energy storage density and extend
the range of electric vehicles.
M
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IW1011_26_28_30_31.indd 30 11/10/11 1:45:21 PM
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INFORMATION TECHNOLOGY
QUANTUM COMPUTING
From bit to qubit
The hype and hope
around quantum comput-
ing that has ebbed and
flowed since the idea was
first proposed in the early
1980s may finally be com-
ing to fruition. Quantum
computers, the theory goes,
could exploit the strange properties of quantum mechan-
ics to simultaneously perform massive iterations of cer-
tain types of calculations.
Very briefly, conventional computers use 0s and 1s to
store information. In quantum computing a quantum bit
or qubit representing a particle, such as an electron, can be
described in two states, spin up or spin down, each repre-
senting a 0 or 1. At the same time it also exists in both of
these and all possible states, known as quantum superpo-
sitions, thereby representing both 0 and 1 simultaneously.
Not going any further into the physics or the scientific
debate over what a quantum computer is and should be
capable of, this past spring a company based in Burnaby,
British Columbia, known as D-Wave announced the com-
mercial availability of a quantum computer with a 128-
qubit chipset. The processor uses a form of quantum com-
puting known as quantum annealing to solve problems
related to machine learning and artificial intelligence.
The chip is a generator of probability distributions that
you can tune as a user, explains Geordie Rose, D-Wave
founder and CTO. D-Wave solved the technical problems
of noise and heattwo of the main challenges for those
trying to build quantum computersby super-cooling the
chip inside a cryogenic system within a 10-square-meter
shielded room.
In late May D-Wave announced the sale of its first quan-
tum computer system and a partnership agreement with
Lockheed Martin. The aerospace and defense contractor
is currently installing the unit and expects it to be opera-
tional by early 2012. Addressing some of its most pressing
needs, according to a company spokesperson, the com-
pany plans to use the large-scale computing capabilities to
reduce the labor and time required for the verification and
validation testing (V&V) of complex systems.
We believe quantum computing can significantly re-
duce V&V costs and generate other savings in cost avoid-
ance and reduced schedule delays, says the spokesper-
son. Examples include the complex control systems for
ships and aircraft that must perform flawlessly.
D
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32 IW I NOvember 2011 I www. INdustryweek. cOm
Supplier diversity programs offer more than a positive corporate image.
The Business Case for Supply Chain Diversity
SUPPLY CHAIN
B y j o n a t h a n k a t z
S
upplier diversity programs can provide
manufacturers with that feel-good aura of
social responsibility that companies often
champion as proof theyre model corporate
citizens. Sometimes manufacturers imple-
ment such programs to meet customer man-
dates or federal supplier requirements.
But does a business case exist for establishing programs
that target minority- and women-owned suppliers? Sev-
eral large manufacturers that have created supplier diver-
sity programs for both compliance and strategic reasons
say yes. For one, such programs can help manufacturers
connect with a major portion of their customer base.
For instance, women account for more than 70% of all
consumer purchases, says Elizabeth Vasquez, CEO and
founder of WEConnect International, an organization that
helps connect multinational companies with women-
owned suppliers. You cant deliver solutions and always
have the best and most innovative products and services if
your supply chain doesnt accurately reflect your customer
base, Vasquez says.
Manufacturers that have implemented supplier diversity
programs say the payoff has come in the form of stronger
relationships with their supply base, new business oppor-
tunities and a more agile supply chain.
ChemicoMays LLC became a General Motors Corp. supplier in
1989 after joining GMs supplier diversity program. Founder Leon
Richardson, pointing at the bulletin board above, attributes much
of his companys success to the opportunities gained from GMs
supplier diversity program, including training and mentorship.
ChemiComayS llC
IW1011_32_34_36.indd 32 11/10/11 3:14:58 PM
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GM GroWs Its oWn DIverse supplIers
General Motors Corp.s supplier diversity program dates
back to 1968 after race riots in Detroit a year earlier left 43
people dead and hundreds injured. The idea was to help
provide jobs for the local community. GM provided loans to
businesses near the companys headquarters that would be
used to hire diverse employees from the community, says
Linda Ware, GMs supplier diversity manager.
By the early 1990s the program evolved into a full-
fledged supplier diversity initiative aimed at providing
loans to GM suppliers. The program now includes more
than 200 women- and minority-owned businesses that
supply GM. While GM sought to provide obvious social
benefits through the diversity program, the company also
envisioned an opportunity to expand its customer base. The
hope is that diverse suppliers in GMs network will hire
employees who will in turn purchase vehicles from GM for
supporting the community, Ware says.
GM also created a diverse supplier development program
that provides mentoring and training to approximately 20
suppliers that GM has identified as high-value partners.
Suppliers within the development program are involved
in activities that help promote GM vehicles throughout
diverse communities. In 2010, suppliers within the devel-
opment program began a series of ride-and-drive events
at various ethnic gatherings, including some at African-
American churches and an India Day event. This gives
people participating a chance to test drive GM vehicles, and
we have actually sold vehicles by doing that, Ware says.
An early member of GMs supplier development program
was chemical management firm ChemicoMays LLC based
in Southfield, Mich. Leon Richardson started the company
in 1989 to provide research and development for nonhaz-
ardous paint and materials in auto industry painting ap-
plications. When Richardson first introduced his company
to GM, he wasnt too familiar with the companys diversity
program but soon discovered the program could be a key
growth driver for his new enterprise. GM matched Richard-
son with an executive within GM who served as a mentor.
As part of the mentorship process, Richardson attended
workshops that educated suppliers on how to market their
goods, invoice GM properly and navigate through the GM
organization, says Richardson, who is African-American.
Since 1989, ChemicoMays has been providing GM with ser-
vices that help identify the chemicals and hazardous mate-
rials that are used in the manufacturing process. During that
time, ChemicoMays has grown from sales under $1 million
to more than $50 million today, Richardson says.
As a small start-up company, even though Im confident
we had the technology that the customer would deem as
valuable, there was no way in the world I could see possible
that we would have access to the engineers, technicians,
managers or executives had there not been a formalized
diversity programwhere we could come in and talk about
the goods and services we provide and have GM take it very
seriously, Richardson says.
DIversIty BrInGs neW BusIness
Milwaukee-based Johnson Controls Inc. has been a Tier
1 supplier to GM and other automakers for years. The com-
pany also is recognized as a supplier diversity leader. In Oc-
tober, the company, which provides technologies for various
industries including auto interiors, received Corporation of
the Year honors from the Michigan Minority Supplier Devel-
opment Council for its commitment to minority businesses.
Johnson Controls spent $1.15 billion with diverse-owned
companies in 2010 and is on track to exceed that amount
this year.
Johnson Controls focus on diversity helped the com-
pany gain business from GM in the late 1990s, says Chuck
Harvey, the companys vice president of diversity and
public affairs. During that time, Johnson Controls knew
GM was looking to increase the minority-produced con-
tent of its vehicles. Johnson Controls was competing with
other companies on seat design, pricing and other typical
bidding points.
To differentiate itself, Johnson Controls approached GM
armed with consumer research that Cadillac was a popular
vehicle in some minority communities. Johnson Controls
offered to form a joint venture with a minority-owned firm
to help GM achieve its minority-produced content goals.
The joint venture became known as Bridgewater Interiors
LLC. Johnson Controls won the business from GM, and
Bridgewater now conducts business with several other
large automakers, Harvey says. Bridgewaters sales cur-
rently exceed $1 billion, according to Harvey.
Johnson controls forMeD
a MInorIty-oWneD JoInt
venture In the late 1990s
calleD BrIDGeWater
InterIors. the partnershIp
helpeD the coMpany GaIn
BusIness froM GM.
S U P P LY C H A I N
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It was a great way for us to figure out how to do some-
thing that was important to our customers and to do it like
nobody else had done it. We have a couple of joint ventures
now similar to this, Harvey says.
Johnson Controls can trace $6 billion worth of business
it has received over the past 12 years to its involvement in
supplier diversity, Harvey says.
SOMETIMES SMALLER IS BETTER
For manufacturers supplying the federal govern-
ment, diverse supply chains arent an option. Fed-
eral diversity requirements mean companies such
as Lockheed Martin Corp. must search for compa-
nies classified as minority-owned or small busi-
nesses to provide a percentage of their content.
The federal governments definition of a minor-
ity-owned business can include small businesses
and veteran or service disabled veteran-owned
companies.
These smaller companies are often more nimble
and innovative than larger suppliers, says Nancy
Deskins, Lockheed Martins director of corporate
agreements and supplier diversity. When you look
at the passing of Steve Jobs and how he started his
business in the garage of his parents home, what
these small businesses do is really bring innova-
tion to our corporation in a much faster method to
market than a real large corporation like Lockheed
Martin might be able to do, Deskins says.
Likewise, Life Technologies Corp., a biotechnol-
ogy tools and equipment manufacturer, must meet
federal mandates as well as customer requirements
for supplier diversity.
In June 2009 the company hired Ed Weil Reyes
as supplier diversity program manager. Reyes led
an initiative to expand the companys program
beyond small businesses to encompass minorities,
women and veterans. The program helps the com-
pany gain contracts with pharmaceutical giants
such as Merck and Novartis, which have begun re-
quiring more diversity in their suppliers network.
But the program has another possible economic
benefit: pleasing potential investors, Reyes says.
There are actually investment groups out there that
want to invest in companies that have supplier diversity
programs and have good citizenship programs, so our sup-
plier diversity program is reported in our annual citizen-
ship report, he says.
S U P P LY C H A I N
IW
S
tarting a supplier diversity
program could seem like a
daunting task. After all, how does
a company sift through thou-
sands of potential partners and
figure out which ones are mi-
nority owned? Carlsbad, Calif.-
based Life Technologies Corp.
reaches out to diverse businesses
through various networking av-
enues. The biotechnology tools
and equipment maker belongs to
organizations that represent dif-
ferent minority groups. The com-
pany attends the minority group
events and meets with potential
suppliers, says Ed Weil Reyes, the
companys supplier diversity pro-
gram manager. Life Technologies
also advertises in publications
that appeal to minority groups,
including a veteran-owned busi-
ness magazine.
Most manufacturers engaged
in supplier diversity include in-
formation and application forms
on their websites. General Mo-
tors Corp., for instance, has an
internal site dedicated to its sup-
plier diversity program at www.
gmsupplierdiversity.com. The site
provides information on how to
become a diverse supplier to
GM, a program overview and a
new supplier registration link.
Multinational corporations
interested in partnering with
women-owned businesses glob-
al ly can fi nd potenti al l eads
through WEConnect I nter-
national. Formed in 2009, the
nonprofit organization certifies
businesses that are at least 51%
owned, managed and controlled
by one or more women. WeCon-
nect collaborates with various
international agencies, such as
The World Bank Group and the
U.S. State Department, to iden-
tify and certify women-owned
businesses globally, says Eliza-
beth Vasquez, CEO and founder
of WEConnect International.
While women carry a tre-
mendous amount of purchasing
power globally, women-owned
vendors typically represent less
than 1% of sales to large, multi-
national corporations. If thats
the case, these companies are
probably not doing as good a job
as they could anticipating the
needs of the market in the fu-
ture, Vasquez says.
How to Find Diverse Suppliers
Johnson Controls can trace $6 billion worth
of business it has received over the past 12
years to its involvement in supplier diversity.
Chuck Harvey, Johnson Controls
IW1011_32_34_36.indd 36 11/10/11 3:00:33 PM
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111IW.indd 37 11/7/11 4:06:08 PM
While consumer interest in alternative-fuel vehicles has been lukewarm, the
commercial-vehicle industry is shifting into high gear with green technology.
BIG GREEN
MACHINES
B Y J O S H C A B L E
I
n October, the waste-management firm Republic Ser-
vices announced plans to build a natural-gas fueling
station in Indianapolis and add 60 natural-gas trucks
to its fleet there next year.
Republic Services, which provides waste-collec-
tion services for customers in 40 states and Puerto
Rico, noted that natural-gas vehicles cut greenhouse-
gas emissions by nearly 30% compared with diesel trucks,
while delivering a quieter ride.
Green technology is nothing new to Phoenix-based Re-
public Services. The company has been using natural-gas
vehicles for at least 15 years in California, spurred by the
states tough emissions standards, explains Kevin Wal-
bridge, executive vice president, operations.
While Republics 700 natural-gas collection vehicles
represent about 5% of its fleet, the company has made
the decision to aggressively pursue the use of compressed-
natural-gas vehicles as existing trucks reach the end of
their service lives, he says.
Were very comfortable with them. We think theyre
very reliable, Walbridge says of compressed-natural-gas
(CNG) vehicles. We have a very
good repair history, we under-
stand the vehicle and we under-
stand the economics.
Regarding the economics, Wal-
bridge estimates that the company
typically recoups its investment
in a natural-gas vehicle in less
than three years thanks to the fu-
el-cost savings. But Republic also
takes into consideration some of
the less tangible benefits of natu-
ral gas, such as improved fuel-
supply stability by virtue of its
reduced dependence on foreign
oil.
The other thing, from a closed-
loop-environment standpoint, is
our landfills generate methane gas that we can convert
into CNG, Walbridge says. That gives us a little bit of a
natural hedge.
Driven by environmental regulations, growing cus-
tomer and shareholder demand for greener products, and
the specter of higher fuel prices, green technologies are
steadily gaining traction in the commercial-vehicle mar-
ket, says Elisa Durand of the fleet-management firm Auto-
motive Resources International (ARI).
Durand, who is assistant manager of strategic services,
environmental and fuel strategies at ARI, asserts that inter-
est among commercial-vehicle users in green technologies
has moved beyond being a feel-good trend that will
come and go.
This stuff is here to stay, Durand says. Its not just,
Im gonna go out and hug some trees and pet a bunny.
[Fleet managers] really see this as an opportunity to di-
versify themselves, to save some money on fuel. The next
time we get a 2008 where fuel spikes, if you have enough
propane and natural-gas vehicles or even hybrids, youre
not going to be sweating as much, because you prepared.
GREEN TECHNOLOGY
Republic Services has 700 natural-gas
refuse vehicles in its fleet.
IW1011_P38_40_42.indd 38 11/10/11 3:01:49 PM
**Monthly charges exclude taxes, Sprint Surcharges (incl. USF charge of up to 15.3% [varies quarterly], Administrative Charge [up to $1.99/line/mo.], Regulatory Charge [$0.40/line/mo.] and state/local fees by area [approx.
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wireless product or service within the last 6 months. The proprietary study results are based on experiences and perceptions of consumers surveyed JanuaryJune 2011. Your experiences may vary. Visit jdpower.com. Phone requires a new-line activation
(or an eligible upgrade) and a two-year Agreement. GPS reliability varies by environment. International services are not included. Sprint Business Advantage Messaging and Data Plan: Offer ends 1/7/12. Talk Plan: Additional Anytime Min.: $0.25/min.
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using independent third-party and Sprint databases. Standard roaming rates/restrictions apply. Only available with select Sprint plans and while on the Nationwide Sprint or Nextel National Networks (excludes calls to voicemail, 411 and other indirect methods).
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of kilobytes. Prohibited network use rules apply. See in-store materials or sprint.com/termsandconditions for specic prohibited uses. Messaging: Includes text, picture and video for domestic messages sent or received. International
messages sent or received from the U.S. are $0.20/msg., and from outside the U.S. are $0.50/msg. SMS voice messages may incur an additional data charge of $0.03/KB. Data: Premium content/downloads (games, ringers, songs,
certain channels, etc.) are additional charge. Texts to third parties to participate in promotions or other may result in additional charges. Sprint Radio includes access to select radio channels and song downloads (cost varies). Sprint TV

includes select channels. Direct Connect: Nextel and PowerSource devices operate on the Nextel National Network. Sprint devices operate within certain EV-DO Rev. A coverage areas on the Sprint 3G Network. Group Connect (21
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111IW.indd 39 11/7/11 4:08:07 PM
A SUSTAINABLE BUSINESS MODEL
Commercial-vehicle OEMs and suppliers have hopped
on board the green movement in recent years.
Warrenville, Ill.-based Navistar International boasts that
it was the first company to produce hybrid commercial
trucks on an assembly line, and in 2009 said it was the first
OEM whose customers accumulated more than 5 million
miles driving its hybrid trucks and buses.
Navistars vehicle lineup includes hybrid versions of
its commercial and school buses and medium-duty and
severe-duty trucks. The CE-Series plug-in-hybrid school
bus, for example, mates its MaxxForce diesel engine with
an induction electric motor, lithium-ion batteries and pow-
er-management software to boost fuel efficiency by up to
65% and slash GHG emissions by up to 39%, according to
the company.
Navistar recently introduced a CNG version of its Inter-
national WorkStar work truck, and in March unveiled a
prototype Class 8 semi truck that runs on a mixture of 15%
diesel fuel and 85% liquefied natural gas.
The company began dabbling in hybrid technology in the
mid-2000s, says Navistar communications manager Steve
Schrier. But the eye-popping spikes in fuel prices in 2008
prompted fleet managers to take a serious look at alterna-
tive fuels, kicking hybrid development into high gear at
Navistar.
When youre looking at diesel fuel at $4, $4.50, $5, $5.50
a gallon, thats millions and millions of dollars to a large
fleets bottom line, Schrier says. Thats really what drove
a lot of this. Were not green for the sake of being green.
Were green because it makes sense to our customers.
Cleveland-based Eaton Corp. is in the same camp. In
October, Eaton announced that users of its hybrid power
systems had accumulated more than 200 million miles of
service.
The companys hybrid electric and hybrid hydraulic
systems are used on city and school buses, utility vehicles,
refuse trucks and other commercial vehicles made by com-
panies such as Daimler Trucks, Ford, Freightliner, Navistar,
Peterbilt, Indias Tata Motors and Chinas Yutong Group.
The company is seeing global acceptance of hybrid
technology among truck and bus manufacturers as well as
fleet owners and operators, said John Ritter, vice president
and general manager of Eatons Hybrid Power Systems Divi-
sion.
Another Cleveland-based companyParker Hannifin
Corp.has been busy in the hybrid space as well. In Septem-
ber, the manufacturer of motion and control systems launched
its new Hybrid Drive Systems Division, which will focus on
commercial-scale launch of its hydraulic hybrid technolo-
gies for use in heavy- and medium-duty vehicles, the com-
pany said.
Autocar LLC, a Hagerstown, Ind.-based manufacturer
of Class 8 trucks, is using Parkers RunWise series-hybrid
technology in its new E3 refuse vehicle, while FedEx and
UPS have placed orders for a new hydraulic hybrid delivery
truck being developed jointly by Parker and Freightliner
Custom Chassis.
In September, Troy, Mich.-based Altair Engineering un-
veiled what it called the worlds first series-hybrid hydrau-
lic transit busthe LCO-140H. The bus, which promises to
lower the cost of ownership by $170,000 per bus compared
with conventional diesel models, is powered by Parkers
hydraulic hybrid technology.
Altair Engineering, a product design and development
consulting firm best known for its proprietary computer-
aided engineering software, hopes to partner with an OEM
to commercialize the transit bus.
The initial plan would be to produce about 400 buses
each year in a single-shift operation, Altair ProductDesign
COO Mike Heskitt told INDUSTRYWEEK, noting that some
5,000 buses are purchased each year in the United States.
Its a sustainable business model, Heskitt said. If we
can offer a very good product with a much better ROI, and
lower [transit authorities] dependency on fuel, we feel like
theres a good space for us in the market.
DIESEL ISNT DEAD
The increased interest in alternative fuels shouldnt
obscure the fact that diesel-powered vehicles are more ef-
ficient and cleaner than ever, asserts Brian Mormino, direc-
tor of energy policy and emissions compliance for engine
manufacturer Cummins.
Navistar offers a plug-in-hybrid version of its CE-Series school bus.
Navistars lineup includes the International DuraStar hybrid.
GR E E N T E C H N OL OGY
IW1011_P38_40_42.indd 40 11/10/11 3:02:28 PM
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WHERE
MANUFACTURING
SOLUTIONS ARE MOVING
111IW.indd 41 11/7/11 4:10:27 PM
Its not your daddys diesel, Mormino
says.
The on-highway diesel engines of today emit
99% less particulate matter and nitrogen ox-
ides (NOx) than they did 30 years ago, accord-
ing to Cummins, thanks to technology such as
exhaust-gas recirculation, diesel-particulate
filters and selective catalytic reduction (SCR).
The real headliner going forward, Morm-
ino says, will be SCR, which virtually elimi-
nates NOx emissions while improving fuel
efficiency by up to 6%. In an SCR system, a
chemical reductant such as urea converts to
ammonia in the exhaust stream and reacts with NOx over a
catalyst, forming harmless nitrogen gas and water.
While filters have reduced particulate emissions to near-
zero levels, SCR systems typically produce exhaust that
is cleaner than the ambient air around you, Mormino
explains.
Dan Clark, general manager of GE Capital Solutions
Transportation Finance, expects diesel technology to con-
tinue to get greener over the next couple generations.
From a diesel perspective, you dont see the black smoke
anymore, Clark says. I think the whole industry has sub-
stantially changed their image and percep-
tion and their intent to not be the polluters
of the 60s and 70s.
That said, hybrids and other alterna-
tive-fuel commercial vehicles arent going
away, asserts ARIs Durand. But in terms
of adoption, she doesnt see one particular
green technology pulling away from the
rest of the pack.
If someone is driving 200 miles a day,
electric is probably never going to be the
No. 1 fuel choice, Durand says, unless
advancements in battery technology en-
able electric vehicles to travel much farther on a single
charge. But if youre in the city, and youre doing a fixed
route and you have the opportunity to recharge, electric
is going to be the better choice. I think youre going to see
people diversifying their fleets.
As examples, she notes that early adopters such as Pep-
siCo, Coca-Cola and UPS have a mix of electric, propane
and natural-gas vehicles in their fleets.
I think youre going to see people adopting more green
technologies, but not necessarily putting all their eggs in
one basket. IW
W
hen the Obama administra-
tion in August unveiled the
first-ever standards to regulate
greenhouse-gas emissions and fuel efficiency
in medium- and heavy-duty commercial ve-
hicles, Cummins was ready.
So ready, in fact, that the company
said its ubiquitous engines will meet the
requirements of the new regulations on
Jan. 1, 2013one year before the rules
begin kicking in.
Columbus, Ind.-based Cummins
praised the Department of Transporta-
tion and EPA for including vehicle and
engine manufacturers, suppliers, fleet
managers and environmental groups in
the rulemaking processand for listen-
ing to them. The end result, Cummins
said in August, is a workable regulatory
structure that accommodates the diverse
needs of the commercial-vehicle sector.
With support from the likes of Chrysler,
Cummins, Daimler Trucks, Ford, General
Motors and Navistar, the final rule brings
to bear the expertise of government
regulators and the industry, asserts Brian
Mormino, director of energy policy and
emissions compliance for Cummins.
We understand our engines and the
industry, and so does Daimler, so does
Volvo, so does Navistar, so does the
American Trucking Association, Mor-
mino tells INDUSTRYWEEK. And because
of that widespread knowledge and in-
volvement, EPA and DOT did a great job
of saying, Lets go out and get this broad-
based knowledge. Lets reach out to ev-
erybody, bring everybody in the tent, and
really have a collaborative process to put
together a rule.
And its a model for how industry
and government should work together.
The process drew praise from Navistar
as well.
I dont think weve always been
brought in on the process in other
regulations, but I think we felt that our
voice was heard, and that at the end of
the day the actual rules and regulations
that came out reflected our input and
our commitment to the customer, says
Steve Schrier, communications manage
for Navistar.
Navistar and Cummins are among a whos
who of commercial-vehicle manufacturers
and suppliers participating in the Depart-
ment of Energys Super Truck program. The
program, which aims to create a Class 8
truck that is 50% more efficient than cur-
rent models, is another example of a robust
public-private partnership, Mormino says.
Collaboration with the Department of
Energy has been absolutely critical to the
development of commercial-vehicle technol-
ogy that has enabled the industry to comply
with environmental standards, Mormino
asserts.
Without that collaboration, I think we
would have a much more difficult time and a
much costlier time getting there, Mormino
says.
GR E E N T E C H N OL OGY
WORKING TOGETHER FOR THE GREENER GOOD
The collaboration between truck manufacturers and the Obama administration on new
GHG regulations shows that maybe, just maybe, government isnt completely broken.
Navistars International
DuraStar hybrid
IW1011_P38_40_42.indd 42 11/10/11 3:03:03 PM
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111IW.indd 43 11/7/11 4:13:39 PM
44 IW I NOVEMBER 2011 I www. INdustRywEEk. cOM
I
ndustry uses approximately
one-third of the energy con-
sumed in the United States, ac-
cording to the U.S. Department
of Energy, at a cost of more than
$100 billion a year. Energy-
intensive industries such as chemicals,
petroleum refining and primary metals
represent 83% of all manufacturing
energy use. While energy management
programs are in place at many compa-
nies in an effort to reduce energy con-
sumption and costs, these programs of-
ten are focused on individual projects
or programs. Typical plant projects
involve switching to more efficient
lighting or updating HVAC systems.
But energy experts such as Deloitte
Consulting Principal Dave Fornari say
it is time for companies to take a more
strategic approach to energy manage-
ment. He says plant initiatives fail to
provide companies with a consistent,
comprehensive view of how energy
and resources impact the business
model. As a result, says Fornari, who
leads Deloittes federal energy and
resources management practice, com-
panies may have difficulty allocating
capital improvement funds for energy
management in a way that provides
the greatest return on investment.
The changing picture in energy
supply is another key driver for more
focus on energy management. Aging
coal plants with some 30 GW to 50 GW
of capacity will likely be retired in the
next decade, according to ICF Interna-
tional, due to either outdated equip-
ment or environmental rules. When
you take very efficient and cheap coal
plants offline and replace them with
higher-cost renewable energy or build
cleaner plants with natural gas, you are
going to increase the cost of energy in
your state, notes Fornari. He expects
that, depending on the region they op-
erate in, companies could see energy
prices increase 20% to 40% over the
next 10 to 15 years.
Companies also need to consider
energy from a risk-management stand-
point. In mature economies, we tend
to think of energy, whether it is water,
electricity or gas, as if it will always be
in abundant supply, says Greg Boden-
hamer, vice president, Industry End
User Solutions & Services, Schneider
Electric. But disruptions to energy
supply are a real possibility, he says,
and argue for manufacturers becoming
more efficient consumers of energy. He
notes that for every unit of energy con-
sumed at the point of use, three units
must be produced upstream because of
inherent inefficiencies in generation,
transmission and distribution. If you
want to become very efficient, save it
at the point of use, Bodenhamer says.
Some major companies have
started to put more executive focus
on energy management. At Alcoa Inc.,
Rick Bowen, president of Alcoa En-
ergy, is responsible for overseeing the
companys overall energy strategy and
reports to CEO Klaus Kleinfeld. Alcoa
joined DOEs Save Energy Now leader
initiative in 2010 and has committed
to reducing the energy intensity of its
manufacturing operations other than
aluminum smelting in the United
States by 25% by 2020. Alcoa formed
a Global Energy Efficiency Team to
coordinate energy efficiency activi-
ties across the company and share
best practices. Last year, Alcoa also
began linking leadership performance
pay to achieving incremental energy-
efficiency targets.
Nearly a decade ago, the com-
panys CEO established a program
called the Energy Efficiency Network
to audit facilities and provide local
management with potential energy
efficiency targets. That program iden-
tified over $100 million in potential
energy savings.
Bodenhamer says it is critical for
companies to get executive leader-
ship involved in energy management,
establish accountability throughout
the organization and develop a cul-
ture where energy is seen as a vari-
able cost that managers can impact.
Industrial manufacturers have
not thought about energy consump-
tion as a per unit expense. It has typi-
cally been some fixed cost overhead
that just gets allocated to produc-
tion lines in a plant, he observed.
Leadership has to drive home the
idea that it is not a fixed cost that in-
dividual plant or line managers have
no control over.
Technology
B y s t e v e mi n t e r
Energy Management
Enters the C-Suite
Costlier energy calls for a more strategic ap-
proach to managing energy issues.
In mature econo-
mies, we tend to
think of energy,
whether it is water,
electricity or gas, as
if it will always be in
abundant supply
Greg Bodenhamer, vice
president, Industry End
User Solutions & Services,
Schneider Electric
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n
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t
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n
G
IW1011_44.indd 44 11/8/11 7:41:50 AM
www. industryweek. com i noVemBer 2011 i IW 45
A
s much as $40 billion per year is lost due to
cargo thefts, and only recently has the FBI
started keeping track of how many cargo
crimes are committed every year. Its a major problem,
and one that would enrage consumers if they were
aware that affected companies are marking up their
prices by up to 20% to compensate for these losses.
As a global manufacturer of electronic products
sold in most of the world, Hewlett-
Packard is using high-tech gadgetry
to foil cargo thieves. HP manages
one of the worlds most extensive
IT supply chains, and spends $60
billion per year on transportation,
distribution, materials and other
key components of its supply chain.
Theres risk within every aspect of
the supply chain, explains Fred Smith, director of
global security group programs and supply chain for
HPs Global Security Services Organization.
While HP maintains close partnerships with the
public sector, law enforcement and customs groups
around the world, cargo thieves are constantly chang-
ing their techniques, Smith points out, so HP has had
to stay current with the latest technological solutions
to thwart the thieves, or at the very least, to recover
stolen merchandise. One such solution involves co-
vert GPS satellite unitson truck trailers, pallets and,
in some cases, the product themselvesto track the
products while in transit. These units typically cost
$200 or more each, so users such as HP need to be
selective in how and when they deploy them. Due to
the covert nature of the units, the truck drivers do not
know they are being introduced into their loads.
The GPS units are monitored by third-party security
companies, who follow the regular pings sent out by
the battery-powered units. Since cargo thieves these
days tend to steal entire trailer-loads of goods, theres
an immediate payback on the investment in the GPS
units.
HPs suppliers are strongly encouraged to be pro-
active in securing the supply chain as well. Several
years ago, there was a lot of resistance within the sup-
ply base to implement security requirements, but now
its pretty much a standard part of business for most
suppliers, Smith says. Their security programs
will differ greatly based on the country and the risks
within a country. For example, in Brazil, where cargo
theft is a problem, theyve adopted a much higher de-
gree of security measures and more rapidly because
of the risks that theyve had. My personal opinion is
the supply base has advanced tremendously in the
last decade.
Supply Chain & logiStiCS
B y d av e B l a n c h a r d
Thwart Cargo Thieves
With Covert Technology
Hewlett-Packard uses high-end high-tech to secure
its supply chain.
ToyoTa Unleans
ITs sUpply ChaIn
Automaker rethinks its supplier management
to better recover from disasters.
H
istorically, Toyotas supply chain has focused on
the keiretsu, an integrated group of suppliers that
function as a joint partnership. having earned
Toyotas trust, these suppliers are responsible for developing
and providing the key components that go into producing
Toyotas vehicles. Under normal business conditions, Toyota
is able to drive waste out of its process by limiting the num-
ber of companies involved in its supply chain.
But what happens when the supply chain breaks, as it did
earlier this year when an earthquake, a tsunami and a nuclear
meltdown effectively shut down some of Toyotas key sup-
pliers, at one point costing the automaker $80 million per
day due to supply shortages? proving that it takes the spirit
of continuous improvement very seriously, Toyota is cur-
rently developing what it refers to as an earthquake-proof
supply chain. The goal is to be able to recover full produc-
tion within two weeks if and when another earthquake
strikes. During the recovery period, Toyota will effectively
unlean its supply chain by widening the scope of its supply
chain to temporarily include its major competitors.
In a recent interview with Reuters, shinichi sasaki,
Toyotas vice president of purchasing, outlined the earth-
quake-proof strategy:
1. standardize parts and components across Japans
automakers so companies can share common parts that
could be built in several locations.
2. Work with suppliers and get them to agree to
hold enough inventoryas much as several months
worthof specialized parts that are only built in one
location.
3. Make each region independent in its parts procure-
ment, so that production wont be interrupted in other
parts of the world if another disaster hits Japan.
IW0011_P45.indd 45 11/8/11 12:28:19 PM
Tim Chase:
We looked at
every one of the
incentives that
we offered and
we pushed them
to the front
of the timing
chart.
expansion management
T
he recession was par-
ticularly unkind to Wichita
Falls, Texas. Beginning in
December 2008, when building-ma-
terials manufacturer Saint-Gobain
Corp. shuttered its local factory and
eliminated 750 jobs, a slew of plant
closures and layoffs hit the city so
hard that its unem-
ployment rate shot
up 60%.
So when local
economic develop-
ment officials found
out that Carrier
Corp. wanted to sell
off a local air-condi-
tioner manufacturer
that it had acquired
a decade earlier
Magic Airethey
feared the worst.
When our future
is left at the hands of folks who
dont live here and theyre making
decisions, sometimes those deci-
sions are advantageous to us, but
many times theyre not, says Tim
Chase, president and CEO of the
Wichita Falls Chamber of Com-
merce and Industry, which handles
economic development efforts for
the city.
The story of Magic Aire has a
happy ending, though, thanks to
a creative financing approach that
the chamber devised during the
dark days of the recession.
After Carrier announced its
plans to divest Magic Aire in late
2009, the Magic Aire management
teambacked by local investors
proposed a buyout. However, the
group was about $1 million short.
Enter the Wichita Falls chamber,
which bridged the financing gap
by providing a 20-year, no-interest
loan of $1 million to the group.
With sufficient funding in place,
the management team made a bid
on Magic Aire, and Carrier ulti-
mately accepted it. The sale was
finalized in July 2010keeping
Magic Aire and its 100 employees
in Wichita Falls, where the com-
pany was founded in 1932.
The chamber was critical in sup-
porting us and encouraging us and
closing the gap that we had, says
Magic Aire President and CEO Ron
Duncan, who was part of the buyout
group. Otherwise, it would not
have been possible for us to even
tender an offer.
UpfronT fInancIng
In the late 1990s, the people of
Wichita Falls voted for a sales-tax
increasewhats known in Texas
as a 4A sales taxto fund job-cre-
ation efforts. Up until the last few
years, the chamber had been using
the funds to reward companies
for creating jobs or making capital
investments in Wichita Falls, and
had been disbursing the funds
on a pay-for-performance basis
typically six to 12 months after the
companies delivered on what they
promised.
When the recession hit, though,
community leaders took a hard
look at the best way to use the
funds, which had grown to $26 mil-
lion, Chase estimates. They came
to the realization that companies
place a higher value on incentives
that produce results upfrontor
within the first three years.
So we looked at every one of
the incentives that we offered and
we pushed them to the front of the
timing chart, Chase says.
The city decided to offer inter-
est-free loans to tantalize compa-
nies to make capital investments or
create jobs in Wichita Falls. As long
as the companies deliver on what
they promise, annual repayments
on the loanswhich range from
seven- to 20-year termsare dis-
counted or waived altogether. (In
the case of Magic Aire, loan repay-
ments will be waived.)
Over the past two years, the shift
to a pay-for-potential incentive
model has helped Wichita Falls se-
cure economic development proj-
ects that promise to create or retain
2,300 jobs, Chase says.
That includes 125 jobs that are
expected to be created by Excalibur
Paint & Coatings, an environmen-
tally friendly coating manufacturer
that secured $1.5 million in fund-
ing from the city to grow its busi-
ness.
Chase believes the new financ-
ing tool, coupled with a redoubling
of the chambers marketing efforts,
will help Wichita Falls build on its
core strengths: cheap electricity,
plentiful natural gas, an abundant
water supply and a workforce that
understands a three-shift-a-day
work environment.
Those assets should make
Wichita Falls a sweet spot for large
process manufacturers, particularly
in the food and beverage sector,
Chase says.
Even though the city is chipping
away at the losses of the recession,
local officials admit a turnaround
in employment is in its infancy.
Its very fragile, and were cer-
tainly approaching this as we still
need to be as aggressive as we can
to provide good-paying jobs for our
citizens, Chase says.
B y j os h c a B l e
Paying for Potential Pays Off in Wichita Falls
A creative approach to incentive financing is helping the city rebuild its manufacturing base.
IW1011_P46.indd 46 11/10/11 3:13:20 PM
www. industryweek. com i november 2011 i IW 47
ceeds, opportunities exist to make adjustments
without requiring major overhauls. Such early
prototypes are often less expensive than com-
plete systems and can be made more rapidly,
decreasing costs and shortening development
time.
In collaboration with the customer, it is wise
to test those parts that present the highest risk or
biggest challenges first. In doing so, companies
and their customers are better able to determine
if any barriers are insurmountableand would
necessitate putting the brakes on a project
prior to substantive investments in time, energy
or dollars. Even if a project does not meet its
initial goals, it can still be considered a success.
The collaborative process strengthens customer-
developer relationships and gives each party a
better idea of the others needs and capabilities,
which can help facilitate the next project.
The Process Pays Off
Manufacturers that implement best practices
in customer-driven product development can
reap unique benefits. Activities in this area gen-
erally represent lower investment and lower risk.
Though anticipated returns are also lower, be-
cause the potential user base is smaller, these
activities can be especially important with major
customers to build a sense of responsiveness and
develop brand equity.
Further, because customers are involved, com-
panies are tackling real, current problems. If the
problem is solved, the customer normally will
buy the solution, resulting in faster adoption
rates of the technology and better financial re-
turns. Customer-based activities also create a
fertile environment for developing complemen-
tary ideas and enlarging a product portfolio. In
addition, the process can strengthen customer-
developer relationships and lead to future col-
laboration and mutual successes.
Following best practices in working with
customers, while strategically approaching the
relationship between technology development
and product development, can help a company
achieve success in product innovation. The ef-
fort is well worth it. A manufacturer known
for innovation stands apart in the marketplace.
Internally, product innovation offers companies
a meaningful payoff as wellthe opportunity to
celebrate success and the many team members
who contribute to it.
David Peace is vice president, engineering, for
Swagelok Co., a major developer and provider
of fluid system solutions based in Solon, Ohio.
He can be reached at David.Peace@swagelok.
com.
ad index
Advanced Technology Services ................................................................................................... 19
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AFLAC..................................................................................................................................................... 13
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ANSYS Inc. ...............................................................................................................................................9
www.ansys.com/promise
ARC .......................................................................................................................................................... 17
www.arcweb.com/events/arc-orlando-Forum-2012
Baldor Electric Company .......................................................................................................... IFC,1
www.baldor.com
Citgo Petroleum Lubricants ....................................................................................................30,31
www.citgolubes.com
Exxon Mobil .............................................................................................................................................3
www.mobilindustrial.com
Greater Topeka Chamber of Commerce ................................................................................ 10
www.GoTopeka.com
IFS North America Inc. .................................................................................................................... 35
www.youragileassets.com
IMTS - International Manufacturing Technology ................................................................. 37
www.IMTS.com
IndustryWeek Best Plants ............................................................................................................ 29
www.iwbestplants.com
IndustryWeek Expansion Management .................................................................................. 11
www.industryweek.com/emroundtables
Invensys ................................................................................................................................................... 21
www.InFusionjourney.com
Kronos ..................................................................................................................................................... 15
www.kronos.com/stories7
Material Handling Industry of America ................................................................................... 41
www.MODEXShow.com
MSC Industrial Direct Co. Inc. ................................................................................................... iBC
www.mscdirect.com/vending
SAS Institute Inc. ............................................................................................................................... 25
www.sas.com
SKF Group Headquarters .................................................................................................................7
www.skfusa
Sprint Nextel ........................................................................................................................................ 39
www.sprint.com/sprintdirectconnect
Swagelok ................................................................................................................................................ 23
www.swagelok.com
ThomasNet ........................................................................................................................................... 43
www.PromoteYourBusiness.Thomasnet.com
Verizon Wireless ................................................................................................................................. 27
www.vzw.com
Vertex Standard .....................................................................................................................................5
www.vx450.com
WorldPay................................................................................................................................................ 33
www.worldpay.com/riskguardian
Zurich North America .................................................................................................................... BC
www.zurichna.com/stories2
E x e c u t i v e V i e w f r o m p g . 1 7
IW_16_17_47.indd 47 11/7/11 1:40:25 PM
Trade wars with the second-biggest
economy in the world is a bad idea.
However, China must float their currency like the
euro and the peso. Our economy will grow nicely
if we have trading partners that adhere to WTO
rules about currency manipulation.
Drew Greenblatt, president, Marlin Steel Wire Products LLC, Industry-
Week.com, Oct. 12
I think theres a thousand
reasons to complain, but if I
read another op-ed piece, I
just want to throw up.
I think the world is sick of
speech-making and op-eds.
I think its all about trying to
get action done. Weve got
one country; weve got one
president, and Im going to
do my damndest to try to
come up with a great jobs council
thats lled with good ideas.
Jeffrey Immelt, General Electric Co. CEO and head
of President Obamas jobs council at the Cleveland
Clinic Medical Innovation Summit Oct. 3
We as business
leaders, as
learned people,
have to help
the government
understand that theyre here to help us
and not to hurt us.
Ursula Burns, CEO, Xerox Corp., during the Cleveland
Clinics Medical Innovation Summit Oct. 3
THE LAST WORD
You call a company in America
and the first thing you get is,
This call is being recorded.
Why are they recording it?
Because they dont trust
their people, and they
dont empower them to be
trusted.
Norman Bodek, lean guru and INDUSTRYWEEK
Manufacturing Hall of Fame inductee
We sense a dangerous disease
infecting our modern culture
and eroding hope: an increasingly
prevalent view that greatness
owes more to circumstance,
even luck, than to action and
disciplinethat what happens
to us matters more than what
we do.
Jim Collins and Morten Hansen, Great by
Choice (HarperBusiness; October 2011)
It was do or die time for American
furniture and textile manufacturers.
We knew that we could compete and beat
importers at their own game if we stayed
committed to excellence, customization,
quality and design.
Norman Coley, president, Lee Industries, in The
Rebirth of the American Furniture Industry, by
Julie Reiser, IndustryWeek.com, Oct. 28
Other governments rely
much more heavily on their own
intervention in driving their
manufacturers competitiveness
than we do. Our principle asset, our No. 1
most critical factor in our ability to innovateand
thus our ability to compete successfully in the global
marketis in fact our skilled workforce. And so it
has become much more critical for the United States
to understand this shortage and to address it via the
right policies.
Emily DeRocco, president, The Manufacturing Institute
C
o
l
l
i
n
s
H
a
n
s
e
n
IW_0811_56.indd 48 11/3/11 3:34:17 PM
A smarter vending solution can improve your bottom line.
All vending solutions are not created equal, and one size does not t all. Put simply, MSC
understands that your manufacturing and supply chain requirements are unique. So we work
with you to create a special Metalworking and MRO vending solution that will meet your
specic productivity goals, reduce your costs and maximize the return on your investment.
In fact, were so condent that MSCs customized vending solutions will work for you, if you
dont experience the productivity and bottom line gains you expect, well take it back. No
questions asked. No cost to you.
Not all vending solutions are created equal. To nd out
more about how MSCs advanced vending solutions
have helped our customers increase productivity and
reduce costs, visit www.mscdirect.com/vending or
call 800.521.9520.
www.mscdirect.com
111IW.indd 49 11/7/11 4:15:09 PM
Integrated insurance solutions for even the most
specialized projects.
We provided Sasol-Huntsman, one of the largest producers of Maleic
Anhydride in Europe, with an integrated insurance and risk engineering
solution to address the risks associated with moving a 700 ton factory
component across Germany. By helping our customer ensure the necessary
precautions were taken, and providing coverage for the entire trip, everyone
was breathing easy. Its an example of how Zurich HelpPoint delivers the help
businesses need when it matters most. To learn more about this case, visit
www.zurichna.com/stories2
We had to move this 700 ton
component more than 400 miles.
Scores of risks, but Zurich
made us feel confident we
were well covered.
Herbert Peters, Managing Director,
Sasol-Huntsman, Moers, Germany
In the United States, coverages are underwritten by member companies of Zurich in North America, including Zurich American Insurance Company. Certain coverages not available
in all states. Some coverages may be written on a non-admitted basis through licensed surplus lines brokers. Risk engineering services are provided by Zurich Services Corporation.
Zurich Services Corporation does not guarantee any particular outcome and there may be conditions on your premises or within your organization, which may not be apparent to us.
111IW.indd 50 11/7/11 4:16:29 PM

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