MFGx Blog

Another Energy Alternative

aj — Thu, 04 Sep 2008 18:54:42 GMT

The dialogue around alternative and renewable energy has reached a fever pitch, and that's nothin' but good. The airwaves around the world are rife with groups and individuals espousing their own plans (and often their own agendas) to remove the burden of fossil/foreign fuels from their countries and the world.

In the U.S., the natural gas industry is pushing - shockingly! - natural gas. The oil companies are advocating - surprise! - increased indigenous drilling for oil. Some, like T. Boone Pickens, actually seem 100% genuine.

So, I was surprised to stumble on a unique approach that's original, practical from someone without a dog in the fight.

J.C. Bell is the founder and CEO of Bell Bio-Energy, Inc. Mr. Bell, with a background in engineering and agriculture, has developed and patented a process that converts just about any biomass - any living thing, like a plant - into hydrocarbons that can in turn be converted to crude oil.

It's alledged that Mr. Bell first got the idea after observing cows - ahem - pass methane. Thinking of the process that took place in the cows stomach to convert food to gas inspired him to pursue his biomass project.

Before you laugh, know that Bell Bio-Energy is slated to open 7 initial plants at U.S. military instillations this month - all inconjunction with the U.S. Department of Defense.

Bell's plan is to use data collected from the DOD phase of this project to refine the full-scale process. Once that process is defined, he thinks it could produce up to 500,000 barrels of oil per day within the first 18 months. He also predicts that full-blown production would reach 5-million barrels per day in 3-4 years.

Still laughing?

Of course, the perfect solution isn't to produce more crude. If the pollution side of the equation isn't in the mix, we still have serious issues to deal with. But biomass is biomass - Bell's process converts any biological materials into crude. That includes plants, lawn clippings, human waste, and several kinds of refuse.

Personally, I like Picken's Plan. But when you add this as a bridge (along with natural gas) to fruition, it seems like an obvious alternative.

Pickens Plan Good For Manufacturing?

aj — Tue, 12 Aug 2008 16:01:20 GMT

Have you heard of T. Boone Pickens' plan? Pickens, the successful U.S.-based investor, has proposed a plan to influence the incoming presidential administration to wean the U.S. off of foreign oil by migrating to wind power for electricity and natural gas for automobiles.

Building new wind generation facilities and better utilizing our natural gas resources can replace more than one-third of our foreign oil imports in 10 years.

The plan is, in a word, perfect. It's clearly enunciated, easy to understand, the right thing to do, and - what really caught my eye - a potential boon to manufacturing. From the Pickens Plan site:

Developing wind power is an investment in rural America.

To witness the economic promise of wind energy, look no further than Sweetwater, Texas.

Sweetwater was typical of many small towns in middle-America. With a shortage of good jobs, the youth of Sweetwater were leaving in search of greater opportunities. And the town's population dropped from 12,000 to under 10,000.

When a large wind power facility was built outside of town, Sweetwater experienced a revival. New economic opportunity brought the town back to life and the population has grown back up to 12,000.

In the Texas panhandle, just north of Sweetwater, is the town of Pampa, where T. Boone Pickens' Mesa Power is currently building the largest wind farm in the world.

In addition to creating new construction and maintenance jobs, thousands of Americans will be employed to manufacture the turbines and blades. These are high skill jobs that pay on a scale comparable to aerospace jobs.

Plus, wind turbines don't interfere with farming and grazing, so they don't threaten food production or existing local economies.

Now, to be sure, there's enough hot air coming out of Washington these days about what we should or could do to solve the energy dilemma. An election year makes it all the more depressing. Especially when we all know how serious this problem is to us all.

But the value to manufacturing makes this a slam-dunk, and worthy of our attention.

Visit Pickens' site. Regardless of what country you call home, this plan represents an acceptable solution for us all.

Who Has It As Bad As We Do?

aj — Fri, 01 Aug 2008 20:05:19 GMT

I recently had the great privilege of visit from my friend James, who came in from his home in Shanghai. James is one of the smartest, funniest, most dignified people I know.

As we were catching up, talk turned to the upcoming Olympics. I asked James if the steps taken by the Chinese government to reduce pollution have had any noticeable affect.

His response:

"Oh, yes! For the past few weeks, the air in Shanghai has been as clear and clean as Los Angeles. It has been beautiful."

Now certainly, we have a lot of work in the U.S. to get our house in order – fiscally, governmentally, and environmentally.

But isn't this the right perspective? We complain about much in this country, but overlook the fact that others might like to have it as bad as we do.

At least in some respects.

Same As It Ever Was

aj — Thu, 24 Jul 2008 10:00:48 GMT

Talkin' with my friend Tony last night about the credit and energy mess. Stewing on the fact that we let this stuff happen, get past it, and find ourselves takin' it in the same ways all over again - typical of conversations all over America these days. Then Tony shows me an image a friend sent him and we had a good laugh. Until we thought about it - then it got a little quiet and we just walked away. The image he showed me is of a Time magazine cover - from 1974.

I think you get the picture:

Follow Up On The Oil Speculators

aj — Wed, 23 Jul 2008 17:53:27 GMT

A few weeks back, I wrote about the open letter/e-mail sent from the 12 principals of the major U.S. airlines sharing their take that speculation and futures trading has had most to do with rising oil costs.

The e-mail (and my post) both linked to a site called Stop Oil Speculation Now that made it easy to share this concern with your government representatives.

Just after I posted that piece I followed the link, filled out the form, and submitted it. Piece of cake.

Wellsir, today I got a response from my Senator, Saxby Chambliss. Which is to say it was from his office, and a typical form letter - well meaning, certainly, but a form letter, just the same.

I say typical because it touched on many of the hot buttons surrounding this issue - not just the issue of speculation:

The key areas of a responsible energy policy that will reduce gas prices, lessen our dependence on foreign oil, and strengthen our economy include: increasing our domestic energy production, improving energy efficiency through technology, increasing conservation, diversifying our nation's energy supply through the use of renewable fuel sources, and ensuring transparency in our futures markets.

The letter went on to explain the senator's stance on each issue and, of course, tout his and his colleague's "bipartisan" efforts to solve "... the current energy crisis."

I can't decide if this is a shell game or not. Sure, domestic production and alternative fuels are awfully important. But the one issue that government, industry and lobbyists allowed to happen - if not directly caused - is presented as an afterthought.

This, from my response to the form letter:

In the near term, I urge you and your peers to address the issue of speculation with the greatest enthusiasm and force. We have allowed regulations and laws to creep through deregulation to a point that futures trading has traded our futures in ways we've yet to realize. This behavior - while perhaps not technically criminal anymore - is at the very least abhorrent. Lobbyists and industry have been allowed to create wealth based on a scam unchecked, and government must accept responsibility and take action to correct this now. All of the valuable efforts you mention in your response will take years from which to realize benefits - closing the loopholes, focusing the FTC on speculators in the U.S., and working with other countries to scrutinize the behaviors of speculators overseas will offer short-term relief.

Our system and officials have failed us and we are looking to you to take action to fix this. I strongly urge you to focus your short-term efforts on the speculative markets and their current regulations to ensure this doesn't happen again, while we pursue the noble efforts you've listed.

Manufacturers - and all businesses - must react to this. I believe that the credit and energy crises are related in a fundamental way: They aren't random. They are the result of deregulation and opening loopholes through which the rats entered the pantry.

Whether you choose to follow the link above or not, get in the grills of your representatives.

My advice: Raise holy ****.

12 Angry Men & High Fuel Costs

aj — Thu, 10 Jul 2008 18:24:17 GMT

This morning, colleagues of mine and I - and maybe you, too - received an e-mail from 12 Angry Men. Most of us just juiced it without reading it.

Now let me say before I go on that I am not a big fan of the airlines, and that Delta really roasts my onions. I'm just not too fond of big, stagnant companies that can't carve a profit while killing competition at hubs, pulling the rug out from under investors, and further dehumanizing and already dehumanizing experience.

So imagine my genuine surprise when a friend forwarded this message, signed by 12 CEOs and presidents of the largest U.S.-based airlines, calling BS on what's generally being reported as the causes of astronomic fuel prices.

We've heard 'em, haven't we? Worldwide consumption is up. Emerging cultures like China are increasing demand. And we've all seen the e-mails that want us to fight the power by which gas stations we choose to buy our gas.

But the directness of the e-mail - especially considering who it's from - just bowled me over. And its message is dead-nuts on:

Since high oil prices are partly a response to normal market forces, the nation needs to focus on increased energy supplies and conservation. However, there is another side to this story because normal market forces are being dangerously amplified by poorly regulated market speculation.

Whoa. Preach it, my brothers (sorry, there are no women among the 12).

This is EXACTLY the problem that the mainstream media don't comment on, because the boogey man is us. Not the Saudis, not the Axis of Evil - it's our government, asleep at the wheel again.

Or is it something worse?

Twenty years ago, 21 percent of oil contracts were purchased by speculators who trade oil on paper with no intention of ever taking delivery. Today, oil speculators purchase 66 percent of all oil futures contracts, and that reflects just the transactions that are known. Speculators buy up large amounts of oil and then sell it to each other again and again. A barrel of oil may trade 20-plus times before it is delivered and used; the price goes up with each trade and consumers pick up the final tab. Some market experts estimate that current prices reflect as much as $30 to $60 per barrel in unnecessary speculative costs.

Over seventy years ago, Congress established regulations to control excessive, largely unchecked market speculation and manipulation. However, over the past two decades, these regulatory limits have been weakened or removed. We believe that restoring and enforcing these limits, along with several other modest measures, will provide more disclosure, transparency and sound market oversight. Together, these reforms will help cool the over-heated oil market and permit the economy to prosper.

So, the actionable item of the e-mail is a link to a Web site: Stop Oil Speculation Now. Once there, you can enter your Zip Code and send a message to your members of the House and Senate, telling them to get control of this system that's clearly a mess and just as clearly their fault.

Sure, there are plenty of factors that contribute to high fuel and energy prices. And the invisible hand is surely one of them.

But this is at the heart of the matter, and is exactly the action we need to right this ship now. Not only buying gas at the neighborhood station or trading in the SUV.

These 12 men are standing up and saying what needs to be said. Greed, once again, is dragging us all down and making a very few very, very wealthy.

It’s almost enough to make me like these guys again.

Solar Power Update

aj — Mon, 07 Jul 2008 23:17:30 GMT

Last month, I dropped a post on the feasibility of solar power for manufacturing facilities and plants ("Solar Power for Manufacturers - Does It Make Sense?").

The push of my post was that solar isn't acceptable for SMB manufacturers - yet. It's just too expensive. But, I proposed, maybe solar could be a catalyst to help energize manufacturing and help solve the energy and ecological conundrum we're in.

But according to a recent report from McKinsey titled "The Economics of Solar Power (registration required to view entire report), it seems that solar is gaining more steam as a viable, affordable energy source. It goes so far to suggest that solar could become comparable in cost to conventional electricity within 10 years.

Says McKinsey:

Within three to seven years, solar energy's unsubsidized cost to end users will approach the cost of conventional electricity in a number of markets, including parts of the United States (California and the Southwest), as well as Italy, Japan, and Spain.
Installed global solar capacity will grow by roughly 30 to 35 percent a year, from 10 gigawatts today to about 200 gigawatts in 2020.

While likely investment is baked into McKinsey's forecast, it's not too clear how unforeseen technological advances could affect velocity. Regardless, this is an astonishing prediction from a more than reliable, credible source.

More to follow ...

Hope: A Global Independence Day

aj — Thu, 03 Jul 2008 14:39:43 GMT

Tomorrow in the U.S. we'll be celebrating our country's independence from England. Every country has their national holiday to celebrate itself. July 4th is when we eat too much and blow stuff up.

Hey, we're Americans. It's what we do.

But this year is different. There are many chickens coming home to roost that aren't just affecting my country directly - our world is seeing fundamental change, and it's awfully troubling these days to play the tape through to its end.

It's pretty clear to me that most everything that ails our world these days boils down to energy - where it comes from, who uses it, and its byproducts are challenging us all economically, politically and morally.

Sure, economies get screwed around and nature always comes around to remind us that she's in charge. But to me, our most serious challenge that we can do something about is energy and how it's used.

In the most recent Time magazine (U.S. version), in an article titled "10 Things You Can Like About $4 Gas," the number 1 thing to like is "Globalized Jobs Return Home".

The world suddenly seems big again. A family of four can't fly cross-country for much less than $2,000. The cost of shipping a standard 40-ft. (12 m) container of couches from Shanghai to New Jersey has tripled since 2000. Trucking carrots from Mexico to Georgia makes less and less economic sense.

In more industries, such as steel, lawn-mower batteries and upscale furniture, doing business in the U.S. is starting to look slightly more feasible.

All true, and it's a trend you'll see gaining steam in the coming months and years. But I fear that manufacturing in general - and the U.S. specifically - will fall back into a familiar reaction to this. Whenever a threat has turned out to be less deadly than was first believed - the threat to the U.S. manufacturing base from other manufacturing sources (Japan), the threat of outsourcing (1980's) - manufacturers heaved a sigh of relief and got complacent again until the next threat came along (China). Then everyone acted surprised, like it never happened before.

Maybe that's human nature. But in the case of energy, we have an opportunity now to do something bold even if the pain of outsourcing begins to ease from work pulling back to less expensive locations, logistically speaking. We all need to come together toward an initiative to wean ourselves now from traditional, less renewable, fossil fuels and high carbon footprints. We need to adopt alternative energy sources, and we all know it. But we can't.

Cause we don't have the huevos.

This morning, I came across an op-ed piece in the latest Industry Week that represents my thoughts, and I'm pretty sure it will resonate strongly with you. In "More Than Just Earth-Friendly, Going "Green" a Route To Jobs and Prosperity, John Madigan points to a logical solution and how to get there:

Manufacturing ... actually creates both wealth and jobs. Developing "green" manufacturing technology also offers opportunities to become a net exporter of environmentally friendly products and processes. "Green" manufacturing, and the technology to support it, can create the required $20-per-hour jobs to sustain a strong middle class while helping to solve air, energy, water, and food crises.

Create a government-sponsored program, similar to the "Apollo Program," to create jobs based on solving environmental needs. Such a program, focused on self-sustaining and renewable solar, wind, water turbine, clean hydrogen energy and desalination of the ocean's water, could jump-start a revival of U.S. manufacturing.

Incent companies, by tax policy, which make environmentally friendly and sustainable end products here.

Create prizes to reward innovation for environmental friendly products manufactured here.

Utilize existing tax supported agencies such as NIST manufacturing centers to: Define and teach best practices to manufacturers through shared network of knowledge resources; Benchmark on the successes -- Toyota, Wiremold, Danaher Corp. and employ proven lean executives on oversight boards; Challenge "economy of scale" thinking and standard cost accounting for more market-based accounting systems; Focus on small businesses or start-up companies and nurture "incubator green manufacturing zones";

I do not agree with some of Mr. Madigan's points in the article (his take on productivity, for example) but I wholeheartedly agree with it in spirit.

We need a bold initiative, similar to the U.S. Apollo or Russia's Luna programs, that will stimulate our collective creativity and find real solutions while creating wealth.

According to NASA, there have been over 1500 "spinoff" technologies from the Apollo lunar program to benefit business, health and wealth. We need that now, but on a global scale. The problem is too large, too complex and affects too many of us politically to tackle it in a vacuum.

I hope that we can find the resolve to address this as one people - for all of us, including manufacturing.

Happy Independence Day to all of you, no matter where you are.

Let The Games Begin

aj — Mon, 16 Jun 2008 15:10:33 GMT

Once again, Rick over at All Roads Lead To China offers up sound advice for buyers with suppliers and supply nodes in China.

Last year, ARLTC warned of the impending dilemma buyers and sourcing pros faced from the elimination of the VAT rebates, warning them to get their shipments out before gridlock hit the ports. (The photo below shows the gridlock in Shanghai last June, as suppliers rushed to ship product before the VAT reabates were discontinued in July.)

Over at MFG.com, coverage was also extensive around the VAT reductions and their impact.

Unfortunately, many failed to listen to Rick's warnings from on the ground in China. And now he's back, playing Paul Revere with a message that's critical for buyers in the near term, and excellent intelligence for suppliers in the U.S. and other markets:

When I began reporting a couple months ago that the Olympic Shutdown was coming, some were skeptical ... but (you should) understand that the risks of this are growing, that the impacts will reach into many supply chains, and there are ways to mitigat(e)/manage the risk.

Folks, time is short to act on these issues, and a word to the wise is sufficient.

Rick lists 3 characteristics of suppliers in China that make them susceptible to shutdown (in order of importance):

Heavy air polluters
Require high amounts of energy
Require high amounts of water

Rick also identifies 3 potential scenarios that could affect buyers that rely on Chinese sources:

Suppliers will be shutdown and therefore a part/ process cannot be delivered on time
Suppliers will not be able to deliver the goods on time due to restrictions on trucks
Even if you get the parts and are able to avoid being shutdown ... you may find it difficult to ship your goods yourself. Ports may be restricted for security, trucks may be off the road, (or) crane operators may be watching the national team

True to form, Rick offers sound suggestions on ways to mitigate the pending risks. He advises:

If you need 4-6 weeks to produce (parts or deliverables) you really only have 1-2 weeks left to push out orders or build up stock... so act now
Understand which of your suppliers are at the highest risk and speaking to them about developing some measure of safety stock within their/your warehouse
Get your sales and logistics departments together and make sure they are in sync over the capabilities of shipping department vs. customer delivery (requirements)

Rick points out that there's about 2 months until the Beijing Olympics begin, but he believes only about 4 weeks before the first shutdowns commence. That doesn't leave much time for buyers to react and plan, but forewarned is forearmed.

Before You Complain About High Gas Prices This Weekend ...

aj — Fri, 13 Jun 2008 20:18:47 GMT

Add this to the list of factors (VAT rebate reductions, rising taxes, falling U.S. Dollar, elevated wages, etc.) raising the costs to manufacture overseas - especially in China:

Stung by Soaring Transport Costs, Factories Bring Jobs Home Again from the WSJ (subscription required).

Something in here about clouds and silver linings ...

Have a great weekend.

Solar Power for Manufacturers – Does It Make Sense?

aj — Wed, 11 Jun 2008 13:33:19 GMT

I can’t decide if solar energy is right for manufacturers as an energy source.

On the one hand, anything that gets us away from dependence on oil is nothing but a good thing. On the other, manufacturing businesses – especially SMBs – likely can’t justify the hefty initial investment in current solar technology.

Please spare me the argument that it pays for itself, or that “you can sell back to the grid” to offset costs. Those are long-term issues for businesses with wicked cash flow and shrinking margins. And the energy needs of a manufacturer are much greater than most other businesses. Besides, if any technology gets the nod first, it’s likely gonna be for something that automates or improves the processes of the business.

For a quick video overview of solar power with consideration for manufacturing applications, check out this video from Cisco over at bMighty.com.

Now that you know where I stand, consider another angle to all this. In the video, the cat explaining how businesses buy and install solar technology says his company’s been seeing 50% growth every year. He goes on to point out that his two solar panel suppliers are “at capacity” and they’re in “the Philippines and Japan.”

So what about using solar power as a catalyst to help U.S. manufacturing? You can find several examples of solar power’s potential from myriad sources (here, here and here).

Solar power manufacturers are enjoying accelerated growth, while many in mature or shifting markets struggle. The time is right to make a change. It’s been suggested by many that bold initiatives are called for to rebuild the fading U.S. infrastructure – so why not a bold initiative to renew U.S. manufacturing dominance through solar power.

It kills 2 birds. Or, I should say, revives them.