Wednesday, March 3, 2010

Cisco Trims Packaging & Saves $24M

This case study was also published by Greener World Media in March 2010 and referenced in the 2011 book, Green to Gold Business Playbook.

In a recent post, I challenged ITC suppliers to reduce packaging. Since then I visited with several members of Cisco’s supply chain team working toward a comprehensive Sustainable Value Chain strategy overseen by Edna Conway, Sr. Director, Advanced Compliance and Social Responsibility for Cisco.

Cisco’s environmentally sound packaging program is still evolving and not fully rolled out, but early results show what is possible.

One product line reduced packaging by 33% and increased transportation load utilization by 50% resulting in $1.3M annual savings. The most dramatic improvement for a product was 450% increase in transportation efficiency with savings of $1.8 million.

The savings are sensational! The savings realized in the pilot program were $24 million annually.  A savings in materials and transportation costs was achieved by focusing on packaging material content, volume, and transport container efficiency. 

More than 4 million pounds of materials were eliminated across the pilot products. In addition, progress was made to increase recycling potential. From an environmental perspective, greener packaging resulted in decreased energy and water use while reducing GHGs related to transport.  

Transportation costs were a major contributor to costs since Cisco supports global manufacturing and a global customer base. Much of the product is shipped at some part of its journey via air which is the most expensive transport method, both financially and environmentally. As reported by the Environmental Protection Agency (EPA), shipping by air compared to ship creates nearly 20 times as much GHG for the same ton-mile shipped.

Cisco selected high volume products from its wide range of product families to participate in the pilot program. 
 Product   $ saved annually lb saved annually
 IP Phone

 $1.3 M

 Cisco Niagra Router

  $14.1 M 2,008,000
 Optical Modules

   $  2.3 M  500,000
 Midsize 3RU/5RU Catalyst

  $  2.3 M 430,000
 CRS TelePresence

  $  1.8 M 208,000
 Spares, cables, memory modules, etc

 $  2.3 M 461,000
 TOTAL $24.0 M  4,561,000

When trying to digest the millions saved, I noticed that for each pound of packaging material that Cisco reduced, more than $5 of annual savings was achieved for those products participating in the pilot. The type of materials, weight, volume and transportation methods could change how many dollars are saved per pound.

A “per pound saved” metric is simple to conceptualize. Most of us are able to imagine removing at least one pound of materials and thus provides a good starting point for brainstorming new packaging design.  It is also a helpful metric when comparing savings across product lines.

Best Practices
Cisco’s new packaging practices are compared to the three best practices reviewed in my previous post, which are eliminate, right-size and sustain.

1. Eliminate
Paper based documentation was digitized and migrated to CD’s or “pointer cards” --- 3 by 5 inch card with on-line reference. The intention is to use pointer cards whenever documentation is not mandated by regulation.  The IP phone benefited from documentation reduction. Now three IP phones can be shipped in the same space that previously could only support two units --- a 50% improvement.


Photo provided by Cisco Systems

Cisco also looked for activities that could be eliminated. For example, with its TelePresence product, the old method was to depopulate and package cards after testing. By leaving the cards in the rack, Cisco was able to eliminate an entire crate.  Cisco also reduced labor by no longer removing and packing the cards.  

Photos provided by Cisco Systems

2. Right-size
Although cushioning is still required, Cisco took a solid piece of cushioning and reduced the materials used without any performance degradation.

Cisco also eliminated a plastic bag type that could not be recycled and replaced it with a thinner and recyclable bag.

For multiple unit shipments, engineers reviewed the shipment holistically --- like a 3-D puzzle – to optimize the footprint. For Cisco’s Telepresence CTS-3000, product engineers were able to increase packing capacity by 450%. Nine units now fit on a single truck while only two units could be transported per truck prior to reengineering the packaging.

3. Sustain
Cisco is making recycling easier through better design of its packaging. “Pizza” type boxes were made easier to compress. One distribution center uses honeycomb paper pallets that can also be easily recycled. On some products, Cisco is  using plastic pallets made out of material that can be recycled.

Edna Conway shared, “Through the efforts of our purchasing, engineering and reverse logistics teams, over 99% (by weight) of our packaging can be recycled in regions with robust recycling processes in place.” Cisco notes however, that the feasibility of achieving this volume of recycling varies by geographic regions.

Cisco is committed to supporting the market for recycled plastics and cardboard by purchasing recycled materials. For example, Cisco used 100% recycled cushioning in one router family. [Note 1] Conway observed that material availability still constrains what Cisco and the industry can do.
Photo provided by Cisco Systems

Cisco is looking for opportunities to go even further in partnership with its supply chain. Cisco’s distribution centers and logistics providers reuse pallets; buying used pallets from recyclers that are pre-inspected and repaired as needed.

Nearly all of Cisco’s manufacturing is outsourced. Consequently to make improvements, Cisco needed to engage with its more than one thousand suppliers. Cisco invited suppliers to participate in industry organizations to show suppliers that packaging was more than a Cisco issue and that greener packaging had broad industry support.

Cisco also emphasized how suppliers would share the benefits of improved packaging.  As Conway noted “We are collaborating with our suppliers on packaging innovation which they can use to differentiate themselves from their competition.”

A partnership between suppliers and Cisco was critical to the process and packaging innovation Cisco has achieved to date. Conway shared that “my job is to frame the challenge to inspire our supply chain partners and our own engineering and manufacturing talent to find creative ways to both protect the product and the environment.”

Cisco packaging engineers and colleagues from many other organizations rose to that challenge to develop a smaller packaging footprint. It was a collaborative effort among teams across the organizations including product, documentation and packaging teams. Critical to their success was working together in order to see the impact of each team’s design to the whole. Customers also played a part in the process to identify areas that were inefficient.

Cisco’s packaging project is more than a one-time effort. Greener packaging will now be incorporated as part of Cisco’s value engineering process. Existing product lines will be incorporated based on potential for reduction. 

Cisco is sharing its practices with and learning from industry groups to ensure that we are all motivated and have knowledge to put greener packaging in-place. As Edna Conway said, “Packaging sustainability provides empirical evidence that green is good for the bottom line.”

Note 1:  The thermoformed cushions are made from 100% recycled polyethylene. Cisco is using products from Reflex that include juice and milk jugs as part of its recycled PE content. Previously these cushions were largely made from virgin oil. Cisco is exploring Reflex or similar product for broader expansion.

Note 2:  PDF presentation from Cisco sharing more about its Sustainable Value Chain packaging

  • Cisco Sustainable Packaging Update Feb 2010.pdf

 Note 3: Edna Conway, Senior Director, Advanced Compliance & Social Responsibility for Cisco’s Customer Value Chain Management organization.

Conway oversees teams focused on Cisco’s global product compliance, supplier diversity, value chain social responsibility, and supply chain contracts. As the Strategist for Cisco’s Sustainable Value Chain, she is responsible for creating and driving Cisco’s Green Supply Chain initiative in alignment with the mission of Cisco’s EcoBoard, the cross-functional council setting Cisco’s long-term green vision and strategy. Conway is frequently consulted by industry analysts on Green Supply Chain processes and methodologies. For example, in 2008 Conway’s work was recognized by the Aberdeen Group. Aberdeen noted Cisco’s Global Supply Chain Management "green" best practices and used Cisco as a case study in its January 2008 “Supply Chain Executive’s Strategic Agenda.”

Conway wrote a guest column for the April/May 2008 issue of Supply & Demand Chain Executive magazine, entitled "Tackling Green in the IT Supply Chain." 

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