Sustainability is Smart Business: Cisco Packaging Reductions Save $24 Million/Year

Sustainability is Smart Business: Cisco Packaging Reductions Save $24 Million/Year

    Sustainability is simply smart business— and SEMI is committed helping companies understand how sustainability can translate into profits. An excellent example: packaging reductions save $24 million per year at Cisco Systems. Cisco has a holistic view of sustainability across the supply chain— from planning and ordering to production and field support.

    Cisco’s philosophy is that all of its products should be sourced, manufactured and sold in an environmentally and socially responsible manner. Sustainability is a big focus for John Chambers, Cisco’s CEO. He believes that it is Cisco’s responsibility to “… meet the needs of the present while not comprising the ability of future generations to meet their needs.” The company tries to build sustainability into everything, driven by employees who are given the latitude to effect change.

Mark Brillhart, Cisco Systems

This approach yields extraordinary results. “At Cisco, every time we do something good for the environment, we deliver a tremendous amount of savings to the bottom line,” stated Mark Brillhart, Cisco VP of Technology and Quality at the SEMICON West 2009 EHS Global Care Executive Luncheon. Brillhart’s keynote presentation focused on how Cisco saves money with sustainability practices.

    Test Reductions Save $12 Million in First Year

    Cisco employees observed that a lot of energy was wasted during test operations. As a result of eliminating redundant test processes, Cisco realized huge energy savings while also eliminating a lot of old test equipment. One goal involved improving energy efficiency by eliminating the high-power burn-in process. This resulted in:

  • Intelligent reduction of redundant testing resulted in 5,000 MWh/year saved which equates to 3,000 metric tons of CO2 eliminated (equals emissions from 588 cars).
  • In the first year, test changes resulted in $12 million savings, with subsequent savings of $6 million annually.

    In addition, Cisco applies the test learnings to other processes. For example, Cisco is working with SmartGrid (a U.S. Department of Energy initiative) and partnering with other companies to develop SmartGrid solutions. SmartGrid involves using a network to monitor electrical consumption and figure out when to take things to idle, standby, and when to turn things on and off. Deploying that process for the entire contract manufacturing footprint will result in a significant opportunity for savings. Brillhart says that “Cisco is not just saving energy and not just eliminating waste in the environment; we’re delivering unbelievable cost savings to the bottom line of the company.”

Mark Brillhart, Cisco and Aaron Zude, SEMI

Bruce Klafter, AMAT, accepts a plaque as one of four finalists for the SEMI Sustainable Technologies Award

    Water Wash Elimination Saves $1.3 Million per Year

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Brillhart notes that in the “stone age of electronic assembly,” or 15 years ago, all the printed circuit boards were washed. Now, Cisco reduces environmental impact by eliminating the water wash process for boards and assemblies while still improving quality. Currently, Cisco prevents the use of about 90 million gallons of wastewater per year for 86% of Cisco products, saving about $1.28 million per year. Cisco’s goal is to eliminate the wash process on allof its products by October 2009. This will save an additional 20 million gallons of water per year.

(20 million gallons equals approximately 144 million bottles of water; 16.9 oz. (500 ml)per bottle).

    Packaging is the #1 Opportunity for Sustainability Improvements

    According to an AMR Research (Phoenix, Arizona) study in 2008, packaging is the number one opportunity for making sustainability improvements. Reducing packaging waste is cited by 76% of companies as a way to improve sustainability. Other methods include: improvement in energy consumption (68%); reduction of consumption of natural resources (62%); and changing the return process for recycling (47%).

    Packaging Reductions at Cisco Save $24 Million per Year

    At Cisco, packaging staff figured out that they were wasting a lot of cardboard and materials. With so many products flown around the globe, extra cardboard and other packaging translated into a lot of wasted space in airplanes. Packaging redesigns at Cisco have generated $24 million in savings and a reduction of over 4 million pounds of material reduced, including: 3.8 million pounds of corrugated cardboard; 68,000 pounds of foam; and 158,000 pounds of plastic.

    In addition, these changes increased transportation efficiencies due to lower volumes and weights by saving space and fuel surcharges. In sum, Brillhart credits Cisco employees for a tremendous collaborative effort across manufacturing, product, engineering and business units.

    Big opportunities for cost savings:

  • Small Products: Savings add up to $14.1 million per year by eliminating 2,008,400 lbs of material per year. The Cisco product Niagara (routers) was the first product to use 100% recycled cushioning.
    • IP Phones: Savings of almost $1.3 million per year were realized by collaborating between documentation, packaging and Business Units. Cisco eliminated 906,700 lbs. of paper and 47,400+ lbs of plastic per year. By removing packaging waste, Cisco increased transportation efficiency. For example, before reducing the packaging, only 2,000 phones fit on a truck. Now, with less packaging, 3,000 phones can be shipped on the same truck.

  • Optical Modules: Packaging reductions saved $2.3 million per year by eliminating 500,000 lbs. of materials per year. This includes progressive digitization of documentation: printed material to CDs to online information. Cisco also replaced non-recyclable bags with thinner, recyclable bags.
  • Spares: Cables, Memory Modules, etc.: More than $2.3 million per year was saved by eliminating 460,900 lbs. of material per year. Memory affects nearly every business unit and manufacturing site.
    • Mid-size products (3 RU/5 RU, Catalyst): Savings of over $2.3 million per year by eliminating 430,000 lbs. of material per year.

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  • Top Products (CRS, TelePresence product): Some products represented real challenges in terms of packaging. However, armed with customer feedback, the packaging team eliminated an entire massive wood crate for each product shipped. This involved optimizing space in packaging of materials, including simple changes like putting accessory kits on the side. Packaging changes in these products resulted in savings of $1.8 million per year and the elimination of 207,600 lbs. of material per year.

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    CRS packaging: before and after

    The goal: to dramatically reduce the amount of packaging material used. Again, all of the packaging changes resulted in saving Cisco $24 million.

    Reverse Logistics: Reuse before Recycle

    Brillhart discussed another sustainability initiative called Reverse Logistics. Like all companies, Cisco gets products back from the field due to customer upgrades and customer returns. Five years ago, this material was simply scrapped. Then Cisco staff member Dan Gilbert suggested “Reverse Logistics.” Instead of driving returned products to the lowest level (scrap), returned materials would be sorted and inspected, trying to extend product life by considering these alternatives to scrapping: spares/repairs, secondary market, internal reuse, or philanthropy. Scrapping at Cisco is now a last resort.

    In 2005, when the Reverse Logistics program started, Operating Expenses were almost 120% (as a percent of value recovered). Now, that number is down to 39%. In 2005, less than 5% of returned materials were reused, with 95%+ going to the scrap heap. By 2008, 44% of returned material was reused—saving Cisco money and the environment.

    Collaboration Technologies with Video Conferencing Equipment

    More than 450 TelePresence systems are deployed within Cisco globally, in 150+ major cities in 43 countries. In a 24-hour day, overall average utilization of the video conferencing equipment is 50% (12 hours per day). This results in a large reduction in travel expenses, estimated at $215 million per year. In addition, Cisco estimates that emissions are reduced about 115,000 metric tons per year due to the video conferencing equipment.

    Sustainability Recommendations

    Here are Brillhart’s practical recommendations for making sustainability work and saving money at the same time:

  • Start with internal alignment and culture around sustainability. Sustainability doesn’t work if people in the organization don’t agree with it and take it seriously. Everyone in the company has to realize that sustainability is positive for the environment and for the bottom line of the company. Sustainability needs to be a part of every person’s job and performance evaluation. Now significant customers like the U.S. government are demanding proof of sustainable practices, and other companies may follow.
  • Investigate new collaboration and communication technologies that yield both green and business benefits. For example, at Cisco, videoconferencing and WebEx are extensively used. Employees try to avoid travelling by plane, which results in huge savings to the bottom line.
  • Remember that manufacturing is not an island: Take a comprehensive, integrated view of sustainability across the value chain. Make sure that you emphasize that opportunities are everywhere, and that minor design changes could result in big savings.
  • Share your ideas: Industry and supplier collaboration is key to effective change. Sustainability represents a real opportunity to partner as an industry.
  • Encourage people to lead, innovate, and differentiate. Focus on getting new ideas from staff by giving clear objectives and empowering them to make a difference.

    Cisco has proved that companies can make sustainability smart business. For more information on SEMI and sustainability, please contact Sanjay Baliga at sbaliga@semi.org.

    Mark Brillhart is VP of Quality and Technology at Cisco Systems, Inc. With 66,000+ employees in 75 countries and $39.5B FY’08 revenue, Cisco offers a broad range of products and solutions: networking systems, data centers, collaboration (voice and video), mobility/wireless, and security.

    For more information on SmartGrid, please visit http://www.oe.energy.gov/smartgrid.htm.

    September 1, 2009