Proctor & Gamble

Gillette
Energy Use & Footprint Reduction

MIT Sloan School of Management

Laboratory for Sustainable Business

Catherine Liang Chew, Akinori Nagano, Daisuke Tominaga, Alex Zheng

May 13th, 2010

Laboratory for Sustainable Business

P&G Reduction of Energy Usage and Footprint

Table of Contents
Introduction............................................................................................................................ 2
Company background ........................................................................................................ 2
Gillette South Boston Manufacturing Center .................................................................. 3
Project Objectives ............................................................................................................... 3
Methodology and Approach ................................................................................................... 4
A General Framework for Evaluating Resource Use ...................................................... 4
Base-lining .......................................................................................................................... 5
Benchmarking .................................................................................................................... 6
Opportunity Identification ................................................................................................ 7
Solution Generation ........................................................................................................... 8
Analysis of Solutions ........................................................................................................ 10
Sources of Interest ............................................................................................................... 12
Conclusion ............................................................................................................................ 13
Appendix A: Current State of Sustainability....................... Error! Bookmark not defined.
Appendix B: Detail Information about SBMC ..................... Error! Bookmark not defined.
Appendix C: Detail Diagnoses and Recommendation by Source of EnergyError!

Bookmark

defined.
Steam & Natural Gas ........................................................ Error! Bookmark not defined.
Electricity............................................................................ Error! Bookmark not defined.
Compressed Air .................................................................. Error! Bookmark not defined.
Nitrogen .............................................................................. Error! Bookmark not defined.
Water ................................................................................... Error! Bookmark not defined.

Cautionary statement: This document consists of body and appendix. The

appendix includes some sensitive information of our host organization we
obtained through our project. For the purpose of confidentiality, the
appendix will not be publicly available.
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Laboratory for Sustainable Business

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Introduction
Company background
Procter & Gamble Co. (NYSE: PG), one of the worlds largest consumer goods
manufacturers, was founded in 1837, and today provides its products to customers in
roughly 180 countries with total revenue of $79.03 billion (2009). In 2005, the company
acquired The Gillette Company, a leading global supplier of shaving products based in
Boston. In 2007, the company established five strategies for Sustainability as shown in
the chart below and set goals to be achieved by 2012.

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Since 2002, significant progress has been made in the areas of energy usage, CO2
emissions, waste disposal and water usage. These are the main sustainability metrics
that P&G uses. However, since 2007, improvements have not kept pace with prior
progress in some areas, suggesting that more can be done.

For details, please refer to

the chart in Appendix A: Current State of Sustainability Progress.

Gillette South Boston Manufacturing Center

Production began at the South Boston Manufacturing Center (SBMC) in 1904,
soon after Gillette received a patent for its safety razor, with the original production
process developed by MIT graduate William Nickerson. The current state-of-the-art
production facility in South Boston includes full razor manufacturing operations. For
more information about SBMC, please refer to Appendix B: Detail Information about
SBMC.

Project Objectives
The purpose of our project is to help SBMC understand its energy usage across the
plant, to identify the major loss areas, and recommend efficiency improvements, which
have a potential to be reapplied to other P&G plants. For the purpose of this project, we
will work together with the Energy Loss-Elimination Team, created within the SBMC.
With the completion of our project we will provide SBMC with the following deliverables:
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Systematic energy flow map, report and presentation

Assessment of energy usage and costs
Identification of loss elimination/recovery opportunities with an aim of identifying
30% potential savings
Recommendations for longer range equipment/site
Preliminary environmental impact and financial analysis of recomendations
Summary with recommended procedure on how to reapply the energy analysis
process at other P&G sites

Methodology and Approach

A General Framework for Evaluating Resource Use
In the course of evaluating each of the resource use categories for the SBMC, we
applied a common framework in order to take a systematic, whole-system perspective to
each resource. The approach can be extended to other campuses and resources, as it is
broad enough to apply in a variety of situations. The seven steps to the approach are
outlined below.

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Base-lining
Involves fully understanding the current state of the system
Define and measure appropriate metrics
Accounting for all physical flows and sinks in the system
Benchmarking
Comparison to other Gillette Factories
Comparison of each resource or sub-system to industry benchmarks
Recognize regional or temporal differences may limit basis of comparison
Opportunity Identification
Identify areas where resource consumption is above baseline as "problem areas"
Zoom in on specific sub-system causing resource consumption to be high
Identify easy wins in terms of time and budget
Solution Generation
Focus on solutions that directly address problem areas
Identify applicable best practices from benchmark cases
Identify emerging trends and technologies in relevant areas
Analysis of Solutions
Quantification of potential costs and benefits
Apply financial, environmental, strategic, and other perspectives
Assessment of short-term and long-term impact on relevant metrics
Prioritization & Selection
Use of common metrics to prioritize potential projects
Allocation of funding to high-impact, high-return projects
Assess contribution to corporate strategy
Implementation Plan
Work with vendors and internal staff to determine implementation details
Continuous revision and refinement of implementation plan over course of project
Ensure implementation plan is robust to changes in system conditions

Base-lining
The first thing our team did in looking at each of the resource areas was to create
a snap-shot of the existing state of the system.
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In some cases, this involved

Laboratory for Sustainable Business

P&G Reduction of Energy Usage and Footprint

constructing resource flow maps that carefully show the inputs, outputs, and uses of
resources in the system. For our project, we focused on assessing resource flows for
energy and water in the SBMC system. This allowed us to get a better understanding
of the total magnitude of each end-use, as well as prioritize our thinking in terms of
areas of greatest impact. While the data we found were useful, we discovered that in
many cases measurement systems at SBMC were incomplete. It is important that in
the future these systems be updated and made more comprehensive.

Base-lining is also important because it creates a platform of common

understanding about the current state of the system. This is not useful for planning
potential future savings, but is vital for looking back on a project once it has been
implemented and understanding the savings over what was there before. Projects that
fail to create a detailed benchmark before implementation reduce their ability to make
claims about their effectiveness once they have been implemented, because the base case
was not recorded.

Benchmarking
Once a baseline has been created, it needs to be viewed in context. The question
is, what is the appropriate frame of reference for a given benchmark? What makes a
given factory comparable to another factory even if it is performing the same function?
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There are two major approaches to benchmarking, both of which we took to some degree.
The first is to look for a direct match that performs basically the same functions as the
existing system on all levels. This peer comparison approach allows managers to
draw direct parallels between the plants and share information about best practices. It
also naturally lends itself to a systems perspective, since some plants may have
completely different ways of accomplishing the same tasks. For the SBMC, this might
be the Berlin plant or another similar Gillette plant, since they produce similar products.
However, this is not always possible, especially for unique operations.

A second

approach divides the system into a number of sub-systems, which can be individually
compared to reference systems that are better established. For example, at SBMC, the
Power House can be designated as a separate sub-system that can then be directly
compared to other powerhouses with similar equipment. The water treatment system
might also be designated as a separate sub-system that can be compared to the water
treatment systems of other industrial applications.

Opportunity Identification
Once the plant has been base-lined and appropriate benchmarks have been
identified, it is then a simple matter of comparing the two across the relevant
dimensions. Problem areas can be quickly identified as
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Areas where the baseline resource use is high in an absolute or relative sense
Areas where the same function is being performed by the baseline plant and the
benchmark plant but with a much lower resource consumption level at the
benchmark plant
These problem areas represent the most obvious opportunities for resource use
reduction. These opportunities are not just a function of total magnitude of the energy
use, but also the ease with which an issue can be addressed. At SBMC, it seems that
many of the problems have already been identified qualitatively. However, what is
often missing in many of these systems is a comprehensive sense of which problems and
opportunities are greater in magnitude than others. This goes back to the basic issue of
developing metrics and base-lining the system on an on-going basis, and comparing the
system to relevant benchmarks. While Gillette has taken steps towards through their
sustainability reporting system, this system can and should be made more
comprehensive. An improved system could include more detailed analyses of individual
sub-systems as well as a broader lifecycle perspective that incorporates the overall
footprint of the plants activities.

Solution Generation
The reduction of resource consumption is not always a simple matter of taking
practices from benchmark plants and importing them wholesale into the plant under
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consideration. Path dependencies, fixed costs, and limited scope of application often
hinder these direct approaches.

Instead, once an area of opportunity has been

identified, a number of options can be brought to bear to try to reduce its resource
consumption:
Best practices from other plants and industry benchmarks
Emerging trends and technologies
Elimination or redesigning of processes and functions
The best solutions are often not taken from external sources but promoted from
within the organization. Those who are on the ground performing frontline functions
on a day-to-day basis are best positioned to identify and report potential areas for
savings.

Establishing channels for these ideas to propagate to management is an

important part of on-going solution generation. At SBMC, a number of systems are

already in place to propagate great ideas from the staff upwards. However, the ability
to analyze and act on these suggestions, especially when they are larger or involve
multiple systems, is significant impaired.

Greater priority and human resources

should be given to promoting and implementing some of these cross-cutting solutions at

SBMC.

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Analysis of Solutions
Most likely, more solutions will emerge than can realistically be implemented.
Proposed solutions should be analyzed on a number of dimensions to determine their
alignment with overall goals of the company as well as general feasibility.

These

dimensions may include:

Financial and economic
Environmental and resource consumption
Worker relations
Public relations
Alignment with overall corporate strategy
These factors need to be weighed together in order to understand the overall
impact of a solution. Most solutions involve tradeoffs of one kind or another. It is
important that management not only understand these tradeoffs, but that the
management make tradeoffs that push greater alignment with the firms overall
corporate strategy. In general, SBMC has a great core of technical expertise that can
help analyze these solutions quickly. However, it is becoming capacity constrained as
these resources are limited. In the future, SBMC should consider engaging vendors and
outside groups at an earlier stage in the process in order to offload a greater share of
analytical tasks on the relevant firms. While core managerial decision-making cannot
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be outsourced, the basic analyses that are inputs to that decision making process can be,
especially if the analyses required is outside of the expertise of existing staff or if current
human resources are highly constrained.

Prioritization and Selection

It is critical for organizations to prioritize the many solutions that are generated,
given limited resources. Traditionally, projects are funded on a NPV basis. While cash
investment needed, NPV and payback period provide a nice way to prioritize the projects
from a financial perspective, sustainability projects need to be examined from a different
mindset.

As outlined in the Analysis of Solutions section above, a common set of

metrics expanded to cover stakeholders and alignment with corporate strategy is

important to avoid getting so narrowly focused on the immediate economic cost-benefits
that other factors such the potential to create public goodwill and/or new markets are
overlooked.

These other factors can ultimately create longer-term benefits, though

difficult to quantify.

Therefore, we recommend examining the NPV using a longer

payback

especially

period,

since

sustainability

projects

are

usually

infrastructure-related. We also recommend applying a color-coded strategy to estimate

the impact of more qualitative factors, relative to the current state as well as each other.
Making it visual will provide another way to prioritize projects to the high-impact and
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high-return projects.

Implementation Plan
As with any recommendation, the key ultimately lies in the implementation. It
is critical to simultaneously work with vendors and internal staff to get buy-in and
proper training. A new piece of equipment is useless if the staff refuses to use it or if the
staff is not fully aware of its capabilities and how to maximize the gains. This is an area
that we feel the Integrated Work System (IWS) can play a large role, not just in the
Focused Improvements Pillar but across all pillars.

Being able to speak the same

common language of sustainability will enable the entire organization to see it as part of
their responsibility and not just someones job.
Over the course of a project, conditions and needs are constantly changing.
Staying flexible and continually revising the plan of action with vendors and staff will
help projects to be successful and strategically aligned with the business goals.

Sources of Interest
Following the identified methodology and approach, we took a deeper look at
several sources of energy including steam, electricity, water, and compressed
air/nitrogen in order to understand the main flows within the plant and build a
preliminary energy flow map. This approach would also allow us to assess the energy

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usage and costs, potentially uncovering some loss elimination ideas that have been
previously overlooked.
highlights.

The following diagram outlines the four areas and some

For the detail description within each sources of energy please refer to

Appendix C: Detail Diagnoses and Recommendation by Source of Energy.

Steam
Reconsider operating constraints of power plant once gas fired turbine is
installed
Consider shutting down steam circulation during summer months

Electricity
Additional metering could increase accountability of electricity use
Potential to tie occupancy sensors to Lighting and HVAC systems
Water
More detailed water accounting could provide better understanding of losses
Potential quick-wins with low-flow water heads
Compressed Air / Nitrogen
Better system monitoring may improve leak identification and help target
efforts
Distributed production and storage may offer potential savings in both
systems

Conclusions
We believe that SBMC is making strong progress with its aggressive
sustainability planning and existing initiatives. Our recommendations include specific
on-site tactical (micro-level) changes as well as high level strategy (macro-level) changes.
Micro-level changes include shutting off the steam loads during the summer months to
shorten the circulating loop and implementing a water storage system to collect water
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for reuse. Macro-level changes include rethinking the way projects are selected, using
distributed systems where beneficial, and improving the understanding of current state
with expanded metering systems in all areas. The number of great ideas is numerous
the broader challenge lies in prioritizing time and resources and integrating the projects
into a cohesive strategy that aligns with the business goals. We recommend prioritizing
recommendations using a systems approach, taking into account more than financial
impact factors such as public relations, employee retention, environmental impact, and
potential for new markets may also be important in approving a strategic project which
may not have immediately quantifiable benefits but could be a cornerstone in changing
the way SBMC is perceived both inside and out. While we understand business need
for economic value, we also believe that sustainability projects require a shift in mindset
to see the benefits that go well beyond savings. Sustainability projects can bring costs
down but more importantly, they serve to mitigate business risks of overdependence on
fundamentally limited resources. For infrastructure-related investments, the required
payback period should also be extended to reflect its longer useful life and potentially
lower cost of capital. The table below is an example of a prioritization and selection tool
that has been expanded to incorporate a few key considerations in addition to traditional
NPV analyses.

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Solar PV

Low Flow Toilets,

Showerheads &
Faucets

Smart Occupancy
Sensors

Shorten
Compressed Air
Loops
On-site Nitrogen
Gen

Balance H2O
pumping

Legend
Large benefit or low cost
Medium benefit or medium cost
Low benefit or high cost
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New Markets

Morale

PR

Waste

Water

Energy

CO2

Savings

Cost

Solution

Laboratory for Sustainable Business

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P&G Reduction of Energy Usage and Footprint

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