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Green Decision Analysis in Manufacturing

Sean Salleh 02 Sep 2013 Energy and environment

At one time, manufacturing relied totally on deterministic decision analysis. Neither the PC nor Monte Carlo methods had been invented, but manufacturing decision processes were also much simpler, endogenous and controlled. A few arithmetic expressions were enough, give or take a few inequalities. Now times have changed. Green decision analysis in manufacturing means also taking into account factors whose values are uncertain and uncontrollable. Building up an overall model with Analytica from deterministic and stochastic sub-models is one way to handle things.

Factors influencing green decisions in manufacturing Image source: lg.com

When Going Green is Not an Option

Manufacturing companies that do not appreciate the carrot of reduced costs through greening are increasingly faced with the stick of green regulations. Recent policy changes in the European Union have been putting enterprises under increase pressure. States in the US such as California and Vermont have been in legal tangles with car manufacturers about emission standards. And not only do firms have to monitor their internal greening, but they also have to be picky about where they source their raw materials and their components and even the greenness of their power supplies if they want to be able to present a completely clean ecological slate.

A Complex Model

Manufacturers have to get their raw materials from somewhere. If they buy from a supplier that lacks respect for the environment, the benefits of any in-house greening of their own may be cancelled out. On the other hand, pricing, availability and reliability of supply also enter into the equation. An initial sub-model can be made for suppliers with an influence diagram to map out the different factors and relationships. The next sub-model could then describe the internal production operations with energy efficiency and waste products for different product lines, including considerations about packaging and other factors according to the products being made.

What Does the Market Want?

Changes in market demand for types of product need to be factored in as different scenarios to test the overall model for sensitivity to any particular factors. This was how car manufacturer Nissan approached its own green decision analysis, with decisions leading to a flexible strategy allowing it to ramp up production of different types of greener or fuel-economical solutions such as HUVs (Hybrid Utility Vehicles) and diesel-powered vehicles. Customer factors that can affect manufacturers’ green decision analysis include greater competitive product differentiation, demand for products that make better use of environmental resources, and even the willingness to pay a premium for green products.

Manufacturing and Environmental Case Studies

Analytica has already been used for a number of modeling requirements involving manufacturing multi-variable challenges and environmental decisions. The modeling capabilities in Analytica allowed manufacturer Rexam to increase its confidence in its R&D decision process for new product ranges, and also making projections of how biofuels, electric vehicles, plug-in hybrids and hydrogen fuel cell vehicles, among others, might transform transport in the US with its Analytica Transportation Energy Assessment Model (ATEAM).

If you’d like to know how Analytica, the modeling software from Lumina, can help you manage the multiple decision criteria in green decision analysis of any kind, then try a thirty day free evaluation of Analytica to see what it can do for you.

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Sean Salleh

Sean Salleh is a data scientist with experience in guiding marketing strategy from building marketing mix models, forecasting models, scenario planning models, and algorithms. He is passionate about consumer technologies and resource management. He has master's degrees in Operations Research from University of California Irvine and Mathematics from Northeastern University.

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