Lean + Circular Principals = a New True North for Manufacturer

For a photovoltaic solar panel array to function effectively as a unit, every tiny solar cell must perform at the same high level. So when SunPower, a vertically integrated designer and maker of solar cells and panels for homes, commercial buildings, and power plants, launched a lean management effort in 2011, focusing on quality improvement and variation reduction made sense.

When they became good at those activities, the transformation expanded to employ flow production, improved factory layout, overall equipment effectiveness, problem solving, A3s, kaizen events, etc.

By 2015, the effort had generated solid improvements in key corporate measures:

• End-to-end value stream lead time (days) down 47%
• Total cost down 54%
• Yield loss reduction down 77%
• Customer corrective action requests down 92%
• Manufacturing labor productivity up 23%
• OEE up 41%

In its trajectory and results, SunPower’s lean journey resembled most others — until 2015. That’s when the company began seriously thinking about “where else do we want to go,” said Ralph Robinett, vice president of operations.  “We were doing well, but what’s next for us?”

At that time, COO Marty Neese and other company leaders were investigating a concept called the “circular economy,” a regenerative business model emphasizing conserving natural resources. Instead of following the traditional linear economic model of “take, make, dispose,” companies following a circular model continually reuse, remanufacture, and recycle products and raw materials so less energy and effort is expended in mining, refining, transporting, etc.

“We had this moment where it was sort of an epiphany that it’s not okay to just reduce waste, it’s not okay to do less bad. How were we going to go do more good?” said Robinett. “We started looking at a new vision; a new mission for the company, defining a new True North.”  The mission statement changed from the practical but uninspiring “Install 10 gigawatts of solar panels by 2016” to the ambitious and motivational “We change the way our world is powered.” To achieve it, SunPower melded lean principals with those of the circular economy to launch what it is calling a “CLean Transformation.”

COO Marty Neese describes the “circular economy” and the business reasons behind it versus the traditional “take, make, dispose” economy during a plenary session at LEI’s Lean Transformation Summit March 18, 2016, in Las Vegas.

The basic tenets of the circular model are laid out in detail in the book, The Circular Economy A Wealth of Flows, by Ken Webster, head of innovation at the Ellen MacArthur Foundation (Ellen MacArthur Foundation Publishing, 2015). A key premise is that companies should retain ownership of their goods and the resources embodied in them over the full life of the product, agreeing to take them back when their useful life has ended, either to be remanufactured or recycled for their core materials. According to the book, this practice “gives corporations in terms of rising resource prices a high future resource security and resource price guarantee as well as a competitive cost advantage against throughput-based competitors, along the lines of: ‘The goods are the resources of tomorrow at yesterday’s prices.'”

So as part of its CLean model, SunPower takes back its solar panels after their guaranteed life of 25 years. “We made our panels 100% recyclable,” Neese said. “Everything we do with circularity has to be embedded in our core processes. Previously, we often never considered what happens when our product leaves the factory, or where our raw materials come from – let alone, what happens after the customer is done with a product.”

Complementary Concepts
While the circular economy as described in Webster’s book doesn’t openly embrace lean, it places a high value on the contribution of human creativity and ideas that are so central to any lean transformation. “Human labour is the only renewable resource with a qualitative characteristic,” the book states. “Work is the most versatile and adaptable of all resources, with a strong but perishable qualitative edge: it is the only resource capable of creativity and with the capacity to produce innovative solutions.”

SunPower would need people’s creativity if its Mexicali plant, chosen as the model facility to test the CLean idea, was to get “triple certified.”  That meant winning zero waste-to-landfill certification, designing and manufacturing cradle-to-cradle certified products, and operating the facility in a very sustainable way for LEED certification.

LEED applies to a set of efficiency standards developed by the U.S. Green Building Council. The Leadership in Energy and Environmental Design or LEED, includes rating systems for the design, construction, operation, and maintenance of “green” buildings. Mexicali expects to attain it in the third quarter of 2016. Zero waste to landfill means a process or facility diverts 99% of its waste to recycling, with 1% or less going to landfills.  And cradle-to-cradle manufacturing requires a company to take responsibility not only for the remanufacturing and eventual recycling of its products when their useful life is over, but also for emphasizing environmental concerns at the front end, especially in product design and choice of non-hazardous materials.

As an example, SunPower eschews the practice of some solar panel manufacturers of using lead in making of the panels, choosing instead to use copper and tin for the bus bars, the metal links that connect the cells.

SunPower Cradle to Cradle from Lean Enterprise Institute on Vimeo.

Taking a question from a Summit attendee, VP Ralph Robinett and Neese explain the concepts of cradle-to-cradle, zero waste, and LEED.

Putting Lean in CLean
SunPower’s CLean program uses lean tools to make it more green in everything it does. For example, during the normal kaizen process at Mexicali “we did a gemba walk of our operation, looking to see where the waste was on the shop floor as well as the waste that goes into the dumpster outside the plant,” said Robinett.

They found that of the Mexicali plant’s total waste, 72% was recycled, and the rest went to the landfill, leaving 27% gap to close. An employee kaizen team used lean’s plan-for-every-part concept to dissect the waste stream on the plant floor. Team members photographed and described in detail each piece of waste going to the landfill, including the vendor of origin and where it would end up when discarded.

Employees contributed ideas on how to eliminate waste on the shop floor and in the cafeteria. Paper and cardboard were recycled. Pallets the plant used to ship finished solar panels to customers were picked up and returned to the plant for reuse, eliminating a huge pile of pallets where SunPower was building a power plant for a customer and also resulting in a cost reduction for the company.

Plastics waste from the manufacturing process in which the edges were trimmed off the solar panels was reused by a concrete manufacturer instead of being discarded. Similarly, scrapped glass was recycled for its basic materials of silicon and sand.

Despite all the improvements, the plant still wasn’t at the 99% recycling mark needed for zero waste-to-landfill certification. To find the root cause of the remaining waste, the kaizen team emptied the dumpster behind the plant and sifted through the contents. It found that the bulk of the residue came from the employee cafeteria, including about 250 pounds of food waste per day.

As an experiment, the team began composting the food waste on a plot of ground behind the plant. An initial effort using a homemade composting setup quickly graduated into using a bigger composting machine. “That got us over the last 1% of material that had previously been diverted to the landfill,” Robinett said. “Now we are growing our own vegetables for the cafeteria, including lettuce and radishes. And we are using our own solar panels — ones that had cosmetic defects — to power the composter. It’s now a very circular process.”

The composting garden started by a kaizen team behind SunPower’s Mexicali plant reduced landfill-bound food waste.

From Neese’s perspective as COO of an enterprise known for building renewable energy products, the kaizen team’s dumpster dive is an example of the company’s responsibility to go further in demonstrating its leadership as both a lean and “clean” manufacturer. “My sense is that we haven’t done our homework as lean practitioners,” he said. “For instance, how can you be running a lean transformation exercise and have waste streams that go into landfills? We felt we needed to update our model.”

How To
Neese acknowledges that the circular economy may present a “disruptive perspective” for many companies. “It’s a framework, a theory at this time,” he said. The big question for most companies, of course, is “how do you do it?”

For SunPower, the answer was to engage the company’s lean culture to both identify and implement the changes. “The single best transformation engine I know is the lean community,” Neese said. “We decided to connect this new vehicle of achieving circularity to the drivetrain of lean.” That approach is particularly fitting, given SunPower’s mission statement of “We change the way our world is powered.”

In its manufacturing facilities, SunPower has made significant strides in applying lean to reduce waste and make for cleaner, less wasteful processes. Following a kaizen aimed at improving the plating process, which had been water-intensive, the company came up with a dry process that actually produces cells that yield more energy, uses half the water, and gives off 75% less carbon dioxide.

Through improved design and cutting wasted time, motion, and materials, SunPower reduced the total cost of producing solar panels by 54% from 2011 to 2015. This was a significant improvement from a competitive standpoint, Robinett says. “We use a lot of commodity metals, and cost reduction is really critical in this business, because without it, you’re at the mercy of the markets,” he said. “You have to make solar a more compelling choice than other power choices.”

Customer complaints were reduced by 92% over the same time. In 2015 the company shipped five million panels, out of which 100 were defective. And, as cited above, SunPower reduced its overall value-stream duration, starting with the sand used in making silicon cells to the finished panels from 171 days to 47 days.

Some methods the company employs on the shop floor are statistical process control, one-piece flow, pokayoke, andons, and visual control. In one instance, the root cause of a defect was identified as a poorly designed manufacturing fixture, so operators engaged in a kaizen event to improve the fixture design, eliminating the source of the defect. Similarly, a kaizen team developed an andon light to act as a pacesetter for operators performing standard work, thereby getting rid of any unevenness in the process.

Moving from muda to mottainai: Neese uses a value stream map to show how to couple lean concepts with circular to create “CLean thinking.”

One of the materials left over from SunPower’s solar cell manufacturing process was calcium fluoride. Instead of discarding it as waste, the company partnered with a cement company that uses the waste material in its product.

From a circular standpoint, Neese said the most value-added approach is to build products that can continue to perform indefinitely, given regular upgrades, servicing, and eventually, remanufacturing. By contrast, he says, recycling goods such as computer hardware that has to be crushed to extract the value of the metals inside, is the least value-added. SunPower not only warrants panels for 25 years, but also guarantees to take them back at the end of that term for remanufacturing or recycling so that all of the materials can be reused, with nothing discarded. “We made our panels 100% recyclable,” Neese said.

In the case of solar power plants the company builds for customers, SunPower takes responsibility for its product once its stated useful life has expired. The company joined with First Solar, another large solar firm, to form a publicly traded, solar-only “yieldco” called 8point3 Energy partners. Yieldcos are publicly traded spinoffs that own cash-generating projects, ensuring a guaranteed cash flow from which to pay dividends to investors.

“As an example, let’s say we have a 20-year off-take agreement with investors in the power plant, even though we believe our panels will continue producing energy for twice that long,” Neese explained. “Our investor partners enjoy early returns while 8point3 captures the benefits of a more durable, long-lasting product. At the end of its first-use cycle, estimated to be some 40 years or more, we will disassemble the panels and reuse their parts.” Added Robinett, “We own the power plant and its residual value, and it’s made of steel, aluminum, and glass, so at the end of the product life, we’ll have free materials.”

Ideas from Automotive
As is typical of the sharing of ideas and experiences among members of the lean community, SunPower managers got some pointers from another company that had already traveled the path of melding lean with sustainability. Marissa Yao, SunPower’s director of sustainability, did a Google search and identified Subaru of Indiana Automotive as a company that was a leader in harnessing lean to achieve zero-waste-to-landfill status.

After contacting Subaru executives, five SunPower managers spent a day visiting the automaker’s Lafayette, IN, plant. Having set a goal of becoming the nation’s first zero-landfill automobile plant, the company redesigned processes to yield less waste and use less materials, while reselling remaining waste products or materials to other companies. In typical lean fashion, employees contributed ideas to the company’s green effort.

The Subaru facility found ways to reuse, resell, or recycle various discarded materials such as foam packing cases, scrap metal, and waste paper. The plant significantly reduced energy consumption and stopped sending waste to landfills in 2004.

“We took the lessons we learned there and then had a kaizen,” Yao says. “The result was that we were 90% landfill-free in a year, but it took us six months to get that last 9% (to the goal of 99% landfill-free).”

One of the ideas SunPower adopted from Subaru was the overturning of the Mexicali plant’s waste dumpster to catalog everything inside to determine the contributing waste streams. Through SunPower’s idea solicitation program, called the Bright Idea system, shop-floor workers suggested segregating waste by type of material using color-coded bins. Instead of being thrown away, plastic waste from the trimming of the laminate on solar panels was saved to be reused by a concrete manufacturer.

Reducing transportation needs along with hydrocarbon emissions was another way SunPower was able to conserve. The company had been receiving six shipments per week from a key supplier. “By cutting those trips to two shipments per month, we were able to reduce the amount of CO2 expended annually into the atmosphere by 7,488 kilograms,” said Neese.

Yao credits COO Neese for having the vision to push the company to marshal its lean capability to bring about the changes in waste elimination, product design, nontoxic materials use, and overall sustainability. “It’s exciting to see a change-oriented COO who sees the concepts of lean and sustainability as complementary,” she said. “It’s about smart design and making the product itself not part of the waste.”

Advancing from Muda to Mottainai
Lean practitioners everywhere seek to eliminate the 3 M’s — short for Japanese terms that describe unevenness in an o peration (mura), overburdening equipment or operators (muri), or an activity that consumesresource without creating customer value (muda). But for solar manufacturer SunPower, the focus on waste doesn’t end there.

SunPower has adopted a fourth M– mottainai. “It’s the inherent respect for the entire process the product goes through, from end to end,” says Marty Neese, chief operating officer at SunPower. “At a lot of industries, the product is done when the customer has used it up. We want our products to go through an endless loop of value.”

Business Payoff
Of course, one company’s product design only goes so far. The reality is that most companies source from their supply chain a variety of materials or components that go into their finished product. “We have a supplier sustainability program,” Yao said. “Our suppliers must conform to our requirements. For example, when we did our continuous improvement, we found that the majority of waste was in the supplier packaging.”

Getting suppliers to think about their contribution to a more circular economy has a payoff for them, too. Yao points out that companies using SunPower’s solar panels to help power their plants and offices can receive points for doing so toward their LEED certification. “In this way we are providing a benefit to our customers and adding to the value proposition of our products.”

Yao stresses that for the sustainability effort to succeed, there has to be a business payoff for the company. “The theme we have always operated under is that there has to be business value,” she said. “Sustainability is part of the profit and loss statement.”

It’s no secret that many corporations are taking a hard look at ways to reduce their carbon footprint, cut energy consumption, and evolve to a more green operation. Of the Fortune 50 companies, 43 have goals for LEED, reducing climate impact, renewable energy, and carbon reduction, Yao said. “It’s the next evolution in your lean journey.”

Much of SunPower’s experience combining lean ideas with circular goals could be followed by other companies, Yao said. She noted that SunPower had each of its factories use lean continuous improvement tools to pursue the zero waste-to-landfill result.

“All of these initiatives could be copied beyond SunPower,” she said. “It’s keeping that fundamental questions of lean, but adding the question of ‘What can I now do with the output — if we still have waste, what do we do with it?’ And it’s a tool by which we get people to rethink how we deal with our suppliers. It’s opening up another level of questioning and critical thinking on the factory floor.”

Going forward, Robinett believes SunPower’s CLean initiative will continue to help the company remain competitive. “Our concept of a lean future state for the company is self-sustaining, very circular, and very efficient, while providing our customers power at the same or lower cost than our competitors.”

Next Steps:

• Learn more about SunPower and its approach to sustainability.
• Learn more about the circular economy.
• Explore all of LEI’s lean management case studies from a variety of businesses (no registration required)