Analysis of the existing methodologies supporting innovation and solution engineering

Transcription

1 D3.2 Version: 1.0 Date: Author: VTT Dissemination status PU Document reference D3.2 Analysis of the existing methodologies supporting innovation and solution engineering Project acronym: Project name: Call and Contract: SustainValue Sustainable value creation in manufacturing networks FP7-NMP-2010-SMALL-4 Grant Agreement no.: Project duration: (36 months) Co-ordinator VTT VTT Technical Research Centre of Finland (FI) Partners: POLIMI Politecnico di Milano (IT) UiS FIR DIN FIDIA Riversimple CLAAS ELCON UC Center for Industrial asset management, University of Stavanger (NO) Research Institute for Operations Management at RWTH Aachen University (DE) DIN, The German Institute for Standardization (DE) FIDIA (IT) Riversimple LLP (UK) CLAAS Selbstfahrende Erntemaschinen GmbH (DE) Elcon Solutions Oy (FI) University of Cambridge (UK) This project is supported by funding from the Nanosciences, Nanotechnologies, Materials and new Production Technologies Programme under the 7 th Research Framework Programme of the European Union.

2 Project no SustainValue Sustainable value creation in manufacturing networks D3.2 Analysis of the existing methodologies supporting innovation and solution engineering Due date of deliverable: Actual submission date: Start date of project: Duration: 36 months Organisation name of the lead partner for this deliverable: VTT Revision 1.0 Project co-funded by the European Commission within the Seventh Framework Programme Dissemination Level PU Public x PP RE CO Restricted to other programme participants (including the Commission Services) Restricted to a group specified by the consortium (including the Commission Services) Confidential, only for members of the consortium (including the Commission Services) Page 1 of 57

3 Contents 1 Executive summary Introduction The purpose of the deliverable D Sustainability challenges of manufacturing networks The structure of the deliverable Business strategy development and innovation management Strategic decisions, competitive edge and differentiation Methods used in strategy development Case example about sustainability and strategy Innovation management and exploration of business opportunities Methods used in innovation management Remarks concerning business strategy and innovation management Management of design, planning and development phase Methodologies regarding design and planning New product development (portfolio management) Management of a new product development project Systems Engineering Service development and solution engineering Solution engineering (Product-Service-Systems Engineering) Design for Excellence (DfX) and Design for Sustainability (D4S) PSS development with focus on sustainability Remarks regarding the planning and development phases and a requirement check Management of manufacturing systems Methodologies regarding manufacturing systems Traditional manufacturing Page 2 of 57

4 5.1.2 Lean manufacturing Sustainable and green manufacturing Methodologies regarding ethical sourcing, trade and consumerism Remarks concerning manufacturing and sourcing management Management of distribution, logistics and services Distribution and logistics Green logistics and distribution Service operations Remarks concerning management of logistics, distribution and services Management of usage phase Quality, safety, health and environmental management Maintenance during usage phase Performance management Remarks concerning usage phase End of life cycle management Methodologies regarding end of life cycle Reverse logistics From 3R s to 6R s Remarks concerning end of life cycle phase Gap analysis of existing development methodologies considering sustainability Summary of gap analysis Strategic approach to sustainability Sustainable development at network level Summary Page 3 of 57

5 Document summary information Authors and contributors Initial Name Organisation Role PV Pasi Valkokari VTT Author KV Katri Valkokari VTT Author MR Markku Reunanen VTT Author GR Christian Grefrath FIR Author WG Dirk Wagner FIR Author NA Nicole Adomeit DIN Contributor JP Jayantha P. Liyanage UiS Contributor JB Jakob E. Beer UiS Contributor MM Marco Macchi POLIMI Contributor MH Maria Holgado Granados POLIMI Contributor PR Padmakshi Rana CU Contributor Revision history Revision Date Who Comment Pasi Valkokari Outline of deliverable Katri Valkokari Draft deliverable Pasi Valkokari Draft deliverable Pasi Valkokari Draft deliverable Pasi Valkokari Final Quality control Role Who Date Project manager Teuvo Uusitalo Disclaimer The content of the publication herein is the sole responsibility of the publishers and it does not necessarily represent the views expressed by the European Commission or its services. Page 4 of 57

6 1 Executive summary Existing methodologies supporting innovation (management) and solution engineering are collected and checked against the developed requirements presented in D3.1. The result of this step is an overview on which part of which existing methodology achieves which requirements regarding sustainability. This overview is a basis for the creation of a new development methodology towards life-cycle based products and services. Since the business model aspects are covered in the work package 2 of the SustainValue project, this report focuses on current innovation and solution engineering methodologies that are used in manufacturing industry. They are studied from the following perspectives according to the life cycle of a product: business strategy development and innovation management management of design, planning and development management of manufacturing systems management of distribution, logistics and services management of usage end- of- life cycle management The study reveals that there are various methodologies that could be used in order to support innovation and solution engineering within manufacturing industry during development activities. All the presented methodologies are considering at least some of the elements of sustainable development. According to the gap analysis of the studied methodologies, strategic approach to sustainability is needed, while the key challenge is to identify what is the company-specific sustainability recipe. Furthermore, companies cannot comprehensively reach sustainability objectives alone in the present networked manufacturing environment. Therefore it is important to consider sustainability at a network level over product life cycles. Page 5 of 57

7 Terminology Business architecture (D2.1) The link between business strategy with the business processes, roles, behaviours and information (Wolfenden & Welch, 2000). Business architecture is conceptualised to structure the responsibility over business activities prior to any further effort to structure individual aspects (processes, data, functions organization, etc.) (Versteeg & Bouwman, 2006). Business ecosystem is the network of organizations including suppliers, distributors, customers, competitors, government agencies and so on involved in the delivery of a specific product or service through both competition and cooperation. The idea is that each business in the ecosystem affects and is affected by the others, creating a constantly evolving relationship in which each business must be flexible and adaptable in order to survive, as in a biological ecosystem (D1.1). Business model It is a conceptual tool containing a set of objects, concepts and their relationships with the objective to express the business logic of a specific company or a company network. Therefore it has to be considered which concepts and relationships allow a simplified description and representation of what value is provided to customers, how this is done and with which financial consequences (Osterwalder et al., 2005). (D1.1) Business model is the way in which a business chooses to create, deliver, capture and exchange value (D 2.1: working definition for SustainValue project). (Carbon) footprint is an indicator of total greenhouse gas emissions caused by an entity. It is the overall amount, expressed in terms of CO2 equivalents, of carbon dioxide and other greenhouse gas (GHG) emissions associated with a product, using LCA methodology. A carbon footprint is only one ecological footprint; other indicators include e.g. water footprint and services footprint. Framework supports understanding and communication, and exploration of structure and relationship within a (business/industrial) system for a defined purpose (Shehabuddeen et al., 1999). D2.1. Innovation: Innovation is a new idea that can be commercialized and is significantly better than an earlier solution. The innovation can be related to products, services, technologies, business and organizational models, operational processes, or operational methods (Paasi & Valkokari, 2010). Innovation management: Innovation management is management of a process creating potential for the emergence of innovations (e.g. Drejer, 2003; Boer & During, 2001). Life cycle assessment (LCA): Compilation and evaluation of the inputs, outputs and the potential environmental impacts of a product system throughout its life cycle (EN ISO 14040, 2006). Life cycle costing (LCC): Life cycle costing is the process of economic analyses to assess the total cost of acquisition and ownership of a product. It can be applied to the whole life cycle of a product or parts or combinations of different life cycle phases (IEC , 2004). Life cycle profit is a broader term than life cycle costing. In life cycle profit calculations the expected profits gathered during the chosen life cycle phases are considered. Page 6 of 57

8 Method is a series of steps describing how to accomplish or approach some objectives (see D2.3). Methodology: Framework clustering, evaluating and employing methods and tools (see D3.1). Model supports the understanding of the dynamic interaction between the elements of a (business/industrial) system (Shehabuddeen et al., 1999) (see D2.3). Procedure: Specified way to carry out an activity or a process with a defined beginning and end point (adapted from ISO 9001) (see D3.1). Process is an approach to achieving a managerial objective, through the transformation of inputs into outputs (Shehabuddeen et al., 1999) (see D2.3). Product data management (PDM) PDM is an engineering discipline that includes different methods, standards and tools to manage product data during the product s entire life cycle (Crnkovic et. al., 2003). See also Product life cycle management (PLM). Product life cycle management (PLM) is the process of managing the entire life cycle of products; from the design, production, support, and use to final disposal. From a technical and business perspective, PLM is an integrated, IT supported, approach to the co-operative management of all product related data along the various phases of the product life cycle (See Terzi et al., 2010). Product Service System (PSS): A product service system can be defined as the result of innovation strategy, shifting the business focus from designing and selling physical products only, to selling a system of tangible products and intangible services which are jointly capable of fulfilling specific customers needs (adapted from Manzini and Vezzoli, 2002). Requirement: A requirement is a notation about the characteristics or the output of a PSS or a solution, a process or the resources which are used in the processes (adapted from Van Husen 2007, p. 32). Service engineering: The systematic development and design of services employing interdisciplinary models, methods and tools (cf. Bullinger & Schreiner, 2002) (see D3.1). Service system: Service systems are dynamic configurations of people, technologies, organisations and shared information that create and deliver value to customers, providers and other stakeholders (White Paper of Service Science, 2007). Solution: A solution is defined as combination of tangible products and intangible services to fulfil customers needs. More broadly, a solution may be a product, a service, a new operating practice, a new business model, etc., or a combination of any or all of these (see also definition of innovation). Solution Engineering: Solution engineering uses systematic approaches, methods and tools to develop a desired solution (draft definition for SustainValue project). Stakeholder Stakeholder is an individual or group that has an interest in any decision or activity of an organization (ISO2600, 2010) (D1.3). Page 7 of 57

9 The key stakeholders discussed in relation to sustainability, primarily, include workforce, environment, suppliers, community (consumers/citizens), governments, international organisations, non-government organisations (international and local) and the media (D2.1). Sustainability is a state that requires that humans carry out their activities in a way that protects the functions of the earth's ecosystem as a whole (ISO 15392, 2008). Sustainability has an economic, an environmental and a social dimension (ISO 15392, 2008).Corporate responsibility and triple bottom line (Elkington, 1997) address these as three pillars of sustainability (D2.1). Sustainable manufacturing can be defined as the ability to smartly use natural resources for manufacturing by creating products and solutions via a network of suppliers, partners and collaborators that due to new technologies, regulatory measures and coherent social behaviour are able to satisfy sustainability - economical, environmental and social objectives. Thus preserving the environment, while continuing to improve the quality of human life and remaining financially viable for the long term by returning adequate profits and growth (developed from Garetti and Taisch, 2011 and D1.3) (see D2.2). Sustainable solution: A sustainable solution is defined as combination of tangible products and intangible services to fulfil stakeholders needs that deliver sustainable value (environmental, social and economic objectives) (see D3.1) Sustainable manufacturing network is an organisational form which (i) targets to gain future competitive edge to all participants through interaction and collaboration, and thereby (ii) is able to balance the three key aspects of sustainability (environmental, economic and social aspects) (see D1.1). Tool is a resource / mechanism that facilitates the practical implementation of transformations of inputs into outputs (i.e. process) at different steps of accomplishment (i.e. method) (see D2.3). Tools are utilities supporting the execution of methods on a detailed level (Bullinger and Schreiner 2002, p. 72f.) (see D3.1). Value network Value network generates economic [environmental and social] value through complex dynamic exchanges between one or more enterprises, customers, suppliers, strategic partners and the community. These networks engage in more than just transactions around goods, services, and revenue (Allee, 2000; see D2.2). Value network consists of organizations (companies) co-operating with each other to benefit all network members. In manufacturing industries lead producer and its suppliers and customers form a typical value network (see D1.3). Value network, i.e. a group of three or more organizations, should be connected in ways that facilitate achievement of a common goal (Provan et al., 2007; see D4.1). Page 8 of 57

10 2 Introduction The overall goal of the SustainValue project is to develop industrial models, solutions and performance standards for new sustainable and more performing manufacturing and service networks. According to the project s original work description, key challenges that sustainable manufacturing must respond to are: economic challenges, by producing effectively and efficiently and creating new services ensuring development and competitiveness through time environmental challenges, by promoting minimal use of natural resources (in particular nonrenewable energy) and managing them in the best possible way while reducing environmental impact societal challenges, by promoting social development and improved quality of life through renewed quality of wealth and jobs 2.1 The purpose of the deliverable D3.2 The purpose of this deliverable is to collect information on current methodologies of innovation (management) and solution engineering, and to compare them against the requirements identified in task 3.1 (presented in D3.1 Definition of requirements of the new solutions development methodology). The deliverable aims not to compare the different methodologies with each other since they all have many different viewpoints and are continuously evolving. In other words, the deliverable targets to be a checklist about different life cycle management methodologies that are already utilised in modern manufacturing networks and to analyse their potential with respect to sustainability. In the following tasks of WP3 the relevant methods and tools will be further studied. In D3.1 the requirements are separated into requirements for sustainable solutions (Table 2 in Chapter 5.3 in D3.1) and into requirements which concern requirements of a solution or a productservice system (Table 4 in Chapter 7.3 in D3.1). The requirements for sustainable solutions (summary in Table 2 on p. 22) are the baseline for the analyses in this report, while the aim is to consider sustainability requirements management over the borders of individual companies, i.e. at a value network level 1. The requirements concerning the development process of sustainable solutions are considered in Chapter 4 of this report (design, planning and development phase). Innovation and its management as well as solution are defined broadly within this report. Innovation is a new idea that can be commercialized and is significantly better than an earlier solution. Innovation can be related to products, services, technologies, business and organizational models, operational processes, or operational methods (Paasi & Valkokari, 2010). Similarly, a solution may be a product, a service, a new operating practice, a new business model, or a combination of any or all of these. Furthermore, innovation management considers the management of a process creating potential for the emergence of innovations (e.g. Drejer, 2003; Boer & During, 2001). This broad 1 This is based to SustainValue vision presented in D1.1: New forms of business models and value networks together enable knowledge-based transformation of the manufacturing industry and improve all three dimensions of sustainable value (economic, environmental, and social). Page 9 of 57

11 definition of innovation is in accordance with emerging practical literature of innovation. The focus in practically oriented innovation research has shifted increasingly towards examining entire companies from the perspective of innovation management (e.g. Tidd et al., 2005; Davila et al., 2005; Apilo, 2010; Paasi & Valkokari, 2010) as opposed to earlier product development studies (e.g. Ulrich & Eppinger, 2004; Cooper, 2000). The broad definition of innovation requires also broad view to sustainable development and its clear connection to business development. In other words, the SustainValue project aims to identify the business opportunities and define new business modelling tools and methods that take into account sustainability. In accordance with this several authors (for instance Maxwell & van der Vorst, 2003; Jayal et al. 2010; Gunasekaran & Spalanzani, 2011) have suggested need for integrating sustainability through the life cycle approach, although they have slightly different viewpoints of the phases. These approaches are in accordance with the structure of this report and D3.1 which makes a distinction between five stages: (1) design, planning and development, (2) manufacturing, (3) distribution, logistics and services, (4) usage and (5) end-of-life cycle. In order to highlight the importance of a strategic approach to sustainability, the five stages presented in D3.1 have been complemented with business strategy development and innovation management phase (see Figure 1). 2.2 Sustainability challenges of manufacturing networks In this report (D3.2.) existing methodologies supporting innovation and solution engineering are studied based on a life cycle view presented in Figure 1. The life cycle description aims to combine the aspects related to strategy development and issues related to the life cycle management of the product and solutions that a manufacturing network is producing. For the sake of clarity the lifecycle is presented as linear in Figure 1, although in practice the life cycle of one product is at least partly circular. Figure 1. Life cycle definition used as a baseline of the study. In practise life cycle phases are intertwined to each other and thereby development methods as well as requirements are also linked to each other. For instance, Aurich et al. (2007) have described the product service system engineering process as Life Cycle Management (LCM) that includes two product life cycles - manufacturers and customers (see D3.1.). In the present networked business environment the challenge to manage sustainability requirements are even more complicated than this. Thus, it is relevant to consider sustainability requirements management of the present methodologies by taking into consideration the overlap between life cycle phases and value network. While exploring the life cycle of a manufacturer s particular solution, several life cycles of different solutions could be identified that are influencing sustainability. Figure 2 aims to illustrate this complexity in the manufacturing value networks. Page 10 of 57

12 Figure 2. Life cycles that are influencing the life cycle of manufacturer s particular solution. Strategic approach to sustainability is important in order to take into account the requirements of customers and network partners. As a matter of fact, it is crucial that an actor is capable to identify its position in the network. This makes it possible for the actor to recognize in what way it could have an effect on sustainability of the manufacturing network and its solutions (see case example in chapter 3.1.2). Sustainable development must have a clear connection to several levels of organizational decision making and performance management, e.g. starting from the strategy, to the portfolio management and further to an individual new product development project. Similarly, business models are considered as a link between the strategy and operational level (see Figure 2 in D1.1). Since the business model aspects are the focus of the WP2, this report focuses on innovation management and solution engineering methodologies used in manufacturing. In addition to the manufacturing principles and relevant methods addressed in this report there are also several standards targeting sustainability. These standards are studied in WP4. (see D4.1 for a summary). Furthermore, WP4 aims at the development of a governing framework for sustainability performance. 2.3 The structure of the deliverable Figure 3 illustrates the structure of the report and how it is connected to life cycle view (Figure 1). Individual methodologies are discussed in one chapter, although many of them consider several life cycle phases. Page 11 of 57

13 Figure 3. The structure of report. Page 12 of 57

14 3 Business strategy development and innovation management Current management paradigms emphasize innovativeness, flexibility and agility. To be successful in an ever-changing networked business environment, companies must be proactive and innovative as well as operationally efficient (Hamel, 2007; Gupta, 2010). In accordance with SustainValue vision innovation management and business development are key elements in sustainability. The business model aspects are dealt with in WP 2 in more detail. In terms of future sustainable manufacturing industry and its competitive advantages, the current manufacturing models which are based on the old paradigm of unlimited resources and unlimited capacity for regeneration need to be updated (Garetti & Taisch, 2011). In present networked environment another important viewpoint is strategic collaboration within all life cycle phases. The companies must consider with whom to collaborate in order to gain the objectives and more importantly how to ensure the commitment of the involved actors. 3.1 Strategic decisions, competitive edge and differentiation Since Porter s (1986) presentation of value chain activities external network positioning has been perceived as key success factor in manufacturing industry. Porter observed that configuration and coordination of a company s (value chain) activities assist in economies of scale, comparative advantage (location of activity performed), cost advantage, differentiation, reinforcing brand reputation and flexibility in responding to competitors (Porter 1986, p ). Later on, the approach of core competence argues that firms which rely on the complementary competencies of other firms and focus more intensively on their own areas of competence will perform better than firms that are vertically integrated or incoherently diversified (Prahalad & Hamel, 1990). Similarly, different network management and service business approaches highlight, that due to the growing complexity of products (and services), firms must in certain instances depend on external resources and capabilities. Today, companies perceptions about sustainability are already changing. As in the past, company representatives see the potential for supporting corporate reputation, but recently they have also come to expect operational and growth-orientated benefits in cutting costs and pursuing opportunities provided by new markets and products (Bonini, 2011). It has been even argued that there is a currently growing market for sustainability and that companies are already using sustainability to gain a position over competitors (Nidumolu et al., ). Thus, sustainability must be aligned also to other strategic targets of an individual company as well as targets of its network partners. If the customers are requiring sustainability and consider it critical, the companies must respond to this requirement in order to continue to compete. Furthermore, to be on top, companies must find new ways to implement sustainable development practices. 2 In their recent article Why Sustainability Is Now the Key Driver of Innovation Nidumolu et al. (2009) argue that in future only companies that make sustainability a goal will achieve competitive advantage. They describe a five-phase model for change process towards sustainability: 1) Viewing compliance as Opportunity, 2) Making Value Chains Sustainable, 3) Designing Sustainable Products and Services, 4) Developing New Business Models and 5) Creating Next-Practice Platforms. Page 13 of 57

15 Many companies these days are advertising either going green or green practices in operations. Still, companies have much ahead if it is to realise the opportunities presented by sustainable production and business operations. Development towards sustainability can open new means for differentiation, e.g. both operational and growth-orientated benefits and new business opportunities that support manufacturers in finding their blue ocean strategy (concept originally presented by Kim & Mauborge, 2005). Still, strategic considerations, e.g. why to develop sustainable solutions, are required in order to gain these benefits Methods used in strategy development As mentioned in the introduction business modelling process configured in WP2.3 3 is overlapping with strategy development, because a business model provides a link between the strategy and operations and enables exploitation of entrepreneurial opportunities (see Figure 2 in D1.1). Thus, related to the business modelling process there are several existing methods, which can be utilised also in strategy development. Such are for example: Scenario building SWOT, Tukker & Tischer (2006) sustainability SWOT and (value) network or stakeholder analyses. These methods will not be covered in this report. As pointed out also in D2.3 most of these methods are typically used at a company level. SWOT analysis, for instance, is frequently used for analysing the external (opportunities and threats) and internal (strengths and weaknesses) environment of a company in order to support decision-making processes. Thus, sustainability requirement management over life cycle phases requires network level considerations Case example about sustainability and strategy The case company operates as supplier of industrial products, which it integrates to a tailored system solution to its B-to-B customers. Figure 4 presents its network position. In the upstream direction there are large component and equipment suppliers, as well as network partners participating in assembly, manufacturing or R&D. In downstream there are B-to-B customers and end-users from several sectors. From the life cycle management point of view there are several life cycles as presented also in Figure 4. 3 For a summary see D2.3 titled: Proposed design of new methods & tools, within the overall architecture. Page 14 of 57

16 Figure 4. Network picture of case company (modified from the network picture presented as Figure 26 in D4.1). Identifying the key players and their roles within different network dimensions is the first step in order to develop sustainable solution within this value network. The case company stated that its products are typically customized solutions for its B-to-B customers, who are project suppliers of larger systems and integrate the solutions delivered by the case company to their own offerings to end- users. According to their business model as a project supplier, these B-to-B customers are usually not responsible for the operational phase and related activities (e.g. maintenance) that add to the life cycle costs. Thus, the sourcing price is an important decision factor for them. On the other hand, the case company typically purchases components to its customized solutions from large component and equipment suppliers. Although it cannot directly influence these suppliers and their sustainability development targets, it can make at least in some cases its own purchasing decision in accordance with its sustainability principles. 3.2 Innovation management and exploration of business opportunities As already pointed out in Chapter 2 innovation management is strongly linked to new product development, and thereby the innovation process (or funnel) is often presented as a linear process starting from research phases. Nowadays, within networked and uncertain business environment actors are more and more trying to find new ways to link market needs and drivers with available, feasible and possible technology into specific and desired business opportunities (Phaal et al., 2004; Paasi & Valkokari, 2010). Figure 5 presents this kind of a broader framework for the innovation development. This report has a similar broader view to innovation and its management. Page 15 of 57

17 Figure 5. Innovation process model (developed in the INNORISK project). Before an opportunity can be evolved into an innovation, one needs a strong ability to make important strategic decisions, a capability to conceptualise the opportunity and to transform it into a final product and, importantly, to manage risks related to commercialisation. A major challenge related to success and sustainability of innovations concerns the question of timing so that the market needs will be met at the moment of the innovation launch. Thus, business concept development should be better linked to the fuzzy-front end of innovation management. The development of new lines of business starts from the recognition of an opportunity. What follows is more or less fuzzy, and therefore the front end of innovation process is often called the fuzzy-front end. On the other hand, the front end is not uncontrollable. Managing (or co-ordinating) the front end is the key for successful as well as sustainable innovation. As presented in Figure 6 new concept development (NCD) within the fuzzy-front end of innovation process consists of five elements: 1) opportunity identification, 2) opportunity analysis, 3) idea generation and enrichment, 4) idea selection, and 5) concept definition (Koen et al., 2002). The NCD engine starts with an idea for a new business opportunity, but it thereafter does not have to proceed in the given order (Paasi & Valkokari, 2010). Page 16 of 57

18 Figure 6. New Concept Development (NCD) model (engine) with its five core elements (modified from Koen et al.,2002, Presented in Paasi et al., 2007). Foresight and market studies supplies input into the NCD engine. R&D is an interactive link to research which may cover a large network of players. There are several critical decision making steps within the process. Thus, early decision making and connection to sustainability also supports the effective use of resources throughout the innovation process. Several methods can be utilised in order to manage uncertainty within new concept development. Next chapter (3.2.1) considers the most relevant methods Methods used in innovation management Similarly to strategy development also innovation management methods are overlapping with tools supporting business modelling process, which are dealt with in D2.3. Scenario analyses and PESTEL, for instance, are shortly described. Forecasting, backcasting, roadmapping, sign posting, and customer observation are examples of other methods which can be utilised also in innovation management and business development. The roadmap for future sustainable manufacturing business model development priorities (presented in D1.1) was formed based on a visionary roadmapping process (Ahlqvist et al., 2010). Figure 7 represents the main elements of visionary roadmapping (VTT Backpocket Roadmap used as an example). Although science and technology foresight, including roadmaps, is typically used by national governments to support long-range planning for economic and social policy development (Calof et al., 2006), it can be utilised also to vision building. A road mapping process also helps to facilitate collaboration and visioning among companies within industries, in the formation of joint industry government research programmes, and in many other venues. Page 17 of 57

19 Figure 7. The elements of visionary roadmapping (VTT Backpocket Roadmap). Similarly to roadmapping also forecasting and backcasting methods are originally methods of future studies, which have later on also adapted to vision building and strategy work at company and industry levels. Forecasting and backcasting methods, although quite similar, differ from each other based on the reasoning mechanism. A manager backcasts by identifying a desired future state and then by considering which of several strategies in the present is most likely to bring that state about. A manager forecasts by identifying several strategies in the present and then by considering the different future states that each strategy is likely to cause (Ebert et al., 2009). At a strategic initiative level signpost is one forecasting method for adaptive contingency planning (Strong et al., 2007). The signposting process integrates several forecasting tools with business opportunity recognition and it can therefore be suitable also for solving the challenging questions about timing of innovations and preparing for unexpected. Figure 8 illustrates the signposting process that explores the future by several different means. Figure 8. Signposting process (modified from Strong et al., 2007). Page 18 of 57

20 Within the signposting process the point of view analysis targets to identify strategic initiatives that are both significant and desirable. These analyses are closely connected to business architecture and business model processing which are dealt with in WP2. Scenarios and technology landscapes are used to explore the business opportunities generated by technology development. The target is to further evaluate the vision areas. Based on these steps the relevant potential futures are covered with candidate signposts and further analysed in order to identify that signal business model shifts and generate technology bridges. (Strong et al., 2007) 3.3 Remarks concerning business strategy and innovation management This chapter consists of a summary of different business and innovation management practices and their aspects regarding sustainability. The practices mainly focus on economic elements, e.g. on the continuity of business and new business opportunities created by sustainable development. The work in task 3.1 did not directly form requirements for business strategy or innovation management. Still, the management paradigms are dealt with here in Chapter 3 because they form a basis for sustainable development and must therefore be considered. Because companies must be proactive and innovative as well as operationally efficient, several viewpoints regarding sustainable development must be considered and linked to strategic decisions. Page 19 of 57

21 4 Management of design, planning and development phase As pointed out also in D3.1 theories for systematic technical product development have existed for decades and evolved into a great number of theories. In this chapter the most relevant methodologies for management of the requirements listed in D3.1 (Table 2) are discussed. The methodologies related to development overlap especially with the methodologies related to manufacturing. They are discussed in Chapter Methodologies regarding design and planning Most of product s costs are determined during its design phase. Thus, approaches regarding design and planning are important to sustainable development. However, sustainability of one product is always a limited consideration, because products are typically connected to each other, e.g. their production and use is a systemic phenomenon. Approaches of systems engineering, new product development (including product portfolio management), service development and design for excellence - approaches are covered here New product development (portfolio management) Portfolio management is about project prioritisation and resource allocation to achieve new product objectives for the company. It is a dynamic decision process where the list of active new products (offerings) and R&D projects (utilisation of capital and human resources) is constantly revised. Portfolio management asks questions like: Which new product projects, from the many opportunities the company faces, will it fund? And which ones will receive top priority in order to utilise company resources in the best way to operationalise the company's strategy? Portfolio management is also about finding and maintaining the right balance between short-term offerings and projects supporting current lines of business, and long-term offerings and projects that create new business (Figure 9). Page 20 of 57

22 Strategic planning Technology scanning R&D information Offering planning Technology Roadmaps Portfolio Management Product Roadmaps Market information Opportunity scanning Portfolio Assessment Portfolio Review Proj. Review process Resource Management Competence Development Other Demands NP proj. Figure 9. Offering planning and portfolio management activities (adapted from Patterson, 2005). Figure 9 aims to illustrate the hierarchical view of management related to new product development projects and connections to strategic decision making. The target of the strategic co-ordination by portfolio management is simply: Do the right development projects! Management of a new product development project One of the most referenced models for the management of the new product development projects is the stage-gate model introduced by Cooper (2000). The model proposes that, product development projects are evaluated on the desired gates based on strategically important criteria. In the next deliverable D3.3, a development methodology will be developed based on the results of D3.1 and D3.2. As a very common structure of different development methodologies Stage-Gates have been used in many development methodologies. The stage-gate model will be used here too as a basic conceptual model for the development methodology. This model subdivides the whole development process into different stages with set quality controls, the gates, after each stage. The stages resemble the different proof of design activities which have to be done in the development process. In other words the gates serve as check points within the process to guarantee the quality of each completed stage. (cf. Cooper, 2000, see also chapter 4.1.1) Figure 10. Basic concept of modified stage-gate process. Page 21 of 57

23 A stage-gate model enables the management to synchronize activities throughout the whole life cycle for a solution. This is important because methods regarding life cycle management can only be used if certain aspects have been considered within the process of development. These elementary aspects can be synchronized directly with the development stages of the stage-gate process and be controlled by each appropriate gate. Beside Cooper s five basic key stages it is furthermore relevant to extend Cooper s stage-gate process to cover every step within a life cycle of a system. The steps and each fitting gate focus on the development process of sustainable solution. Especially regarding the market phase and each appropriate gate it is important that these gates as well serve the development process. Considering sustainability within the development process it is important to investigate the market and to get feedback of the customers or different stakeholders towards different topics e. g. regarding a sustainable handling or a sustainable recycling of the products, to optimize the development process. In general it is not necessary in the development process to create a total life cycle management but important topics and criteria at the different stages of the life cycle e.g. the end of life of a product should also be considered. Thus after the step of launch, for instance, it is necessary to consider the life cycle phases of implementation and market. The final definition of the stage-gate process for sustainable solutions will be done in deliverable D3.3. Here the focus lies on the general idea and the basic and simple construction of the model which will be used further on. However, literature research shows that plenty of engineering procedures are dealing with different stages or gates. The number of stages and gates vary depending on the approach. In general the literature research shows that following superior four phases imply all topics of the procedure to realise a sustainable solution. The four main phases are shown in figure below (Figure 11). Figure 11. Main phases and gates of sustainable stage-gate process. Page 22 of 57

24 It seems to be useful to integrate gates inbetween these main phases. When reaching the end of one phase and starting the next phase some defined milestones must be fulfilled. As meantioned above the detailed definition of milestones and the final number of gates will be concretized in D3.3. However, to indicate which topics (requirements) must be dealt with during the development process, the four main gates between the four general phases are used for this document D3.2. According to the stage-gate model (Cooper et al., 2001, 2002); the gate assessment of the development projects should be cover following four goals: 1. Value maximisation of the portfolio for certain resource expenditure. To fulfil this goal, an appropriate financial tool is developed, which includes risks and probability factors. 2. Ensuring the right mix of projects. To enable a company to be more certain that the set of development projects is balanced between chosen key parameters (e.g. risk vs. reward, cost vs. timing, strategic vs. benefit, etc.) various tools are to be developed. 3. Attaining a strategically aligned project portfolio. Considered here is whether the company's development projects or investments in them are consistent with the current business strategy. 4. Reaching the right number of development projects for the available resources of the company. Tools to match up this aim cover aspects of resource constraints, including the identification of requirements for competence development Systems Engineering Systems Engineering is an interdisciplinary field of engineering focusing on how complex engineering projects should be designed and managed over their life cycles. Issues such as logistics, the coordination of different teams, and automatic control of machinery become more difficult when dealing with large, complex projects. Systems engineering deals with work-processes and tools to manage risks on such projects, and it overlaps with both technical and human-centred disciplines such as control engineering, industrial engineering, organizational studies, and project management (Haskins, 2007). Although Systems Engineering deals with the system or product requirements in general, the methodology can also be applied when product sustainability requirements are managed through the product life cycle Service development and solution engineering Service development requires new logic of value co-creation with several actors. In other words, service development is strongly linked to network approaches. This has been highlighted especially in the approach of service dominant logic (Evolving to a New Dominant Logic for Marketing (Vargo & Lusch, 2004)). The most commonly cited dimensions of a service concept include (Hakanen & Jaakkola, 2012): the core content of the solution, the essence of the service that meets the customer need the operations and processes needed to create the solution the customer experience of the process the outcome of the service, and its value to the customer Page 23 of 57

25 Aside from a few exceptions (Tuli et al., 2007; Hakanen & Jaakkola, 2012), the main body of literature on solutions is concerned with the integration of products and services, particularly in manufacturing and capital goods industry. Nevertheless, the ways in which collaboration between actors that develop joint solutions affect the customer experience and the outcomes of a solution have yet to be sufficiently understood or fully established. Transfer from product to service, or solution, orientation opens new possibilities to sustainable development within manufacturing industry. Deliverable D3.1 presented three approaches that consider service development: Service-Engineering Concept of Bullinger (Bullinger, 2006), Product service systems engineering, and Product Service System Engineering and sustainability (presented by Tukker & Tischner, 2006). Table 3 of D3.1 (p. 28) summarizes these approaches and compares them with system engineering and traditional product development methods. The last two approaches will be discussed in the next subchapters (4.1.5 and 4.1.7) due to their inclusion of products within a product service system. Table 2 of this report compares these approaches and requirements concerning the development process of a sustainable solution. Service-Engineering Concept of Bullinger The process of service development is subdivided into six steps regarding the cycle process of service engineering Bullinger created (see D3.1). Bullinger ordered the different phases into one closed process, leading one phase into the next one and thereby creating a clear circular flow in which the ending phase leads directly into the new starting phase. In addition that the model implicates that the process of development is not a linear process regarding the order of actions but a flexible one. The six steps Bullinger subdivides his model of service development into are starting-, analysis-, conception-, preparation-, testing-, and implementation phase. (Bullinger & Scheer, 2006) Hoeck developed a systematic model for product life cycle orientated planning and controlling of industrial services. The focus of Hoeck s model is not only on the development of a planning process but also on the different interfaces within the planning system itself. The model is structured into the phases of market analysis, potential analysis, identification and formulation of service ideas, the evaluation of these ideas and an accompanying control of the whole process. This process leads directly to the service demand from a product-life cycle oriented point of view and further on to service innovations under these aspects. The permanent process control verifies if the potential within each service innovation can be used or if the service idea will be eliminated in time. (cf. Hoeck, 2005) Solution engineering (Product-Service-Systems Engineering) Compared to other engineering approaches in the area of sole product or service development Aurich et al. (cf. Aurich et al., 2007) describe the product-service-systems engineering as a Life Cycle Management (LCM). Using this model of LCM the engineering process is seen from two different perspectives. The first LCM perspective, which is the manufacturers one, considers activities during the process of development as well as the value creation networks. The second perspective is from the customers point of view with focus on the LCM phase of using. The four steps of Aurich s approach are organization, PSS planning, PSS development and PSS implementation. The part of organization contains the planning of the sequence and its organization to enable the use of LCM from the beginning on. In addition all components which are standardized are collected in a process Page 24 of 57

26 library. PSS planning cares about the generation of the general idea by regarding the demands of producer and customer. Step 3, the PSS development, includes the project development planning, the deduction of an operation chart from specifications and the structuring of the process into different components to create a steady communication between construction and service development. The PSS implementation contains all steps to bring the PSS onto the appropriate markets. (cf. D3.1) Design for Excellence (DfX) and Design for Sustainability (D4S) Traditionally, Design for Excellence (DfX) includes many forms of value, such as design for manufacturing, reliability, and safety. Currently, also Design for Sustainability (D4S) is one of the globally recognised ways, how companies work to improve efficiency, product quality and market opportunities (local and export), while simultaneously improving environmental performance. Design for Sustainability or D4S is also known as Sustainable product design, and it includes the more limited concept of Ecodesign (see The D4S guidelines state, that in developed economies, these efforts should be linked to wider concepts such as product-service mixes, systems innovation and other life cycle thinking approaches. Thus, the concept of D4S embraces how best to meet consumer needs social, economic and environmental - on a systematic way. Both incremental innovation regarding current products as well as product innovation regarding new product development are included PSS development with focus on sustainability Tucker and Tischner (Tucker & Tischner, 2006) investigated thirteen different PSS development methodologies to find out if product service systems are automatically created in a more sustainable way when compared to their traditional engineering approaches regarding simple products or services. In their findings they describe PSS attributes which are related to sustainability such as longer utilisation or more intense utilisation via product- or use-orientated PSS (economic sustainability). Tucker and Tischner also found out that these aspects are not automatically included in a PSS. These aspects actively need to be considered clearly and integrated into the engineering process. Furthermore ten out of these thirteen methodologies include, besides the economic sustainability, the environmental and social aspect of sustainability as well. These findings lead to a clear converging pattern containing three main development steps regarding a product service system. They are described by Tucker and Tischner (Tucker & Tischner, 2006) as follows: Step 1: Analysing o The current situation o The reference product/service o The customer needs and expectations o The internal situation of companies and their external (potential) partners and thus exploring and identifying new business opportunities in the PSS area Step 2: Creating and detailing new ideas o Based on the findings or the knowledge available about business opportunities, new ideas for PSS are generated o The most promising ideas are selected o The selected idea is detailed Page 25 of 57

27 o Evaluation shows whether the detailed concept is good enough to be realised Step 3: Realising the detailed concept o Preparation of market launch, developing marketing strategy o Production of the material and immaterial parts of the PSS o Market testing o Market launch o Evaluation of success of concept o Review of the PSS development process 4.2 Remarks regarding the planning and development phases and a requirement check Each of the approaches has some elements and complementary viewpoints regarding sustainability and how it should be considered within the design, planning and development phases of individual companies. Naturally, the last one (Design for X or D4S) has the most obvious connections to sustainable development. First, system engineering has its main focus on complex engineering projects, and thereby it has a strong link to the economic dimension of sustainability. For instance, the efficiency of the design and development processes can be improved through their practices. Secondly, the traditional product and service development approaches focus on the management of one development process inside one company. Through the product portfolio management approach (see Figure 9) the importance of strategic considerations within development can be emphasized. Thus, these approaches are strongly linked only to the economic aspects of sustainability, they typically consider environmental or social issues only if their importance have been recognised elsewhere, e.g. within strategic targets. Thirdly, Design for X has variable values, and there is a wide collection of specific design guidelines summarized under its label. Design for Sustainability highlights especially social aspects and consumer needs, although also other viewpoints are included. Furthermore, the D4S approach distinguishes between the sustainability objectives required in developed and developing countries. The following table (Table 1) summarizes the main contribution of each methodology regarding the requirements defined in D3.1. Page 26 of 57

28 Table 1. Comparison of requirements for design, planning and development (D3.1) and current methodologies. Requirements defined in D3.1. Systems Engineering Product and service development Design for Sustainability Requirements concerning complexity management, modularization X Requirements concerning configuration principles X Requirements concerning design, construction, durability, in particular how the environmental, customer and social requirements can be aligned with the company s interest and economic expectations. (X) X Requirements concerning costs and benefits as well as added value X Requirements concerning environmental impacts X Requirements concerning (innovations and) technology X Requirements concerning human rights, cultures and occupational safety X Requirements concerning innovation and technology are strongly linked to business strategy and innovation management decisions, which are discussed in Chapter 3. Still, at present most ecodesign methods focus on the operational rather than strategic levels (Maxwell & van der Vorst, 2003). In the following Table 2 some of the present approaches are further compared with the requirements concerning the development process. The following table aims to match the requirements concerning sustainable solutions with the approaches related to the development of the single solution described by different authors. The target of this is to illustrate which approaches satisfied the requirements identified in D3.1. In this way it is possible to show the gaps between the requirements for efficient development of sustainable solutions and the current approaches in literature. Because there are plenty of approaches, only some of the established development approaches are illustrated to ensure the clarity of the table (Table 2). Analysed development approaches were: development processes for technical products, service engineering processes and PSS development processes including aspects of sustainability. The results presented in Table 2 are gained by a coarse analysis. Page 27 of 57

29 Requirements concerning sustainability General Requirements VDI Guideline 2221 (1999) Pahl et al. (2003) Cooper (2000) Bullinger & Scheer (2006) Hoeck (2005) Aurich et al. (2007) DfX & D4S Tucker & Tischner (2006) FP SustainValue D3.2v1.0 Table 2. Requirements for and development process of sustainable solutions. Check whether methodologies can support/ deliver the requirements Requirements for the new development methodology (see table 4 in D3.1) Architecture of development process should be unitary and hierarchical (R1) X X X X X X X X Configuration of the procedure (R2) X X X X X X X (X) Integration of external stakeholders (R3) (X) (X) X (X) (X) (X) X (X) Provision of resources and capacities (R4) - - (X) X - -? Decoupling of development steps (R5) X X X X X X X X Documentation of individual related know-how (R6) Ensure the application-oriented development (R7) Supporting the communication within the development process (R8) (X) -? - X X X X X X X X - X - X - X X X Minimizing of interfaces and components (R9) X Consider the principles of integration and parallelisation (R19) Unbundling of problems to smaller sub problems or whole system design approach (R11) Enhance development steps with methods and tool (R12) X (X) X - (X) -? - X X (X) X - X? - X X (X) X X (X) X X Visualisation of theoretical concepts (R13) (X) X X X X X X X Consider all phases of the life cycle (R14) X (X) X X X Realize the constitutive characteristics of services (R15) Estimate the technical, ecological, environmental and social aspects during the development process (R16) Consider a concept and construction of the solution (R17) Provide adequate documentation of the development process (R18) Create and implement a wide and transparent value network (R19) Define criteria for the redemption of solutions (R20) Establish training concepts and documentation to avoid inappropriate handling of the products (R21) Have a clear understanding of the customers cultural context and regulatory requirements (R22) (X) - X? (X) X - X X - - X (X) - -? (X) X - - X X X X X X - X X X ? (X) - (X)? X - X - X (X) Fully accomplished requirement = X Partly accomplished requirement = (X) Not accomplished requirement = 0/-, Not clear evidence=? Page 28 of 57

30 5 Management of manufacturing systems This chapter deals with the different principles regarding the arrangement of manufacturing systems 4. The aim of the study of the principles is to enable the evaluation in what sense known engineering and manufacturing principles are supporting sustainable decision making when the objective is to manufacture products and provide services. It could be stated that manufacturing engineering is a discipline of engineering that deals with different manufacturing practices and development of processes, machines, tools and equipment. The discipline aims to develop manufacturing systems that can be used in an efficient way. Thus, also approaches and methods supporting other life cycle phases are overlapping with the manufacturing phase and management of manufacturing systems. 5.1 Methodologies regarding manufacturing systems One of the key concepts regarding the manufacturing phase is Sustainable Manufacturing, although also many other manufacturing principles have a strong connection to sustainability. Figure 12 presents some of the key concepts and their relations. For instance sustainable and green manufacturing (or green supply chains) are often used as synonymous, although some differences can be found within them. Green manufacturing focuses on environmental issues whereas sustainable manufacturing highlights innovativeness and even new business opportunities offered by sustainability (Jawir, 2008). Thus, the concept as well as sustainability thinking in whole is work in progress. It can be even reflected that Figure 12, originally presented by Jayal et al. (2010), includes hypotheses that sustainable manufacturing would create greatest shareholder value. This is a robust hypothesis, which can be either wrong or right depending on level or time of analyses. 4 Shi and Gregory pointed out how a new type of manufacturing system deriving new strategic capabilities and requiring design tools but also posing new theoretical questions about systems and decision processes (Shi and Gregory 1998, p. 196). Page 29 of 57

31 Figure 12. Evolution of manufacturing principles (source: Jayal et al., 2010). The manufacturing principles are covered in a chronological order starting from the most traditional manufacturing approaches such as mass production. Covered disciplines are evolving and overlapping and have several dimensions. All manufacturing engineering practices are not presented in this report Traditional manufacturing In this report mass production, prefabrication, and just-in-time (JIT) production are considered methodologies supporting the traditional manufacturing paradigm. Mass production (also flow production, repetitive flow production, series production, or serial production) is the production of large amounts of standardized products, including and especially on assembly lines. The concepts of mass production are applied to various kinds of products, from fluids and particulates handled in bulk (such as food, fuel, chemicals, and mined minerals) to discrete solid parts (such as fasteners) to assemblies of such parts (such as household appliances and automobiles). Prefabrication is the practice of assembling components of a structure in a factory or other manufacturing site, and transporting complete assemblies or sub-assemblies to the construction site where the structure is to be located. The term is used to distinguish this process from the more conventional construction practice of transporting the basic materials to the construction site where all assembly is carried out. Just-in-time (JIT) is a production strategy that strives to improve a business return on investment by reducing in-process inventory and associated carrying costs. Just-in-time production method is also called the Toyota Production System. To meet JIT objectives, the process relies on signals between different points in the process, which tell production when to make the next part. Implemented correctly, JIT requires continuous improvement and can improve a manufacturing organization's Page 30 of 57

32 return on investment, quality, and efficiency. To achieve continuous improvement key areas of focus could be flow, employee involvement and quality Lean manufacturing Methodologies supporting Lean manufacturing include in this report also flexible manufacturing system (FMS), mass customization and agile manufacturing. Although Lean manufacturing has many similarities with JIT production strategy its principles are quite popular at the moment and thereby it is covered separately in this report. Lean manufacturing is a production practice that considers the expenditure of resources for any goal other than the creation of value for the end customer to be wasteful, and thus a target for elimination. Working from the perspective of the customer who consumes a product or service, "value" is defined as any action or process that a customer would be willing to pay for. Thus, Lean manufacturing focuses on manufacturing phase and do not consider other life cycle phases (design, use, end of life). A flexible manufacturing system (FMS) is a manufacturing system in which there is some amount of flexibility that allows the system to react in the case of changes, whether predicted or unpredicted. This flexibility is generally considered to fall into two categories, which both contain numerous subcategories. The first category, machine flexibility, covers the system's ability to be changed to produce new product types, and ability to change the order of operations executed on a part. The second category is called routing flexibility, which consists of the ability to use multiple machines to perform the same operation on a part, as well as the system's ability to absorb large-scale changes, such as in volume, capacity, or capability. Mass customization, in marketing, manufacturing, call centres and management are the use of flexible computer-aided manufacturing systems to produce custom output. Those systems combine the low unit costs of mass production processes with the flexibility of individual customization. Mass customization is the new frontier in business competition for both manufacturing and service industries. At its core is a tremendous increase in variety and customization without a corresponding increase in costs. At its limit, it is the mass production of individually customized goods and services. At its best, it provides strategic advantage and economic value. Agile manufacturing is a term applied to an organization that has created the processes, tools, and training to enable it to respond quickly to customer needs and market changes while still controlling costs and quality. An enabling factor in becoming an agile manufacturer has been the development of manufacturing support technology that allows the marketers, the designers and the production personnel to share a common database of parts and products, to share data on production capacities and problems particularly where small initial problems may have larger downstream effects. It is a general proposition of manufacturing that the cost of correcting quality issues increases as the problem moves downstream, so that it is cheaper to correct quality problems at the earliest possible point in the process. Agile manufacturing is seen as the next step after Lean manufacturing in the evolution of production methodologies. The key difference between the two is like between a thin and an athletic person, agile being the latter. One can be neither, one or both. In manufacturing theory being both is often Page 31 of 57

33 referred to as leagile. According to Martin Christopher, when companies have to decide what to be, they have to look at the Customer Order Cycle (the time the customers are willing to wait) and the lead time for getting supplies. If the supplier has a short lead time, lean production is possible. If the COC is short, agile production is beneficial Sustainable and green manufacturing Green manufacturing focuses on environmental issues whereas sustainable manufacturing highlights innovativeness and even new business opportunities offered by sustainability (Jawir, 2008). International Trade Administration (2007) defines Sustainable Manufacturing as follows: design and manufacture of high quality/performance products with improved/enhanced functionality using energy-efficient, toxic-free, hazardless, safe and secure technologies and manufacturing methods utilizing optimal resources and energy by producing minimum wastes and emissions, and providing maximum recovery, recyclability, reusability, remanufacturability, with redesign features, and all aimed at enhanced societal benefits and economic impact. On the other hand, in SustainValue project sustainable manufacturing is defined as the ability to smartly use natural resources for manufacturing by creating products and solutions via a network of suppliers, partners and collaborators that due to new technologies, regulatory measures and coherent social behaviour are able to satisfy sustainability - economical, environmental and social objectives. Thus preserving the environment, while continuing to improve the quality of human life and remaining financially viable for the long term by returning adequate profits and growth (developed from Garetti & Taisch, 2011 and D1.3) (see D2.2). This definition of Sustain Value project aims to highlight the system thinking and holistic view to sustainability, e.g. how value networks actors can create sustainability together. Thus, the current methods typically consider sustainability and its management within one company although the need for sustainable development within supply network has been identified as pointed out also by the vision of the SustainValue project. For instance, organizational strategies in Sustainable green supply chain contains following elements: innovativeness, outsourcing, reengineering, environment cautious servicing, closed loop systems (Sundarakani el al., 2010). In order to find the best practices to all these elements, several disciplines have been governed in this report. Thus, Supply Chain Management (SCM) has also been approached, for a very long time, as not unifying but coordinating the operations of (a) independently managed entities (b) who seek to maximize profits (only) individually. This point of view is a major obstacle to achieving sustainability in supply chain operations. On the contrary, for sustainability, supply chains must be designed and managed as an integrated system. (Jayal et al., 2010). Furthermore, in D 4.1 it has been argued that the notion of supply chains is misleading as chains do not take into account lateral interrelations. However, for sustainable manufacturing, we do need to take these interrelations into account and thereby the concepts of (supply or) value networks should be utilised. Furthermore, sustainable manufacturing network should be defined as an organisational form which (i) targets to gain future competitive edge to all participants through interaction and collaboration, and thereby (ii) is able to balance the three key aspects of sustainability (environmental, economic and social aspects) (see D1.1). Page 32 of 57

34 5.2 Methodologies regarding ethical sourcing, trade and consumerism In the last 10 years active discussions on social issues - like child labour, companies running sweatshops, workers rights and on indigenous people have emerged corporate social responsibility to corporate strategies. Concurrent division of work has, on the other hand, emphasized sourcing and related ethical principles. Ethical sourcing means ensuring that the products being sourced are created in safe facilities by workers who are treated well and paid fair wages to work legal. The Ethical Sourcing module is also a voluntary supplement for SQF 1000 or SQF 2000 Certified Suppliers. Also other concepts, like ethical trading, fair trade and ethical consumer highlight social issues and global moral within decision making. Still, as the concepts aim to influence on decision making of individuals they are connected also to product use phase (Chapter 7). On the other hand, due to various political attributes it can be stated that they are connected also to the design and development phase. The Ethical Trading Initiative is an alliance of companies, trade unions and voluntary organisations, who work in partnership to improve the working lives of poor and vulnerable people across the globe, whereas Ethical consumerism is a type of consumer activism practiced through 'positive buying' in that ethical products are favoured, or 'moral boycott', that is negative purchasing and company-based purchasing. Still, these concepts are often criticised from their western-country- or brand owner origins, e.g. the programs reach only limited number of producers or do not sufficiently consider long-term impacts to local environment in developing countries. 5.3 Remarks concerning manufacturing and sourcing management This chapter will include a table of different manufacturing engineering, sourcing, and maintenance practices and their aspects regarding sustainability. All the principles have some overlapping approaches to sustainability. First, different manufacturing principles have been evolved during several decades each of them highlights different aspects, like agility, flexibility, efficiency or innovativeness of manufacturing operations. Thus, their connection to sustainability is strongly linked to the economic dimension. Secondly, ethical sourcing and trading approaches focus on the social dimension of sustainability. In the following table (Table 3) the main contribution, in what sense known engineering approaches cover the requirements presented in D3.1 is evaluated and summarized in following Table 3. Page 33 of 57

35 Table 3. Comparison of requirements for management of manufacturing systems (D3.1) and current methodologies. Requirements defined in D 3.1 Requirements concerning business relationships Requirements concerning transparency of used components and goods Requirements concerning the manufacturing of the solution Manufacturing methodologies (X) X X Sourcing methodologies X X Requirements concerning the value network (X) (X) As can be realized based on the above table, current manufacturing engineering and management approaches are typically focusing on activities and practices of focal companies, and thereby also the sustainability development is driven by their objectives and boundary setting. The main challenge in sustainable manufacturing system is, how to connect different [manufacturing and/or supply chain] decisions on different hierarchical decision levels to each other, and to their sustainable impact (Aronsson & Brodin, 2006). In that sense approaches dealing with network and life cycle aspects are required. Especially, it is important to create network -level approaches which support actors to set joint sustainability targets and ensure change from sub-optimization to system thinking (see also D1.2 and D4.1). Page 34 of 57

36 6 Management of distribution, logistics and services This chapter considers the sustainability aspects within present methodologies related to distribution, logistics and services. The approaches related to new service development were already discussed in chapter 4 as they have a clear link to new product development. 6.1 Distribution and logistics Distribution and logistics are often presented as one step within the value (or supply) chain and manufacturing phase. Recently, their importance has been highlighted, because customer orientation has been growing also within manufacturing engineering approaches. On the other hand, both in the inbound and the outbound logistics green thinking has been emphasized due to its impact on environmental and energy footprints. Similarly to manufacturing phase using supply and distribution chain scorecards to measure a supplier s sustainability is becoming widespread throughout the transport and logistics industry. Still, also here the main challenge is to turn from sub-optimization to system thinking and codevelopment of sustainability issues Green logistics and distribution Logistics is the integrated management of all the activities required to move products through the supply chain, from raw material to end products. Some examples of green logistics include: shipping products together, rather than in smaller batches; using alternative fuel vehicles for manufacturing and shipping; reducing overall packaging; utilizing raw products which are harvested in a sustainable way; building facilities for manufacturing and storage which are environmentally friendly; and promoting recycling and reuse programs. Similar means are identified also within green distribution. The concept of reverse logistics has also been introduced within the discussion sustainability of logistics industry. It stands for all operations related to the reuse of products and materials. Reverse logistics stands the process of moving goods from their typical final destination for the purpose of capturing value, or proper disposal. Remanufacturing and refurbishing activities also may be included in the definition of reverse logistics and thereby it has a clear connection to the concepts of 3R s and 6R s discussed in the end of life cycle phase of the report (Chapter 8). Thus, there is also a connection between reverse logistics and customer retention. Reverse logistics has become an important component within service business development, aiming at retaining customers by bundling even more coordination of a company's services data together to achieve greater efficiency in its operations. 6.2 Service operations The methods related to the development of new services are discussed in Chapter 4. Thus, implementation of service operations and changes within manufacturing industry as well as definition of service are shortly considered here. Service involves a provider and a customer working together to create value. Accordingly, service systems can be defined as dynamic configurations of people, technologies, organisations and shared Page 35 of 57

37 information that create and deliver value to customers, providers and other stakeholders5. Within the manufacturing industry the trend of customers, lead producers (like original equipment manufacturers and product companies) and their suppliers seems to be a forward transfer in their value chains. This means that customers and lead producers outsource manufacturing (give up earlier value chain phases) and their suppliers try to increase services (add later value chain phases and give up some of the earlier). Suppliers provide not only raw materials and finished products, but also transportation, energy, packaging, design and re-cycling services. Transfer from product to service, or solution, orientation opens new possibilities to sustainable development within manufacturing industry. While the service development requires new logic of value co-creation with several actors (see Chapter 4.1.4) also sustainable development can therefore be considered from the multilevel approach. Tukker and Tischner have even discussed whether Product Service Systems are automatically more sustainable than conventional product based solutions (D3.1). 6.3 Remarks concerning management of logistics, distribution and services This chapter includes a summary of different logistics, distribution and service engineering practices and their aspects regarding sustainability. These are closely connected to manufacturing engineering approaches presented in Chapter 5. All the approaches have some overlapping views to sustainability. First, green logistics has its main focus on environmental (and energy) efficiency. Secondly, service development approaches emphasize typically economic aspects, like business development and value co-creation between involved actors. In the following table (Table 4) their main contribution, in what sense known engineering approaches are supporting sustainable decision making is evaluated. Table 4. Comparison of requirements for distribution, logistics, services (D3.1) and current methodologies. Requirements defined in D 3.1 Distribution and logistics Services Requirements concerning training (education) and assistance Requirements concerning suitable services (monitoring, inspections, consultancy, ICTsolutions etc.) (X) X Requirements concerning delivery chain/networks X (X) 5 In 2007 the University of Cambridge Institute for Manufacturing (IfM) and International Business Machines Corporation (IBM) organized a symposium on service science, management and engineering in Cambridge (UK) where leading experts in the field discussed the new discipline of service science. The symposium resulted in a discussion paper where (among other issues) the terminology of service business was defined. [Succeeding Through Service Innovation: A Discussion Paper, University of Cambridge, Cambridge, available at: Page 36 of 57

38 The current distribution and logistics methodologies have the focus on one product and its environmental and energy footprints. Thus, they are more operational than strategic approaches and thereby the link to strategic decision making is typically missing, e.g. companies may calculate and follow the environmental footprint of their products (or logistics) but they may not have considered what they should do in order to change their customer s thinking towards sustainability. Page 37 of 57

39 7 Management of usage phase Requirements related to usage phase and its management differs in B-to-B and B-to-C markets. Concerning B-to-C markets, incentives like ethical and fair trade 6 have already been discussed Chapter 5.2 and Birth of Blue (Werbach, 2008) 7 highlights consumer expectations. This report focuses mainly on B-to-B markets, where the life cycle approach challenge the network actors to new kind of benefit and cost sharing. On the other hand, the D4S approach focuses already on requirements of B-to-C markets. All the requirements related to the usage phase should be considered already in the design and planning phase, where most of product (and life cycle) costs are defined. Similarly, the requirements of usage are also relevant within manufacturing phase regarding the usage of manufacturing equipment and they are often considered also in manufacturing and maintenance methodologies. The main challenge of the usage phase in B-to-B is related to cost and benefit sharing between the actors (like customer, operator, and supplier), because the decisions made in one phase influence and impact on sustainability and costs in other phases. For instance, in recent years suppliers have developed their capabilities in order to operate as performance partners and offer knowledge intensive life cycle services to their customers. Through this development suppliers have larger responsibilities on life cycle costs and sustainability impacts of produced products or their components, and they may also have better possibilities to influence. 7.1 Quality, safety, health and environmental management As pointed out in above chapters and illustrated in Figure 12 there are several management trends with overlapping concepts evolving together. Each of these management trends have their own traditions and their modern versions also include sustainability aspects; for instance safety management is closely linked to social and environmental dimensions of sustainability, while environmental management is clearly connected to the environmental dimension. Their focus is typically on management practices of an individual company. Spreading of quality management methods started from using statistical methods for quality control for production 8. Later on, a number of highly successful quality initiatives have been invented by the Japanese (for example: Genichi Taguchi, QFD, Toyota Production System). Certification according to 6 Although Fair Trade is originally an agreement between the agricultural producer and the wholeseller, it is typically utilised in order to improve the brand name and influence to consumers purchasing decisions and thus it can be considered also as B-to-C marketing concept. 7 According to Werbach: People, who are part of the BLUE movement, aspire to make a difference through the people and products that touch their lives. It encompasses green issues like protecting our last wild places and reducing our output of CO2, but it also includes personal concerns like saving money, losing weight, and spending time with friends and family. 8 Quality management was first proposed in 1924, when Walter A. Shewhart made a major step in the evolution towards by creating a method for quality control for production, using statistical methods. This became the foundation for his ongoing work on statistical quality control. During World War II Edwards Deming and Robert S. MacNamara among others applied statistical process control methods in the United States, thereby successfully improving quality in the manufacture of munitions and other strategically important products. Page 38 of 57

40 quality as well as environmental standards is nowadays quite essential and thereby many quality management tools, like six sigma, are utilised in companies. Furthermore, emerging management disciplines (like systems thinking) are bringing more holistic approaches also to quality so that people, process and products are considered together rather than independent factors in quality management. Safety management is a function that enhances company performance by predicting operational, procedural or environmental risks and threats before they occur. Similarly to quality management also the modern definition of safety management highlights its strategic importance and defines it as process that identifies and addresses safety issues for employees and the company. Also environmental management is typically strongly connected to quality management systems. Environmental management tools include: environmental management standards, environmental policies and guidelines, environmental auditing, life cycle assessment, the measurement of environmental performance, and environmental reporting. 7.2 Maintenance during usage phase Maintenance involves maintaining and securing the equipment and systems in, or restoring them to, a state in which they can perform the required functions. The challenge for maintenance planning is to identify appropriate objects and tasks for preventive maintenance and ensure that there are adequate resources for the repair actions (Rosqvist et. al., 2009). In the literature, there are presented several maintenance programme planning methodologies. In the following table characteristics of standard Reliability Centered Maintenance (RCM), Business Centered Maintenance, Waeyenberger & Pintelon approach and Value-Driven Maintenance methodologies are presented. Based on the information of the table (Table 5), it can be stated that the maintenance programme planning methodologies do not directly handle sustainability issues. The RCM is a method for establishing a preventive maintenance programme which will efficiently and effectively allow the achievement of the required safety and availability levels of equipment and structures (IEC ). Other three referenced maintenance planning methodologies are starting their objective setting more from the strategic objectives of company that owns the manufacturing system. Therefore it could be stated that if the manufacturing company has sustainability in its strategic agenda, it should have an influence also to the objective setting and maintenance key performance indicators. Page 39 of 57

41 Table 5. Comparison of four maintenance program planning approaches (Rosqvist et al., 2009). Maintenance planning approach Basic steps Standard RCM Business-centred maintenance Waeyenberger&Pintelon approach Value-driven maintenance planning What are the objectives? Recognises the need to define the objectives of a maintenance programme. Gives a short generic listing of the objectives. Corporate and production objectives steer the explicit formulation of a general maintenance objective for production units (equipment places). Recognises different levels of objectives: asset management and maintenance objectives Company, plant and maintenance objectives must be defined. Value tree representation. How can we optimise what we are doing? Appropriate information for setting a task frequency or interval is instructed to be obtained from one of more of the following: a) prior knowledge from other similar equipment b) manufacturer/supplier test data c) reliability data and predictions. Maintenance workload is determined in cooperation with the production and the key to optimal maintenance is proper preventive maintenance scheduling. Means for this are presented. Preventive maintenance task selection at equipment level is not addressed. Reference to literature on maintenance interval optimisation Use of expert judgement based on experience feedback. Equipment location level. No synthesis of plant maintenance schedule. What should be measured so that we know we are doing right? Recognises the need to collect in-service failure history data. These data include failure times and dates, failure causes, maintenance times, etc., throughout the equipment operating life. A broad range of measures related to maintenance productivity and effectiveness, and organisational efficiency Reference to literature on performance measurement systems Definition of Key Performance Indicators and Maintenance Performance Indicators. Expert panel to review reasons for possible deviations between goals and measured performance. During recent years, the importance of the maintenance function has risen and there has been a lot of discussion over the asset management aspects of the maintenance organisations. Asset management aims to offer integrated and holistic view on planning, decision making and implementation of activities concerning production assets including e.g. following elements (Komonen et. al., 2012). capacity capabilities overall equipment effectiveness investments Page 40 of 57

42 maintenance disposals Economic analyses are very important in 'asset management'. The life cycle cost and profit objectives and life cycle cost structure should have significant influence on the asset strategy and strategic choices. Within the asset management framework a challenge to be met is how to sustain or improve the life cycle profits of the original investment. Recently in asset management a business oriented approach and sustainable asset solutions has been emphasized. Following three aspects are emphasized and it is stated that (engineering) asset management is (Komonen et al., 2012) maintenance and improvement of the profit-making capability of production assets maintenance and optimization of the net asset value (physical assets), and improvement of sustainability and safety of asset solutions There are also other definitions for asset management. Mitchell (2002) says that 'asset management' is a comprehensive, fully integrated, strategy, process, and culture directed at gaining greatest lifetime effectiveness, value, profitability, and return from production and manufacturing equipment assets. In the publicly available specification PAS 55 asset management is defined as the systematic and coordinated activities and practices through which an organisation optimally manages its assets and their associated performance, risks and expenditures over their life cycle for the purpose of achieving its organisational strategic plan. Another approach of the most recent years, more technology driven, is referred under the name of e-maintenance. E-Maintenance is an emerging concept generally defined as a maintenance management concept whereby assets are monitored and managed over the Internet (see Crespo & Iung, 2006). Nevertheless, a lot of complementary definitions exist in which the principles of collaboration, knowledge, intelligence are introduced. From a pragmatic point of view, and with the aim of summarizing, we may say that e-maintenance is the set of maintenance processes that uses the e-technologies to enable proactive decisions in a particular organization and in networks (definition partially derived from Levrat et al., 2008). Levrat et al. (2008) envisioned the use of e-maintenance as a concept, and a technology, not just for improving proactive decisions in industrial plants, but also as relevant enabler to achieve sustainable performances, especially for what concern environmental aspects (besides cost and efficiency). Indeed, these authors state that the paradigm of eco-efficiency is one of the main factors for justifying a new way of thinking (e) -maintenance. Nonetheless, this is more a vision for the next future, rather than an existing fact. As a vision, then, it provides interesting open issues for research advances, in the perspective fostered, for example, by Manufuture platform. Keeping in mind the importance of the technology, as a lever for more sustainable manufacturing, Garetti and Taisch (2011) underlines two special topics, attainable under the e-maintenance vision, and relevant for reenforcing such approach: (i) the sustainable predictive maintenance of production equipment and (ii) the mobile and remote maintenance. Total Productive Maintenance (TPM) is a maintenance process developed for improving productivity by making processes more reliable and less wasteful. The objective of TPM is to maintain the plant or equipment in good condition without interfering with the daily process. To achieve this objective, Page 41 of 57

43 preventive and predictive maintenance is required. TPM has basically three goals - Zero Product Defects, Zero Equipment Unplanned Failures and Zero Accidents (Venkatesh, 2007). 7.3 Performance management In D 4.1 Performance Management is defined as the process of analysing performance-related information (generated through performance measurement ), making decisions based on this information, planning and implementing actions to improve or maintain the state of performance, and feeding back information intended to improve the process of performance measurement. Furthermore, in order to be able to generate the information that are necessary for informed decision making, knowledge of influencing factors on performance as well as causal relations between influencing factors and performance characteristics have to be known. Thus, organizational performance is complex and can be affected by a host of different factors. As pointed out in D4.1 in order to achieve consensus in the discussion of sustainability performance, it is necessary to define the system boundaries the performance shall be based upon. In the context of sustainability performance, three general approaches to system boundaries can be distinguished: On the micro level, system boundaries would equal firm boundaries On the macro level, life cycle can be considered the system boundary On the meso level (between the micro and macro levels), the manufacturing network consisting of several actors, e.g. customers, manufacturing companies, service providers and suppliers, represents the system. As already highlighted in the introduction, this report aims to consider sustainability requirement management from both the meso and the macro levels. Targets must be in accordance with strategy of actor (see Figure 14 in Chapter 9). 7.4 Remarks concerning usage phase This chapter includes the summary of different practices regarding to management of usage and their aspects regarding sustainability. These are connected to management of products end-of-life presented in Chapter 8. All the approaches have some overlapping views to sustainability. In the following table (Table 6) their main contribution, in what sense known management methodologies of usage phase are supporting sustainable decision making, is evaluated. Page 42 of 57

44 Table 6. Comparison of requirements for usage phase (D3.1) and current methodologies. Requirements defined in D3.1 QSHE Management Maintenance and Asset management Performance management Requirements concerning consumption of energy, water, materials, air, land Requirements concerning emissions and waste X X (X) (X) Requirements concerning efficiency and intensity of usage, maintenance X (X) Requirement concerning the continuous improvement Requirements concerning safety and health X X (X) X X (X) Page 43 of 57

45 8 End of life cycle management This chapter considers the present methodologies regarding the end of life cycle management. Thus, the concepts related to this phase (for instance 3R and 6R) emphasize the circular nature of life cycles. In other words, through recycling, reuse or remanufacturing the end of life cycle of one product may turn to the beginning of life cycle of another product. 8.1 Methodologies regarding end of life cycle Reverse logistics Reverse logistics stands for all operations related to the reuse of products and materials. It is "the process of planning, implementing, and controlling the efficient, cost effective flow of raw materials, in-process inventory, finished goods and related information from the point of consumption to the point of origin for the purpose of recapturing value or proper disposal. More precisely, reverse logistics is the process of moving goods from their typical final destination for the purpose of capturing value, or proper disposal. Remanufacturing and refurbishing activities also may be included in the definition of reverse logistics. (Hawks, 2006) From 3R s to 6R s As illustrated in Figure 12 (in Chapter 5) the focus of green manufacturing was on 3R s whereas later on sustainable manufacturing highlights the approach of 6R s. The 3 R s (Reduce, Reuse, Recycle) are described as starting point of sustainability implementation programs. The principles are the following: 1) Reduction; purchasing and using only what is necessary, 2) Reuse; find an alternative use extra materials and 3) Recycling; unused materials are transformed into new products. The focus of 3R s is clearly on environmental efficiency, although implementation of main principles (3R s) also can increase company s profitability. Later on, the 6R s approach was introduced in order to have a broader and innovation-based approach to product life cycle. Recover, Redesign and Remanufacture complemented the closedloop product life cycle system (see Figure 13). Page 44 of 57

46 Figure 13. Closed-loop product life cycle system in 6R approach (source: Jayal et al. (2010), originally presented by Jaafar et al. (2007)). 8.2 Remarks concerning end of life cycle phase This chapter includes a summary of practices regarding the management of the end of life phase and their aspects regarding sustainability. These are closely connected to manufacturing engineering approaches presented in Chapter 5 and to usage management considered in Chapter 7. All the approaches have some views to sustainability. First, reverse logistics focus on products end of life (post-use) phase as it defines the process of moving goods from their typical final destination for the purpose of capturing value, or proper disposal. On the other hand, both the 3R s and 6R s concepts have a broader view to sustainability, while redesign, remanufacture, recover, reduce, reuse and recycle practices are gathered. In the following table (Table 7) their main contribution, in what sense known end-of-life cycle management methodologies are supporting sustainable decision making, is evaluated. Table 7. Comparison of requirements for end-of- life cycle (D3.1) and current methodologies. Requirements defined in D3.1 Reverse logistics 3R s & 6R s Requirements concerning recyclability and re-usage. X X Page 45 of 57

47 Although, broader approaches (such as 3R& 6R) already exist, the network and strategic approaches within them are still missing. In other words, although the concepts highlight the cyclic nature of product life cycles they do not consider, how this could be realized at the network level or what could be the new business opportunities related to these new operations regarding to recycling, reusing, remanufacturing etc. Page 46 of 57

48 9 Gap analysis of existing development methodologies considering sustainability The previous chapters considered several methodologies related to industrial management in order to collect information on how they could support innovation management and solution engineering towards sustainable solutions within manufacturing networks. As pointed out several times these management paradigms have overlapping concepts and are all the time evolving together. Although there is a consensus on the importance of networks, most of the management methods still focus on individual organisations. This chapter first summarizes the identified gaps of existing methodologies and secondly presents: i) how strategic approach to sustainability is required and ii) how the network governance model, presented in the D1.2, could support sustainable development at the network level. 9.1 Summary of gap analysis The requirements defined in the D3.1 formed the baseline for this report (summarized in Tables 2 and 4 in D3.1). The broad literature review of D3.1 emphasized that plenty of different requirements could be identified. The spectrum of requirements is very broad so that consciously no detailed structure of these requirements was introduced in D3.1. In this report the requirements regarding each life cycle phase (summary in Table 2 on p. 22 in D3.1.) were explored in chapters 4-8. As already pointed out in the introduction the aim was to form a checklist of different methods and principles behind them. Still, the requirements concerning the development process of sustainable solution were considered in more detail in Chapter 4 of this report (design, planning and development phase). Gaps of current methodologies are analysed based on tables (1-7) as follows: methodologies in business strategy and innovation management; there are only few tools that clearly link sustainable development to strategic decisions and innovations, e.g. how sustainability can offer competitive advantage, differentiation and new business opportunities methodologies in design, planning and development; the existing tools focus typically on how to ensure that strategic targets are considered during the new product (or service) development work, rather than setting the strategy methodologies in manufacturing systems development; the current approaches do not cover network and life cycle aspects, although holistic thinking and integrated approaches are required methodologies in distribution, logistics and services; similarly to manufacturing approaches the focus has been on individual company, while service thinking highlights that collaboration with customers should be covered Page 47 of 57

49 methodologies in operation and maintenance phase; modern versions of management methodologies within operation and maintenance phase include also sustainability aspects, but once again the focus is on individual company methodologies in end- of- life cycle; broader approaches (3R& 6R) already exist, still network and strategic approaches within them are missing The summary and gap analyses illustrate that several methods of innovation management and solution engineering already exist, and they can be utilised also to sustainable development within some dimensions. Still, holistic approaches for strategic thinking are required. The companies cannot reach the sustainability targets alone. The new methods should support actors defining what sustainability means within their industry and to business (models) of all involved actors. Furthermore, companies should be able to position themselves within the value network in order to recognize, how they can influence to other actors and drive the network-level change towards sustainability. Thus, the present methods may support the requirement management also at the network level, if the system boundaries are defined transparently and the strategic targets are agreed on the network level. 9.2 Strategic approach to sustainability As pointed out already in the introduction (see especially Figure 2) in the present networked business environment the challenge to manage sustainability requirements is a complex challenge. When exploring life cycle of manufacturer s single solution, several life cycles of different solutions could be identified that are influencing its sustainability. The gap analysis highlights that it is crucial to integrate sustainability into companies as well as networks core strategies. Importance of strategic connection is highlighted also by other authors, for instance Maxwell and van der Vorst (2003). Still, the strategic connection is typically considered at the level of an individual company. The network level strategic approach to sustainability is needed, while the key challenge is to identify what are the company- as well as network-specific sustainability recipes and how to guide the whole network towards sustainable development. In the present networked economy the companies cannot reach sustainability objectives alone (See figure 2 for reasoning). Thereby, it is important to consider sustainability at network level over product life cycle. Figure 14 illustrates the importance of strategic approach and the connection between main levels of sustainable co-development in broader context. In other words, development can and should appear in any life cycle phase, although the method and tool development work in WP3 focuses on development process of sustainable solutions. Page 48 of 57

50 Setting the objectives Setting the objectives Strategy of the sustainable manufacturing network Shared objectives and performance indicators of the network Objectives of the network partner Feedback information Feedback information Figure 14. Strategic approach to sustainable co-development. First, the strategic importance of sustainability should be discussed at the manufacturing network level. Secondly, based on network level strategy the shared objectives and performance indicators should be set. Thirdly, the objectives of the network partners should be aligned with network level objectives and furthermore also the feedback loops between the levels are important. Furthermore, the work in WP4 provides more detailed framework for multi-objective performance management. The performance framework developed and presented in D4.1 consists of three interlinked principal components: network conditions, structural elements, and triple bottom line assessment. The reason for this separation rests on the inherent challenges of measuring and managing the various key issues, including intangibles, in complex environments. Thus, the identified components have a clear link to strategic level approach presented in the above figure (Figure 14). First, the network conditions go beyond strategy of sustainable manufacturing network. Secondly, the shared objectives of sustainable manufacturing network are naturally based on triple bottom line. And finally, the structural elements cover the most significant internal factors impacting on sustainability performance, and they can be perceived in the objectives of network actors. 9.3 Sustainable development at network level D1.2 presented the SustainValue network governance model. It illustrates the sustainability governance within a manufacturing network as a process to guide the activities of all involved actors towards sustainable development and performance over product life cycle (Figure 15, originally presented in D1.2 p. 43). As pointed out in D1.2 the SustainValue governance model illustrates a process, which integrates i) requirements and commitment of stakeholders within business ecosystem as well as ii) business models and self-interest of manufacturing network companies. Thus, further development of this governance model is required in order to consider the requirements identified in WP3, e.g. the requirements for sustainable solution and its development process. Page 49 of 57

51 Figure 15. SustainValue governance model (adapted from D1.2). There are three main tasks of sustainability governance; analysing, organising and developing (Figure 15). These three network level tasks are overlapping with company-level development. Page 50 of 57