Master Research Project Technology Management Faculty of Management and Organisation
University of Groningen
Identifying Energy Reducing Opportunities in Projects
embedding the energy topic in the investment projects of Teijin Aramid Emmen
Master Research Project Technology Management Faculty of Management and Organisation
University of Groningen
Identifying Energy Reducing Opportunities in Projects
embedding the energy topic in the investment projects of Teijin Aramid Emmen
Author: ing. D.N.E. Meppelink
st. nr. 1505793
Faculty Supervisors: dr. ir. W. Klingenberg drs. A.J.J. Braaksma Company Supervisor: ir. E.C. Kalsbeek
Company of Study: Teijin Aramid B.V.
1e Bokslootweg 17
7901 CA Emmen
Emmen, January 2007
Management Summary
English Summary
This thesis was conducted during a 3.5 month research at the company Teijin Aramid located at Emmen. Teijin Aramid Emmen faces a number of internal and external threats that in time affect the competitive advantage of the company. The product they make is a high performance fibre called Twaron. For the coming 1.5 year the product is sold out. This puts a lot of strain and pressure on the production facility, but also on the projects executed. The consequence is that there is not been given the appropriate attention to the energy issue that influences the competitive advantage.
In order to identify the energy reducing opportunities within projects, this research was initiated. It was concluded that energy decisions should be made at an earliest time possible.
In that way a solid foundation is being laid to work further on. This is done by adding a decision tree to the project plan and updating the VTW form with an energy paragraph. The project plan is the first document where decisions are being made that affect the entire project.
A VTW can be submitted by every employee who has an idea. So instead of emphasizing energy in projects, energy itself can become a project.
It was suggested to make the combined energy effort of the project teams visible. This is done by means of the Balanced Scorecard approach. This helps developed the most appropriate key energy performance measures. A number of energy measures have been identified, but it is recommended to use only four to maintain an energy focus. The performance measures are developed on a higher level than a project. Which means that the combined effort made by the project members is made visible and can thus be corrected and evaluated on a continuous base.
Dutch Summary
Dit onderzoek is gedurende 3,5 maand uitgevoerd bij het bedrijf Teijin Aramid te Emmen.
Teijin Aramid Emmen is onderhevig aan een aantal interne en externe factoren welke de huidige sterke concurrentiepositie in gevaar brengt. Het product Twaron dat zij maken is een aramidevezel met een groot prestatievermogen. Voor de komende 1,5 jaar is het product uitverkocht. Dit heeft tot gevolg dat er veel productiedruk is, maar dat ook de projecten onderhevig zijn aan een sterke tijdsdruk. Hierdoor wordt er nauwelijks aandacht geschonken aan energie gerelateerde factoren welke de concurrentiepositie in het geding brengen.
Het onderzoek is ontstaan vanuit de gedachte dat er meer aandacht binnen projecten moet zijn voor energie reducerende mogelijkheden. Energie beslissingen moeten worden genomen op een zo vroeg mogelijk tijdstip zodat een solide basis wordt gelegd om mee verder te werken.
Deze solide basis wordt gelegd door het toevoegen van een energie beslissingsboom aan het projectplan en het updaten van het VTW formulier met een energie paragraaf. Het projectplan is het eerste document waarin beslissingen worden genomen welke een effect hebben op de verdere projectvoortgang. Een VTW kan door iedere werknemer worden ingediend. Dus in plaats van energie te benadrukken in projecten kan energie zelf een project worden.
Het is aanbevolen om de gecombineerde moeite van de projectteams meetbaar te maken door middel van de Balanced Scorecard benadering. Hiermee zijn de meest geschikte kritieke energie prestatie indicatoren ontwikkeld. Er zijn meerdere energie indicatoren geïdentificeerd.
Maar om de energie focus te bewaren is aangeraden om vier van deze toe te passen. De
prestatie indicatoren zijn op hoger niveau ontwikkeld dan project niveau. Dit heeft als positief
effect dat gecombineerde moeite door de projectleden zichtbaar gemaakt wordt en mogelijke
aanpassingen en evaluaties op een continue basis kunnen worden uitgevoerd.
Table of Contents
Management Summary... 3
Table of Contents ... 4
Preface ... 6
1. Introduction... 7
1.1 Research Project Initiation...7
1.2 Company Description ...8
1.3 Product Description...9
1.4 Process Description...10
1.5 Chapter Summary ...11
2. Research Design ... 12
2.1 Problem Statement ...12
2.2 Research Objective ...13
2.3 Research Question ...13
2.4 Conceptual Models ...15
2.5 Research Model & Methodology...17
2.6 Chapter Summary ...19
3. Process Change Triggers ... 20
3.1 The Problem Situation Explained ...20
3.2 The Energy-Efficiency Covenant Consequences ...22
3.3 Energy Sources used for the production of Twaron...23
3.4 The Sustainable Energy Issue...24
3.5 Chapter Summary ...24
4. Investment Process Characteristics and Enablers... 25
4.1 Project Management Features ...25
4.2 Current Projects undertaken within FDQ...26
4.3 The Sources of an Investment Procedure ...28
4.4 Stakeholders involved in the Investment Process...29
4.5 Project Team Members ...31
4.6 Energy Management...33
4.7 Investment Categories ...35
4.8 Process Analysis...36
4.9 Chapter Summary ...37
5. Organisational Analysis ... 38
5.1 Process Vision ...38
5.2 Organisational Culture...39
5.3 Organisational Structure...40
5.4 Resources & Capabilities...41
5.5 Project Commitment...44
5.6 Process Strategy...45
5.7 Making the right Energy Steps at the Right Time...46
5.8 Chapter Summary ...47
6. Combining Process Vision & Strategy ... 48
6.1 Relation between CSF and KPI’s...48
6.2 Implement Strategy through the Balanced Scorecard ...49
6.3 Establish insight in the Perspectives ...50
6.4 Break the Vision Down by Perspective ...51
6.5 Develop the right Critical Success Factors...54
6.6 Work the Strategy Map out for the Perspectives ...55
6.7 Chapter Summary ...56
7. Measuring the Strategic Intent... 57
7.1 Project Performance Measures ...57
7.2 Performance Measures ...58
7.3 The Overall Balanced Scorecard...60
7.4 Formulate the right energy goal and action plan ...61
7.5 Implementing the Balanced Scorecard ...63
7.6 Answering the Research Question...64
7.7 Alternatives to the Balanced Scorecard ...64
7.8 Chapter Summary ...65
8. Conclusion & Recommendations... 66
8.1 Conclusions of the Research...66
8.2 Recommendations for further Research...67
References... 69
Appendix I Organogram Teijin Ltd...Error! Bookmark not defined.
Appendix II Extended Production Process...Error! Bookmark not defined.
Appendix III Sulphuric Acid Retrieval Process...Error! Bookmark not defined.
Appendix IV Research Model Building ...Error! Bookmark not defined.
Appendix V Production of Twaron and Energy consumption of FDQ...Error!
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Appendix VI Five Forces Model and the Product Life Cycle Phases ...Error!
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Appendix VII Initial Project Process Flow...Error! Bookmark not defined.
Appendix VIII Analysis on the Time and Influence of Stakeholders Error! Bookmark not defined.
Appendix IX Detailed Process Analysis ...Error! Bookmark not defined.
Appendix X The Overall Graphical Representation of the Project Process ...Error!
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Appendix XI Team Roles appropriate for Business Process Re-engineering...Error!
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Appendix XII The Questionnaire & Questionnaire Results ...Error! Bookmark not defined.
Appendix XIII Organisational Culture...Error! Bookmark not defined.
Appendix XIV Graphical representation of the VTW Energy update...Error!
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Appendix XV Energy Decision Tree...Error! Bookmark not defined.
Appendix XVI Cause-and-Effect Relationship Explanation...Error! Bookmark not
defined.
Preface
This paper represents my final thesis for the Master Technology Management at the University of Groningen. I executed my research at Teijin Aramid Emmen (FDQ). A very interesting company not only because of the products they make, but also for their ability to maintain a ten percent growth for the past several years while the Netherlands was in a recession. The company produces an aramid yarn called Twaron which is, at the same weight, five times stronger than steel and can endure a heat of 700 degrees Celsius. These specifications make it especially useful for products that need to be heat and cut resistant or should perform under other extreme conditions.
The paper was written with three objectives in the back of my mind. For Teijin Aramid Emmen I wanted to generate solutions that solved their problem, my recommendations should be of additional value and contribute to the business management. I also wanted to apply to the academic standard and rules set by the teachers, supervisors and professors of the Economics and Business Faculty of the University of Groningen. My final objective was to write this paper for myself. I wanted to produce a paper that when I look back on it can say; I did my best in achieving the goal set for me by Teijin Aramid Emmen.
A number of persons helped me generate insight and gave useful feedback during the project.
First of all I want to thank my company supervisor Mrs. Ir. Esther C. Kalsbeek. During the research see helped me get familiar with the company and provided me with the right internal information. She also gave very useful tips that contributed to the structure of the report.
Second, I want to thank Dhr. Dr. Ir. W. Klingenberg, my faculty supervisor. He gave me useful pointers on how to write a thesis and he also let me concentrate on the main issue. I also want to thank Dhr. Drs. A.J.J. Braaksma, my second faculty supervisor, for reading this paper and giving me feedback. Finally, I want to thank all the employees of Teijin Aramid Emmen who helped and contributed to the execution of this research. I found it very encouraging that every employee was willing to answer my questions patiently and timely.
Overall I have enjoyed conducting my research within Teijin Aramid Emmen and I am thankful that they gave me the opportunity to do so.
Danny Meppelink
January 2008
1. Introduction
Increasing oil prices are not only becoming a serious issue for the car driving citizens, but also for the petrochemical industries that for a great deal rely on the supply of oil for the production of their products. This problem is also becoming a serious issue for Teijin Aramid.
The basic chemicals they use in the production process are extracted from crude oil. But the increasing oil prices have also an affect on the energy prices, which are based on the oil prices.
The increases of the oil price have thus a double impact on the energy costs of Teijin. And also the government takes measures regarding the energy consumption of industry. In 1999 the ministers of the cabinet signed a covenant, whereby obliging the industrial companies to take care of their high energy consumption pattern. These factors are beyond the control of Teijin Aramid Emmen, they are externally forced upon. But Teijin also finds itself responsible to care for the people, planet and its profit. Teijin feels socially responsible to reduce the CO
2emissions for a healthier planet where people life in. The external factors are increasingly becoming a greater threat to Teijin and added up to a point where Teijin feels the need to intervene or else the competitive advantage comes under pressure.
This chapter will first introduce the company where this research was conducted, Teijin Aramid Emmen also known as the FDQ plant. There will also be explained how this research initiated. Then the products made at Teijin Aramid Emmen, what their main characteristics are and where they are being used for is explained. Finally the energy intensive production process is going to be described. At the end of the chapter it will be clear that the goal of this thesis is a need for a collective commitment to reduce the energy consumption at the FDQ, which is why the executing of this research is so important.
1.1 Research Project Initiation
FDQ produces the aramid thread called Twaron. The production of Twaron is done in a highly intensive production process where al lot of different energy sources are being used.
Currently FDQ feels that there is not enough attention being given about how energy is embedded when engaging in the projects they undertake. Since the energy prices are rising, as a consequence of the increasing oil prices, and the signing of the Kyoto petition by Dutch government, Teijin feels the need to reduce its energy use. This means that Teijin, who has signed the covenant, which derived from the Kyoto petition, has to apply to these regulations set. And since the energy prices make up a significant amount of the product costs, an energy reduction of just a few percentages would also contribute directly to the profit FDQ makes.
Because of these two reasons FDQ appointed in September 2006 a full-time energy engineer.
1The energy engineer analyzes the current energy usage and works out the energy system to generate a full understanding of what energy is being used, where it is being used and how reductions can be realized. One objective of this inventory is to generate insight in the costs involved. This is the point where this research project initiated, how project members can be made aware of the energy criteria when executing projects. This research project therefore consists of looking at ways how FDQ can embed the energy criteria in their projects.
1.1.1 Significance to the study
There is a dual purpose to this research project. On the one hand internally by Teijin’s own obligation to conduct sustainable business and on the other hand externally imposed by the rising energy prices. As a consequence of the steady grow of FDQ throughout the years, the
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Corporate Social Responsibility Report 2006
rising energy costs have a significant impact on the profit FDQ makes. In the study programme of Technology Management a lot of attention is being given on how products and processes should be designed and how business processes should be engineered. This research project combines both elements, it emphasis how specific criteria like energy should be embedded in the investment process and how this has an influence on the total life cycle costs.
On the other hand it deals with the soft side of business engineering; members of the investment process should be made aware at the right time that energy (among others) has a significant impact on the cost endured in the operational phase.
1.2 Company Description
Teijin Aramid Emmen is part of the parent company Teijin Limited Group, with its headquarters located at Osaka, Japan. Teijin Limited is not only active in the aramid fibre business, but they also produce medication, foils and plastics. Teijin Aramid B.V. is part of the high performance fibres business group of Teijin Limited, see Appendix I. Teijin Aramid B.V. has a product portfolio of four different aramid fibres, produced across the world. They differ from each other in the sense that they all have a different structure and are used for different purposes. In the business market these four products are known as, Twaron, Sulfron, Teijinconex and Technora.
Teijin Aramid B.V. has three facilities in the Netherlands, in Delfzijl, Arnhem and Emmen.
Delfzijl produces the two basic monomers extracted from oil. These are in turn being used for the production of the polymer, which is also being produced in Delfzijl. Teijin’s Research Institute and headquarters are located at Arnhem. Arnhem also produces pulp and recycles rejected Twaron products. At Emmen, the polymer made in Delfzijl, is being used in the polymerisation process to make the Twaron aramid fibre. The Emmen plant also produces pulp and the Twaron yarn is being converted into a fibre that has specific characteristics. The converting and pulp production is being done at FDQII and the production of the Twaron fibre, called the spinning process is being done at FDQI. Teijin Aramid Emmen itself is located on the secured Emmtec Industry and Business Park.
1.2.1 Company Strategy
The Teijin Group has summarized the promise of the Teijin brand in its brand statement,
"Human Chemistry, Human Solutions," which is to develop chemical technologies that are friendly to both people and the global environment. This brand statement is the cornerstone of the Group's corporate brand strategy.
2Teijin Aramid Emmen is part of the Teijin Group and the strategy therefore also applies to the actions they undertake. Since FDQ is a high-intensive petrochemical company that uses a lot of energy for the production of its products the global environment topic is becoming a serious issue. Not only because of the rising oil prices but also as a result of the sharpened government regulations on energy consumption and emission.
1.2.2 Company Vision/Philosophy
The Teijin Group’s corporate philosophy is “Quality of Life”. Teijin feels committed to enhance the quality of life of people everywhere through a deep insight of human nature and the application of their creative abilities. The Teijin Group wants to accomplish this first of all by growing and evolving in harmony with the society, thereby justifying the trust of the shareholders, customers and society at large. Teijin Group places the highest priority on safety and the preservation of the natural environment. Secondly they encourage their employees to achieve self-realization by developing their abilities to the fullest. In doing so, they nurture a corporate community with a variety of abilities and personalities to foster creative innovation.
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http://www.teijin.co.jp/english/ir/ir04_06.html
As can be concluded from the corporate strategy and philosophy; the Teijin Group places a lot of emphasis on the environment and their employees, who are in turn members of the society.
Teijin Aramid also has its own vision and strategy, derived from the Teijin Group’s strategy.
It focuses on the three pillars Profit, People, Planet. These terms are the cornerstone of Teijin Aramid’s sustainable business development.
1.2.3 Company History
The history of fibre production dates back to November 1915 when the Azuma Limited rayon plant was established. They were the first to produce manmade fibres on a large scale. In 1962 the company name Teijin Limited is first being mentioned after two other companies merged.
Until then the process for making Twaron was not yet been discovered. It was only until the seventies that the Dutch company Akzo developed the para-aramid fibre now know as Twaron. In 1976 the first Twaron pilot plant was built and in 1985 there where already five production facilities operational in two different locations.
From 1985 until 2000 the market for Twaron had steady flow of output around 6 or 8% a year.
At the end of 1999 the demand for Twaron accelerated significantly with more than 20% a year. This was due to the explosive increase in demand for optical cables, asbestos replacement materials in brakes and gaskets, the reinforcement of special tires and the high demand for ballistic protection used by the police and the military. In that same year Akzo assigned all their fibre activities to the new founded Dutch fibre group Acordis. At the end of 2000 the Twaron division of the Acordis group was taken over by the Teijin Limited Group.
With as a result that Teijin now holds around 50% of the world’s poly-aramid fibre business.
1.3 Product Description
Twaron is a light-weight, super strong synthetic thread made out of an aramid polymer, called PPTA. PPTA (or polyparafenylenetereftalamide) is the basic aramid used for the production of Twaron. The polymers of this basic aramid evolve from the reaction of the two basic components TDC (terftaloyldichloride) and PPD (p-fenylenediamine), see figure 1.
Figure 1, the polymer PPTA and its raw materials.
The Twaron polymerisation is thus the reaction of PPD and TDC into the basic component PPTA. PPTA is being produced at the Teijin Production Facility at Delfzijl. From here it is being transported in so called octabins or “lermervaten”, respectively eight shaped cardboard boxes and aluminium barrels, to the production facility at Emmen.
1.3.1 Product Characteristics
The Twaron aramid thread has a unique combination of characteristics that make it so special
for the application in specialized products. Besides being a super strong synthetic thread, the
yarn is also light weighted, cut and heat resistant and has a high elasticity modulus. These
characteristics make it useful in a number of application areas. Twaron can be used for the
replacement of asbestos, steel ropes, glass and synthetic fibres. Twaron is for example being
used in ropes to secure freight ships, but also in the protective clothes for the United Nations
and in the hull of yachts to make sure the rupture is being reduced to a minimum.
1.3.2 Product Assortment
Teijin Aramid strives for the search of new product applications to supplement the current product assortment. Besides delivering the basic Twaron yarn to the customers, who use the yarn in their products, the product assortment also consists of spun or converted Twaron yarn.
3Twisted yarn can for example be found in the tires of cars and trucks. One of the biggest customers of this kind of twisted Twaron yarn is the well known tire producer Michelin. Another example is a water blocking finish which is put on Twaron used for the protection of optical fiber cables. Twaron is therefore often not visible to the human eye.
1.4 Process Description
The process of spinning Twaron was in the 1970’s developed by Akzo. The basics for making Twaron have remained the same, but a lot has done to optimize the production process. The two basic components for making the Twaron thread are PPTA and 100 % sulphuric acid. The PPTA is being made at the Teijin Delfzijl facility, but one hundred percent pure sulphuric acid is not available on the market. One hundred percent sulphuric acid means that the sulphuric acid contains no traces of water. But to obtain a hundred percent sulphuric acid Teijin concentrates its diluted sulphuric acid, which was being used in the production process, through series of steps to a more concentrated sulphuric acid with a 96% percentage. This is still not enough, therefore Oleum24 is added to 96% sulphuric acid and this mixture generates the concentrated 100% sulphuric acid that is being used in the beginning of the process.
1.4.1 Primary Process
First the primary production process will be described (see figure 2), than the process of retrieving the diluted sulphuric acid will be dealt with. Figure 2 gives a simplified visual representation of the Twaron production process. In order to get a complete representation of all the steps that are being undertaken in the production of Twaron, appendix II gives a detailed description of the process. The sulphuric acid used in the production process is a composition of Oleum24 and the 96% sulphuric acid produced by the secondary process.
Figure 2, the graphical presentation of the Twaron production process (simplified)
The 100% sulphuric frozen into a powder and mixed with the PPTA, this is the first step of preparing the polymer. Within this process step the sandy spin solution is heated and put under pressure in order to form a viscose substance. This substance is the input for the spinning phase. Here the most important part of the process takes place; the melted substance is pressed through a spinning nozzle that arranges the molecules and makes the elementary threads. The yarn is then run through an air gap, which improves the orientation of the filaments and led into the coagulator bath. Here the yarn is cooled down and formed into a solid thread. The yarn contains a lot of sulphuric acid that has to be washed out.
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Teijin Aramid sales presentation 2007
This is done in the washing phase, where a lot of washing water is being used. The purpose of the washing street is to obtain a wet but sulphuric acid free Twaron yarn. The wet Twaron is then being dried in steam heated dehumidifying driers. On the Twaron can then be put a finish and through a series of transport roles the thread is brought under the right tension. The Twaron is then wound up on a coil, ready for transport. The cooling down, heating up and washing of the thread consumes a lot of energy. Not to speak of heating and cooling of the building and the air conditioning needed. Air conditioning is needed because the sulphuric acid could be irritating to the eyes and respiratory routes of the employees. These reasons make FDQ want to give more attention to its energy use, because the related energy costs make up a great part of the total costs.
1.4.2 Secondary Process
The Oleum24 is being delivered by an external supplier, but to retrieve the 96% sulphuric acid a series of steps are undertaken, see appendix III. The word retrieval is being used, because the diluted sulphuric acid can not directly be recycled back in the primary production process. When the spinning substance is run through the spinning nozzle and is tunnelled through the air gap, then for the first times the spun thread enterers the so called washing street and comes into contact with the water. The fibre enters the coagulation bath which purpose it is to deprive the fibre from sulphuric acid. The washing water used in this process is being transported to a Mechanical Vapor Recompressor (MVR) that concentrates the diluted sulphuric acid up to 22%, this 22% sulphuric acid is subsequently being transported to one of the Bertrams evaporator. Here the diluted acid is concentrated to a 78% sulphuric acid.
In order to upgrade this concentration once more, the last step in the retrieval process is to evaporate water out of the 78% sulphuric acid in the Plinke evaporator. Then a concentration of 96% sulphuric acid is reached. This sulphuric acid is pumped back and used, together with the Oleum24, in the beginning of the process. The overdue of acid is being sold and the evaporated water is being condensed and used again in the washing street. This secondary process of retrieving usable sulphuric acid is a highly energy consuming process.
1.4.3 Finishing Process
The two processes described above are part of the FDQI spinning process, but as mentioned there is also a FDQII where besides pulp production the Twaron yarn is being finished and converted. Most of the Twaron product portfolio is being made here. FDQII adapts the yarns to the wishes of the customer. There are a number of different product characteristics the customer can choose from (see subparagraph 1.3.2).
1.5 Chapter Summary
Twaron is a very specialized product made in a high-intensive production process. Twaron is
a semi-finished product that can perform under extreme conditions and is being used for a
number of product applications. The product Twaron is often not visible to the human eye,
since it is being used by the end-user in combination with other materials. Energy at FDQ is
becoming a serious issue and originates basically from one external source, namely the oil
price, which causes a dual problem. First the basic chemicals used in the process are extracted
from oil and second, energy used in the process is generated by fossil fuels. These issues will
be discussed in depth in chapter three. The main thing is that the energy costs increasingly
affect the profit of FDQ. This is because the demand for Twaron is only rising, as is the
energy consumption related to it. This last item affects the planet and thereby the people who
life on it. These reasons together with the Teijin Group strategy makes FDQ want to reduce its
energy consumption and stress the need to reduce it.
2. Research Design
In the previous chapter the foundations for the research have been laid, it established an insight in Teijin as a company, what the facility at Emmen makes and how the product Twaron is being made. It has become obvious that the making of Twaron is a highly intensive production process. This results in a high energy use and the need to reduce this consumption.
This chapter explains what information might be needed, what literature might be useful and what methodology can best be used. This is done in order to generate a solid foundation that sets the structure of this research project and can act as a guideline for the research.
2.1 Problem Statement
To get a good understanding of the problem, the problem situation and project boundaries need to be clear. Only in that way a good understanding can be generated and the research stays focussed. According to De Leeuw (2002) a problem situation for management is every situation that induces the management to strive for improvements and enhancements. In this case the management of Teijin is striving for a better imbedding and understanding of the energy issue within the process of an investment. When the project members understand that there is a serious need to reduce the energy consumption and the cost related to it. Then the energy topic becomes a point of focus that could lead to a number of positive results for Teijin.
These will be made apparent throughout the paper.
But the creation of understanding alone is only a part of the problem situation, it describes through what means the deeper objective is being met. This objective is to be better than the best in the world on energy-efficiency (profit) and care for a healthy environment (planet &
people). From this point of view there can be stated that Teijin’s energy reduction not only contributes directly to the profit, but has also a positive affect on the planet since less natural resources are being used. These reasons are relatively superficial and should be conducted by every other high-intensive industry.
Since every company should take care after its energy consumption, there might be asked why there is a sudden need for FDQ to study topic now? The simple reason is that Twaron is such a desired product and the demand for Twaron exceeds the supply. The profit made of Twaron is therefore so high that the energy consumption is just accepted as it is. The main concern until now was that energy should be supplied on a continuous base regardless of the cost. But for the last couple of years the energy prices have raised significantly and other changes have occurred in the fibre business market that added up to a point where it is necessary to intervene or else the competitive advantage comes under pressure.
2.1.1 Research boundaries
Verschuren & Doorewaard (1995) state that the period to do a research project is limited, therefore project boundaries need to be set. This is also the case for this thesis. The research boundaries have therefore not only the function of defining the research, but they also get the researcher more focused on the area of concern. The following research boundaries have been set in order to make the scope of the research project clear:
• Teijin Aramid has a strategic objective of lowering its energy consumption by at least 1% annually, as stated in the global social responsibility report 2006.
• The research shall be focussing on the investment projects within FDQ. Since this research is conducted at and tries to be of additional value for Teijin Aramid Emmen.
• The research is being conducted on a strategic level, which means that those who will
ultimately implement the results of this study work on a strategic level within FDQ.
2.2 Research Objective
The research objective is the result of the problem statement (Verschuren & Doorewaard, 1995). The scope of the research has been defined in the problem statement. The main question in this paragraph is what objective is to be accomplished with this research. As can be understand from the problem statement, energy reduction and the associated operational cost reduction should be highlighted in the process of an investment. An investment consists of several steps that all have different deliverables. The energy topic in itself should therefore not be seen as independent; it should be integrated with and emphasized at the right time through the process of an investment.
This means that there should be a clear defined investment process on the one hand, which can be considered as the hard part. On the other hand the recommended process changes should be used by people and create a level of conscious, regarding the energy topic. This can be considered the soft side. The objective of the research is to explicitly deal with the hard side of the process and redesign the process of making an investment. The soft side is not being dealt with in depth, since it is beyond the scope and time of this research. The process should emphasize energy reductions. The research objective is therefore described as follows:
Redesign the investment process so that project members put an emphasis on energy reductions and that the energy topic becomes an integrated part of the project.
For FDQ it is important to embed the energy issue in the road of an investment decision. This means the investment process should by analyzed and redesigned in such a way that members in the investment process deal at the right time with the energy subject and act upon it. It is the challenge of this research to implement strategic change, regarding the energy topic, through FDQ’s investment projects.
2.3 Research Question
The research question follows from the research objective. The predominant requirement a research question must have is that the question must be both efficient and give certain guidance (Verschuren & Doorewaard, 1995). The research question gives answer to what is wanted in order to achieve a desirable outcome for Teijin Aramid Emmen. The research question is constructed as follows:
How can the investment process be redesigned so that members of the investment project make the right energy related decisions and the process itself is
focussed on efficient and effective imbedding of energy?
When this question can be answered there can be concluded that the path to efficient and effective embedding of the energy criteria is being laid. Also how to reach the objective is being answered with the question, since the efficient and effective imbedding of the energy topic should be done when project members are conducting a project. What becomes apparent is that project members have to make the right decisions. In order to fully understand the research question, sub question need to be asked.
2.4.1 Sub questions
In order to get a full understanding of the problem at hand, sub questions are being computed.
The sub questions are derived from the research question and have the function of giving more guidance to the research project and are therefore more detailed (Verschuren &
Doorewaard, 1995).
Sub question 1:
How does the current investment procedure look like?
An investment projects must initiate at some point in time. From then on several steps will be executed before the project really goes in production. Information is needed about the current steps in an investment procedure and who are involved and authorized to make decision. This leads to the following sub question.
Sub question 2:
Which members are involved in the process of an investment procedure?
It is important to understand which persons can influence a project. And moreover which stakeholders are involved, who can have an influence in the investment procedure. Since the project members are the ones that carry out an investment procedure and make the decisions regarding an investment procedure, they should make the right energy decisions and take action upon it. That is why the following sub question is being stated.
Sub question 3:
When should project members make the right energy related decisions in the project?
It is important to realize when project members should make the right decisions regarding the energy topic. An investment process consists of several steps and with the completion of each step more and more details become solidified. If one of these steps has to be done over again, in order to realize energy reductions, the time put in before is a waste. This means that decisions have to be made at the right time in order to avoid rework. Other criteria also become solidified at the end of a phase and how these relate to the energy topic is also of importance. This is why the following sub question is computed.
Sub question 4:
Which criteria could stand in the way of efficient and effective imbedding of energy?
At each step of the investment process different decisions have to be made. The energy criteria is not the only criteria within an investment project. It is important to identify the criteria that might stand in the way of efficient and effective imbedding of the energy topic.
Knowledge about these criteria should give insight in how the investment process should be redesigned. This subsequently leads to the last sub question.
Sub question 5:
How should the investment process be redesigned?
This sub question is deliberately put as the last question, since redesigning means that there has to be knowledge about how the process works, who are involved and what criteria play when an important role. The question reflects the effective part of the research question, since it deals with combining the factors that influence the energy topic and investment process.
When an answer can be given on all the sub questions, the research question can be answered.
It can be seen that there is a certain structure in the way the sub questions are ordered. This is done because of the information needed to subsequently answer the following sub question.
There first of all needs to be a clear understanding of the process before answering sub
question four. Answering the research question will be done at the end of the paper.
2.4.2 Terminology Explanation
Some definitions that are being used in the paper need to be clarified in order to make sure that the reader fully understands the subject at hand. The terms that are being used in this paper and need explanation are listed below:
• Energy; energy extracted from natural resources, like for example electricity, steam and natural gas. This research does not deal with human energy (e.g. labour).
• Energy efficient; do the benefits make up for the endured costs. This means that trade- offs need to be made between other criteria.
• Energy effective; does the solution contribute to the strategy/philosophy of Teijin.
• Investment project; from the moment the initiation takes place, until the moment the machine is being bought and starts producing. In the report it will also be referred to as the investment process.
• Technology; the information needed to produce and/or sell a product (Biemans, 2004).
2.4 Conceptual Models
The conceptual model is a schematic representation of how according to the researcher the different terms are associated (Baarda & de Goede, 2006). The research model used for this research is constructed from two different models presented in scientific literature. A research model is being used to identify the factors related to the problematic situation and give guidance when dealing with the research topics in an orderly manner (De Leeuw, 2002). The conceptual models dealt with in this paragraph form the basis for the development of the research model that is going to be described in the next paragraph.
2.4.1 Process Model
The first model from the literature is presented in figure 3 and is adopted from Davenport (1993). This model represents a high level approach to process innovation ideally for analyzing the investment process. The model consists of five phases which ultimately result in designing and prototyping the new process. This process, developed by Davenport (1993), is also referred as business process reengineering (BPR). One reason why organisations have used process re-engineering is to seek improvements in their business performance (Launonen
& Kess, 2002). The sequence of the activities in the model may vary, but aspects of the ordering are important (Davenport, 1993).
Figure 3, Process Model; A high-level approach for analyzing the investment process of FDQ (Davenport, 1993)
Selecting processes for innovation, for example, should be done early in order to focus effort and resourced (Davenport, 1993). The model as presented by figure 3 begins with the activity of identifying processes for innovation. After that there will be identified which change levers can be used in order to innovate the process. When this is done, a process vision will be developed. Process visions link strategy and action; they translate high-levels strategies into measurable targets for process operations, and they set targets both for the designers of a process and for those who should subsequently manage it (Davenport, 1993). Than an understanding should be generated about how the current process is being structured and how the process elements merge in one another.
When the research has established a high-level vision of the new process, set measurement criteria, gained a perspective on the current process, and identified the key enablers. Then there can be started with the new process design. And a new or improved process design is exactly what should be done in this problematic situation, considering the research objective set earlier. The elements mentioned make the model of Davenport (1993) suitable and useful to be used in this thesis.
Besides developing a new process, a new strategy should also be adopted. Since a process in itself is a collection of organized elements or activities through time (de Leeuw, 2002), structure to these activities is being given by creating a clear strategy. A strategy relates to the organisational behaviour in an environment aimed at retaining or improving of the company his current position (de Leeuw, 2002). This is why, besides a clearly defined and designed process, a clear strategy should also be developed, which will be done with the strategy model.
2.4.2 Strategy Model
The second scientific model is adapted from the literature of Rajagopal & Bernard (1995).
The model, see figure 4, starts with the identification of the forces that can trigger change both internal and external. When the forces have been identified, a couple of stages have to be worked out in order to adopt the right change oriented strategy;
• Stage 1; managers have to make sense of the environmental forces that surround their firms. In stage 1, an analysis is made on what external and internal forces that triggered the need to reengineer the investment procedure to integrate the energy topic.
• Stage 2; involves assessing how these internal and external conditions affect the firm’s strategic posture. At stage 2, the organisation may also recognize that their internal systems are beyond repair and require a complete overhaul. In that case strategic change is needed.
• Stage 3; this stage analyses and dissects the crucial roles in activating strategic purchasing orientation change. Planning change is not enough; much is required to get there. It is suggested by Rajagopal & Bernard (1994) that strategic purchasing requires a new mindset, a new way of organizing. With a new mindset in this case is being meant making the project members make the right decisions at the right time.
• Stage 4; the result of the model is to select, implement and evaluate the effective purchasing orientation change strategy.
The model runs through several stages of the investment purchasing process, it does this on a high hierarchic level. This means that each stage can be deepened out with literature specific suited for the energy investment approval. This is what is being done in the next chapters.
Process change without strategy and vision seldom goes beyond streamlining (Davenport,
1993). So in order to develop a proper strategy suited for the energy topic, this model is very
useful for the execution of this research.
Figure 4, Model for strategic purchasing orientation change (Rajagopal & Bernard, 1994)
The conceptual models are acuminated on the basic perception of the problem and have the purpose of getting insight in the problem situation on a high aggregation level. A conceptual model is a concrete model of an abstract system (de Leeuw, 2002), which in this case means that it is a model that presents how the research should be conducted. In order to fit the two models together, a model specifically suited for this research is going to be developed. The next paragraph deals the building of this research model and explains how it is constructed.
2.5 Research Model & Methodology
The research is being conducted in accordance with the scheme illustrated in figure 5 (see subparagraph 2.5.2). Also interviews will be taken from the personnel and questionnaires will be handed out the employees of FDQ in order to generate useful information. To work out the research model relevant scientific literature has been used. As well as other relevant literature that helps in the perception and can act as guidance for this research.
2.5.1 Relevant Literature
In order to indicate which literature is relevant for this study the guidelines of Verschuren &
Doorewaard (1995) are being applied. Appendix IV presents the seven steps that have contributed to the insight in the relevant literature needed. What the model in appendix IV makes clear is that in order to achieve the objective set, a number of subjects need to be covered. In that way understanding about the project is being generated.
What has become apparent is that information and literature about critical success factors is
needed that relates to the energy issue. There particularly is being looked at how to implement
these criteria. Since the area of concern is the investment process at FDQ, there needs to be an
understanding of how, what and when decision are being made.
Also insight in strategic change management is of importance, since people need to be make the right energy decisions and should be motivated to take actions regarding the reduction of energy consumption. And last but not least, the question should be asked; how to imbed these decisions and actions in a structured way so that it remains under the attention of the investment process members. In other words what strategy is best suited in this situation.
When these elements are made clear there can be started with the development and adaptation of the project process focussed on the embedding of energy within FDQ.
2.5.2 Research Model
Both the process and strategy model are high-level approaches to process innovation. The research model presented below lays out the different steps that have to be taken and is therefore adapted for the purpose of this research. The process model was developed by Davenport (1993) in order to bring structure and guide the process of business re-engineering (BPR). This is why the process model is appropriate for this research, the energy criteria has to be embedded in the current process. In order to achieve this, the process has to be re- engineered. To put it metaphorically, new energy pieces have been added to the process puzzle and in order to generate a complete picture the puzzle has to be rearranged.
Combining the high-level approach of the process model and the high-level approach of the strategy model will give guidance to this research. Therefore a model that acts as a guide, for this problem situation, is being developed. It combines the elements and activities that are needed in order to structure the research and come up with an appropriate investment process and strategy. Figure 5 represents the developed research model. At this point there can be spoken of a research model, since a research model is a schematic representation of the goal of this research and the steps that need to be taken in order to achieve this goal (Verschuren &
Doorewaard, 1995). The model gives insight in how the research is constructed.
Figure 5, Research Model; the thesis is conducted in line with the presented model
There is an indirect relationship between the sub questions and this research model. The sub questions are answered throughout the paper. The research model is guide to reach the research objective and in turn the research question is derived from the research objective.
Following the research model will thus not only lead to achievement of the research objective
but also to the answering of the research question and the sub questions derived from it.
With the help of information from scientific literature, information within FDQ and observations (empiric evidence) the research will be conducted in line with the research model. As can be seen the model begins with the external and internal forces that triggered the need to focus on energy reduction. What is going to be dealt with in the next chapter will be summed up below;
• Chapter 3 handles the change triggers related to the investment process. The process to innovate is thus the investment process, by what means this innovation will be executed is going to be described in chapter 4.
• Chapter 4 will also be dealing with process features, the process itself and the stakeholders involved in the process. When this is mapped out a solid foundation is being laid for the next chapter.
• Chapter 5 begins with a vision of how the process should be reengineered. And according to Davenport (1993) no good visioning process can go without a solid strategy, which will be developed at the end of this chapter.
• Chapter 6 begins with linking all the energy issues and criteria with the findings described in previous chapters. Chapter 6 has thus the purpose of bringing perspective and brings the vision and strategy together by applying the Balanced Scorecard model developed by Kaplan & Norton (1996).
• Chapter 7 will start with the analyzing and stating what the most appropriate energy performance measures should be that make the combined effort of the project teams visible. At the end this of this chapter an answer will be given on the research question.
• Chapter 8 will give recommendations and sums up the conclusions of the research.
2.5.3 Research Perspective
Verschuren & Doorewaard (1995) state that there are eight different ways to conduct a research. For the purpose of this research there has got to do with a change oriented research.
But the project also goes in the direction of a design oriented research, since the energy topic is an under-exposed subject within the process of investment project. The investment process needs to be defined and redesigned in order to embed the energy criteria. The research model gives guidance in the achievement of this objective.
2.6 Chapter Summary
Now that the competitive advantage becomes under pressure Teijin Aramid Emmen feels the need to conduct research about the energy reducing opportunities it has when projects are executed. This desire together with the problematic situation described in the previous chapter formed the basis for this research. The research objective was therefore formulated as follows;
Redesign the investment process so that project members put an emphasis on energy reductions and that the energy topic becomes an integrated part of the project.
From this research objective the research question was formulated and the sub questions were
subsequently derived from the research question. The objective shows that the main topic of
the research is the investment process and the influence the project members could have on
this process in relation to the problematic energy situation. In order to support the research
objective and give guidance to the research, a research model was constructed based on two
high-level conceptual models from literature. The several steps presented in the research
model relate to the chapters that are going to be dealt with in this paper. As can be seen in the
research model, the next chapter will deal more explicitly with the factors that threaten and
have an affect on the competitive advantage of Teijin Aramid Emmen.
3. Process Change Triggers
This chapter deals with the external and internal influences Teijin Aramid Emmen has to endure. And also what other forces FDQ has to cope with, regarding the energy issue. It therefore generates a deeper insight in the energy problemacy and goes in more detail about FDQ’s energy use.
3.1 The Problem Situation Explained
Currently there is not enough attention considering the energy issue related to the investment of new machinery or processes, although it is becoming a serious topic. As stated in the Teijin’s philosophy, it places the highest priority on safety and the preservation of the natural environment. But that is not the only reason Teijin feels the need to reduce their energy consumption and emission. There are a few other issues that play a significant role.
3.1.1 Increasing Oil Prices
Figure 6 shows both the price movements of a barrel of oil and the volume of oil discovered world wide, depicted in barrels of oil. What comes apparent is that from the 1970’s the price of a barrel of oil has raised significantly from approximate 4 dollars to over 60 dollars in 2005.
At the moment the price of a barrel of oil is even around the 94 dollars.
4And since the volume of discovered oil is only dropping this price will run up. These price changes have a significant impact on the raw materials like TDC and PPD Teijin purchases, since they are extracted from oil. But it also affects the energy prices, because energy, like electricity and steam, is generated through the use of oil or gas. Emmtec is the supplier of energy for FDQ.
Figure 6, the price of a barrel of oil significantly rises and the volume of oil discovered worldwide in barrels of oil is only decreasing (Omer, 2007).
Looking at the prices Emmtec demanded over the past several years (see table 1), it is clear that the rising energy prices have a considerable effect on the overall cost of FDQ. In fact in 2006 there is 15.3 million euro spent on energy and other utilities (like water). This means that only an energy reduction of a just a few percentages could contribute directly to the profit FDQ makes.
The table clearly shows that the energy rates of 2006 have raised significantly compared to 2005. The price of electricity over the year 2005 – 2006 has risen with 52% and the price of natural gas even rose with 78% in that same year. The forecast for 2007 is that the energy prices will only keep increasing.
5This is supported by the fact that the prices for a barrel of oil is still increasing and there are found less and less new oil fields. To put this in perspective,
4
www.oil-price.net, consulted at 28-11-2007
5
From the PowerPoint presentation “Energy Technology FDQ” on June 2007.
the energy bill will rise exponentially due to the fact that the Twaron business is still growing (see appendix V) and because of the fast rising energy prices. As a results, the energy costs as part of the cost price will only become larger. This will probably at one point in time result in a higher cost price for the consumers of Twaron, if FDQ takes no initiative in reducing it.
Table 1, The energy rates Emmtec demands are increasingly rising, due to the related oil problem (1999-2006).
Looking at the percentage of energy costs that are made up of the cost price, there can be seen that around 15% of the cost price consists of energy costs. And according to the control department of FDQ the energy costs as part of the cost price will rise up to 18% by the year 2010. These energy costs only relate to the FDQ facility. The energy costs of the PPTA production at Delfzijl are not even included.
63.1.2 Rising competitors
The production of Twaron is a specialized process, with high initial cost. The only direct competitor Twaron has at this moment is DuPont. Only DuPont brings this product in the market under the name Kevlar, but both Twaron and Kevlar have the same chemical structure.
A lot of law suits have been fought over the right to make the product, but nowadays both Teijin and DuPont hold about 50% of the market. But until recently two new competitors entered the market, namely Kolon and Hyosung. It is not surprisingly that new competitors are entering the market, since the demand for Twaron is high; for the next 1.5 year Teijin already sold all its Twaron.
Kolon, a producer of polyester started with production of Heracron in 2005 and is since the end of the year 2007 becoming a global player. As with Twaron and Kevlar, Heracron has the same chemical structure. This means for Teijin a third player with the exact same product in the aramid oligopoly market. There are others on the market like DSM who produces a polyethylene fibre, called Dyneema, and is in some cases being used for the same purposes as Twaron.
7However a lot of other characteristics Twaron has, like high elasticity and heat resistance does Dyneema not have. This makes Twaron more desirable in number of other specific circumstances. This is also the case with the product Lycocell, produced by Hyosung.
Lycocell is mainly used for tire applications.
All these influences indicate that the market is moving towards the maturity phase (see Appendix VI), according to the life cycle literature. During product maturity phase, organisations undertake intense efforts to reduce costs to remain competitive (Atkinson, Kaplan & Young, 2002). How these threats influence the environment and competitive advantage of FDQ is being elucidated by means of Porter’s Five Forces analysis (see Appendix VI).
6
From the internal document “Kostprijzen 2007 Teijin Twaron BV, Site Emmen”.
7
www.morestoppingpower.com
3.1.3 Kyoto Protocol
As mentioned Teijin is obliged to take measures concerning their energy consumption and CO
2-emission, the Kyoto protocol has a large stake in this matter. The Kyoto Protocol contains quantified and legally binding commitments to limit or reduce greenhouse gas emissions to 1990 levels (Rosenqvist, Milne, Lucas, Imhoff and Dobson, 2003). The Kyoto Protocol was signed by 150 countries on December the 11
th1992, including the Dutch Government. Thereby not only obligating themselves, but also the energy-intensive industries like the petrochemical industry Teijin operates in. The goal is this to reduce the CO
2-emission and bring it back to the level of 1990. This has to be done before the year 2012. Any domestic penalties in case of non-compliance can be set by the government (Matsuo, 1997). But so far there are specific guidelines on what the height of those penalties should be.
The members of OPEC (Organisation of Petroleum Exporting Countries) believe that the implementation of the protocol will slow growth in their revenues from oil exports. The implementation of the Kyoto Protocol (such as a carbon tax) will increase oil prices to consumers, like Teijin, and reduce demand in developed countries which account for 60% of world oil consumption (Barnett, Dessai & Webber, 2004).
3.2 The Energy-Efficiency Covenant Consequences
As a result of the signing of the Kyoto protocol the Dutch government was obligated to take measures regarding the use of energy and the emission of CO
2. On July the 6
th1999, the ministers of the cabinet signed the covenant, making it official that industrial companies had to reduce their energy use and emissions. Although the production of Twaron was not in the hands of the Teijin group they where also obliged to take action, since they took over this fibre division from Acordis including its regulations and liabilities.
3.2.1 Covenant definition
The covenant applies to any energy-intensive institute that has an energy consumption of at least 0.5 PetaJoule (PJ) a year. The energy-intensive company, which is incorporated in the declaration of participation, must have a complete installation to make or handle a specific product. Furthermore the committed concerns are being benchmarked with the best facilities that have the most energy-efficient process installation in the World. Whereby meaning those process installations that are successfully being operated by a financial healthy organisation in or outside the country.
3.2.2 Covenant objective
The covenant is aimed at bringing as many process installations of the committed facilities that signed the covenant, to the best energy efficient operating facilities in the world.
8Thereby contributing to the realisation of the Dutch CO
2-objectives as far as it goes regarding the expanding of energy-efficiency. The facilities are being benchmarked against those who are now best in the world, determined by the “protocol determining world top”.
3.2.3 Covenant consequences
The covenant is legally binding from the moment it is being signed until is abolished, which is on December the 31st 2012. Until then the participating companies present their progress every four year. The measuring of the progress is done by an independent third party with expertise in the area energy-efficiency; the related costs are for FDQ itself. The objective is to determine the distance to the most energy efficient companies in the world.
8
According to the covenant benchmarking energy-efficiency signed on 6
thof July 1999
Figure 7, Teijin Aramid Emmen has an energy level above the level desired by the Teijin Limited Group.
9The green line, in figure 7, shows the energy efficient index (EEI) computed by FDQ itself.
Teijin has the obligation, when it signed the covenant, that it must reduce it energy consumption to the levels of 1990. FDQ is already under this objective, since it can include the WKC-advantage in its energy efficient coefficient.
10But Teijin itself has also set its own EEI standard of reducing its energy consumption each by year with 1%. The energy efficient index correlating with this objective is stated in figure 7.
3.3 Energy Sources used for the production of Twaron
As described in the production process a lot of production steps are needed to make the Twaron yarn. And almost every process uses some kind of energy. For their energy FDQ completely depends on the energy facility of Emmtec, owned by Nuon. Emmtec owns 2 heat supply power stations and provides a range of other energy sources. But Emmtec also provides the necessary water and cares for the purification of the wastewater.
113.3.1 The different energy sources explained
Currently most money is being spent on electricity. Electricity accounts for over more than 40% of the total energy cost bill being paid by FDQ. The total amount of electricity being used in 2006 was around 26GJ (Giga Joule) per ton production of Twaron, see table 2. After Electricity, low-pressure LP-steam is the second largest user of energy. LP-steam accounts for an energy consumption of over 24 GJ per ton production and it is being used for the five Bertram evaporators. High-pressured (HP)-steam is used in two of the Bertrams and for the Plinke. Per ton produced Twaron, HP-steam makes up for almost 9 GJ of energy consumption.
Compressed air is used in a number of operations, sometimes with a pressure of around 3 Bar (A) called low-pressurised air
12, in other cases with a pressure of 30 Bar (A)
13. One of the main users of compressed air is the spinning process itself. The pressured air is also used for the transportation of PPTA powder. Only the Plinke evaporator works on natural gas.
9
From Teijin Twaron’s “Corporate Social Responsibility Report 2006”
10
The WKC-advantage that FDQ can incorporate in its EEI comes from the second heating power station installed by Emmtec. FDQ can take in account heat that they otherwise should generate themselves.
11
www.emmtec.nl
12
Bar (A), which mean Bar absolute is being used since some pressure gets lost along transportation.
13
