Term Project

ISDS 7313 Global Operations Management

Dr. Ernest Nichols

December 3, 2010

By

Nicci Osborne

Robin Steele

Loie Walters Watkins

 Table of Contents

Business Objectives 2
Market Assumptions 3
Product Description 5
Facility Location and Layout 7
Supply Chain and Inventory 9
Total Quality Management Systems 11
Operations Strategy 12
Competitive Priorities13
Core Competencies 14
Order Winner 15
Order Qualifier 15
Positioning the Firm 16
Manufacturing and Costs 16
Process Choice 16
Capacity Determination 17
Conclusion 18
References 20

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Business Objectives
With the rising use of technology in various fields, it is apparent that the demand for energy will
increase as well. Our technological advances have made life much easier for us, but they have
also put a strain on the environment. Many of these technological devices operate on energy that
is generated through harmful acts such as burning coal, which releases dangerous toxins in to the
environment. Although this method is very cost efficient for cities with steadily increasing
populations, it is not worth the harm inflicted upon the environment. A good example of this
increased need for energy can be found in China where the population has risen from
approximately 560,000,000 in 1950 to 1,331,534,117 in 2010. (CITE). Because China has an
abundance of coal, it has become their primary source of energy. Although coal is cost efficient,
there are some serious concerns when examining the environmental effects of burning this fuel.

Due to various gases being released into the environment as a result of energy practices such as
the buringburning of coal, the level of carbon dioxide and greenhouse gases has grown
exponentially and has begun to affect the Earth’s climate. Polar ice caps have begun to shrink
and there has been an increase in the number of violent storms around the globe. whichThese are
all consequences of these harmful gases polluting the environment. These same energy problems
are also present in the United States, the world leader in energy consumption. These problems
have caused Americans to rely on more renewable sources of energy to decrease the use of non-
renewable energy sources that are depleting at a rapid rate. Demand is increasing across the
world, but supply remains the same. This means that all people must find alternate methods of
creating energy. Initiatives such as former Vice-President Al Gore’s “Go Green” campaign have
been formed to counteract the damage we have done to our environment. He Gore suggested
suggests that we begin taxing big corporations who are often responsible for emitting large
amounts of these toxins through from their factories. The proposal was has not been well
received by many companies claiming who claim that they would be taxed based on
“unjustifiable” reasons.

At Green Electric we will manufacture, distribute, and maintain hydrokinetic turbines that
generate energy through the steady movement of rivers and other waterways. Our main
objective is to reduce the pollutants that are being released into the environment by offering an
alternative that is both cost effective and economically friendly. To assist our organization in the
effort of operating in a way that is not harmful unsafe to the environment, we will partner with
steel producer ArcelorMittal. Our paper will include an analysis of three major steel companies
that we analyzed to arrive at this conclusion. This company maintains similar philosophies to
that of Green Electric., in that tThey believe in operating in a way that is environmentally
conscious. They haveArcelorMittal employs several environmental managers whose sole
purpose is to monitor the environmental affectseffects of their production processes are having
on the environment and to devise and implement ways that in which they can reduce these

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affects. Their databases constantly consistently monitor air, water, energy and waste data from
facilities worldwide. The company-wide intranet system allows this data to be available to every
employee at any given time. It also allows employees to stay updated up to date on emerging
technologies, regulatory changes and the latest research studies. ArcelorMittal also focuses on
producing steel that is sustainable., This helps lower usage of non-renewable resources.so that
they will not have to continuously use non-renewable resources to re-produce steel for the same
purposes. This environmental awareness is what makes ArcelorMittal a greatan ideal supplier
for Green Electric. Our similar philosophies will allow us to work collaboratively to produce a
product that is innovative and sustainable. We hope that other companies will take heed of
mirror our processes and do the same for their own companiesimplement/adopt similar strategies
in the energy and other industries.

Our goal is to make this collaboration a permanent partnership between companies who depend
on each other to operate at their optimum level. Although Green Electric is a new company, we
are confident that the hydrokinetic turbine is an innovative product that will only become more
relevant/ inelastic as we head into the future. We want to partner with a well-known supplier
such as ArcelorMittal early because they will give us the stability and the credibility that we will
need as a new company. Investors will have more confidence in our product knowing that it was
produced using ArcelorMittal materials. If this partnership is beneficial to both companies, we
will consider more further collaboration for products in the future.

From a revenue perspective, we are confident that this product will be very profitable and a good
investment for any potential investorsopportunity. The main components of this turbine the
Greene Turbine are concrete and steel, which are both very inexpensive renewable resources.
Because of these cost effective components we estimate that the production of a 250-foot turbine
will cost approximately six million dollars. This is a lotmuch less expensive than turbines of a
similar nature that rely on expensive mechanical generators to continuously operate on a
continuous basis. While one can never be sure of how much energy will be generated over time;
estimates show that these turbines should will generate $2 million dollars per year worth of
electricity. With a 30-year product life-cycle that will generate about approximately $60 million
dollars per turbine. Cost of electricity is a constantly changing variable that is constantly
changing, but we estimate that electric companies will pay us 4-5 cent per kilowatt, whereas it
cost about 2 cent per kilowatt to produce. There is obviously a great profit to be made if these
estimates prove correct. We are already currently in negotiations with the TVA (Tennessee
Valley Authority) (TVA) Electric Company concerning a multi-year contract for the rights to our
electricity produced via Greene Turbines. TVA isTVA is owned by the U.S. government and
although a corporation, they don’t make profits or receive money from taxpayers. TVA is the
electricity provider for Alabama, Georgia, Kentucky, Mississippi, North Carolina, Tennessee and
Virginia servicing 9 million people (www.tva.gov/abouttva).

The actual model of the Greene tTurbine is a completely new invention that we have patented
and would like to expand outside of the United States globally to other countries. This is a
product that highly populated areas such as China would greatly benefit from if used correctly.

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Following our pilot project and a second-phase project to take place in the Gulf of Mexico,
Green Electric plans to go global with the Green Turbine. China will be our first international
location.

Market Assumptions
We expect that the market will respond positively to our product because it is something that is
needed. The most popular way to generate energy is through burning coal, but at the current rate
of consumption we will eventually run out of this non-renewable resource. The hydrokinetic
turbine provides so many benefits to people and it is a product that will only become more
valuable as the world population continues to increase. Of course there are already vVarious
types of hydrokinetic turbines that have just recently begun to makemade a place for themselves
in the market, but we feel that our product is unique and has the capability of penetratinges an
untapped market. The object is not to compete, but rather to provide an alternative to the usual
mechanism of generating energy. Once people see the benefits of our product, we are confident
that it will be successful.

Similar productsOther renewable energy technologies already in the market include the solar
turbine, the wind turbine, and other forms of hydra-power generated turbines. These products
mainly serve the same purpose but they have very different ways of generating energy. The
biggest difference between our product and other products in the market is that the hydrokinetic
turbine is constantly generatinges energy. Unlike the sun which sets and the wind that ceases to
blow, the currents of our rivers and oceans are in continual motion. This will be an advantage in
the market because many government agencies are looking for ways to constantly generate
energy. With populations growing at such a rapid rate it is not enough to simply add more
energy -creating resources, but we must find ways to increase the use of these resources. Studies
show that because of this constant generating of energy, hydrokinetic turbines are 200 times
more powerful than wind turbines. Although solar turbines have proven to be successful in
states such as Florida, their main problem is that they are highly expensive to implement. (Cite?)

In recent studies, the U.S. Department of Energy has identified over 500,000 potential sites
where hydropower can be implemented. Estimates suggest that the amount of energy captured
would be enough to power over 67 million homes. “A 1986 study by New York University of
free-flow river power in the USA estimated conservatively that there is 12,500 MW of
undeveloped capacity for energy.  This is worth about $10 billion in electricity sales today and
equivalent to displacing 22 coal-fired power plants” (CITE). As the demand for energy
continues to increase, we anticipate consumption to increase by 57% from 2204 to 2030. This
estimate only considers the current amount of electricity usage in comparison to the population,
which is expected to drastically increase. It does not take into account the rise in popularity of

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products such as electric-cars, which will cause the demand for electricity to increase faster than
expected. To combat the need for increased petroleum usage, many automobile companies are
resorting to cars such as the Hybrid, which operate partly partially on electricity. Although this
seems like a good idea because it decreases the amount of toxins emitted from burning gases, it
also requires that we find more ways to generate electricity. This is another reason why our
product is needed in the marketplace. We anticipate there to be a learning curve for those who
do not understand how the turbine operates, but once this information is understood we expect
great success.

Hydrokinetic energy is a great opportunity because the majority of the population lives in close
proximity to some type of moving body of water. The prospect of creating renewable energy
will be beneficial on a global scale. Many third-world countries are filled with small villages
that are located on the banks of rivers, canals, and other waterways. They depend on these
waterways to support their agriculture, cultural, and even their transportation needs. Because
many of these people are located in remote areas of the world they do not have access to energy
sources. The presence of these waterways allows for energy to be created through our
hydrokinetic turbines. We estimate that a small turbine of 20-feet in diameter would still be able
to generate 2-3 megawatts of power. Even if the energy created is on a much smaller scale, it
would still be enough to power a small village.

A concern we have about the implementation of our product is where the government will allow
us to place these hydrokinetic turbines. Because they rely on the natural movement of water we
want to place them in some of the faster moving rivers in the United States. We have identified
potential placement locations as the Mississippi River, the Colorado River, and the Yellowstone
River. These rivers are known for their fast-moving currents that will be beneficial in generating
high amounts of energy. These public rivers are maintained by the government via the U.S.
Corps of Engineers; therefore, we must have permission to place our turbines in these waters.
The government must issue permits that allow companies to place their products in public rivers.
Historically, The Federal Energy Regulatory Commission (FERC) has maintained strict
guidelines on this new industry and where turbines can be placed. Fortunately they have
lightened up on these restrictions because they realize the benefits of these turbines.

Because the Greene Turbine is yet to be implemented for full use in the United States, the first
turbine that is implemented will be considered the “pilot project.” Pilot project means that the
first turbine will be seen as an experimental trial run andwith the results will be closely
monitored. The requirements to be issued a permit are by the FERC for a hydrokinetic pilot
project is that the project is small in capacity (equal to or less than 5 megawatts). Project sites
are to avoid sensitive and potentially hazardous locations. The project draft application that is
submitted for approval must include detailed explanations of how these projects will be
monitored. Because these are only “pilot projects” they must be easily removable and able to
shut down on short notice given by the government.

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Product Description
Our product is, The Greene Turbine, which is a
hydrokinetic turbine that which generates energy using via
hydra power that is created from the free- flowing
movement of water. Normally, hydra power is created
through the use of dams or other man-made objects, but
hydrokinetic power is generated using no man-made
objects, but rather the velocity of water. The energy is
created through “a closed fluid drive system that transmits
the hydrokinetic energy to the electric generator (turbine)
without a mechanical connection”
(http://greeneturbine.com). This lack of mechanical connection is what one of the things that
makes the Greene Turbine unique. The outside of the entire turbine’s exterior will be comprised
of lightweight aggregate concrete that which is virtually weightless once submerged underwater.
The inside of the turbine’s interior will be comprised of mainly of steel and a few other
renewable metals. Outside of the turbine there are tanks that are connected with various pipes
and valves in a way that water must flow through them once hitting the rotating turbine. These
tanks are concrete on the outside, but the inside is lined with either steel or a brass metal. The
tanks are filled with water and once they reach the 12 o’clock angle the water drops down to the
generator, which is located at the center of the turbine. The water flows through the center
generator where there is another generation spinning at an estimated 15 rpm. The center shaft
contains steel pipes that are built in a non-linear format. These steel pipes that pushes the water
to the back of the turbine before it is being drained at the 3 o’clock position. This rapid
movement of water from a high distance is what creates enough force to generate electricity.
Because the tanks are able to gather the water and drop it downrelease the gathered water from
the tallest point on of the turbine, this creates the force necessary force to generate electricity is
accomplished. The turbinesThe Greene Turbines are held at to the river bottom by several cables
made up of steel and other renewable resources. These cables are held in place by bearings that
are constantly rotating. These cables and bearings and are also how the means by which the
electricity is transferred from the turbine to a nearby electrical grid.

The turbines are placed in rivers and other moving currents across the country where the force of
water is used to spin the turbine and generate electricity for the closest power grid located on
land. These turbines can be as large as 250 feet in diameter and would be placed in some of the
deepest bodies of water, such as the Florida gulfGulf of Mexico (off the coast of Florida), to
generate large amounts of energy. For the purposes of this project we will focus our efforts on
smaller turbine sizes (30-40feet) that which will be placeds in the Mississippi River. This is an

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great ideal river to usilizeutilizee as our testing sitein our pilot project because its contains
similar current speeds are comperablecomparable to that of the Florida Gulfcurrent speeds found
in the Gulf of Mexico. Because it iThe sMississippi River’s close in proximity to our
headquarters in Memphis, TN we will be enableenables us to perform numerous any necessary
tests with minimal travel transportation expenses. Because these turbines can become so large
in diameter it would be very difficult to mobilize them; therefore, we will final assembly of the
turbines will take placee the actual turbines at the site of placement. The turbine contains no
moving parts and is comprised of 12 segments made of commercial off- the -shelf -products.

Once assembled the turbine will be placed

on a boat and driven shipped out to the
selected water location. After being
stabilized, the turbine will be removed from
the first boat using smaller boats that which
will pull the turbine into the water. There
will be airbags underneath the blades of the
turbine, which will allow it to float on top of
the water before prior to being lowered to
the river bottominto the river. Depending
on the flow of the current, the cables may be connected to the shore banks instead of the river
bottom. This is because if the water is moving in mainly one direction it will only hit the turbine
from one angle, meaning the turbine will only be receiving force on one side. It is more useful to
have the cables on shore if possible because it will be easier to transfer the electricity through the
cables if they are not completely underwater. ObviouslyT this will obviously not be possible in
larger bodies of water because there will not be any land that is close enough for the cables to
reach.

These turbines have proved to be marine life friendly because they do not disrupt the normal
routine of marine animals. Studies have shown that the majority of sea creatures are easily able
to avoid these large turbines because they remain stagnant and emit signs of water rotation
before animals can approach the structure. They are also often rotating at speeds which are
slower than walking. Many people believe that other water activities such as the capturing of
fish for commercial use is more harmful than the implementation of water turbines. Because
these turbines are beneficial to the environment our company will qualify for a tax credit, which
is 1 cent per kWh in the United States. We anticipate that the turbines will generate
approximately 4-10 watts of energy and have a 30-year lifespan.

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Facility Location and Layout
Placement of the hydrokinetic turbines has been decided upon with the following issues in mind:
size of river, current capabilities of the river, proximity to manufacturers of steel, and proximity
to electricity markets. Research has shown that the Mississippi River provides average currents
at or above 6 miles per hour which will ensure the optimal efficiency of the hydrokinetic
turbines. The southern portion of the river is also in close proximity to electricity markets located
in the Southeast (www.redorbit.com/news/display/?id=1321709). Green Electric has a deal in
place with the Tennessee Valley Authority (TVA) and they will be our first and primary
customer during the pilot project.

Specific site locations of the Greene Turbines consist of one location near Greenville,
Mississippi and three locations concentrated in the portion of the Mississippi River from Baton
Rouge, Louisiana to the Gulf of Mexico. In this section of the river, the U.S. Corps of Engineers
maintains a depth of 45 feet via its series of locks and dams (www.mvm.usace.army.mil). This
depth is necessary for placement of the turbines. Accompanying these sites are Green Electric
Assembly and Maintenance Plants which are located within five miles of the turbine placement
site. This enables on-site employees to maintain the turbine while ensuring low transportation
emissions and costs. While maintenance of the turbines is minimal, Green Electric believes it is
important to have a presence at each turbine site.

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 Greene
Turbine Site

Green Electric’s layout, both internally and externally, is supportive of our green supply chain.
Externally, Green Electric has been successful in lowering transportation emissions by utilizing
the Mississippi River to transport parts for assembly. This was achieved by choosing to partner
with a steel manufacturer with a comprehensive EMS and a plant location on the river.

Internally, Green Electric has created departments which, while individual, work cohesively
towards a common goal. These departments include management, accounting, administration,
engineering, human resources, information technology, internal audit, and operations. Green
Electric will start out with 21 employees with 13 of those employees working in our
headquarters located in Memphis, Tennessee. The other 8 employees will work at our Assembly
and Maintenance Plants (2 per plant). Following is a block plan and closeness matrix for the
various departments.

Department Area Needed in Feet

1. Management 1000
2. Accounting 500
3. Administration 250
4. Human Resources 500
5. Information Technology 1000
6. Internal Audit 250
7. Operations 250
8. Engineering* 250
Total 0

Closeness Factors
Department 1 2 3 4 5 6 7 8
1. Management ─ 10 7 4 8 10 9
2. Accounting ─ 3 4 2 10 7 2
3. Administration ─ 9 10 8 3 4
4. Human Resources ─ 2 5 3 2
5. Information Technology ─ 2 4 5
6. Internal Audit ─ 2 2

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 7. Operations ─ 5
8. Engineering* ─

8 1 2 6

7 4 3 5

Proposed Layout

Supply Chain and Inventory

Green Electric believes that our product and mission require the implementation of Green Supply
Chain Management (GSCM). Truly effective GSCM requires that an organization examine the
environmental practices throughout the entire value chain. This includes the environmental
impact from operations, suppliers, warehousing, transportation, product use and product disposal
(Darnall, 2006). “The lifecycle impact of a product – ranging from shipability, energy
consumption, offgassing, service requirements and end-of-life disposal or recycling, must be
taken into consideration” (http://whitepapers.technologyevaluation.com/vendor/96/ifs)Leedale,
2010) Green Electric began searching for a steel manufacturing partner that would support our
green supply chain management strategy. After researching three steel manufacturers in the U.S.
(ArcelorMittal, U.S. Steel, and Harsco Corporation), ArcelorMittal was chosen based on the
following criteria: green standards, quality, location, materials cost, and freight costs. U.S. Steel
was immediately discarded as an option when research showed that the company was ranked as
the 8th largest air pollution producer in the United States.

1. Since the merger of Mittal Steel and Arcelor created ArcelorMittal in 2006, ArcelorMittal
the company has risen from the 40th to the 1st largest producer of steel in the world
(www.worldsteel.org/?action=programs&id=53). ArcelorMittal has fourteen plants in the U.S.
and since 2007, the majority of its plants have acquired certification from the International
Organization for Standardization (ISO). This ISO 14001 standard certification has been achieved
in over 90% of its plants with 100% compliance expected by the end of this year.
(www.arcelormittal.com/index.php?lang=en&page=8).

This certification ensures that the company’s environmental management system (EMS) is
operating within specific guidelines and requires that the company provide objective evidence
which is auditable. Their environmental policy, environmental management system, research and
development efforts, and overall dedication to reducing their CO2 footprint convinced us that
they are an ideal manufacturing partner for Green Electric. Therefore, the ArcelorMittal plant in

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Cleveland, Ohio has been chosen as our supply partner and will supply Green Electric with the
steel component of the hydrokinetic turbines. The Cleveland plant “is today the most productive
steel mill in the world, requiring less than one worker hour to produce a ton of steel”
(www.arcelormittal.com/environment/us/cleveland).

Our partnership with ArcelorMittal will help us realize business success while achieving our
environmental goals. We have similar gGoals we share include such as: reduction of waste and
direct emissions; implementation of environmental management systems (EMS); compliance
with all regulatory bodies and environmental laws; and company-wide involvement in the effort
to ensure all aspects of the value chain are environmentally sound. ArcelorMittal uses Life Cycle
Assessment methodology which “analyses every stage in the life of a piece of steel from mining
and coating, to use, and finally recycling and disposal” (www.arcelormittal.com/index.php?
lang=en&page=686). It is especially important for all parties to have open communication.
ArcelorMittal’s Research and Development team are eager to meet regularly with Green Electric
in a constant effort to optimize production while minimizing environmental risk.

Our green supply chain consists of the following: manufacturing of steel parts which are
delivered by boat via the Mississippi River to Green Electric assembly and maintenance plants;
assembly of those parts by Green Electric engineers; transport of the partially finished product by
an outsourced trucking company to the placement location; placement of product onto a boat
owned by Green Electric; final assembly on the boat by Green Electric Engineers; placement of
the product into the river; megawatts of power produced sold to TVA.

Raw Energy
Materials Transport Fabrication Assembly Placement
Company

In conjunction with GSCM, Green Electric is implementing an enterprise resources planning

(ERP) system which will enable us to gauge, manage, and run reports on our environmental
footprint. This will be useful when communicating with our supply chain, proving compliance
with regulations and environmental laws, and making improvements internally to our operations
and product design. The ERP we will be using will include an Eco Footprint Management tool
which “allows inclusion of other environmental impacts not attributable directly to the product
but to the company’s operation as a whole, and amortizes it across the entire product line”
(Leedale, 2010). The ERP has been customized by our IT staff to fit our needs and will enable
every employee to cohesively view our operations. This type of system also enables the different
divisions of Green Electric to better understand the other divisions’ roles within the organization.
Another advantage to implementing the ERP system is that the four on-site Assembly and

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Maintenance plants will have real-time access to the exact same information that the employees
at Headquarters have access to.

Solid inventory control systems are necessary when practicing GSCM. These comprehensive
control systems lessen the risk of unnecessary stock surplus and encourage a more streamlined
production practice (Rosenberg and Campbell, 1985). Due to the nature of Green Electric’s
business, inventory lot size will be limited to the parts necessary for the assembly of four Greene
Turbines. After placement of the turbines, Green Electric will maintain only the limited
inventory necessary for maintenance. Replacement parts for each part used to assemble the
turbines will be housed as inventory at the four Assembly and Maintenance plants. A base-stock
system of inventory will be implemented at each Assembly and Maintenance plant. Within the
base-stock system, anytime that a part is taken from inventory, it will immediately be replaced
by our steel supplier, ArcelorMittal. This will ensure that anytime maintenance is needed, parts
will immediately be available and that not too much inventory is being held. Also, because of the
information sharing capabilities of the ERP, every employee will be able to see real-time
numbers in inventory.

Total Quality Management Systems

Green Electric will implement a lean Total Quality Management (TQM) system. This lean
system will: help reduce waste and increase productivity; emphasize employee and departmental
interaction; encourage innovative ideas from all employees; enable strong supplier partnerships;
and aid in a low inventory maintenance. We will implement the Five S (5S) method which
consists of the “five practices of sorting, straightening, shining, standardizing, and sustaining”
(Krajewski 2010). These practices must be done systematically and across the entire
organization. As a result, all employees will become more productive and begin to see their work
in a new a more focused manner.

We will also incorporate Total Productive Maintenance, especially within the four Assembly and
Maintenance Plants. Because the Greene Turbine will need so little maintenance, once initial
production is complete, the engineers may have surplus time. Through TPM we will establish
routine preventative maintenance times on the turbines rather than wait for a mechanical issue to
arise. The engineers will also keep detailed standardized maintenance logs which will aid us post
pilot program.

Value stream mapping (VSM) will also be introduced within the lean system as a qualitative tool
to aid in lowering waste production. This will be introduced once operations have been in place
for at least six months. At that point, we will evaluate our process and practices and compare
them to a future model. “The benefits of applying this tool to the waste-removal process include
reduced lead times and work-in-process inventories, reduced rework and scrap rates, and lower
indirect labor costs” (Krajewski 2010).

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This lean system will work well with our green supply chain, ERP, and EMS.

Operations Strategy
Today, environmental pollution is an issue which has the potential to lead to the extinction of
mankind on earth. Of the various kinds of pollution, air pollution needs the most immediate
attention. Global warming, an effect due to the increase in amounts of the green-house gases
present in air is a very severe problem mankind is facing (The Coastal Business Journal Spring
2009: Volume 8, Number 1).

In order to curtail these greenhouse gas emissions, our company, Green Electric, will
manufacture, distribute, and maintain hydrokinetic turbines. They will be sold to utility
companies for installation in deep flowing U.S. rRivers. The turbines will constantly generate
energy to the nation’s electrical grids, thereby reducing pollutants by providing reliable
renewable electricity.

Green Electric will partner with concrete and steel producers for the procurement of the raw
materials to construct the hydrokinetic machines. Our business venture will not only achieve an
ecological benefit, but also gain an economical advantage by avoiding the costly and time-
consuming effort of building a dam or power plant. Green Electric provides innovative energy
solutions that are most affordable and maintains our commitment to a clean and safe
environment.

Competitive Priorities
A production process has to support an organization's competitive priorities: cost, quality, time,
and flexibility. “Competitive priorities are important to the design of new services or products,
the processes that will deliver them, and the operations strategy that will develop the firm’s
capabilities to full them” (Krajewski, 2010). Competitive priorities guide decisions on the
production system, and they must be considered when translating strategy into specific
manufacturing processes (Krajewski, 2010). Green Electric’s key competitive priority is quality.

The performance and features of the turbine and its hydrokinetic energy are superior. They are
durable, lasting approximately 30 years and requiring little maintenance. The construction of the
turbines must conform to government specifications to avoid detrimental impacts to the marine
environment. In an e-mail responding to questions from The Associated Press, the Energy
Department said there are more than 100 marine and hydrokinetic devices under development in
the United States and the world. However, due to the complexity of the device, most are in the
early stages of readiness, the Energy Department said. Furthermore, strict specifications of the
product lengthensstrict specifications of the product lengthen the time that it is at risk before it
becomes obsolete.

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Investment cost amounts to $6 million. However, the hydrokinetic equipment offers a lucrative
return on the investment, potentially capitalizing $60 million in revenues ($2 million in revenue
per year over a 30 year life cycle).

Quality is also consistent. Processes are designed and monitored to reduce errors, prevent
defects and achieve similar outcomes over time (Krajewski, 2010). Quality is measured using
key performance metrics and a target level of quality has been established for our product and
service. Employees are involved in quality of productions, operations, processes, and customer
service,service and efforts will be evaluated on a quarterly basis. Systems are set up to ensure
quality. Quality awareness is maintained, and it is the driver of decisions in other functional
areas.

Competitive priorities are assigned to core processes to achieve the service required to provide
complete customer satisfaction. Four core processes include: customer relationship, new
service/product development, order fulfillment, and supplier relationship (Krajewski, 2010).
Quality is key to our core processes. It is assigned to the core processes as follows:

 Customer Relationship. The quality is consistent; information and service are

error free.
 New Service Development. Top quality is achieved because new services
must be carefully designed.
 Order Fulfillment. The service provided must be top notch and quality is
consistent. Once the quality level is set, it is important to achieve it every
time.
 Supplier Relationship. The quality of the inputs must adhere to the required
specifications. In addition, the information provided to the suppliers must be
accurate.

Core Competencies

The core competencies will allow our company to succeed in the marketplace with a competitive
advantage. One core competency is having a patent for new technology. Other competencies
include our workforce, facilities, and knowledge of the market.

We have a workforce that is highly skilled and well-trained. Employees are flexible to handle
equipment arranged by function on the assembly line. Our engineers have the knowledge and
expertise necessary for installing the machinery within the turbines. Expert mariners will
perform a variety of tasks to measure and maintain the waterways. The logistics team will
oversee the flow of goods and resources between the point of origin and the point of
consumption in order to meet the requirements of consumers, as well as manage the integration
of the supply chain. The logistics team will also play an intintegralracle role in producing
auditable documents regarding our environmental policies and our green supply chain. An
equipped workforce will allow our organization to respond to the market needs.

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Facilities are ideally located to reduce lead time from our facilities to the installation sites. Our
facilities are flexible and able to handle a variety of services including manufacturing, assembly,
distribution, warehousing, and maintenance of the hydrokinetic turbines.

Our company has a competitive edge in regards to marketing our service. Local, state and
federal lawmakers and even countries abroad have a better perspective on supporting and
nurturing the green sector than they did in the past. They have embraced the notion of “going
green” more holistically and this support has translated into stimulating the green sector and the
overall economy as well. Dozens of states are making laws requiring industries to use renewable
energy. For example, Ohio and Iowa requires utilities to buy some of its power from renewable
sources and New Hampshire will require its state to buy fuel that contains at least some biodiesel
(The Coastal Business Journal Spring 2009: Volume 8, Number 1). Firms are also incorporating
green practices into their business models, and consumers are seeking ways to contribute to the
preservation of the environment. Thereby enabling capital to be attained more easily to market
and distribute our services.

Our product can be differentiated from similar products. The design of the turbine makes it
novel. “Typical turbines are like underwater windmills. Their blades must knife through the
water fast enough to spin the turbine to produce electricity. The performance deteriorates when
barnacles attach to the blades, slowing them down. They are also expensive to maintain.”
(http://www.commercialappeal.com/news/2010/mar/21/inventor-finds-right-spin-on-turbine/)
The Greene hydro-turbine is different. It “uses the force of falling water inside the blades to turn
the turbine, which is sealed in the middle of the structure. The torrent of water within this closed
system continuously spins the turbine. The valve system re-circulates the water from one tank to
the next.” (http://www.commercialappeal.com/news/2010/mar/21/inventor-finds-right-spin-on-
turbine/). Furthermore, the Greene turbine avoids some mechanical power transmission
problems because it does not rely on the usual gear box and transmission shaft. It can be built
using simple materials and Commercial-Off-the-Shelf (COTS) parts. It can also be scaled up to
provide multiple megawatts per unit which leads to increased durability and more energy
produced. No one, to date, has created a hydrokinetic turbine as large as the Greene Turbine, the
largest being 250 feet in diameter (Greene, 2010).

Order Winner

The design of our product and an integrated supply chain are the criterions that make our
company an order winner. A couple of key attributes of the Greene Turbine design is that it is
does not rely on the rotations per minute (RPM) of a generator, and it is scalable, which greatly
reduces costs. Another feature is that it requires low maintenance with the valve lasting
approximately 30 years. Another unique attribute is that the turbine does not need traditional
gear boxes or transmission shafts to harness the energy, eliminating problems with torque and
stress of snapping. Finally, the size of the mechanism makes it unrivaled. The conventional

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design becomes harder to implement as size increases, whereas, our invention actually works
more efficiently the larger the scale (Greene, 2010).

Our integrated value chain gives us a competitive advantage. Embedded in our operations will
be the capabilities to manufacture raw materials into specialized parts, assemble the parts to
construct the turbines, transport the turbines to be installed into the rivers, and provide
maintenance services. Furthermore, in contrast to a traditional supply chain, we have
incorporated a green supply chain. Our green supply chain gives significant considerations to
ecological as well as economic objectives and values.

Order Qualifier

Our business will achieve a level of performance for it to become an order qualifier. The
hydrokinetic apparatus can be a huge benefit. Rivers are in close proximity to the majority of the
population, allowing easy access to utility companies who can offer clean energy services to its
consumers. “An advantage that hydrokinetic energy has is that it's available 24-7 unlike other
sources like solar and wind power that can't work around the clock because they depend on the
sun being up and the wind blowing hard enough...” [Furthermore], … “the hydrokinetic turbines
have the ability to generate a significant amount of power with zero carbon footprint-- a big
selling point for people, companies and governments dealing with the effect that burning fossil
fuels has on the Earth's atmosphere.” "The [Energy] Department is optimistic that marine and
hydrokinetic resources can provide another valuable option to our nation's portfolio of clean
renewable energy sources" (http://www.businessweek.com/ap/financialnews/D9I73F3O0.htm).

Positioning the Firm

Green Electric will compete in the renewable energy sector of the energy & utility industry, as a
limited liability corporation (LLC). Our innovative and efficient, low speed turbines create
hydrokinetic energy which allows our company to provide a reliable service to utility companies
at rates of 4-5 cents per kilowatts. The utility companies will then supply electricity to its
consumers. 

Manufacturing & Costs

Due to the fact that the only materials needed for manufacturing are steel and concrete, we
anticipate these turbines to be very cost efficient. We have created a very simple model of
production, which makes it reliable and durable. Because these devices have low raw material
costs, they can be produced for approximately $6 million. Hydrokinetic turbines also are
economically viable, with installation costs approximately $1,500/kW. There will also be costs
associated with the maintenance of the equipment because they must be routinely cleaned to
ensure that they are fully functional. As far as costs of usage, we will charge either an annual fee

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or a fee associated with the kilowatts of energy produced. The Greene Turbine qualifies for the
Section 45 incremental hydropower production tax credit (1 cent per kWh) in the United States.

Process Choice
Green Electric operates within the process design as both a product-process structure and a
service-process structure. With a product-process position, the hydrokinetic turbine is
manufactured as a job process coupled with a make-to-order strategy. With a service-process
position, energy is a commodity available continuously to customers, and services are highly
standardized to assure uniformity.

The optimal process choice for the product-process is the job process. Customization is high and
volume for any one product is low. The workforce and equipment are flexible to handle
considerable task divergence. Bids are submitted for work orders, and each new order is handled
as a single unit (Krajewski, 2010).

A job process primarily organizes all like resources around itself (rather than allocating them out
to specific products); equipment and workers capable of certain types of work are located
together. These resources process all jobs requiring that type of work. Because customization is
high and most jobs have a different sequence of step, this process choice creates flexible flows
through the operations rather than a line flow (Krajewski, 2010).

The job process is coupled with the make-to-order strategy in order to satisfy the unique needs of
customers. Green Electric will employ the make-to-order approach to customer orders. This
strategy is considered suitable because of the turbine being highly configured and holding
inventory would be very expensive. The product is manufactured in low volume after the
customer order is received. Afterwards, each specialized part is assembled to build the turbine
according to government specifications.

Our resource flexibility is specialized. Resource flexibility is the ease with which employees and
equipment can handle a wide variety of products, output levels, duties, and functions. Members
of our workforce are highly skilled and capable of performing many tasks. Flexible, general-
purpose equipment is used in our operations.

Our capital intensity contains low automation. Generally, capital-intensive operations must have
high utilization to be justifiable. Automation does not align with our competitive priority. Our
firm offers a unique product and high-quality service that require a skilled workforce and
individual attention, causing automation to become ineffective.

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Capacity Determination

In-stream river and ocean current energy projects have the highest capacity factor of all
renewables, which can be above 98%. They operate in continuous fashion, which is important
for electric grid reliability and better helps the U.S. meet its growing demand for new power.
Current-based hydrokinetic energy is predictable, dependable and forecastable
(http://www.hgenergy.com/benefits.html). Because of demand and supply uncertainty, process-
focused plants cannot do an effective job if they operate near their full equipment capacity. In
fact, they operate best with a comfortable level of capacity cushion.

It is critical that the turbines conform to specifications mandated by the government so that the
ecosystem remains environmentally safe. The size and quantity of turbines are then built based
on the order that will meet the customer’s need. Therefore, we will wait until more demand is
more certain before expanding capacity of the turbines.

As it relates to providing a service of hydrokinetic energy, a 250 foot turbine wheel produces 23
megawatts (MW) and can power 1,000 homes at a time. A 100-foot wheel makes 1.8 million
watts. The power generated from a 30 foot diameter turbine has the capacity to produce 140,000
watts, which is equivalent to 1,400 100-watt lightbulbslight bulbs (Greene, 2010). Our firm has
the capacity to meet current and future demand that will enable us to make profits and growth. If
demand increases over time, capacity will increase also.

The capacity level for the production of the turbines and harvesting hydrokinetic energy requires
a one-shift operation. If our firm were to encounter a temporary peak in demand, our process
can operate above its capacity level using employee overtime as its marginal method of
production. Reducing costs of purchased materials can help economies of scale drive costs down
and make operations more efficient. Our company can take advantage of a better bargaining
position and reduced costs of steel by purchasing from other suppliers such as Wal-Mart, Home
Depot, or Lowe’s. This will be possible due to the design of the Greene Turbine; it was invented
with cost effectiveness in mind. Our firm can also reap benefits from speeding up the learning
curve of employees and improving process and job designs (Krajewski, 2010).

The capacity cushion for the turbines is minimal, amounting to 5%, with it being highly capital-
intensive. Our less capital-intensive energy service experiences a 30% cushion. Our current
demand is to produce 4 turbines in a year. Demand is expected to increase to 6 turbines in a year
over the next five years. If the desired capacity cushion is 5%, we will plan for enough capacity
to serve 6 customers in five years [6/(/ (1-0.05) = 6].

We will adopt the conservative wait-and see strategy. This strategy follows demand and
expansion is planned in smaller increments, such as by renovating existing facilities rather than
building new ones. In addition, expansion will be carefully planned with leasing land from the
government in order to place the turbines. The wait-and-see strategy reduces the risk of

18
overexpansion based on overly optimistic demand forecasts, obsolete technology, or inaccurate
assumptions (Krajewski, 2010).

Conclusion

References

www.redorbit.com/news/display/?id=1321709

www.mvm.usace.army.mil

http://whitepapers.technologyevaluation.com/vendor/96/ifs.html

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www.worldsteel.org/?action=programs&id=53

www.arcelormittal.com/index.php?lang=en&page=8

www.arcelormittal.com/environment/us/cleveland

Krajewski, Lee J., Operations management / Lee J. Krajewski, Larry P. Ritzman, Manoj K.
Malhotra.—9 ed. p. cm. ISBN-13:978-0-13-606576-0

The Coastal Business Journal Spring 2009: Volume 8, Number 1

http://www.commercialappeal.com/news/2010/mar/21/inventor-finds-right-spin-on-turbine

Greene, Jeffrey. Interview at Greene Turbine offices 12/1/2010.

http://www.hgenergy.com/benefits.html

http://www.coastal.edu/business/cbj/pdfs/articles/spring2009/ho_shalishali_tseng_ang.pdf

http://greeneturbine.com/index.html

http://www.businessweek.com/ap/financialnews/D9I73F3O0.htm

http://www.commercialappeal.com/news/2010/mar/21/inventor-finds-right-spin-on-turbine/

http://findarticles.com/p/articles/mi_qa3796/is_199901/ai_n8837740/pg_3/

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