Creating the Smarter, Leaner & Greener Workplace of the Future

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Information about Creating the Smarter, Leaner & Greener Workplace of the Future

Published on June 15, 2012

Author: StanfordBusiness



Steve Thompson, VP Enterprise Application Solutions & Alliances, Johnson Controls Inc.

From the 2010 Responsible Supply Chains Conference at Stanford Graduate School of Business:
For more resources from previous years:

Responsible Supply Chain Creating the smarter, leaner, & greener workplace of the futureStephen ThompsonVice President, Enterprise Applications & AlliancesApril 29, 2010

Agenda• Johnson Controls overview• Operational challenges in the current facility environment• Shortcomings of the existing facility build – operate – retrofit process• An emerging better way – focus on the building life cycle from the start• Case Study – JCI Corporate HQ2 Johnson Controls

Three global businesses focused on sustainabilityacross the supply chain 140,000 Employees Fortune 100 Multi-Industry CompanyBuilding Efficiency Power Solutions Automotive Experience Creating quality indoor Providing the highest quality, Delivering world-class environments that are lowest cost automotive technologies that differentiate comfortable, safe, energy batteries to power vehicles vehicle interiors and increase efficient, and sustainable of today and tomorrow consumer demand  200 million vehicles  12 million homes  1 million commercial buildings 3 Johnson Controls


We provide a mix of these services to over 1 million customers in 150+ countries across the globe Apartment units Lodging Schools Colleges & Universities Hospitals High Technology Homes Retail Shopping Malls Government Life Sciences AirportsHigh-rise Apartments Medical Clinics Small Commercial Large Commercial Arenas/Convention Centers Industrial Plants Residential Mid Market Complex 5 Johnson Controls

Sustainable supply chain principles guide Johnson Controls$26B in annual 3rd party spend ENVIRONMENTAL SOCIAL ECONOMIC STEWARDSHIP RESPONSIBILITY PROSPERITY • Achieve competitive • Increase minority business development & • Ensure the ongoing edge from supplier diversity financial viability of the environmentally business through • Strive to attain a high performance work responsible products & strategic investments environment free of workplace diseases services and management of risk and that is physically and emotionally safeWorld Environment Center JCI has a long history of commitment to a diverse supply chainGold Medal for InternationalCorporate Achievement in  Johnson Controls spends $1.7 billion annually with ~340 diverse suppliersSustainable Development  One of only 13 companies in the Billion-Dollar Roundtable  Member of Dow Jones Sustainability World Index 6 Johnson Controls

Agenda• Johnson Controls overview• Operational challenges in the current facility environment• Shortcomings of the existing facility build – operate – retrofit process• An emerging better way – focus on the building life cycle from the start• Case Study – JCI Corporate HQ7 Johnson Controls

Commercial buildings have a major energy & environmentalimpact consuming nearly 50% of the electricity in the U.S. Buildings use 40% • Building sector represents 40% of the world’s energy consumption of U.S. primary energy • 1/3rd of energy-related global GHG emissions (~8 gigatons/year) Residential Industrial Buildings • Buildings responsible for 30% of raw 22% materials use, 25% of solid waste, 25% 32% water use, and 12% of land use. Commercial Buildings • Commercial buildings provide much more 18% concentrated targets for energy and Transportation sustainability programs 28% Sources: International Energy Agency; U.S. Energy Information Administration (2009) Annual8 Energy Review; U.S. Dept of Energy (2009) Building Energy Data Book; World Resources Institute; United Nationa Environment Program –Sustainable Buildings & Climate Initiative

Global changes in energy and climate legislation / regulationincreasing scope and immediacy of the challenge Passed Passed Passed - Stimulus funds - Energy Performance in - National energy goals - EE retrofit tax deduction Buildings Directive recast - Local/regional carbon - RE tax credits - Emissions trading system trading (Australia, Tokyo) - Greenhouse gas reporting rule - UK Climate reduction - Japan revised Energy Proposed commitment (CRC): 32% Conservation Law requires - Prescriptive rebates (Jobs Bill) reduction by 2020 company-wide energy - EE/RE resource Standard - HCFC Phase-out mgmt - PACE loan guarantees Proposed - Energy codes (JP, CN, IN) - Utility decoupling - Binding 30% energy reduction - Stimulus funds / Tax - Dynamic utility rates targets (from voluntary 20% incentives - CFC Chiller replacement goal) Proposed incentives - Building retrofit Initiative - Energy savings certificate - 30-50% more stringent building - Energy services legislation trading (Australia, India) energy efficiency codes - Mandatory energy audits - India ESCO risk guarantee - Mandatory building energy - GWP Refrigerant phase down facility labeling - Energy Tax revisions - Singapore Government - Carbon cap and trade system Bldg Green Mark 2030 Goal9

Productive response to rising global demand for energy &sustainability requires rethinking approaches to buildings What is your companys top strategy going forward to meet its carbon reduction goal? 0% 10% 20% 30% 40% 50% Onsite renewable energy 12% Renewable power purchases 10% Energy efficiency in buildings 45% Energy efficiency in transportation 6% Use of alternative transportation fuels 1% Carbon emission offset purchases 7% No prioritization amongst strategies 14% Other/Dont know 7% Building efficiency is largest and most cost effective strategy for reducing greenhouse gas emissions10 Source: Johnson Controls/ IFMA (2009) Energy Efficiency Indicator

Agenda• Johnson Controls overview• Operational challenges in the current facility environment• Shortcomings of the existing facility build – operate – retrofit process• An emerging better way – focus on the building life cycle from the start• Case Study – JCI Corporate HQ11 Johnson Controls

Gaps in motivations, tools, and goals leads to high levels of disconnect across the existing building lifecycle Building Lifecycle Plan / Acquire or Operate / Construct Assess Design MaintainLead Owner facilities team Architects / Designers General Contractors Facility Manager, Occupant groupsFocus Balancing capital Create a memorable First cost; risk mitigation; Facility as a tool to support availability with time- building; Design delivery; Deliver on time on budget their efforts to deliver core line and growth plans Manage safety risk mission of enterpriseProcess Incomplete Limited insight into details Minimal concern about Minimal engagement priorGaps knowledge of of intended use leads to operating cost. to occupancy = poor life- intended use / capacity for peak demand cycle performance operation 12 Johnson Controls Minimal interaction across lifecycle

Plan / Acquire Operate / Construct Assess & Design MaintainDesign team focused on conceptualperformance with insufficient regard for the actual use of the facilities Challenges Impact• Difficult to translate conceptual design • Designs generally built to deliver to actual performance requirements capacity for peaks • Each sub-component designed to cover• Challenged to tie together disparate unknowns in other systems components to create a unified system • Life-cycle cost, performance, and• Analytic / design tools focused on safety factors excluded component initial performance • Real estate portfolio doesn’t optimize support core missions of individual• Insufficient insight from cross – section department and overall organization of end users • Construction process takes longer and• Poor hand-off to construct phase costs more for same delivered value (general contractor) 13

Plan / Acquire Operate / Construct Assess & Design Maintain Traditional construction model amplifies disconnects between key constituents across the building life-cycle Traditional Contracting Model Traditional Model - Disconnected Architect / Owner Engineer End Building User General Systems Contractor Systems Mechanical Electrical Contractor Contractor Electrical High Voltage Water Systems Piping Equipment Distribution Access Voicemail Internet HVAC Control Air Systems Building Emergency Power Medium Voltage Access Automation Generation Distribution Technology Fire Protection Fire Alarm System Lighting Control Fire/Life Installation System Safety Patient Monitoring Mechanical Special Mechanical Integrated Business IT Network Equipment Systems Security System Systems Facilities SupportSpecial Technology Power Management Specialty Healthcare Department Systems & Assurance Services Other Specialty Technology Systems Time & Attendance Traditional Contracting Limitations POS • Silo mentality with limited integration between subsystems; creating operating inefficiencies Finance • Fragmented subsystem approach that creates cost inefficiencies (labor & materials), and increases project risk IT Department • Difficult to determine contractor accountability 14

Plan / Acquire Operate / Construct Assess & Design MaintainCurrent process ignores / sub-optimizes operationalperformance leading to significant decline in performance over time Intended Traditional Construction Process Performance (Opportunity) Auto Commission Optimum “As Built” Peak Performance First Occupancy Design Service Live Performance Existing Practices Minimum Acceptable Performance Actual Service Live Time15

Agenda• Johnson Controls overview• Operational challenges in the current facility environment• Shortcomings of the existing facility build – operate – retrofit process• An emerging better way – focus on the building life cycle from the start• Case Study – JCI Corporate HQ16 Johnson Controls

An emerging facility approach brings together constituents to build /remodel more efficient and productive real estate investments Building Lifecycle Plan / Acquire & Construct Operate / Assess Design Maintain Key Action Impact • Involve all key constituents as • Improved project quality with reduced early as possible in process cost and schedule variability • Decisions based on total life- • Projects deliver facilities that are cycle cost optimized to perform, impacting 100% of life-cycle cost rather than the 25% that is first cost 17 Johnson Controls

Building life-cycle focus enables business objectives by driving efficiencies across the entire real estate budget … Fortune 1000 Typical Corporate Real Estate Spend Enterprise Challenges (illustrative) Example: Pharmaceuticals • Capital constraints Houskeeping 6% • Uncertain / declining real estate Maintenance 18% markets • Accelerated shift to global v multi- Fixed Asset - national Rent, Depreciation, etc. 53% Utilities • Volatile utility prices 11% • Increasing regulatory / government Security 6% investment in sustainability Other 6% … impacting all elements including rent / depreciation (>50% of total spend)18 Johnson Controls

Plan / Acquire Operate / Construct Assess & Design MaintainUsing sensing technology to evaluate / improve workplaceutilization while maintaining worker safety, comfort, and productivityGreen & Agile @ BBC, Media Village W12  18% reduction in workstations – release of Woodlands  Average utilisation improved from 46.8% to 62.2%  Move to a more agile and sustainable way of working – churned over 2500 people  Average share ratio of 1.2:1 (equates to 12 people sharing 10 desks) 19 A Discussion on Corporate Environmental Sustainability

Plan / Acquire Operate / Construct Assess & Design MaintainMajor construction consumers showingincreased preference for the benefits of the design – build process Growth trajectory Key accelerators 60% • Increased collaboration 54% 50% 50% between owner and 50% 45% contractor • Single-point of contact 40% throughout process 40% 40% 35% 30% • Realization of operational vision 20% • Reduced schedule variability and increased cost visibility 10% Trad Design Bid Build Design Build • Flexibility in construct process 0% to adapt design 2000 2005 2010 2015 20 Johnson Controls

Plan / Acquire Operate / Construct Assess & Design Maintain Intelligent buildings require new construction model to deliver highly integrated projects … engages operators early Technology Contracting Model Integrated Model – Converged Systems Architect / Owner Engineer Building End User General Systems Systems Contractor Mechanical Low Voltage Technology Electrical Contractor Contractor Contractor Contractor Facilities Support Special Mechanical High VoltageWater Systems Fire Protection Systems Distribution Department Services Building Special Technology Medium Voltage Piping Automation Systems Distribution Technology Electrical Air Systems Fire Alarm System Installation Equipment Mechanical Lighting Control Integrated Emergency Power Equipment System Security System Generation IT Department Specialty Healthcare IT Network Systems Business Power Management Other Specialty Systems & Assurance Technology SystemsTechnology Contracting Advantages• Holistic approach that enhances technology convergence; Engage operations teams during• Eliminates waste from system and infrastructure duplication. Balances first and lifecycle costs and reduces risk construction process to ensure design /• Owner / GC has a single source of accountability; minimizing delays in build to optimize life cycle performance construction schedule 21 Tech contracting is the logical evolution of the design – build Johnson Controls process … increased focus on engaging system users in design

Plan / Acquire Operate / Construct Assess & Design Maintain Emerging construction models focus on building life-cycle cost … improving facility performance while mitigating risk and cost Key drivers of waste in Estimated waste the traditional model Percent of total technology spend Common cabling and wiring for all low voltage systems, reducing amount of material Redundant materials 3-4 Integrated project management and minimized Duplicate labor 2-3 integration efforts after implementation reducing labor Potential delays in Upfront integration and issue building completion due TBD resolution, prior to to integration errors implementation reduces sources of errors and change Change orders to integrate orders 2-3 disparate systems Leveraging JCI volume and Loss of procurement benefits 1-2 competitive bid process helps procure these systems for lower prices Total Waste in process 8 - 13 22 Johnson ControlsSOURCE: JCI Internal analysis

Plan / Acquire Operate / Construct Assess & Design Maintain Facility owners / operators can optimize / maintain their capital investment through real time data analysis and improvement projects Intended Integrated Design, Build, Operate Performance (Opportunity) Auto Commission Optimum “As Built” Peak Performance First Occupancy Perpetual Design Service Live Commissioning Performance Existing Practices Minimum Acceptable Performance Actual Service Live Time 23SOURCE: NIST 2004; JCI analysis

Plan / Acquire Operate / Construct Assess & Design Maintain The new, smarter buildings utilize technology to drive performance improvement across the building life-cycle Info technology platform that integrates disparate real Sustainability Command Center estate and building management systems into a single portal for improved real-time management Case Study: State of Missouri Issues • Spends $300M annually to operate/maintain 1,000 buildings • Launched plan to reduce statewide energy consumption by 15% by 2010 • State had little visibility of building performance JCI Offering • $24M performance contract to integrate individualEnergy Square Building Equipment General Scheduling Capital systems and buildings to common user interface Use Feet Conditions, Condition & Ledger Systems Planning Data Controls Maintenance Data • Created dashboard that provides real-time information on utility usage, maintenance spending, and capital investments Outcome Sequentra® • $35M annual savings from reduced energy usage • State can calculate its carbon footprint, and better control energy, maintenance, and real estate costs We are continuing to develop this offering as more customers request this kind of solution. 24

Plan / Acquire Operate / Construct Assess & Design MaintainFuture buildings must be prepared todeal with multiple elements of the smart grid Benefits to Owner/Tenant • Lower real estate spend (energy, O&M, capital) • Smaller GHG footprint • Improved energy security Today’s challenge… • Enhanced comfort and productivity • Green recognition Traditional Benefits to Utilities/ISO supply-side • Flattened load profile solutions to • Reduced peak energy demand problems • Cleaner energy profile • Compliance with cannot meet RPS/EERS Smart net-zero • Least cost ancillary Buildings energy goals services alone Benefits to Society • Reduce climate risk • More reliable and secure electric system • Lower energy costs Without smarter building operations on the customer side of the meter, 25 Confidential the full potential of the smart grid cannot be unlocked

Plan / Acquire Operate / Construct Assess & Design MaintainAgenda• Johnson Controls overview• Operational challenges in the current facility environment• Shortcomings of the existing facility build – operate – retrofit process• An emerging better way – focus on the building life cycle from the start• Case Study – JCI Corporate HQ26 Johnson Controls

Johnson Controls has used this approach to redesign its global HQ,creating a high performing, more comfortable, and sustainable campus 34 acre site, 500,000 sf total building footprint  4 LEED-NC v2.2 Platinum buildings  1 LEED-EBOM v2.0 Platinum building  >90th percentile EnergyStar ratings27 Johnson Controls

Johnson Controls had several goals for its corporatecampus expansionConstruction Goals Operational Goals• Safety–our primary concern • High performance workplace• Five secondary (equally weighted) project goals • Sustainability from a community perspective • Budget: Bid / Buy / Deliver / Respond to Changes • Energy and resource conservation • Quality: Attention to detail (Create a world class facility) • LEED Platinum • Schedule: Completion date is predictable – make necessary adjustments • Platinum LEED Submission: Campus submission to create all high performance buildings • Diverse Supplier Goal: 20% Minimum28 Johnson Controls

Johnson Controls Corporate Headquarters combines the best of thenew practices in a significant retrofit / new build  Targeting highest concentrationSolar Thermal Geothermal of LEED Platinum certified buildings (4 NC, 1 EB) in world  >90th %tile Energy Star ratingsGray WaterRecycling  272 wells for ground-source heat pumps reduce energy by 29%  Extensive daylight harvesting and shade control  385 kW combined ground and roof mounted photovoltaic arrays (Wisconsin’s largest PV system)  1,330 sf solar thermal collectors used to heat hot water in building Solar Photovoltaics  BMS integration to IT monitoring system in data center29 Johnson Controls

Design / construction process utilized advanced HVAC /controls to deliver energy and asset performance targets Under floor air distribution system that can be easily reconfigured Daylight harvesting and shade controls Personal environment modules Semi-automated demand response Bi-Directional Communications BMS ↔ IT asset mgmt system integration in data center BMS ↔ Work order management system30 Johnson Controls

Actual performance significantly better than comparable JCI facilitiesTotal Electrical Demand (Watts /square foot) York, PA Campus Building Efficiency HQ 31 Johnson Controls Milwaukee Building B1 Corporate HQ

Construction process incorporated LEED checklist as part ofachieving LEED platinum certification for new and existing buildingsSustainable design in the LEED process – specific local content requirements

Future Vision Example: Strategic Alliance with IBMPress Release 22 Feb.IBM and Johnson Controls Join Forces to MakeBuildings SmarterCombined Offering to Enhance Energy and OperationalEfficiencies• IBM’s Maximo is the core of Connect MX• IBM’s Lotus Mash-up tools will deliver client dashboard’s• Integrating our building technlogies and enterprise applications brings a richness of information that enables dynamic operation of buildings ……FM 2.0FM 2.0 will deliver significant competitive advantage and enhanced client retention• Energy Savings through continous commissioning - 10% to 20%• Operating cost savings through reduction of labor and and auto despatch of technicians – 10% to 20%• Space optimization through building occupancy tracking …..33

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