PepsiCo is taking the concept of "off the grid" seriously. 

The company's Frito-Lay North America Division reconfigured its 25-year-old manufacturing facility in Casa Grande, Ariz. to have a "near-net-zero" impact on the environment. 

No aspect of the ambitious initiative was overlooked. PepsiCo addressed issues of water, electricity, natural gas and waste. John S. Phillips, senior vice president of customer supply chain and logistics, jokingly characterized the project with the acronym BHAG: Big Hairy Audacious Goal. 

Covering nearly 188,000 square feet, the Casa Grande plant produces snack foods with some of the popular names in grocery retailing: Fritos, Lay's, Ruffles, Tostitos and Doritos, among others. The idea, said Phillips, was to apply everything the company knew about sustainability to a single facility. 

The initiative would come to involve multiple projects in various locations, both within and beyond the property's boundaries. The goal was to achieve new operating efficiencies, improve the local environment and devise a series of processes that could be repeated at other manufacturing locations run by Frito-Lay and PepsiCo. In effect, said Phillips, Casa Grande would serve as a "live learning lab" for future sustainability efforts. 

Located in the midst of a desert, Casa Grande was an ideal place to commence the experiment. Out of dozens of possible candidates, it was selected "due to the abundant solar energy and availability of renewably sourced biomass in the area, and also because of the pressing need to address water scarcity in the desert southwest," the company said. 

By PepsiCo standards, Casa Grande is a medium-sized plant, noted Al Halvorsen, senior director of environmental sustainability. It has about 400 employees and turns out 100,000 pounds of product annually. (In terms of units, that's a much greater volume than the number appears to indicate, given the lightweight nature of so many packaged snack products.) 

Aiding PepsiCo in the effort were multiple entities, including the Oak Ridge National Laboratory, National Renewable Energy Laboratory, the standards body Energy Star, the U.S. Environmental Protection Agency's SmartWay Initiative, Environmental Defense Fund, Conservation International and Rocky Mountain Institute. The company also drew on a benchmarking study from Harvard Business School, which examined environmental impacts on 15 global businesses. 

Where to Begin?

Every big initiative has to start somewhere. PepsiCo began with energy and water. It created the company's first manufacturing facility to achieve Gold Certified status under the LEED rating system of the U.S. Green Building Council. The designation is awarded to buildings that meet sustainability targets in multiple areas, including water, energy, atmosphere, materials and resources, and indoor environmental quality. 

Individual projects that helped PepsiCo win the Gold Certified designation included the installation of reflective roofing material, adoption of more efficient indoor lighting, use of sustainable cleaning products, creation of a recycling program for construction waste, and even the addition of bike racks in the parking lot. 

Turning its attention to water, PepsiCo installed a membrane bioreactor system, which recycles 75 percent of the 400,000 gallons used each day for washing and cooking. The recycled water meets all EPA standards for drinking water. In fact, said Halvorsen, it's purer than the water that enters the MBR system.

Another piece of environmental technology, a biomass boiler, addressed the facility's need for sustainable steam power. Burning old wood pallets, agricultural waste and pecan shells (the last due to the region's plentiful supply of pecan trees), the equipment can produce about 60,000 pounds per hour of steam. As a result, Casa Grande has been able to slash natural-gas usage by 80 percent. (Some natural gas is still needed for the ovens, Halvorsen said.) 

For vehicles serving the facility, PepsiCo has adopted the use of compressed natural gas and electric power. It's aiming for a 50-percent reduction in fuel use by 2020, according to Halvorsen. In addition, a pair of local delivery trucks runs on solar energy from Stirling engines. 

Solar is Casa Grande's trump card. "We went big," said Halvorsen. Five-megawatt tank systems generate 10 million kilowatt hours, providing half the facility's electricity needs over the course of a 24-hour day. (During the afternoon, the plant is completely off the grid, returning to metered electrical power after sunset.) To maximize its use of solar energy, PepsiCo installed 36 acres of trackers, which follow the sun's position throughout the day.

In the area of packaging materials, the Frito-Lay operation now reuses cartons seven to eight times before recycling. (A recycling program for cardboard boxes was already in place.) For the last two years, Halvorsen said, the plant has sent zero waste to landfills. 

Savings From Going Green

At Casa Grande, PepsiCo has managed to combine environmental responsibility with bottom-line savings. It has seen reductions of 47 percent in the use of water, 33 percent in natural gas, 15 percent in fuel and 25 percent in electricity. It all adds up to a savings of $100m in annual operating costs. 

The initiative "helped us to prepare for an unknown future," Halvorsen said, citing water scarcity and soaring fuel prices as just two areas of concern. Now, PepsiCo plans to apply the same techniques in additional locations. India, China, Pakistan and other areas where water is scarce are strong candidates for the new technology, he said. 

Progress can already be seen at other Frito-Lay manufacturing sites. Nearly all 30 of its U.S. locations are sending less than 1 percent of their waste to landfill, said Halvorsen. Ten are at zero.

By 2065 - PepsiCo's 100^th birthday - all 300 of the company's manufacturing plants should have matched the environmental performance of Casa Grande. Still, even with lessons from the "learning lab," the task isn't easy to execute. Halvorsen said the company has to jump through a number of regulatory and bureaucratic hoops. For its photovoltaic equipment, it spent longer negotiating a common purchase agreement with a local utility than it did building and installing the panels. 

Economic results won't always be as impressive as those realized at Casa Grande. In locations with less sunshine, the cost of solar is greater than that of relying on the local electrical grid. And the recent drop in natural-gas prices has eroded the savings generated by the burning of biomass. 

Nevertheless, PepsiCo is convinced that its quest for "near-net-zero" production makes sense for the long term. Said Phillips: "The space is still ripe for innovation."

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Keywords: supply chain, supply chain management, PepsiCo supply chain, green supply chain, supply chain planning, retail supply chain