OREGON STATE UNIVERSITY

OSU prof helping high tech companies cut costs

09/24/1997

CORVALLIS - An Oregon State University professor, working with a $350,000 grant from a consortium of semiconductor manufacturers called SEMATECH, has developed a software model that accurately gives companies their true environmental, safety and health costs.

Since he developed the model, Anthony Veltri has been asked to present his research results to major corporations across the United States, as well as in Korea, Taiwan, Italy and Finland.

And no small wonder. Veltri said his model consistently demonstrates that companies significantly underestimate their environment, safety and health costs. Corporate financial officers usually estimate that ESH costs represent 2-5 percent of overall costs, Veltri said, while the actually figure is more like 10 to 15 percent.

Capturing cost burdens and understanding profitability potential of ESH activities "tends to get a lot of attention and support," he pointed out.

"Companies that fail to perform this activity are leaving a significant amount of money on the table," said Veltri, an associate professor of public health at OSU. "Traditionally, the private sector hasn't been able to reasonably estimate their environmental, safety and health costs.

"Now," he added, "they can."

Veltri's research has resulted in a model that looks at activities which drive environmental, safety and health costs from a business perspective, not a regulatory perspective. That bumps ESH decisions upstairs to financial managers and provides access to upper level administrators, he said.

His model looks at the costs of activities to comply with federal, state and local environmental regulations; to obtain permits and acquire ESH equipment; to reclaim resources for recycling activities; for waste disposal; for legal and lobbying efforts; and even for "decommissioning," or the removal of pipes, storage tanks or equipment when the job is finished.

In all, Veltri has identified 15 cost factors and more than 75 activities that increase costs.

"Most companies know the direct costs of permits, such as wastewater discharge, air emissions, or handling, storing and transporting hazardous materials and waste," Veltri said. "But they tend to overlook indirect expenses such as studying the procedural and performance requirements of the permit, conducting environmental impact studies, making applications, gaining community approval, or capital required to re-engineer the factory site infrastructure."

Likewise, he added, companies meticulously log the purchase, use and disposal costs of necessary chemicals, materials, gases, water and energy, but they don't collect information about the costs associated with these activities, thus underestimating their true costs.

One good way to cut costs, Veltri said, is by using advances in product and process technology.

"Equipment and material suppliers are advancing just like the semiconductor field," he said. "There is an increased interest by suppliers and manufacturers to find ways to reduce natural resource use and eliminate problem chemicals. As a result, employees, the environment and the bottom line benefit."

Veltri spent nearly three years developing his model working with SEMATECH and with member companies located throughout the U.S., including IBM, Intel, Hewlett-Packard, National Semiconductor, Texas Instruments, Motorola and AT&T. During pilot testing, he discovered that the most important factor in his model was to consider environmental, safety and health costs up front.

"Consideration of ESH concerns at an early stage in the design engineering of products and processes tends to prevent future problems and expenses," Veltri said. "When ESH specialists intervene after the product and manufacturing process is designed, it is usually too late.

"Post-modifications of existing projects and processes are very expensive," he said.

Veltri says his model is flexible enough to adapt to different companies, and even to different businesses outside the semiconductor industry. His sophisticated software can calculate the costs for a new factory location, and for new and emerging technologies. The model provides annual and lifetime costs information, an ESH cost per wafer manufactured, and labor costs.

"Within the software, we can also calculate the impact of environmental incidents, injuries and non-compliance fines," Veltri said. "If the activities that your company are doing have an adverse effect on the environment - such as depleting natural resources, exposing employees to problem chemicals, or not using organizational resources productively - it will have an impact on performance and may have an impact on the company's competitive place in the market."

SEMATECH, located in Austin, Texas, is a collaborative effort among the nation's leading semiconductor manufacturing companies. Its principal interest is to study ways for U.S. companies to be more competitive in the manufacturing of wafers.

Veltri's research has received a warm reception in Oregon, as well as nationally and internationally, he said. The competitiveness of the industry results in product and manufacturing changes about every three years and any models that have the potential to reduce costs, enhance yield, and improve operating logistics are looked at closely, he said.

There is also a cultural attitude in Oregon that puts the state out in front in making the right decisions about the environment, and the health and safety of workers, Veltri pointed out.

But Oregon CEOs are no different than their national counterparts in one area, he added.

"They still vastly underestimate their environmental, safety and health costs."