Supp 5 – Page 2 – The OM Blog by Heizer, Render, & Munson

OM in the News: Why Chocolate Prices are Soaring

Starting the end of 2024, chocolate makers that sell or produce in the EU will have to show that the cocoa they use wasn’t grown on land cut from forests since the end of 2020, reports The Wall Street Journal (May 20, 2024). In practice, it means that each morsel of cocoa that makes its way into the bloc will need to be linked to the GPS coordinates of the farm where it was harvested. Because the EU is the world’s largest chocolate market, the law will also apply to global confection giants like U.S.-based Mars, the maker of M&M’s, or Switzerland-based Nestlé.

A farmer cuts a cocoa pod to collect the beans inside in Ivory Coast

Ivory Coast, the world’s no. 1 cocoa producer, has mapped 80% of the country’s 1.55 million cocoa farms. Failure to map all farms could take more beans out of the market, worsening current shortages. Farmers have traditionally responded to cocoa shortages by clearing forests to make way for more farmland. That’s not an option under the new EU legislation.

The EU initiative is part of a growing movement (see Supp.5) to make raw materials—including agricultural products and minerals used in smartphones and electric cars—traceable, with the goal of reducing the potential harm they inflict on the environment and local populations.

Ivory Coast was once covered in dense rainforest. But over the past 60 years, 90% of the country’s forest cover has disappeared, making it one of the countries with the highest annual rates of deforestation in the world.

For consumers, the EU law couldn’t have landed at a worse time. Unseasonable weather as well as cocoa-tree diseases have hit harvests across West Africa, the source of 70% of the world’s cocoa beans. Stockpiles this season are the lowest in 45 years, as demand outstrips supply for a fourth consecutive season. Prices for cocoa recently touched a record high of nearly $11,500 a ton, about four times as high as they were a year ago. Those increases will come on top of a 12% rise in the price of U.S. chocolate candies in 2023 and a 14% increase in 2022.

In times of high prices, companies also often shrink the size of their products or tweak recipes to use less cocoa.

Classroom discussion questions:

What are the advantages and disadvantages of this EU plan?
What options do supply chain managers at Marrs and Nestle have?

OM in the News: Building Sustainability Into Product Design

Did you know 80% of a product’s environmental impact is determined in the design phase? With so much dependence on design, it is critical to start thinking about the environmental impact of a product as early as possible, alongside the traditional drivers of cost, quality, and time. To overcome resource scarcity and meet emissions targets, manufacturers are steadily increasing their environmental consciousness, writes Industry Week (April 26, 2024). Those set to succeed are doing so from the very start of their development processes.

Combining the real and digital worlds makes it possible to integrate the entire value chain. This delivers a digital thread that serves as the foundation for collective intelligence, connecting workflows and processes along the value chain. It can also provide designers with access to a comprehensive digital twin informed by simulation results and production data, material information, supplier and product carbon footprint data, etc.

This empowers engineers to rethink design, as they have access to a dynamic and iterative process (outlined in the 5 points below) that is never finished and allows for recycling, remanufacturing and reuse. However, for this to work, sustainability needs to be embedded into all phases of the design process. a point we make in both Ch. 5 (Product Design) and Supp. 5 (Sustainability in the Supply Chain).

1. Conceptual Design In addition to traditional design requirements such as performance, durability, usability and cost, designing for sustainable outcomes means meeting new requirements, including carbon emission caps, water use restrictions and recyclability. Capturing these early is critical .

2. Suppliers When sourcing materials and components, it is important to establish communication with suppliers that best comply with sustainability requirements.

3. Detailed Design The right tools will enable engineers to select the best part materials based on required material properties and the associated sustainability scores. One material may result in a lowered carbon emission rating within manufacturing because it is more recyclable, while another material option might be more durable and extend product life.

4. Validation Validation covers many workflows and engineering domains to ensure the product functions as expected. Innovative materials used to meet sustainability targets might require more thorough testing.

5. Design Improvement This is a continuous journey that extends long after the product is made. Integrating sustainability goals into product design is making that a reality for every company.

Classroom discussion questions:

Why are suppliers an important part of new product design?
Name a product that has gone through these 5 steps.

OM in the News: Construction Firms Go Circular

Recycled concrete being laid at a construction site in Canary Wharf

Hundreds of feet above the British capital’s Canary Wharf financial district, an office tower under construction grows taller as it draws materials from a source just blocks away. Concrete being poured on to the floor of the 52nd story is made partly with concrete recycled from a building being taken down nearby—part of an initiative to decarbonize office spaces through so-called circular construction practices that aim to maximize the reuse of materials. By putting reduced carbon as a requirement from its suppliers, Canary Wharf helped to transform the supply chain as a whole, largely by giving clarity that this was now a key requirement going forward as a developer.

To produce recycled concrete, waste from demolished buildings is broken down and turned into a powder, after which the aggregates and cements are separated. The cements are processed back into a paste, which makes up about 15% of the final product, while the aggregates are used to make the rest of the concrete, replacing the need for new materials like sand.

Buildings account for 39% of global energy-related carbon emissions, with 11% of that coming from materials and construction, reports The Wall Street Journal (March 27, 2024) . Cement and concrete alone account for 9% of total carbon emissions, so as companies look to lower emissions, the embedded carbon from their offices is a growing concern.

With an increasing world population and urbanization, construction activity will continue to increase. It is estimated that the equivalent of the size of New York City would have to be built every 40 days to meet demand.

Moving to more circular construction methods has shown to be an effective way of cutting emissions. Reusing concrete and cement could help abate 600 million metric tons of carbon-dioxide emissions by 2050. Using recycled concrete reduces carbon-dioxide emissions by about 40% compared with ordinary production.

Construction and real-estate companies are increasingly requesting higher levels of transparency and data. They are asking for Environmental Product Declarations which reveal both the positive and negative impacts of each building material’s life cycle, all the way back to the mine. These give specifiers, designers and tenants a transparent view into a building’s full carbon footprint.

Classroom discussion questions:

In what other ways are buildings “going green?” (Hint: see the Orlando Magic case study in Supp. 5 of your Heizer/Render/Munson text)
How can a building being renovated increase its energy efficiency?

OM in the News: The Growth of Electronic Waste

Supplement 5 in our text, Sustainability in the Supply Chain, stresses the important roles of product design and circular economy in protecting our planet. But a new report by the U.N. in Earth.com (March 21, 2024) documents the escalating global challenge of electronic waste (e-waste) generation and how it significantly outstrips the pace at which we are recycling these materials.

E-waste is defined as any discarded product with a plug or battery that harbors toxic additives and hazardous substances, such as mercury. A staggering 62 million tons of e-waste was generated in 2022 –an amount that could fill a line of 40-ton trucks encircling the equator.

Just 22% of this e-waste is known to have been recycled properly, spotlighting the vast amount of valuable resources – worth an estimated $62 billion – that remain untapped, and highlighting the increased pollution and health risks to global communities. The annual rise of 2.6 million tons in e-waste production, with predictions set to soar to 82 million tons by 2030, underscores the problem.

The widening gap between e-waste production and recycling is attributed to several factors, including rapid technological advancements, higher consumption rates, limited repair options, shorter product life cycles, shifts towards EVs, design challenges, and insufficient e-waste management infrastructure. (It is even worse when the extremely dangerous discharged batteries from EVs, not included in the U.N. report, are considered). This complex web highlights the need for integrated solutions that encompass technological innovation, policy reform, and community engagement.

“With less than half of the world implementing and enforcing approaches to manage the problem, this raises the alarm for sound regulations to increase collection and recycling.” writes the U.N. One of the report’s revelations is the current inefficiency in reclaiming valuable materials from e-waste, which presents both an economic loss and a missed opportunity for reducing reliance on rare earth/mineral extraction. “No more than 1% of demand for essential rare earth elements is met by e-waste recycling,” it states.

The report calls for collective action from policymakers, industry leaders, researchers, and consumers to reimagine our approach to electronics consumption and waste management.

Classroom discussion questions:

Why do EVs pose a major challenge?
Identify a product and how its production, use, and end-of-life could be more sustainable.

Guest Post: Sailing Toward Sustainability Transportation

Temple U. Professor Misty Blessley describes a new technology that will uplift sustainability in the shipping industry.

Chemship B.V., a transporter of bulk liquid via its fleet of stainless steel chemical tankers, is the first of its kind to use wind assisted ship propulsion (i.e., sail toward sustainable transportation). Its MT Chemical Challenger, which covers the Trans-Atlantic route between the East Coast of the U.S and the Mediterranean, is the first chemical tanker to be equipped with sustainable wind technology. In a recent article, Chemship’s CEO writes: “We will use less fuel and thus reduce CO2 emissions. For this vessel, we anticipate an annual CO2 reduction of 850 tons. This is equivalent to the yearly CO2 emissions of over 500 passenger cars.”

The technology behind this is four VentoFoils, which have a 30X30 meter sail equivalent. The VentoFoils create a direct wind surface, which when combined with vacuum technology attenuates the force of the wind. The wind sails offer the benefits of easy installation, no needed reinforcements, push-button folding and sail setting, automatic sensing and folding with wind forces over seven and the sails do not obstruct the crew’s line of sight.

Four 16-meter high sails cut fuel consumption by 10-20%

This initiative by Chemship is not only good for the planet, but good for the shipowner’s profits. Since January 1, 2024, due to the expansion of the European Union’s Emissions Trading System (EU ETS) in the shipping industry, shipowners have been paying for the emissions associated with their sea transported goods coming into and going out of European ports.

Classroom Discussion Questions:
1. In Supplement 5 of your Heizer/Render/Munson text, the objective of the EU ETS to combat climate change is discussed. Consider their expansion into the shipping sector.
2. In what ways does Chemship’s adoption of VentoFoils create a competitive advantage? (Note: Water transportation is often preferred when cost is more important than speed).

OM in the News and Video Tip: A Circular Economy Hub for Automaker Stellantis

Stellantis opens its first circular economy hub.

Stellantis–the global automaker with brands including Chrysler, Fiat, Jeep, Maserati and Peugeot– has inaugurated a Circular Economy Hub at its manufacturing complex in Turin, Italy, demonstrating its commitment to a “360-degree approach” to automotive production, involving a strategy of remanufacturing, repair, reuse, and recycling (4R‘s.) Stellantis says it is adopting capabilities and facilities “to change its consumption model to reduce the environmental impact and better manage the company’s aggressive decarbonization target of reaching carbon net zero by 2038.”

“Circular economy,” a topic in Supplement 5 of your Heizer/Render/Munson text, describes an economic concept for production and consumption that preserves the value of energy, materials, and labor as products move from design through to end-of-use handling and recycling. The Hub represents a $40 million investment, covering 785,000 sq. ft. The site will employ 550 workers by 2025.

“The Circular Economy Hub brings together a powerhouse of skills and activities aimed at creating a high-performing center of excellence in Europe,” stated Stellantis in American Machinist (Nov. 28, 2023). “We are industrializing the recovery and sustainable reuse of materials, building new technologies and advanced capabilities as we grow in this area.”

The primary objectives for the Hub are to extend the life of parts and vehicles, ensuring that they last for as long as possible; or, failing that, to recycle those materials and others from end-of-life vehicle dismantling for remanufacturing as new parts and/or vehicles. The goal for the first operation, “Reman,” is to manage over 50,000 remanufactured parts annually by 2025, rising to 150,000 by 2030. For the Hub’s Sorting Center, the target is to process an estimated 2.5 million worn parts annually by 2025, increasing to 8 million by 2030.

The Vehicle Reconditioning activity will undertake aesthetic and/or mechanical repair of remanufactured or used parts and then reintroduce those to the supply chain through Stellantis’ manufacturer-certified used-vehicle program and services network. Last, the Vehicle Dismantling activity will convert end-of-life vehicles into resources for parts to be remanufactured, reused, or recycled.

Stellantis intends for the Hub to generate “efficiencies and synergies” among these activities, and through vertical integration of materials and processes. Here is a 3.5-minute video showing the 4R process in action.

Classroom discussion questions:

What is meant by “circular economy?” Give an example with an iPhone as the product.
What auto parts will be hard to repurpose?

OM in the News: Can AI Rescue Recycling?

Recyclers across the U.S. are struggling, hurt by a shortage of workers and rising costs that too often make recycling uneconomic. They are hoping, writes The Wall Street Journal (Nov. 9, 2023), that artificial intelligence can help turn things around and boost recycling rates.

How can AI help? By doing the sorting work that a dwindling number of people want to do—and doing it better. AI-driven robots pick up recyclable trash at around 80 pieces a minute; people can sort 50-80 pieces a minute. Optical sorters, a more established technology that’s growing more efficient thanks to improved AI, are much faster, sorting up to 1,000 pieces a minute.

Staffing shortages mean sorting sites can’t operate at full capacity. (Sites are often only 80% staffed and sometimes as little as 20%). In the long run, sorting machines are cheaper than human labor. Recyclers typically recoup their investment in robotic systems in two years. Around 32% of the sorting centers in the U.S. are now using robotics, up from less than 5% in 2019.

Optical sorting machines are in most of the large facilities. They use sensors and lights to rapidly find what is recyclable on a conveyor belt of mixed materials. When recyclable materials are identified, the machines fire a burst of compressed air at them to sort them into bins.

Waste Management, the biggest recycler in the U.S., is betting on AI as part of its goal to boost its recovery of recyclable materials 60% by 2030. It is investing $1 billion in recycling infrastructure including 40 recycling centers through 2026, with a big portion going to automation and AI. An automated WM plant has 4-6 people sorting along with the machines, compared with 50 employees at a nonautomated facility.

Republic Services, the second-biggest waste-and-recycling company, is investing in robots as part of its goal to recycle 40% more key materials by 2030, including cardboard, metal, paper and plastics. The company plans to have robotics at 20% of its 74 sorting centers in 2024, up from 10% today.

Still, AI brings its own challenges. Robots require upfront spending and equipment that needs frequent maintenance and upgrades. The cost for a single robot ranges from $150,000 to $300,000. Building or upgrading a recycling center around optical sorters is even more expensive than robots. Optical sorting systems cost $1-2 million each.

Classroom discussion questions:

Recycling of municipal solid wastes has actually dropped in recent years. Why?
What are the advantages and disadvantages of AI in this field?

OM in the News: The Transition to Electric Vehicles Sustainability Dilemma

A mining exploration camp in the *Ring of Fire*

The pace of the global transition to electric vehicles depends on the future of a remote region in Canada known as the Ring of Fire. Located underneath a distant, swampy expanse in Northern Ontario that is cut off from major roads, the Ring of Fire is seen as one of the world’s most important untapped sources of nickel, copper and cobalt—metals essential for making the batteries that power EVs.

But the precious commodities are buried under a vast ecosystem of peat bogs that hold more carbon per square foot than even the Amazon rainforest. Digging them up could trigger the release of more greenhouse gas than Canada emits in one year, turning one of the earth’s biggest carbon sinks into a major source of emissions.

A debate over how, or whether, to tap in to this mother lode, has touched off a fight between mining companies, climate advocates, and indigenous groups as demand for cleaner energy and EVs has surged worldwide, reports The Wall Street Journal (Sept. 29, 2023).

“If I have to hop on a bulldozer myself, we’re going to start building roads to the Ring of Fire,” said the head of Ontario province, which recently signed deals with automakers VW and Stellantis to build battery-making factories in the province. Opponents warn that disturbing the area could have far-reaching consequences.

The Ring of Fire, an area larger than Rhode Island, was formed 3 billion years ago. A retreating ice sheet left sodden, boggy terrain that covers a wealth of minerals. This deposit is “the most valuable nickel deposit, undeveloped, in the world,” said one mining CEO. “We’re not going to be able to switch off fossil fuels, which are destroying the planet, unless we have abundant supplies of nickel.” He estimates the deposits of platinum, palladium, copper and chromite could be worth $67 billion. As EV production has increased, demand has surged for such metals, which are key components in making EVs and military equipment.

Projects like the Ring of Fire represent a new era for the mining industry. Long considered a dirty and often unfortunate legacy of the industrial economy, mining has taken on a green sheen. Extraction is an essential component of the global movement toward electrification.

Classroom discussion questions:

What is the pro mining stance?
The anti-mining position?

Guest Post: Pollution as an Operations Management Issue

Prof. Howard Weiss raises an interesting issue that is in the forefront of many student’s minds.

Recently,
 Shell was sued for air pollution from its plastic plant outside of Pittsburgh
 The German government is being sued for allowing high levels of air pollution
 Monsanto paid $100M dollars to settle a pollution suit for contaminating streams and lakes in Pennsylvania.
Your Heizer/Render/Munson textbook has a graphic (Figure 1.5) on transforming Inputs to Outputs– but perhaps one more output should be added – pollution.

Pollution is an ever-growing global concern that adversely affects the environment and human health. Reducing pollution should be part of the feedback loop. Here are 8 different types of pollution:
1. Air Pollution is one of the most widespread and harmful forms of pollution. Sources include industrial processes, vehicular emissions, agricultural activities, and natural events like wildfires and volcanic eruptions.
2. Water Pollution occurs when contaminants enter water bodies, such as rivers, lakes, oceans, and groundwater. It can stem from various sources, including industrial discharges, agricultural runoff, improper waste disposal, and sewage.
3. Soil or Land Pollution involves the contamination of the Earth’s soil with hazardous substances. This can result from improper disposal of industrial waste, agricultural chemicals, and improper landfill practices. Soil pollution negatively impacts plant and animal life.
4. Noise Pollution is the excessive or disruptive noise that interferes with normal activities, causing stress and potential health issues (and is a topic in Chapter 10). It often originates from transportation, industrial processes, urban development, and recreational activities.
5. Thermal Pollution occurs when there is a significant alteration of water temperature in natural bodies like rivers or lakes. It commonly results from the discharge of heated water from industrial processes, power plants, or nuclear facilities.
6. Light Pollution involves excessive or misdirected artificial light, which interferes with the natural darkness of the night sky.
7. Plastic Pollution is caused by the improper disposal and accumulation of plastic waste. Plastics persist in the environment for extended periods, harming wildlife and marine ecosystems.
8. Radioactive Pollution involves the presence of radioactive substances in the environment, often from nuclear power plants, nuclear accidents, or improper disposal of radioactive waste.

Addressing and mitigating these various types of pollution is crucial for safeguarding the environment and public health. Implementing sustainable practices, adopting cleaner technologies, and enforcing regulatory measures ( all topics of Supplement 5) are essential steps toward a cleaner, healthier planet.

Classroom discussion questions:

How can operations managers address each of these concerns?
Clearly industrial processes create many different types of pollution. What types of pollution do service organizations create?

Guest Post: Kraft Heinz’s Mission to Reduce, Recycle and Replace its Plastics Packaging

Dr. Misty Blessley is Associate Professor of Supply Chain Management at Temple U.

Kraft Heinz, the fifth largest food and beverage company in the world (founded in 2015 with the merger of Kraft Foods and H.J. Heinz companies), is on a mission to reduce, recycle and replace virgin plastics in their packaging, including their tomato ketchup bottles. In 1983, as did many firms at that time, Heinz introduced plastic bottles as the packaging of choice for its famous tomato ketchup distributed to the retail grocery channel.

Virgin plastic is newly produced plastic, and Heinz has a goal of eliminating 100 million pounds by 2030. This is a reduction of 20% when compared to their 2021 baseline. Kraft Heinz recently stated: “When deciding what packages to focus on, we first see if there’s an opportunity to remove any unneeded plastic, then we look for opportunities where we can reduce plastic weight, add recycled content, or replace plastics with other types of materials, while ensuring we do not compromise the product quality and [do] meet consumer expectations.”

Kraft Heinz was able to reduce plastic by simply removing the bag from some products and worked towards their recycling objective by swapping some virgin plastic with recyclable plastic. They are also replacing their plastic ketchup bottles with a paper-based bottle made of 100% sustainably sourced wood pulp. A prototype is currently being tested, for this first of its kind in the sauce category.

Rethinking the Ketchup bottle, Heinz teams with Pulpex to deliver paper-based packaging

The firm is partnering with Pulpex, a packaging technology company focused on delivering sustainability through renewable packaging. If the bottle in the photo looks new yet familiar, it is because Pulpex is innovating with Heinz’s iconic ketchup bottle, the same one seen on Heinz ketchup (at restaurants, as an image on foil packs and dip and squeeze packs, etc.) since 1876.

Classroom discussion questions:
1. Product decisions are fundamental to firm strategy and to competitive advantage (see pages 161 – 162 of your Heizer/Render/Munson OM text). Given the need for sustainability in operations and supply chain management, why and how has packaging become part of the product decision?
2. Why do you think Kraft Heinz and Pulpex both feel that familiar looking packaging is a customer expectation?

OM in the News: The U.S. Enters the Lithium Supply Chain

These days, companies in the south aren’t looking to find more oil—they are instead prospecting for lithium, a metal that is increasingly prized around the world as an essential ingredient in electric-vehicle batteries. “If the U.S. is to ease its dependence for lithium on other countries such as China, it may need Arkansas to lead the way,” writes The Wall Street Journal (July 21, 2023).

The lithium geologic band running through the South

Exxon Mobil, a new player in the hunt for U.S. lithium, is planning to build one of the world’s largest lithium processing facilities in southern Arkansas, with a capacity to produce 75,000 to 100,000 metric tons of lithium a year. At that scale, it would equate to about 15% of all finished lithium produced globally. The prospect could have the equivalent of 4 million tons of lithium carbonate equivalent, enough to power 50 million EVs.

To push the project forward, Exxon and two of its announced competitors will have to profitably scale up the technology used to siphon lithium from brine, which has been an elusive goal across the industry. This particular geologic region, called the Smackover Formation, runs from Texas to Florida. It is rich with saltwater brine, which once bedeviled companies drilling for oil. That brine also contains small amounts of lithium, and the companies are now optimistic they can scale up technologies to extract it. Drilling for lithium with this extraction method is cleaner than traditional mining, and faces fewer regulatory risks.

The mining is expensive, though, costing about $1.5 billion to build 25,000 metric tons of capacity. The three proposed projects would create 6,000 jobs– and require 1,600 trucks by 2028.

Exxon believes it can leverage its engineering prowess to become a low-cost domestic supplier of lithium, and has had discussions with battery and EV manufacturers. The company would also benefit from U.S. green-energy subsidies, which allows for tax credits of 10% of the cost of producing lithium. The firm, generally bullish about the future of oil and natural gas, is also preparing for a future less dependent on gasoline. Last year, Exxon projected demand for auto internal combustion engine fuels could peak by 2025, while EVs, hybrids and vehicles powered by fuel cells could grow to more than 50% of new car sales by 2050.

Classroom discussion questions:

Why is lithium an important EV supply chain component?
What is Exxon’s strategy?

OM in the News: Cutting the Environmental Footprint of Fast-Fashion

“Fast fashion is a problem,” said a European Union official in The Financial Times (July 5, 2023). Lawmakers in the European parliament have called for an “end to fast fashion” and the setting of specific targets for textile waste collection, prevention and recycling. Fast-fashion brands such as the online retailers Shein and Boohoo and clothing giants H&M and Inditex (which owns Zara), have come under increasing pressure to move away from low-cost business models that have resulted in millions of tons of clothes being trashed.

Clothing companies are being pushed to improve the recyclability of their products

The EU wants the textile industry to pay for the processing of discarded clothing and footwear under new rules aimed at cutting the environmental footprint of fast-fashion brands. It proposes to push clothing companies to improve the recyclability of their products and catalyze a growing second market. The equivalent of over 26 pounds of clothes and footwear per EU citizen is discarded each year of which more than three-quarters is incinerated or goes to landfill.

Companies that sell to consumers in the EU would be responsible for paying for the treatment of any waste textiles with the amount charged dependent on the amount of processing required. The cost of making companies pay for clothing waste would amount to 12 cents per T-shirt but it would vary according to the product and what treatment was needed.

Companies say they want to sell more sustainable products, but are hampered by the lack of recycling infrastructure. H&M said it backed the measures and aimed for 30% of its clothes to be made from recycled fibers by 2025. Euratex, the EU textile industry body, said that it was working on pilot projects with small fabric manufacturers in 11 textile producing regions to create a closed loop system with clothes better designed for recycling.

Fast fashion was invented by companies such as Zara, in the late 1990s, when they took the latest styles seen on the catwalk and brought similar products to market. Zara took only 3-4 weeks to bring a simple T-shirt from design to the stores and 6-8 weeks for a jacket or a dress.

Classroom discussion questions:

How do your students feel about fast-fashion its environmental impact?
What is the role of OM in this issue?

OM in the News: The EV Battery Dilemma

Traffic backs up at the Bay Bridge. California is set to implement a plan to prohibit the sale of new gasoline-powered cars by 2035.

Recent U.S. regulations are pumping billions into battery manufacturing and incentives for EV purchases. The E.U., and several U.S. states, have passed bans on gas-powered vehicles starting in 2035. This transition will require lots and lots of batteries, reports Grand View Research (June, 2023).

When a lithium-ion battery, which consists of thousands of cells filled with cobalt, nickel and manganese, comes to the end of its life, its green benefits fade. If it ends up in a landfill, its cells can set afire or leach dangerous chemicals that can contaminate water supplies and ecosystems. The thin metal exterior of a battery will decompose within 100 years, exposing the toxic heavy metals inside, which will never decompose.

But recycling these batteries can be hazardous. If they are not opened carefully, they can explode, short-circuit, and let off toxic fumes. In the coming decades, tens of millions of EV batteries will reach their end-of-life. (Some predict there will be 150 million EVs on the road by 2030. Last year there were fewer than 12 million). Current EV batteries “are really not designed to be recycled,” says one industry expert.

The E.U. and China are setting new rules for some level of battery reuse. But it will not be easy to meet the new regulations. Most recycling processes produce heavy waste and emit greenhouse gases, and very little recycling goes on today. (Recycling rates in the E.U. and the U.S. are less than 5%). Most of the batteries that do get recycled undergo a high-temperature melting-and-extraction process. Those operations, which are carried out in large commercial facilities are energy intensive. The plants are also costly to build and operate, and require sophisticated equipment to treat harmful emissions generated by the process. And despite the high costs, these plants don’t recover all valuable battery materials.

Battery-swapping is one innovative business strategy proposed in OR/MS Today (June 20, 2023). A battery swapping infrastructure station network could provide a service for EV owners to “refuel” their vehicles. Replaced batteries would subsequently be recharged and exchanged for other arriving EVs needing a battery swap. One significant challenge impeding this concept was the need for a universal battery standard that multiple automakers could share. The battery packs needed to have identical dimensions and shapes to be compatible. Tesla tried the concept in 2013, but gave up on it a few years later.

Classroom discussion questions:

Why is battery swapping so difficult?
Why is recycling EV batteries so complex?

Guest Post: Walmart Makes Strides in Reducing Scope 3 Value Chain Emissions

Dr. Misty Blessley is Associate Professor of Supply Chain Management and Academic Director of Experiential Learning at Temple University

Walmart is the world’s largest retailer, with an historically strong brick and mortar presence. According to a recent article in Supply Chain Dive (June 2, 2023), “E-commerce is a growing channel for Walmart, and associated waste and packaging are some of the company’s priority areas as it tackles emissions — particularly Scope 3, or value chain, emissions.”

But what exactly are Scope 3 emissions, how is Walmart tackling emissions in this category, and why it is important to do so?

According to the World Resources Institute’s Greenhouse Gas Protocol, Scope 3 emissions are those that occur in the upstream and downstream value chain.(Scope 1 emissions are tied to a firm’s facilities and Scope 2 emissions relate to purchased energy). What makes Scope 3 emissions so important to address is that this category is about ten times the magnitude of Scopes 1 and 2, according to Walmart’s Chief Sustainability Officer.

Walmart is tackling Scope 3 emissions in its e-commerce by replacing all plastic mailers with paper mailers. This one change will eliminate the need for 2,000 tons of difficult to recycle plastic over the next seven months. A change such as this has huge longer-term implications. Additionally, Walmart has invested in technology in about half of its fulfillment network that helps create custom-fitted packaging. This change is estimated to eliminate the need for packing filler by 60%. Following through to the customer’s hands, upon placing an order they have the option to opt out of receiving their pick-up orders in single-use plastic bags, which is expected to keep millions of bags out of circulation.

Walmart has pilots for reusable or refillable packaging in some categories. They “have a goal for all global private brand packaging to be recyclable, reusable or industrially compostable by 2025,” and they are making strides. In viewing themselves as one node in a larger supply chain, Walmart also encourages their suppliers to consider their alternatives for reducing packaging waste.

Classroom discussion questions:

In what ways is Walmart practicing good corporate social responsibility?
How has Walmart looked beyond design and production for sustainability, to include product distribution?

OM in the News: The “Nickel Pickle” and Other Electric Vehicle Tales

The Wall Street Journal (June 5, 2023) led with a front page article called the “Nickel Pickle” and then went on with two more stories about EV headwinds. Let’s summarize: To make batteries for EVs, companies need to mine and refine large amounts of nickel. The process of getting the mineral out of the ground and turning it into battery-ready substances is particularly environmentally unfriendly. Reaching the nickel means cutting down swaths of rainforest. Refining it is a carbon-intensive process that produces waste slurry that’s hard to dispose of.

Mining and refining nickel is a dirty business

The nickel issue reflects a larger contradiction within the EV industry: Though EVs are designed to be less damaging to the environment in the long term than conventional cars, the process of building them carries substantial environmental harm. One Indonesian miner, for example, said that rainforest clearing caused greenhouse gas emissions equivalent to 56,000 tons of carbon-dioxide. That’s equal to driving 12,000 conventional cars for a year.

Tesla adds that EVs cause more emissions during the manufacturing phase than conventional vehicles, due in part to the process of extracting and refining minerals. Nickel is responsible for 1/3 of the carbon emissions generated from making a battery cell.

The second piece states that battery-powered EVs “are not the only way to achieve the world’s carbon neutrality goals.” Toyota is promoting its hybrids and plug-in hybrids as alternatives to battery-powered EVs. Plug-in hybrids contain an engine that can kick in when the battery runs low and are cheaper than EVs. That firm has pledged to make all its vehicles carbon neutral by 2050.

Toyota’s CEO made news when he claimed that a “silent majority” in the auto industry “is wondering whether EVs are really OK to have as a single option.” He added that “the amount of raw materials in one long-range battery EV could instead be used to make 6 plug-in hybrid electric vehicles or 90 hybrid electric vehicles.” For that anti-EV comment, progressive investors and government pension funds have moved to oust him.

The 3rd article reports that VW “is searching the world, from Canada to Indonesia, for supplies to make the batteries in EVs it sells less dependent on Chinese components,” especially nickel. China dominates global production of refined battery materials used in EV batteries. “Today we are 100% dependent on China,” says a VW exec.

Classroom discussion questions:

Why is nickel a supply chain problem?
Why is the Toyota position controversial?