Supplement 5 – Page 6 – The OM Blog by Heizer, Render, & Munson

OM in the News: Nestlé Tries to Tackle Big Food’s Plastic Problem

Nestle just pledged to cut its use of plastic made from fossil fuels by 1/3 in 5 years and said it would invest $2 billion to find more recycled material, a particularly big challenge for the food industry. Sellers of everything from soap to soft drinks are under pressure from consumers and regulators to use less fossil-fuel-based plastic, as well as prevent plastic trash ending up in the ocean. In response, some big consumer-goods firms, like P&G and Unilever, have rushed to promise reductions in plastic, saying they will switch to recycled material, use refillable containers or scrap packaging entirely.

But changing to recycled plastic is especially challenging for companies that need high-quality material that is safe for direct contact with food, writes The Wall Street Journal (Jan. 16, 2020). Recycling the packaging typically used for coffee, instant noodles or candy bars is difficult and expensive because it is often made from multiple types of material, like plastic melded with aluminum or paper. Sellers of fresh food also rely on plastic film—used to wrap cucumber and broccoli—and thin plastic bags for loose items, that often can’t be recycled.

Even when plastic is technically recyclable, it often isn’t collected and recycled. That is partly because, until recently, there has been little demand for recycled plastic, so even highly recyclable plastic—like drinks bottles—leak into the environment. Nestlé’s target of reducing the 1.67 million tons of plastic it uses is a challenge. Just 2% of its plastic packaging is currently made from recycled material.

To date, there is almost no market for the hard-to-recycle material often used in food packaging. Recycling efforts are being further challenged by China’s ban on scrap imports. For decades, the country took many of the world’s recyclables and turned them into new products. Its absence from the market has hit demand and raised costs for municipalities, propelling some to scrap their recycling programs entirely. This important topic is discussed in detail in Supp. 5 in your text, Sustainability in the Supply Chain.

Classroom discussion questions:

Why has China reversed its position vis a vis importing plastics?
What suggestions do students have for dealing with this serious issue?

OM in the News: New York City Chokes on Deliveries from On-Line Orders

An Amazon order starts with a tap of a finger. Two days later — or even in a matter of hours — the package arrives. It seems simple enough. But to deliver Amazon orders and countless others from businesses that sell over the internet, the very fabric of major urban areas around the world is being transformed. And New York City, where more than 1.5 million packages are delivered daily, shows the impact that this push for convenience is having on gridlock, roadway safety and pollution.

The average number of daily deliveries to households in NYC tripled to more than 1.1 million shipments from 2009 to 2017, writes The New York Times (Oct. 27, 2019), With households receiving more shipments than businesses, trucks are pushed into neighborhoods where they had rarely ventured. About 15% of NYC households receive a package every day.

Delivery trucks double-park on streets and block bus and bike lanes. UPS and FedEx alone racked up more than 471,000 parking violations last year. The main entryway for packages into NYC, leading to the George Washington Bridge from New Jersey, has become the most congested interchange in the country. Officials are racing to keep track of the numerous warehouses sprouting up, to create more zones for trucks to unload and to encourage some deliveries to be made by boat or at night as the city struggles to cope with a booming online economy.

Amazon is now moving toward 1-day delivery rather than 2 days for Prime customers and plans to spend $1.5 billion this quarter to reach that goal. As the delivery armada has ballooned, so, too, have the complaints. “There is just not enough room for all the trucks that need to make deliveries, the cars that need to get past them and the people who live here,” said a NYC councilman. From 1990 to 2017, carbon dioxide emissions from automobiles and trucks in the NYC area grew by 27%, making the region the largest contributor of driving-related carbon dioxide emissions in the country.

Classroom discussion questions:

What are the impacts from the surge in on-line deliveries in metropolitan areas?
Ask students who live in high-rises how the deliveries have affected them. Solutions?

OM in the News: Why Used Clothes Head for the Dump and Not the Recycling Center

Shoppers are buying more clothes and discarding them faster than ever, sending an increasing amount of textiles to the dump and propelling the fashion industry to search for new technology to recycle used garments, reports The Wall Street Journal (Oct. 4, 2019). The growth of fast-fashion retailers like H&M, Zara, and Gap–each vying to deliver quicker and cheaper style–has flooded the world with affordable clothing that is worn just a few times.

The number of garments purchased annually by the average consumer jumped 60% from 2000 to 2014, while the number of times an item is worn before it is discarded dropped 36%. Despite the buildup of used clothes, the technology to recycle old textiles into fiber to make new ones has remained embryonic, meaning clothes eventually end up in the dump or incinerator. Textiles in American landfills jumped 68% from 2000 to 2015.

So far, companies have focused on improving collection of used clothes. H&M and Zara have in-store bins to collect garments which are then sold as secondhand clothing, largely to emerging markets. But there has been little regulatory pressure on clothing makers to take responsibility for the waste generated by their products, unlike the crackdown seen in other areas, such as single-use plastics. Garments that are recycled are mostly turned into lower-value products like wiping cloths and insulation, which ultimately hit the landfill. Less than 1% of the fiber used to produce clothes is recycled into new garments.

The growing popularity of synthetic clothing like fleece jackets and gym leggings is also releasing more tiny plastic particles into the ocean when the garments are washed. The good news is that Americans are increasingly shopping for secondhand clothing, driven by desire to save money, help the environment and avoid appearing in the same clothes twice on social media platforms.

Classroom discussion questions:

How can clothing manufacturers design and produce for sustainability? (See p.197-202 for ideas).
How many students in your class are buying used clothing, and why?

OM in the News: Saving the Planet With “Meatless Mondays?”

Without getting into the politics of global warming and sustainability, Businessweek (Sept. 30, 2019) brings up some interesting climate statistics that students may enjoy discussing.

For example, global meat consumption has more than doubled since the 1960s, and meat production is set to double again by 2050. Americans, who enjoy their steaks and burgers, eat 3 times as much meat as the global average. Should they, and other western diners curb their appetites? Consider this: Livestock are responsible for 12% of man-made greenhouse-gas emissions, more than the entire aviation industry. (Although we should point out that airlines this year will pump 1 billion tons of carbon dioxide into the atmosphere).

Most of livestock emissions comes from just one animal: the cow. Cattle are responsible for vastly more emissions than chickens and pigs, in part because their digestive systems produce methane, a potent greenhouse gas. From a climate-change perspective, serving roast beef at dinner is like driving 100 miles in a car. But cattle don’t just produce gas; they also take up a lot of space. In Brazil, swaths of the Amazon have been cut down to make room for cattle ranches, releasing huge amounts of trapped carbon. Brazil is hardly alone: More than a quarter of the earth’s ice-free land has been set aside for grazing.

Most scientists agree that eating less meat would help to avert a worst-case climate scenario. If all the world swore off meat, it would cut global emissions by 8 gigatons a year — the same as shutting down 2,000 coal-fired power plants. Adopting the Mediterranean diet, which includes poultry but limits red meat, would have the same impact as driving 70 fewer miles each week. The “Meatless Mondays” movement, now active in 40 countries, commits followers to going vegetarian one day a week. The effects add up: Skipping a single quarter-pound hamburger can save more than 400 gallons of water and the energy it takes to power a smartphone for 6 months. Do it every week for a year, and the greenhouse-gas savings are equivalent to biking 1,000 miles instead of driving.

Classroom discussion questions:

How many students would support a “Meatless Monday?”
Why is this an OM issue, and how can managers act to cut greenhouse gasses?

OM in the News: Amazon Delivery Aims Electric, But Employees Want More

Amazon plans to buy 100,000 electric delivery vehicles as it seeks to reduce its carbon emissions in the face of criticism of its environmental impact, reports The Wall Street Journal (Sept. 20, 2019). The e-commerce giant is ordering the electric vehicles from startup Rivian Automotive, in which it invested $700 million this year. Amazon said the vehicles will start delivering packages to customers in 2021. The company plans to have 10,000 of the new electric vehicles on the road by 2022, and all 100,000 by 2030. Amazon has built up its delivery fleet in recent years and has become a force in the shipping industry, although it still works with companies such as UPS.

The sustainability commitments are part of a new climate pledge that promises Amazon will report greenhouse-gas emissions regularly and implement strategies to reduce carbon emissions. Amazon said it expects 80% of its energy use to come from renewable sources by 2024, up from 40% now. It is working toward its facilities being 100%-powered using renewable energy by 2030, helped in part by the development of large-scale wind and solar projects.

Amazon’s climate pledge comes one day before more than 1,550 Amazon employees world-wide threatened to walk out of work if the company didn’t do more to fight climate change. The group of Amazon employees said that the company’s announcement was a win, but said they still plan to walk. “The Paris Agreement, by itself, won’t get us to a livable world. Today, we celebrate. Tomorrow, we’ll be in the streets,”

Classroom discussion questions:

What are various components of Amazon’s delivery strategy?
Should employees be able to dictate the firm’s sustainability strategy?

OM in the News: Hasbro to Phase Out Plastics From Packages

Hasbro Inc. — known for its plastic dolls, Transformers and Mr. Potato Heads — is vowing to cut down on the plastic components used to package those products, reports Industry Week (Aug. 20, 2019). The toy company will start phasing out plastic from new packaging, including elastic bands and shrink wrap, starting next year, with a plan to eliminate virtually all plastic from packages for new products by the end of 2022. The company has not yet announced a plan to cut down on plastic usage in the toys themselves, though it will soon announce steps involving more sustainable materials.

The packaging switch will only apply to new products. About two-thirds of Hasbro’s product portfolio is new each year. “Something already designed and on the shelf we’re not taking off the shelf, but everything we’re putting into the marketplace going forward” would get the new packaging where it makes sense, said Hasbro’s CEO. The new packaging costs will be about the same for the company.

There are some places Hasbro won’t be able to replace plastic, because of health and regulatory rules. For example, packaging for Easy Bake Oven ingredients will remain wrapped in plastic to keep the food tamper-proof and fresh. So far, Hasbro hasn’t been able to find an alternative.

Consumer companies are facing an increasing backlash to single-use plastics, with major corporations from PepsiCo to Procter & Gamble vowing to cut back.

Classroom discussion questions:

How is this an OM issue?
Why is packaging so important to Hasbro?

OM in the News: Amazon’s Package Streamlining

Eight years ago, we reviewed an excellent book called Force of Nature: The Unlikely Story of Wal-Mart’s Green Revolution. At that time Wal-Mart, which was long the target of environmentalists, created nothing less than a green revolution. One of its changes was forcing suppliers to reduce packaging sizes, which ended up saving $3.4 billion a year while reducing trash.

Now, in a similar vein, the new giant on the block, Amazon, is pressuring brands to make their packaging more efficient, prompting vendors to make costly changes to their businesses or face fines. Amazon has told companies they must make packaging for thousands of larger products more compact and easier to open. Eventually, Amazon wants every product it ships to meet similar standards. The firm said the requirements will make packages more environmentally friendly.

The new packaging requirements are the latest example of Amazon’s power to get vendors to change the way they do business, writes The Wall Street Journal (July 30, 2019) . Manufacturers of items from soup to garden rakes say they have to sell through Amazon to reach more customers. Philips Norelco OneBlade said it cut the components in its razor packaging to 9 from 13 and reduced the volume of packaging by 80% to meet the new standard. Hill’s Pet Nutrition said it decreased the packaging volume of its Science Diet premium dog food by 34% and the amount of wasted space, or air shipped, by 82%. The maker of Rubbermaid FreshWorks said it cut the components used to ship its containers to 2 from 7.

Amazon’s expanding e-commerce footprint has been consuming more cardboard and plastic packaging. Now, it is trying to address consumer calls to cut back on waste while reducing excess weight and volume to generate savings on shipping as well.

Classroom discussion questions:

What are the similarities between Wal-Mart and Amazon in this regard? The differences?
Why is this an important OM issue?

OM in the News: Audi’s Pollution Tricks

“After more than $30 billion in fines, numerous indicted executives and a guilty plea in the U.S, you wouldn’t think there was much more to learn about the Volkswagen emissions scandal,” writes The New York Times (July 26, 2019).

Wrong. Four years after VW confessed to systematically evading pollution rules for a decade, new documents show that VW’s Audi luxury-car unit was more deeply involved in developing the emissions cheating scheme than previously known, and continued to sell vehicles with illegal software even after the scandal became public. The documents show that Audi managers and engineers were just as willing as their VW counterparts to cheat in pursuit of the company’s goal of becoming the largest carmaker in the world.

Audi execs bluntly discussed what was in effect a criminal conspiracy, using terms like “defeat device” or “cycle beating” that clearly connote illegal attempts to defeat the testing procedures used by regulators. “We won’t make it without a few dirty tricks,” wrote an employee. Trapped between corporate aspirations and the laws of physics, Audi engineers devised an ingenious but illegal workaround. They installed software in the engine that could recognize the telltale signs of an official emissions test. If regulators were looking, the software would temporarily ramp up pollution controls to be compliant. In everyday use, the cars produced emissions far above legal limits, resulting in estimates of 1,000s of pollution-influenced deaths.

A 2008 Audi Powerpoint presentation noted that the approach was a form of cycle beating, the automotive equivalent of cheating on an exam. “Highly critical in the USA!” the document warned.
As VW later admitted in a plea agreement, Audi deployed illegal software anyway. So ingrained was the use of illegal software that Audi continued to use it even after the U.S. formally accused it of emissions cheating in 2015.

Classroom discussion questions:

Why is this a sustainability issue?
What exactly did VW do that was wrong?

OM in the News: Tesla’s Secret Source of Cash

For years, Tesla has hauled in revenue by selling credits to other carmakers that needed to offset sales of polluting vehicles to U.S. consumers. “These sorts of transactions have largely been shrouded in secrecy — until now,” reports Industry Week (June 3, 2019). GM and Fiat Chrysler just disclosed that they reached agreements to buy federal greenhouse gas credits from Tesla.

The deal with GM will come as a surprise to those who thought years of sales of plug-in hybrid Chevrolet Volts and all-electric Chevy Bolts would leave GM in the clear with regard to regulatory compliance. But demand for its battery-powered vehicles will still be dwarfed by its gas-guzzling trucks and SUVs in coming years. Fiat Chrysler disclosed agreements to buy credits from Tesla that were reached in 2016, 2018 and earlier this year. Fiat says that “U.S. standards are getting stricter at a pace that far exceeds the level of consumer demand for electric cars that is required for compliance.”

Tesla has generated almost $2 billion in revenue from selling regulatory credits since 2010. Its home state of California has a mandate that requires carmakers to sell zero-emission vehicles in proportion to their share of the state’s auto market, which is the largest in the country. If manufacturers don’t sell enough non-polluting vehicles, they have to purchase credits from competitors like Tesla to make up the difference.

GM’s credit purchases illustrate how challenging the U.S. fuel efficiency requirements are getting, even for automakers that are adding more zero-emission vehicles to their lineup. While all automakers complied with U.S. rules in model year 2017, most large manufacturers cashed in credits to get there.

Classroom discussion questions:

The cost of purchasing greenhouse gas credits is a direct cost to those purchasing standard internal combustion engine cars. Is this a fair cost to those customers?
Tesla’s owners also purchase less gasoline per mile traveled and therefore pay fewer taxes to maintain roadways. Should this disparity be addressed?

OM in the News: Pollution and Sustainability on the Seas

Some shipowners want to avoid the financial impact of investing in new fuel and equipment to meet environmental targets by simply slowing ships down.

The new editions of our OM texts feature Celebrity Cruises, and Supp. 5 (Sustainability in the Supply Chain) includes a video case study called “Saving the Waves at Celebrity Cruises.” This recent article in The Wall Street Journal (May 11, 2019) provides a complementary discussion of sustainability issues at sea, as more than 100 shipowners have just signed a UN motion calling for slower sailing speeds to cut greenhouse gas emissions.

The measure could ripple across international supply chains, with products taking more time to be delivered and cargo owners paying more for transport costs because of the longer sailings. But some container carriers oppose the slow-steaming plan, which they believe would undermine their efforts to improve service in the time-sensitive supply chains of their big consumer-goods customers.

Ships move the world’s commodities like oil, iron ore and grains and the vast majority of manufactured goods, including cars, home appliances, clothing and food. They also contribute around 3% of the world’s global pollution, an amount comparable to major emitting countries.

A new maritime environmental target takes effect Jan. 1st,, when vessels will be required to slash sulfur emissions that come from burning the heavy oil that powers ships. International Maritime Organization members have also agreed to improve ship fuel efficiency by 30% by 2025 and to slash greenhouse gas emissions by half by 2050, compared with 2008 levels.

Much of the sulfur-emissions reduction will come from using new low-sulfur fuel that oil refiners are preparing for the market. Operators also are buying equipment known as scrubbers that treat engine exhaust. The shift will add up to $15 billion a year to fuel costs industrywide.

Classroom discussion questions:

What are the tradeoffs shippers and cruise lines are facing?
What issues impact sustainability on the seas?

OM in the News: The Tiny Plastics in Clothes Are Becoming a Big Problem

Makers of sportswear and fleece jackets are trying to address concerns about tiny plastic particles from synthetic clothing finding their way into seafood and drinking water. While the plastics backlash has focused on single-use products like straws, bottles and coffee cups, synthetic clothing is gaining attention because such garments shed plastic every time they are washed.

Each year, more than a half-million metric tons of microfibers—the equivalent of 50 billion plastic water bottles—enter the ocean from the washing of synthetic textiles, reports The Wall Street Journal (March 8, 2019). While all clothing sheds fibers when washed, synthetic particles—unlike wool and cotton—don’t biodegrade. Most conventional washing-machine filters aren’t designed to trap such tiny particles, and while wastewater-treatment plants capture a big slice, they don’t trap everything. The problem is worse in countries that use lots of synthetic clothing and have fewer wastewater-treatment plants.

The number of microfibers entering the ocean is forecast to accelerate as demand for clothes rises. More than 22 million metric tons of microfibers are estimated to enter the ocean between 2015 and 2050. Microplastics have turned up in seafood, drinking water, beer, honey and sugar, but the impact on human health is unclear. Research shows that ingesting microplastics can hurt the ability of planktonic organisms to feed and the ability of fish and marine worms to gain energy from food.

Pending bills in New York and California would require labels on clothes made from more than 50% synthetic material to tell consumers that these shed plastic microfibers when washed. Patagonia found fabrics shed lots of microfibers on the first wash, but few in subsequent washes. That suggests pretreating garments before they are sold could potentially capture and recycle what otherwise goes down consumers’ drains. H&M said it is exploring whether clothes can be designed to minimize shedding. The brand is monitoring the development of alternative biodegradable fibers.

Classroom discussion questions:

Is this a primarily a sustainability issue or a product design issue?
Are your students aware of the problem?

OM in the News: The Silicon Valley of Recycling

The facility sorts out a 30 foot hill of debris daily

You won’t find San Francisco’s Pier 96 in any travel guidebook but it has become a must-see destination for visitors from Afghanistan to Vietnam. They’ve come to explore Recology — one of the world’s most advanced recycling plants, a deafening system of conveyor belts and sorters that, with the help of human hands, untangles a 30-foot hill of debris collected by trucks every day from across the city.

Foreign officials and others come here to pick up tips on how to handle their own mushrooming piles of garbage back home. As the world’s population grows, people are consuming more, creating more trash, and countries are looking for ways to deal with it that put less stress on the environment. Many are part of a growing movement sometimes called Zero Waste or the Circular Economy, writes The New York Times (March 29, 2016). It entails trying to eliminate tough-to-recycle items like flimsy plastic bags and also pioneering new ways to recycle or compost everything else. Despite strained recycling economics–caused by falling oil prices that has driven down the cost of new commodities, like plastic, and, in turn, the price of recycled materials sorted and sold by Recology–interest remains strong.

Today, San Francisco diverts 80% of waste away from landfills, putting it among the elite recycling cities. San Francisco also has a world-class reputation for its composting processes, which turns food waste into fine, coffee-like grounds that is sent to farms as fertilizer.

Although Supplement 5 focuses on corporate social responsibility, this article illustrates that sustainability is a government issue as well.

Classroom discussion questions:

What is the most difficult part of the process for Recology?
Explain the concept of the triple bottom line.

OM in the News: Sustainability and Natural-Gas Truck Sales

A factor limiting natural-gas-powered truck sales is the arrival of new, more fuel efficient diesel engines

“In the midst of the strongest market for commercial trucks in 8 years, sales of natural-gas-powered haulers are just crawling along,” writes The Wall Street Journal (Aug.26, 2014). Higher purchase prices compared with diesel trucks, improved diesel fuel economy and continued scarcity of fueling stations are damping natural-gas-powered truck demand. Forecasters had expected sales to about double to 16,000 vehicles this year amid the trucking industry’s enthusiasm for natural gas a year ago, but only a 20% increase took place.

What happened? A big roadblock remains the premium for a heavy-duty gas truck—$50,000 more than the about $150,000 for a new diesel-powered truck. In theory, the payback for that higher price is recovered from fuel savings of $1.60-$1.70 for the gas equivalent of a gallon of diesel. Paybacks can average 4 years considering the average truck travels 125,000 miles a year. But fleet operators typically replace their vehicles every 3-4 years, leaving little time for them to benefit from the lower fuel costs of natural-gas-powered trucks. And the limited number of natural-gas refueling stations limits the switch to gas. Only about 750 natural-gas fueling stations are available in the U.S., and not all of these can accommodate large trucks.

The good news: UPS this year has ordered about 300 gas-powered heavy-duty trucks and bought 700 gas tractors last year. The trucks operate mostly in corridors in the West and South that have plenty of natural-gas stations, some of which UPS helped to finance. By the end of the year, about 2% of UPS’s 100,000 vehicles world-wide will be powered by natural gas. In addition, Wal-Mart, Office Depot, Lowe’s and P&G are among the companies requesting their trucking suppliers use natural-gas vehicles to comply with corporate policies to reduce carbon dioxide emissions and pollution caused by burning diesel fuel.

This article nicely complements our treatment of Life Cycle Ownership and Break-Even Analysis on p.195 in Supplement 5.

Classroom discussion questions:

1. What are the advantages and disadvantages of natural -gas-powered trucks?

2. Why have sales stalled?

OM in the News: Sustainabilty in Trucking Logistics

Here is a great article that ties into our new chapter, “Sustainability in the Supply Chain” and its Example S2 (see p. 195) dealing with life cycle ownership/break-even analysis. The Wall Street Journal (Oct.30, 2013) writes: “Operators of some of the largest U.S. truck fleets, including Lowe’s , P&G, and UPS are accelerating a shift to natural gas fueled trucks, betting on new engine technology that promises to drop the cost of shifting from diesel fuel.” Lowe’s wants its delivery company to shift all of its several hundred trucks to natural gas by 2017. P&G already has 7% of its trucks on gas and could reach as much as 20% within two years. UPS says it plans to buy 1,000 natural gas trucks by the end of next year. FedEx plans to shift 30% of its long-distance trucks to natural gas over the next decade.

The nation’s supply of relatively cheap natural gas is helping spur this shift. So are new natural gas engines that can power heavy-duty trucks that weigh up to 80,000 pounds. About 5% of all heavy-duty trucks sold next year will run on natural gas, up from 1% this year. Barriers to wider use are coming down, driven by the relatively low-cost of compressed natural gas, or CNG, which sells for about $1.50 less a gallon than its equivalent in diesel fuel, which averages about $3.87. Natural gas also produces less carbon dioxide, carbon monoxide and sulfur-based pollution than diesel or gasoline per mile driven. Diesel-engine trucks get 5-7 mpg and average 100,000 miles a year.

Waste Management, Inc. has converted 15% of its 22,000 truck fleet to natural gas, and 90% of its future purchases will be natural gas fueled, helping it save $15,000-$20,000 a year per truck, a 2-year payoff. The cost of the natural gas vehicles is still an issue. CNG trucks cost $40,000-$50,000 more than a diesel truck, which costs about $120,000. In large fleets, that premium could add millions of dollars to equipment cost.

Classroom discussion questions:

1. Why is the switch to CNG trucks an OM issue?

2. What factors are driving the change?

OM in the News: Fill ‘Er Up…With Natural Gas

LNG pump at Blu filling station in Salt Lake City

If you drive down I-15 in Beaver, Utah, you’ll see a 30-foot-tall silo with white letters that spell out “Blu.” Next to it is a truck stop. It is no ordinary truck stop. The silo contains liquefied natural gas (LNG) chilled to -200° F and ready to fuel specially outfitted 18-wheelers. The facility is owned by Blu Transfuels, which expects to build 50 natural-gas filling stations nationwide this year, according to Fortune (May 20, 2013).

Drawn to the vast potential of America’s fracking boom, Blu plans to convert natural gas into a liquefied form and use it to power the country’s fleet of 8 million heavy and medium-weight trucks, which account for 15% of U.S. oil consumption. The company’s partner, ENN, already operates 238 natural-gas stations in 59 cities in China. Blu’s VP of sales says, “LNG will allow our transportation fleet to save money and at the same time reduce its carbon footprint by 25%.”

Blu is not alone. Clean Energy, a company backed by T. Boone Pickens, says that it will have about 150 natural-gas stations in 33 states by year-end. Shell’s first LNG station opened in April in western Canada. Shell’s president says, “LNG has the potential to transform the transportation sector in a big way.”

The new LNG trucks should cost only $30,000 to $40,000 more than diesels. Given that a typical 18-wheeler travels 100,000 miles a year at 5 mpg and that LNG is about $1 to $1.50 a gallon cheaper than diesel, a driver can save as much as $30,000 a year in fuel — a one-year payback. Many trucking companies lock in their fuel costs for five years, which would provide a total savings of $120,000 over the life of the contract.

Discussion questions:

1. Why is LNG a supply chain topic in operations?

2. What major US shippers have announced plans to convert to LNG-powered fleets?