Tag: EU

OM in the News: Europe’s Move Towards Rare-Earths

Europe is trying to get itself on the global rare-earths map. Estonia, once a textiles hub for the Russian Empire, is now host to Europe’s biggest production plant for the kinds of rare-earth magnets needed in electric cars and wind turbines. It is part of Europe’s push to secure a foothold in a global supply chain dominated at every step by China, reports The Wall Street Journal (Nov. 16, 2025). Financed in part by the EU, the factory is expected to begin deliveries to companies in 2026.

Production of rare-earth magnets is expected to increase at the factory in Estonia, but it still isn’t expected to meet Europe’s projected demand.

The problem: Even at the new factory’s initial planned capacity of 2,000 tons of permanent magnet material, the plant will produce a fraction of what European manufacturers need. There are plans to scale up production to 5,000 tons, but that is still a long way from being enough to break Europe’s dependence on China. Total European demand is forecast to reach about 45,000 tons by 2030.  (Companies in the U.S. are planning to build more than 40,000 tons of capacity by 2030).

After China imposed new export restrictions for rare earths this year, the U.S. stepped up subsidies and other measures to support the industry, spurring a race to build out American mining, processing and manufacturing capacity. Rare earths are also essential to manufacturing many defense systems. European auto suppliers were already eager to diversify their permanent magnet sources before China’s move.

Rare-earth magnets are widely used in products such as electric cars and wind turbines

Europe prospered over recent decades in a global trading system that allowed it to import cheap gas from Russia and rare earths from China, powering its industrial base. But Russia’s invasion of Ukraine and China’s move to restrict rare-earth exports showed how dependent the continent had become on those countries. Europe has some rare-earth processing and recycling facilities but no active rare-earth mining. For now, EU producers are relying on customers being willing to pay a premium to avoid dealing with China’s restrictions.

Classroom discussion questions:

  1. Why does China exert such power over the rare earth supply chain and why is that supply chain so important?
  2. What else can the U.S. and EU do?

OM in the News: Europe Tells Textile Producers to Manage Their Own Waste

Producers that sell textiles in the European Union will have to cover the cost of collecting, sorting and recycling those materials, under a new directive to reduce waste in the fashion industry. The EU is adopting a new law whereby producers will have to oversee the management of waste from clothing to blankets to curtains, reports The Wall Street Journal (Sept. 11, 2025). The directive covers the full life cycle of a product and aims to motivate producers to “reduce waste and increase the circularity of textile products,” since they will be bearing the cost of managing that waste.

EU Pushes Rules for Circular Economy

The EU is looking to reduce the environmental impact of the fast-fashion industry. Some 12.6 million tons of textile waste are generated in the EU each year. It estimates that just 1% of textiles are recycled worldwide.

 The law will apply to all producers, including those using e-commerce tools and irrespective of whether they are established in an EU country or outside the bloc. Smaller companies will have an additional year to comply with the requirements.

“This legislation will accelerate the move towards circular business models and more sustainable consumption,” said a recycling consultant. “The requirements will bring added costs and operational pressures for producers at a time when many are already under strain.”

Elsewhere, the EU is to set new targets on food waste. From 2031, member states will be required to reduce food waste generated during processing and manufacturing by 10%, while the target for shops, restaurants and households will be 30%. Every year, almost 60 million tons of food waste, amounting to about 291 pounds per person, is created within the EU.

Classroom discussion questions:

  1. Supplement 5 in your Heizer/Render/Munson text introduces the term “circular economy.” What does that mean and how does it apply in this EU case?
  2. Discuss the OM implications of this new directive? Does it impact U.S. firms?

OM in the News: The Biofuel Controversy

The battle lines are being drawn on the alternative fuel debate and the steps that will contribute to the International Maritime Organizations’s (IMO) emission reduction goals, reports The Maritime Executive (Feb. 17, 2025).  Major shipping lines and non-government groups are calling for the IMO to exclude biofuels from its list of green alternatives to traditional fossil fuels. They argue it would be unsustainable and could produce more harm than good.

Nearly a third of global shipping could run on biofuel in 2030– up from less than 1% today. But the price advantage of biofuels would result in unsustainable demand. Carriers have invested in the use of biofuels derived from used cooking oil and animal fats. With the supplies limited, just 2.5 – 3% of shipping could run out of used cooking oil and animal fat biofuels by 2030. Two interesting facts:

  • The vast majority of biofuels will come from palm and soy (60%), which are heavily linked to deforestation.

  • Close to 300 millions bottles of vegetable oil could be diverted to powering ships every day in 2030, putting pressure on grocery prices.

(There was a doubling of the use of palm oil biofuels in the EU between 2010 and 2020 following the introduction of a law promoting biofuels in cars.)

There is a debate in the EU on the competition for food supplies if the oils were also to be used as biofuels. “As things stand the IMO risks doing more harm than good. Palm and soy biofuels are devastating for the climate and they take up vast amounts of land,” argues one shipping exec. The fuel-intensive shipping industry would need farmland about the area of Germany to produce enough crops to meet its increased biofuel demand.  Land that could be used for farming would need to be converted to growing biofuel crops, while burning vegetable oil in ships will deprive supermarkets of a staple food item.

This could pose a serious climate problem, as palm and soy are responsible for 2-3 times more carbon emissions than even the dirtiest shipping fuels today, once deforestation and land clearance are taken into account.

Classroom discussion questions:

  1. We open the Supp. to Chapter 5 (Sustainability in the Supply Chain) with an example of airlines switching to biofuels. Is this a realistic approach given the above article?
  2. Make the case for and against shippers switching to biofuels.

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:

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

OM Podcast #1: Sustainability and Supply Chains

 

Welcome to our newest Operations Management text feature–bimonthly podcasts on topics we think you and your OM students will find interesting.

 

Jay and I will be creating 8-9 minute podcasts–posted on this blog. They will be tied to specific chapters in the text. Assignable auto-graded exercises using this podcast (in the form of multiple choice questions) are available in our MyLab OM.  To learn more about these assignments in MyLab, contact your Pearson rep at  https://www.pearson.com/us/contact-us/find-your-rep.html

Today’s topic relates to Supplement 5, Sustainability in the Supply Chain. In it, we talk about new government regulations, the clothing industry, Apple, and greenhouse gasses. Let us know what you think. The next podcast will be released in two weeks on the topic of Blockchains.

OM in the News: Why the Europeans are Not Vaccinated

As Western governments faced criticism for their pandemic management last summer, EU officials began work on a vaccine-procurement plan they hoped would put the continent at the forefront of efforts to banish the coronavirus and reopen economies, writes The Wall Street Journal (Feb. 3, 2021). Instead of its 27 member states fighting for doses from a few manufacturers, the EU would centralize purchases for 450 million inhabitants, bringing prices down and ensuring that residents of rich and poor countries alike would get equal access to the best shots available.

Half a year later, an acute shortage of doses is keeping the EU’s vaccination effort from taking off, making it likely that only a small portion of the general public will get a shot by the end of summer. The reasons: The EU was late in ordering vaccines compared with the U.S. and the U.K.; it bet on companies that have yet to deliver; and when delays started creeping in, it blamed the manufacturers instead of restarting negotiations.

A vaccination center in Hannover, Germany

Israel has vaccinated 55% of its population, the U.K. 14% and the U.S. 9%, against under 3% for the EU. While other governments were wooing vaccine makers with subsidies and immunity from liability in case of side effects, the EU focused on pushing prices down and slowing negotiations, which resulted in late orders. It also spread its purchases widely to reduce risk, signing deals with companies that are still months away from approved shots. And it was slow to authorize the vaccines it had purchased.

In January, the makers of all vaccines approved for use in the EU (Pfizer/BioNTech, Moderna, and AstraZeneca) announced cuts in deliveries because of manufacturing bottlenecks, forcing governments to slow or pause vaccinations. Yet given how complex vaccine manufacturing is, early bookers are less likely to get hit if manufacturing problems appear as production ramps up.

Classroom discussion questions:

  1. What are the cultural differences in vaccine acceptance in various countries?
  2. What are the manufacturing complications that are slowing production of vaccine shots?

OM in the News: The Brexit Bottleneck

The U.K. faces a logistics nightmare that could bring delays and shortages in essential goods after the country completes its exit from the European Union, reports The Wall Street Journal (Nov. 30, 2020). On Jan. 1, the free movement of goods across the English Channel is due to end for the first time in half a century. The change has sparked fears of severe bottlenecks at British ports and highways, where customs officers will inspect trucks amid an acute lack of staff that could rattle supply chains.

Some 10,000 trucks cross the channel on ferries each day, moving about half of all goods between the U.K. and the continent while dozens of daily sailings move freight mainly between Dover on the British side and the French ports of Calais and Dunkirk. The Port of Dover estimates that for every 2 minutes of delay each truck has to spend at the crossing, a 17-mile traffic jam will be created on the M20 highway heading to the port.

Hundreds of trucks held up on the M20 highway heading to the Port of Dover

British supermarket chains that built distribution schemes on the assumption that products would go straight from trucks to store shelves are short of refrigerated warehousing, prompting fears that much of the cargo could spoil.

Bottlenecks could affect more than 30 car makers, including Honda, Toyota and Jaguar—companies that produce around 1.8 million cars every year in the U.K. The manufacturers depend heavily on JIT parts from the EU that go straight to assembly lines to produce many vehicles exported to the continent. Some manufacturers are looking at airfreight to replace trucks, a solution that would bring big new logistics costs on top of EU tariffs that could substantially raise the price of British-made vehicles sold in Europe.

Classroom discussion questions:

  1. Which of the 10 OM decisions described in your Heizer/Render/Munson text are affected by capacity issues like this one?
  2. There are 6 tactics for matching capacity to demand listed on page 312 in Supp. 7. Will all, or some of them, apply here?