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

OM in the News: Fuel Alternative Trucks Aid Sustainability at UPS

UPS is boosting its fleet of compressed natural-gas vehicles by about 19%

United Parcel Service Inc. is growing its fleet of alternative-fuel trucks as the delivery giant pushes to reduce fuel costs and vehicle emissions. The parcel carrier is spending $130 million to buy 730 compressed natural-gas vehicles, boosting its current CNG fleet by about 19%, and to add five CNG fueling stations to its existing network of more than 50 stations. The UPS investment is part of a broader effort to trim the company’s greenhouse-gas emissions from its ground operations by 12% by 2025, reports The Wall Street Journal (June 20, 2018).

Fuel is historically the biggest expense for transportation companies. While diesel prices dipped in 2015 and 2016, the cost has been climbing again. Companies are exploring alternatives. In recent months, trucking operator U.S. Xpress and beer-maker Anheuser-Busch, have reserved hundreds of hydrogen-electric trucks from Nikola Motor. Companies are also lining up to test out Tesla Inc.’s all-electric Semi big rig, Still, alternative-fuel vehicles account for a slim portion of the overall truck market. New models provide significantly better fuel economy than a decade ago.

In UPS’s case, by 2020 the company aims to have one in four new vehicles purchased be an alternative fuel or advanced technology vehicle, such as a hybrid truck or one incorporating lightweight materials that improve fuel efficiency. It also wants to swap out 40% of all fuel for its ground operations with sources other than conventional gasoline and diesel. Between 2008 and 2018 UPS will have invested more than $1 billion in alternative-fuel and advanced-technology vehicles and fueling stations. The volume of goods moved by truck continues to grow in the U.S.

Classroom discussion questions:

What model in Supplement 5 of the text can trucking companies employ in decisions such as these?
Why is UPS spending so heavily on its fleet?

OM in the News: The Fashion Industry Goes Green

In a factory the size of an airport terminal, laser cutters zip across long sheets of cotton, slicing out sleeves for Zara jackets. Until last year, the scraps that spill out into wire baskets were repurposed into stuffing for furniture or hauled off to a landfill near the plant in northern Spain. Now they’re chemically reduced to cellulose, which is mixed with wood fibers and spun into a textile called Refibra that’s used in more than a dozen items such as T-shirts, trousers, and tops.

The initiative by Inditex, the company that owns Zara and 7 other brands, highlights a shift in an industry known for churning out super cheap stuff that fills closets for just a few months before being tossed into the used-clothing bin. Gap promises that by 2021 it will take cotton only from organic farms or other producers it deems sustainable. “One of the biggest challenges is how to continue to provide fashion for a growing population while improving the impact on the environment,” says H&M’s CEO.

The $3 trillion fashion industry consumes vast amounts of cotton, water, and power to make 100 billion accessories and garments annually—3/5 of which are thrown away within a year, writes Businessweek (May 7, 2018). And less than 1% of that is recycled into new clothes. “The equivalent of a dump truck filled with textiles gets landfilled or incinerated every single second,” says one researcher. To tap into this trend, H&M is seeking to make all its products from recycled and sustainable materials by 2030, up from 35% today.

Inditex last winter started disassembling old clothing to spin into yarns for fashions it markets as “garments with a past.” “We’re trying to find a more sustainable version of all materials,” says an Index exec. Today’s recycled jeans, he says, are typically only about 15% repurposed cotton, because the fiber “gets worn down and we have to mix with new.”

Classroom discussion questions:

Why does this industry consume so many resources?
What are the driving forces for change?

OM in the News: Apple’s Sustainability Move

Apple’s new HQ features rooftop solar panels.

“Apple has just announced,” writes The Wall Street Journal (April 10, 2018), “that it has achieved a decade-old goal of having its facilities world-wide powered exclusively by renewable energy, an achievement that will shift the company’s sustainability efforts to its supply chain, where about 10% of suppliers have made a similar commitment”.

The tech giant said it has improved to be 100% reliant on clean energy from 96% last year in part by contracting renewable energy for the first time in India, Turkey, Brazil and Mexico. The figure covers all of its retail stores, offices, data centers, as well as its new California headquarters, Apple Park, the spaceshiplike structure that is one of the largest on-site solar installations in the world.

Apple is just one of many global corporations trying to cut energy consumption and shift to renewable power including wind and solar, both to cut costs and slow climate change. More than 100 companies world-wide, including Apple, IKEA, Anheuser-Busch and Starbucks, pledged in 2014 to shift to 100% renewable energy. Many of these companies are now trying to accelerate efforts to convince their suppliers to join them.

Environmental experts said the bigger challenge will be making the manufacturers of the more than 200 million iPhones and 43 million iPads it sells annually wholly dependent on renewable energy. “We’re not going to stop until our supply chain is 100% renewable,” said Apple’s VP. Apple, which set that goal two years ago, said 9 more of its suppliers have committed to powering all production with 100% clean energy, bringing the total to 23 out of more than 200 suppliers. Apple also will be challenged to keep its own facilities at the 100% level in the years ahead, especially as it looks to add a new campus in the U.S. and $10 billion in data centers.

Classroom discussion questions:

Why is Apple’s drive an OM issue?
Why is the firm’s movement so important to industry?

OM in the News: Ford Goes Greener for Plastics

By 2011, all North American Fords have used soy-based foam in their seats

“What does Heinz Ketchup have to do with plastics and Ford Motor,” asks Plastics Technology (March 1, 2018). It’s not that the squeeze bottles used for the condiment are found throughout Ford cafeterias. Rather, the automaker and the ketchup maker are working together on finding the ways and means to use the skins from 2 million tons of tomatoes that Heinz processes each year as fillers in composite materials that would be used by Ford for vehicle components.

Looking for alternatives for “conventional” plastic materials is nothing new at Ford. Back in the 1940s Ford experimented with using soy beans as a source of plastics. Now, there isn’t a single new North American-produced Ford vehicle that doesn’t use soy oil for the production of foam that is used for seat cushions, seat backs and headrests. The company started using soy oil for the seats in the 2008 Mustang. This is non-trivial, because on average there are 40 pounds of foam in a vehicle.

Ford has been developing a variety of materials that are: (1) natural, and (2) not typically otherwise used. It started working with forest product giant Weyerhaeuser, which had seen the use of its pulp products in the U.S. diminish as paper production moved off shore. They began testing the use of cellulose fibers from trees, and in 2010 those fibers replaced glass in the Lincoln armrest. Not only did the material meet the functional and aesthetic requirements, but because the natural fibers are less dense, they were able to reduce the weight of the part. There are now 8 bio-based materials used in Fords. These include coconut-based composite materials and recycled cotton used for carpet and seat fabrics.

Classroom discussion questions:

What other components are carmakers using that are sustainable?
What are the driving factors in this endeavour?

OM in the News: The European Meat Industry’s Supply Chain Dilemma

Europe is internationally known for its commitment to the environment and fighting climate change. “But there is still a business that continues to embody the recklessness of a bygone era of pollution and destruction: the European meat industry,” reports Mighty Earth (March, 2018). The meat industry relies on massive quantities of soy for animal feed to raise livestock: about 3/4 of the world’s soy is used for animal feed. An area 3 times the size of Germany is dedicated to growing soy in South America, with over 30 million tons of soybeans making it to Europe annually. Deforestation is the result of a supply chain that starts on the South American frontier and ends on European plates.

Large agribusiness companies like Cargill and Bunge are bulldozing and burning thousands of hectares of an ecosystem region spanning Argentina, Bolivia, and Paraguay to make way for industrial soy. Waterways have become polluted, and local communities report a surge in birth defects, cancers, and respiratory illnesses in not only children, but pets and livestock as well.

The total emissions associated with the conversion of South American forest and grasslands to croplands is over 3 billion metric tons of carbon dioxide between 1985 and 2013, more than 4 times Germany’s annual carbon dioxide emissions from fuel combustion. And this trend has been accelerating. Argentina alone lost 22% of its forests between 1990 and 2015, mostly to establish soy farms.

One of the reasons why the agribusiness companies’ policies and actions are so important is that they are operating in a frequently lawless environment. In Argentina, licenses issued by the local government have illegally authorized the deforestation of 150,000 hectares of protected forest, leaving soy businesses to clear land with impunity. But they would not have an incentive to do so if European companies were unwilling to buy deforestation-based soy in the first place. Despite Cargill and Bunge publicly declaring their commitment to eliminating deforestation from their operations, it has continued to occur in their supply chains.

Classroom discussion questions:

Should soy-farming sustainability be an OM concern?
What can be done to minimize the impact on South American ecology?

OM in the News: Levi’s New Laser-Wielding Robot That Makes Ethical Jeans

You know those jeans that your students love, the ripped ones that look like they’re 30 years old? (Even though they just bought them.) You probably don’t realize it, but a team of designers took weeks to figure out exactly where to fade the indigo and position the tears for the most authentic vintage look, reports Fast Company (Feb. 28, 2018). Then, factory workers used sandpaper and harsh chemicals to make it look properly worn in. The jeans washed for hours, so that the blue color would fade out–even though those dyes end up polluting the groundwater.

At Levi’s, a brand that talks about trying to be as sustainable and humane to workers as possible, the ugly reality of what it takes to make jeans—especially when you are selling $4.6 billion worth of them a year—isn’t something that is brushed under the table. “Our company offers over 1,000 different finish looks per season, which is mind boggling,” says a Levi exec. “They’re all produced with very labor-intensive, repetitive motion jobs, and a long list of chemical formulations.”

But the firm has just introduced a brand new laser technology that will, in a snap, do what now takes much longer. The breakthrough uses infrared light to etch off a very fine layer of the indigo and cotton from a pair of jeans, creating the same kind of faded finishes and tears in 90 seconds flat. “It started as an idea for a change in a manufacturing process,” says Levi’s supply chain officer. “But it has actually evolved into a holistic digital transformation that covers the whole supply chain from end to end.” Using the laser-wielding robots in Levi’s factories has the potential to eliminate many repetitive, dangerous tasks that are an everyday part of the job for denim workers– and help cut down on the 13,500 workforce. The new laser tech saves time, effort, and the Earth.

Classroom discussion questions:

Are your students aware of how faded jeans impact the Earth?
Why is this a supply chain issue?

OM in the News: The World’s Trash Used to Head to China

Since the 1990s, the world has shipped its waste paper, discarded plastic and unwanted metals to China, where they are destined to be used as raw materials to help power the country’s export-driven manufacturing boom. In 2016, China imported about $18 billion worth of what the government calls solid waste.

But China doesn’t want to be the rest of the world’s trash can, writes The New York Times (Dec. 4, 2017). Over the summer, regulators in Beijing started an unusually intense crackdown on what they called “foreign garbage,” citing health and environmental concerns.

As with so much else in the global economy, China’s decision is rippling through a vast supply chain that stretches from big waste companies in Texas to the “cardboard grannies” in Hong Kong that pick through mounds of paper and plastic. Scrap dealers are rushing to find buyers elsewhere in Asia, but the Chinese market is so large that it cannot be easily replaced. “It’s almost like they turned the spigot off overnight,” said the president of Waste Management.

As China revved up its manufacturing machine to power growth over the years, officials were willing to tolerate some of the downside of scrap, namely the pollution of local soil and rivers by low-end recycling practices. But China’s economic might increasingly means that it no longer needs to make such environmental sacrifices.

In the U.S., the new rules mean more garbage could stay at home. While that could be good news for some recyclers, it could also mean more waste in the country’s landfills. Recyclers might also have to upgrade their facilities to handle the waste, leading to higher costs for American municipalities and taxpayers.

Classroom discussion questions:

Why is this an issue for operations managers?
What should U.S. municipalities do the offset the impact?

OM in the News: Score One for Hydrogen

Fuel-cell-powered warehouse forklifts gaining on electric

Ever since a Swiss inventor named François Isaac de Rivaz built the first hydrogen-powered automobile in 1808, inventors and futurists have pinned their dreams and fortunes on the clean technology that converts water to energy. But hydrogen never caught on as a fuel, mainly because of its relatively high costs.

“Now, thanks to the thriving warehouse networks of online and big-box retailers, hydrogen has found a place inside growing fleets of forklifts,” reports Businessweek (Aug. 7, 2017). The numbers work out: Although a forklift outfitted with a hydrogen fuel-cell pack costs up to $58,000 — about twice as much as one with a standard lead-acid battery — hydrogen models are 10% cheaper over the 10-year life span of an average forklift. That’s because they can be charged in minutes instead of hours, eliminating the labor cost of charging batteries, freeing up warehouse space and keeping goods flowing around the clock.

Fewer than 3% of the 600,000 forklifts used in U.S. warehouses run on hydrogen, but that number is growing. Amazon recently agreed to try out the technology in forklift fleets at 10 of its warehouses. And last month, Wal-Mart matched Amazon’s $600 million deal, committing to double, to 58, the number of its warehouses that use forklifts running on hydrogen cells.

Fuel-cell companies are also pushing beyond forklifts, using hydrogen to power buses, delivery trucks and drone aircraft. In each of those markets, the vehicles return to a central depot for refueling, eliminating the need for a sprawling network of hydrogen stations.

If you are covering Supplement 5, Sustainability in the Supply Chain, this is a perfect real life example to illustrate Life Cycle Ownership (see Example S2).

Classroom discussion questions:

How can the operations manager decide which forklift is the best choice?
What are the advantages and disadvantages of hydrogen-powered vehicles?

OM in the News: Everything You Should Know About Lithium

Lithium is neither cheap nor easy to mine at this Nevada site

Lithium: “a metal crucial to what bankers, regulators, and clean-energy advocates see as the imminent transformation of the transportation sector and the electric grid,” writes Businessweek (April 3-9, 2017).

The lightest metal on the periodic table of the elements and a superb conductor, it’s what gives the lithium ion batteries in our cell phones, laptops, Priuses, and Teslas the ability to recharge more times, last longer, and provide more energy per weight or volume than other battery chemistries. (The lithium in a Tesla costs around $500). It’s also what makes devices explode if their battery-management systems aren’t working properly, as in many hoverboards or Samsung’s Galaxy Note 7.

How is lithium changing transportation? Chinese battery and auto manufacturer BYD just build its first American bus factory near LA. The buses are lithium-intensive; each uses about 8 times as much as an average electric vehicle, which in turn uses about 10,000 times as much as an iPhone. The vehicles are more expensive than ones that run on diesel or natural gas, but only initially. After 3 to 5 years, customers save $50,000 to $75,000 per year per bus on fuel and maintenance.

In Shenzhen, 20 miles north of Hong Kong, thousands of electric buses draw wind power from the grid overnight, when residential and business customers aren’t using it, and then disperse it during the day as they drive around the city. A shift toward electric vehicles is under way in Europe, as well. BMW and Daimler have each invested hundreds of millions of dollars in electrifying their fleets, moves that help drive the European Union’s policies. And China’s broader electric auto market will soon dwarf them all. Although electric vehicle adoption has been slower in the U.S. than expected, the price of battery packs has been dropping fast, to the point that electric cars are poised to become cost-competitive with gas-powered vehicles.

Classroom discussion questions:

Why is lithium so important in manufacturing?
Lithium prices have increased from $4,000 per metric ton in 2014 to $20,000 today. Why?

OM in the News: America’s Electronics Trash–and Mexico

Life and business revolve around electronic waste in this Mexico City neighborhood, much of it from the U.S. — Life and business revolve around E-waste in this Mexico City neighborhood, much of it from the U.S.

On the street here, in Renovación, a neighborhood in Mexico City, Jesus Gómez watches as 8 men and a woman sit in a circle under an intense sun, breaking two huge sacks of spent Motorola cable-TV boxes apart with hammers and chisels. They wrench out bits of copper, metal, and circuitry, with shards of metal and plastic flying everywhere. Gómez will find buyers for all of it.

Outside the workshop are more piles, and there are yet more in the street; the junk seems to pour in constantly, some of it from around Mexico City and a lot from much farther. Heaps are from Texas. “The gringos throw it out,” says Gomez’ partner. “We do the dirty work of breaking it apart.”

That’s the essence of Renovación. At one unlicensed workshop after another, adults and teenagers disassemble printers, monitors, and PCs. It’s hazardous work: Smash an old TV, and you risk spewing lead into the air. Crack open an LCD flatscreen, and you can release mercury vapor. Mobile phones and computers can contain dangerous heavy metals such as cadmium and toxic flame retardants. Mexican workplace regulations, like those in the U.S., require e-waste shops to provide such safety equipment as goggles, hard hats, and masks. There’s little of that in Renovación.

In much of the world, Renovacion couldn’t exist, writes Businessweek (Nov. 14-20, 2016). Business owners wouldn’t be allowed to employ people in those conditions. Twenty-five U.S. states have laws establishing what’s known as extended producer responsibility, or EPR. That means electronics makers must collect, recycle, and dispose of discarded equipment rather than allow it to enter the waste stream. But the lack of a formal, regulated recycling industry is one of many reasons Mexico has become a magnet for spent electronics. E-waste is a poorly tracked trade, but Mexico is the No. 1 importer of used and junked electronics from the U.S., taking in almost 129,000 tons a year.

Classroom discussion questions:

After reading the linked article, what has Dell done for EPR?
What are the ethical issues that arise in this situation?

Good OM Reading: What Makes a Supply Chain Sustainable?

A growing number of companies are looking to build sustainability into their supply chains. This is due, in part, to mounting pressures to disclose supply chain information. The growing emphasis on supply chain sustainability is commendable, but there is a problem: Most sustainable supply chain initiatives do not actually address sustainability at all. This new article in MIT/Sloan Management Review (Nov. 15, 2016) proposes 4 broad and hierarchical strategies for supply chain management: legal, ethical, responsible, and sustainable.

A responsible supply chain, for example, must also be legal and ethical. However, a responsible supply chain is not necessarily sustainable. First, there are supply chains that operate within legal limits and comply with agreed-upon contractual requirements. All partners in these supply chains must follow, for example, established legal, building, and environmental standards.

Next come ethical supply chains. These focus on how organizations ought to behave. Ethical supply chains expect all partners to honorably conduct their business. For example, the Electronic Industry Citizenship Coalition’s Code of Conduct sets supply chain standards in the electronics industry.

Third, there are supply chains that operate responsibly. Partners in these supply chains are committed to continual improvement, considering stakeholder interests, and making positive contributions in their communities. Responsible supply chains focus on making things better.

Last are sustainable supply chains. These require that all partners behave legally, ethically, and responsibly. However, they must also consider how their actions are situated in the broader sustainability context. A supply chain is sustainable only if its activities can be supported by nature and society over the long term. This is what the other strategies miss.

What makes a supply chain sustainable? Sustainable SCM requires setting science-based targets, developing metrics that take sustainability context into account, and building relationships with players across the chain.

Good OM Reading: The State of Sustainable Supply Chains

Building and maintaining resilient supply chains is a key success factor for business in a globalized and fast-changing world. Over the past few years, sustainability has been added to the procurement and sourcing criteria for many companies. Workforce health and safety incidents, labor disputes, world conflicts, raw materials shortages, environmental disasters and new legislation in areas like modern slavery have contributed to the growing awareness of supply chain risks.

Many companies still do not have an understanding of the performance, risks and sustainability impacts of their supply chain. This new 48 page Ernst & Young study explores the current state of sustainable supply chains by interviewing more than 100 global supply chain executives. The study shows that by improving performance throughout their supply chains, companies can enhance processes, save costs, increase labor productivity, uncover product innovation, achieve market differentiation, and have a significant impact on society.

Companies do vary significantly in their approaches to supply chain sustainability. The interviews revealed that the approach to creating sustainable supply chains can be categorized in 5 major groups: basic, improving, established, mature, and leading. Most companies are in the improving or established categories. An improving program is characterized by a minimum level of expectations with a focus on risk and compliance, and basic auditing of high risk suppliers.

As a program becomes more established, companies set clear expectations for suppliers and develop processes to select and manage suppliers against those expectations. Companies with a mature program focus on integrating these processes, requiring suppliers to work with their 2^nd and 3^rd tier suppliers to improve performance. Mature companies also address their own sourcing processes, rather than simply relying on suppliers to achieve sourcing goals.

The report draws 6 conclusions: (1) supply chain sustainability can no longer be ignored; (2) companies are predominantly risk-driven; (3) companies tailor their approaches to create sustainable supply chains; (4) leading companies are establishing a shared commitment with suppliers; (5) technology enables visibility and influence beyond tier 1; and (6) collaboration is critical for companies to achieve greater impacts.

OM in the News: Designed for Demise

Apple's Liam robot can take apart 1.2 million iPhones a year — Apple’s Liam robot can take apart 1.2 million iPhones a year

Apple just introduced a piece of technology that will likely never be used by any consumer. Instead, it kind of cleans up after them: a robot that breaks down iPhones for recycling. The arrival of Liam—a 29-armed robot –speaks to a big challenge facing tech manufacturers today. Even as they strive to entice consumers to ditch their existing devices for the next new thing, companies must figure out what to do with the growing numbers of devices that are destined for the scrapheap as a result. “We think as much now about the recycling and end of life of products as the design of products itself,” says Apple’s VP of environment, policy and social initiatives.

Other electronics makers take a different recycling approach, designing products that simplify disassembly by replacing glue and screws with parts that snap together, for instance. Some also have reduced the variety of plastics used and avoid mercury and other hazardous materials that can complicate disposal. Samsung designed a 2016 model of its 55-inch curved television for easier disassembly, eliminating 30 of 38 screws, replacing them with snap closures. Now the TVs can be dismantled in less than 10 minutes.

The constant churn of new devices has contributed to an increase in electronic waste, some of which ends up in developing nations where local residents must deal with the health and environmental risks, writes The Wall Street Journal (June 8, 2016). “Many of the environmental problems are made during the design process,” says a U. of Illinois professor. He says a product’s design choices for the types of materials and varieties of components are critical.

Classroom discussion questions:

Describe the “design for disassembly” model in Supplement 5.
Why is this issue important to operations managers?

OM in the News: The Energy-Minded Hotel

A guest room key card at a Sofitel Hotel

American hotels have long resisted key cards (where guests must place a room key into a slot on the wall to activate the lights and temperature control system) or other energy-saving systems. Energy was cheap, and hoteliers feared that guests, who routinely left their rooms with the lights and air-conditioner on, would see any check on their energy use as an inconvenience. “But the aversion of hoteliers in the U.S.,” writes The New York Times (May 10, 2016), ” is slowly shifting as Americans have become more energy conscious and more states and municipalities have adopted rigorous building codes for energy use.”

In 2014, 29% of hotels had a sensor system in guest rooms to control the temperature, compared with less than 20% in 2004; and more than 75% had switched to LED lighting, up from less than 20%. Other energy-saving measures had also been more widely adopted. Energy costs typically represent 4-6% of a hotel’s overall operating expenses, with the largest share for heating and air-conditioning.

Many major hotels in the U.S. have digitally controlled thermostats to monitor the temperature in guest rooms. And a growing number have installed sophisticated systems that sense when a room is occupied. When a hotel guest enters a room, the device allows the temperature to be manually controlled within a certain range — from 60 to 80 degrees, for example — and then sets it back into an energy-saving mode when the room is vacant again. Such a system can save a hotel 20% or more in energy costs. And many utility companies now offer rebates to hotels that have installed digital thermostats and other energy management devices.

Classroom discussion questions:

What are the downsides of key card technology?
Why is sustainability of growing concern in the hotel industry?