It’s been awhile since we have written about how sustainability and operations interact so it is worth pointing to two recent articles. One is from the New York Times and looks at how high oil prices are leading to innovations in how consumer goods are packaged (Devilish Packaging, Tamed, Jun 2). In particular, the article considers how firms are replacing nasty clamshell packaging with packaging that contains less plastic (see the picture to the right).
“With the instability in petroleum-based materials, people said we need an alternative to the clamshell,” said Jeff Kellogg, vice president for consumer electronics and security packaging at the packaging company MeadWestvaco. …
But reducing packaging is more complicated in physical stores. The packaging has to sell the product, whether with explanatory text, bright colors or catchy graphics. And it has to deter shoplifters. Retailers lost about 1.44 percent of sales to theft in 2009, the latest numbers available, according to the National Retail Federation.
“Clamshells actually served that purpose really well for the last 20 or 30 years,” Mr. Kellogg said. Then, petroleum prices rose, first in 2008 and again this year, so the cost of producing clamshells and other plastic packages, which are petroleum-based, shot up.
There are a couple of layers to this. Amazon has been pushing for less intrusive packaging for a while (see Gady’s post from last fall) since they don’t need it for items that are just being picked in a warehouse. Now the action has moved to the likes of Home Depot and Target who count on attractive displays to sell product and security systems to prevent theft. So whatever replaces them clamshell has to serve multiple ends.
Another interesting twist on this is that the impact of reducing the plastic content of packaging goes beyond just tying up fewer hydrocarbons in covering up light bulbs. For example, the article discusses the gains from moving from big clamshells to smaller blister packs.
The cost savings are big, Mr. Sheehan said. With a blister pack, the cost of material and labor is 20 to 30 percent cheaper than with clamshells. Also, he said, “from package density — the amount that you can fit on a shelf, or through logistics and supply chain, there is frequently 30 to 40 percent more density in these products.”
The packages also meet other requirements of retailers. Graphics and text can be printed on them.
Because most people cannot tear the product out of the blister pack with their hands, it helps prevent theft. Also, the small Sensormatic tag that is linked to a store’s alarm system is hidden between the two sheets of cardboard; with clamshells, it was stuck onto the exterior, so a shoplifter could more easily peel it off.
The second article is from the LA Times and discusses how Wal-Mart and other companies have striven to increase their sustainability while boosting the bottom line (Wal-Mart’s motive is no secret: Going green saves it money, Jun 4). There are some interesting examples that go beyond the retailing behemoth.
Beer brewer Anheuser-Busch InBev said it wanted to cut 30% of water use from its production process within five years and to recycle and reuse 99% of its waste by 2012. Hardware chain Lowe’s has recycled nearly 1 billion pounds of wood pallets and cardboard.
Next year, PepsiCo Inc. is planning to test beverage bottles made entirely from plant-based sources — which could include the more than 1 billion pounds of oat hulls and orange peels that the company’s production facilities produce as waste.
IBM Corp. ranked first for environmentalism on a list of 100 companies compiled this year by Corporate Responsibility Magazine. But environmentalism isn’t “a demonstration of corporate virtue” or a form of philanthropy for the company, Chief Executive Samuel J. Palmisano said in a speech last year. It’s a growth strategy.
“The concerns about our natural environment are not opposed to the concerns of our economies and our societies — they are one,” he said.
As for Wal-Mart notes that some of their initiatives go directly to their operations.
But behind the scenes, operations have also gotten a sustainable revamp. The company said it was diverting 80% of its waste in California away from landfills — recycling some into new products. It has already saved millions of dollars scaling back the amount of product packaging.
The article also gives a caveat.
Wal-Mart says it’s proceeding cautiously because any step it takes could significantly affect thousands of suppliers.
“As a large company, we have a responsibility and an opportunity — the decisions we make can accelerate change across the whole supply chain,” said Leslie Dach, executive vice president of corporate affairs. “But we also have to be more careful and considerate because of who we are.”
It’s an interesting trade off. On the on hand, Wal-Mart can make a lot of firms jump. If they decide that something is worth doing, whole industries and supply chains can change quickly. On the other hand, that means there are severe consequence to being wrong. That suggests that smaller firms can take more chances if they can find someone to play their game. Wal-Mart can certainly find people to play their game, but may impose a lot of costs on a lot of people if they are wrong.