It comes from a report by the International Council on Clean Transport entitled “U.S. domestic airline fuel efficiency ranking, 2010” that was published earlier this month. (It is also discussed in the Washington Post.) Here is the question that it is attempting to answer: Given that different airlines do different things, how can we fairly compare their ability to use fuel efficiently? What’s cool about the answer is that you see with in the answer firms’ strategic and operating choices.
Archive for the ‘Sustainability’ Category
Online retail is exploding with Amazon leading the charge in the long tail, items consumers buy irregularly. Online shopping and delivery of fast movers like groceries, however, is available to few areas in the US: FreshDirect in NYC and Peapod in Chicago and some east coast cities are the big exception.
An Operations Audit gives the explanation: the costs of covering the last mile are strongly influenced by delivery density which makes large sprawl areas prohibitively costly to serve (as dotcom busts like Webvan quickly learned). In our operations strategy class, we study Peapod by linking its financial performance to its operational structure and execution. Such analysis highlights the importance of operational metrics such as stops per hour and pick&pack per hour and revenue metrics such as basket size ($ per order). Students always suggest to replace the expensive delivery process by a pick-up model. For companies with a large investment in delivery assets and processes such as FreshDirect and Peapod, however, embracing pickup (which Peapod is experimenting with) then necessitates a hybrid model. In contrast, pure-play pick-up models such as the French ChronoDrive never invested in delivery assets.
This brings us to Relay Foods which seems to differentiate itself on 3 dimensions:
- Emphasize local suppliers, and hence satisfy the “local food movement”.
- Local supply allows daily deliveries which minimizes inventory risk.
- Focus on pickup approach. (They also offer home delivery at a premium of $10/order.)
Relay foods is based in Charlottesville, Virginia, and also serves Richmond. It can show nice growth trajectories (see video below) in those two markets and earlier this month announced it raised $1.2 million to expand in to the greater Washington, Baltimore, and Philadelphia areas. (more…)
What makes for sustainable clothes? That is the focus of a Wall Street Journal article on an index developed by an industry coalition that aims to rank apparel based on a variety of factors (Which Outfit Is Greenest? A New Rating Tool, Jul 25).
The Higg Index (its name doesn’t refer to anyone but was chosen to clear copyright protections in 100-plus countries) looks at the entire life of a product from raw material to disposal. Brands can get points for asking consumers to wash items in cold, rather than hot, water, as Levi’s does, or for using recycled components like Nike’s polyester, made from used water bottles.
The graphic below shows how different fabrics stack up.
The index will initially be available to just industry insiders but the goal is to eventually have clothes in stores with tags that let consumers see the impact of their clothes.
Even in its early form, the Higg index is impacting how firms design and make clothes. (more…)
So a week after I poo-pooed Slate’s series of operations articles, they published a good one (Why Are Poland Spring Bottles So Crinkly?, Jun 19). The article makes the point that there is often alignment in operations between efficiency and being environmentally conscious. That is, a change that aims first and foremost to save money may also, for example, reduce the firm’s carbon footprint.
Consider Nestlé Waters North America, the company behind water brands like Poland Spring, Arrowhead, and Deer Park. It manufactures all its own bottles—an astonishing 20 billion each year. Starting about seven years ago, the company began to examine its processes. It discovered 1) that it could use far less material in manufacturing its bottles, and 2) that those bottles represented 55 percent of the company’s carbon footprint. “When you make improvements,” says CEO Kim Jeffery, “you tackle the items with the most impact first. The bottle was the logical place to go.” …
Posted in global operations, Green ops, Integration, Supply Chain, Sustainability, tagged global operations, Green ops, Supply Chain, Sustainability, vertical integration on June 11, 2012 | 1 Comment »
Here’s an interesting story at the intersection of supply chain strategy and sustainability. The LA Times reports that Taylor Guitars has bought an ebony mill in Cameroon (Taylor Guitars buys ebony mill, pitches sustainable wood, Jun 7).
For Taylor Guitars, which has used ebony from Cameroon for many years, the chance to ensure a steady supply of legal ebony was too good to pass up, Taylor said in an interview.
The company teamed late last year with Madrid firm Madinter Trade, which sells tone woods for musical instruments, to buy the Crelicam mill outside of Yaounde, the capital of Cameroon. The purchase wasn’t officially announced until late last month.
Taylor said it’s been a difficult process bringing the mill’s wood sourcing and operations up to what he and his partners consider acceptable. The mill’s subcontractors, for example, typically cut down 10 trees to find one with all black wood, Taylor said. He agreed to boost their pay to get them to deliver that ebony that had been considered undesirable.
There are some interesting motives behind this move. (more…)
Posted in global operations, Green ops, Lean Ops, Manufacturing, Operations Strategy, process improvement, Product Development, product variety, Quality, Services, Supply Chain, Sustainability on June 5, 2012 | 2 Comments »
For once we are not reporting on external content but on our own: I am excited to announce a totally new approach to executive learning and education on operations. Co-author and co-blogger Gad Allon and I have been working with our friends at McKinsey & Company to design the Executive Operations Experience: From Strategy to Execution.
Operations executives who are eager to stay current, hone their skills and broaden their networks, take note! In an exciting cooperative venture, the Kellogg School of Management at Northwestern University in Illinois, USA, and McKinsey & Company will be offering a first-of-its-kind, experiential learning program starting in the fall of this year. Four, three-day sessions taking place at McKinsey’s model factories throughout Europe will provide a curriculum that covers all operational functions, jointly taught by both academics and consultants. Learn if the new 2013 program might be right for you here.
How much does it cost to change a light bulb? More than you may have guessed if you think of retailers with large parking lots or hotels with high lobby ceilings. In fact, for these firms the cost of changing light bulbs can be so high that it actually changes the calculation on whether it is worth adopting new types of technologies. As the Wall Street Journal reports (The Math Changes on Bulbs, Nov 30), many firms such as Wal-Mart and Caesars Entertainment are switching to LED bulbs not so much because they use less energy but because they last so long.
Here the reporter explains the reasoning:
Now you may think of Ikea as just some oak and some pine and a handful of Norsemen selling furniture for college kids and divorced men, but Businessweek reports that they are also logistics innovators (Ikea’s Challenge to the Wooden Shipping Pallet, Nov 23). Specifically, they are looking to replace wood pallets with cardboard ones.
Ikea, which uses 10 million pallets to ship goods from suppliers to its 287 stores in 26 countries, will ditch wood worldwide by January, cutting transport costs by 10 percent. The new corrugated cardboard design can support loads of 750 kilograms (1,650 pounds), the same as timber, Skjelmose says. At two inches high, the paper pallets are one-third the height of wooden ones, and they’re 90 percent lighter, at 5.5 pounds. The svelte profile means Ikea can cram more goods into each shipment. The pallets, assembled onsite by most of Ikea’s 1,200 global suppliers, will be used only once before being recycled.
To make obvious joke, the article is silent on whether assembling the pallets requires an allen wrench or wooden pegs.
Posted in Auto Industry, Automation, design, Green ops, Lean Ops, Logistics, Luxury goods, Manufacturing, One Line, Quality, Sustainability, Technology, tagged Auto Industry, Manufacturing, VW on November 30, 2011 | 1 Comment »
I love to see how things are made and VW makes that especially joyful in their novel “transparent factory.” This is a completely new approach to factory design and architecture with several noteworthy innovations that make this a perfect fit-in for a center location in beautiful downtown Dresden: