Posts Tagged ‘Green ops’


I keep an empty wine bottle from Chateau de La Rivière in my office. It says right on the front label “Mis en bouteille au chateau,” that is, that the wine was bottled at the winery. It turns out that at least in the British wine market bottling at the winery is becoming the exception, not the rule. According to the Financial Times, a large numbers of wines imported into the United Kingdom are now imported in plastic bladders (see the image above) and bottled in the UK (Crate expectations, Jan 31).

In the past few years there has been a huge structural change in how wine is delivered to those who drink it. The UK, for example, is the most important market for one of the world’s most enthusiastic wine exporters, Australia. In 2008, fewer than three in every 10 bottles of Australian wine on British shelves contained wine that had been shipped from Australia in bulk rather than in bottle. Four years later that figure was eight in every 10, and the total amount of wine shipped out of Australia in bulk overtook the volume exported in bottle.

Australia is far from the only country to ship substantial quantities of wine sloshing around in a tank inside a container rather than neatly sealed in bottles. Spain and Italy export far more wine in bulk than any non-European wine producer, and 65 per cent of all South African wine exports were bulk last year. (Chile is an enthusiastic exporter of bulk wine and earns the highest average price per litre for it.) According to the OIV, the global wine statistics-gatherer, the total volume of wine shipped around the world in bulk rose 61 per cent between 2005 and 2012 to represent more than 40 per cent of all exported wine.

So what is driving this rapid conversion from bottle to bulk? (more…)

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You might not think much about the humble beverage can. You drink your beer or soda and never really worry where the can goes next. As the Wall Street Journal tells it, however, there is an interesting supply chain story behind that can (The Aluminum Can Wars Begin, Sep 25).

The first thing to realize is that the numbers involved are kind of crazy. The US  uses around 90 billion aluminum cans a year (see the graphic at right). A large fraction of those get recycled, so the aluminum you use today may be melted down and back in your hand by December. Using old cans to make new ones is slightly cheaper but notably has huge energy savings.

Used beverage cans usually trade at around 20% less—currently at about 81.5 cents a pound versus $1.04 a pound—than the value of primary aluminum.

The costs of cleaning and processing make cans only marginally cheaper.

Those prices have stayed consistent over the last five years.

Novelis [an Atlanta-based unit of India's Hindalco Industries] says it believes using more cans will allow it to increase sales in places where lower carbon footprints have a marketing value, and to set itself up to minimize carbon taxes if they are implemented. “It’s a long view, but this helps protect our business from the impact of regulatory changes,” says Derek Prichett, Novelis’s vice president for global recycling.

In a world in which retailers like Wal-Mart want to slap some kind of green-index on all products its sells, sodas in cans from recycled aluminum could be at a real advantage.

That gets to the supply chain question: How does an aluminum producer get used cans? (more…)

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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…)

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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.” …


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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…)

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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.


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Some time ago we posted on Wal-Mart’s attempt to lead the creation of a sustainability index. The idea was to provide consumers with clear guidance on the impact of what they bought. Instead of wondering why one product cost a buck more than a different brand, they would have some information on why. Along the way, it was hoped that such transparency would lead to greater competition between firms to drive costs out of the system in a responsible fashion. So how’s that all going? According to Fortune, not so well (The trouble with green product ratings, Jul 13), forcing Wal-Mart to back off some of its initial goals.

There are several dimension to the challenges Wal-Mart has encountered. For one, not everyone has gotten on board. Wal-Mart had hoped to create a standard for the retail industry but other big retailers such as Target have not signed up. Also, the article suggests that some big brands while going along with Wal-Mart to some extent are not overly thrilled. Further, there have been some administrative headaches like finding program directors. However, the biggest problem appears to be just the daunting nature of the task.

The trouble with any consumer scoring systems is that ultimately consumption is about trade-offs. All products — no matter how “green” — impact the planet in some way. The best a consumer index can do is suggest that one product in some particular way might have less of an impact on the planet than another. To achieve this, mountains of data have to be gathered about the impact of thousands of products across every stage of their life cycle, from raw materials and manufacturing to final disposal, while including social factors like workplace conditions. How much waste was generated by the factory in rural China that made that zipper? How much phosphate was used to make this laundry detergent? Were the chips in that Blu-ray disc player manufactured in an energy-efficient way?

It gets even more complicated once such data are obtained: How should various forms of sustainability be ranked? Is soil erosion less important than carbon emissions? Gary Hirshberg, founder and CEO of Stonyfield Farm, now a subsidiary of the food giant Dannon, has been trying to measure the impact of his own organic yogurt products since the early ’90s. “I’m not saying it’s impossible,” he argues, “but it’s very difficult to do in a credible way.” …

It’s enough to make you wonder whether creating a sustainability index is even worth the Herculean effort. Hirshberg thinks not. A company, for example, might earn high marks for using recyclable packaging, but Hirshberg found that Stonyfield reduced its carbon footprint more by switching to yogurt cups that aren’t recycled. It turns out that cups made from plants and then thrown into landfills generate far fewer greenhouse gas emissions than recycled plastic containers. Similarly, a yogurt company might score high for using organically fed dairy cows, but Hirshberg found that a significant source of his company’s methane emissions — a potent greenhouse gas — is cow burps, of all things. (Stonyfield is in the process of reducing those emissions by tinkering with the feed.)

“In the end we realized that to get a real score is a very costly, complex process that’s probably not worth it,” Hirshberg says. Instead he founded a nonprofit, Climate Counts, that does not rate individual products but scores the world’s largest companies on their commitment to fighting global warming and the transparency of their sustainability efforts.


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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. (more…)

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“The Chinese want our nuts” — simply not a sentence that you expect to see in a major daily newspaper (assuming you still look at one of those) but there it is in the Wall Street Journal (Shell Shock: Chinese Demand Reshapes U.S. Pecan Business, Apr 18). In a nutshell, the story explains how the Chinese have very quickly developed a taste for pecans and now represent a major export market for US pecans. As one can see in the (ahem) pecan pie charts at right, the Chinese have taken some nuts away from other export markets but largely they have reduced the number of nuts sold domestically, driving up prices as a consequence.

In the following video, the author discusses what has happened.


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An interesting story from the Wall Street Journal (Tight Supplies, Tight Partners, Jan 9). Apparently it is not as easy to get your hands on good trash as it use to be. That may not sound line a bad thing — unless, of course, your business depends on recycling that trash into usable products. That is the challenge facing SCA, a Stockholm-based firm, that in the US sells hand towels, toilet paper and napkins made of recycled paper to institutions like schools and restaurants. (Their brand in the US is Tork.) The company is caught in a double whammy. On the one hand, less waste is being produced. On the other, there is increasing competition for the waste stream that is being produced from developing markets.

SCA has taken on this challenge by working more closely with recycling centers. SCA does not own the local facilities that take in collected cardboard and paper. It can, however, offer financing and advice in order to make recycling centers more efficient in processing the paper that comes back.

The company provides the recycling centers with financial backing to buy upgraded equipment and offers consultation on operations and marketing. In return, the recycling centers sell recovered fiber exclusively to SCA. (The recycling centers may sell varieties of recovered paper that SCA doesn’t need to other manufacturers.)

Last fall, SCA increased its investment in a Chicago recycling plant so that it could bring in additional equipment that compresses the paper into bales. SCA is putting together a “multicity arrangement” with other recycling centers, declining to specify where. “We’re organically growing existing partnerships and adding new ones,” says David Knight, director of fiber procurement for SCA’s Americas division, which contributes $2.1 billion of the Stockholm-based parent’s annual sales.

For SCA, close ties with recycling-center owners has meant it can encourage investment in sophisticated equipment upgrades that enable recyclers to process more “dirty” paper, or materials that are more difficult to recycle such as books, envelopes with plastic windows and paper with heavy graphics.

“With supply going down, we have to go deeper and dirtier into the waste stream to get more,” says Mr. Knight. “Forming these relationships allows us to do that.”


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