Carbon-neutral logistics

Today’s post has nothing to do with the coronavirus. I can’t tell you how happy that makes me.

The story comes from the Guardian and concerns a coffee roastery in the UK trying to have carbon-neutral beans. The obvious hitch here is that coffee beans don’t exactly thrive in the British Isles so sourcing beans means having to transport them a long way and that has a big carbon footprint. Unless, of course, you use a sailboat (Carbon-neutral coffee comes to UK – via sail boat from Colombia to Cornwall, June 14).

Yallah’s special Colombian coffee grounds and beans are finding their way into coffee shops and restaurants across the country. Using a sailboat to import the beans into the UK made the first leg of their voyage almost entirely carbon neutral. …

By using a traditional sailboat, the 7,500-nautical mile trip has a carbon footprint close to zero. A traditional shipping container might have emitted two tonnes of carbon. A plane would expend 178 tonnes of CO₂. …

“Whilst the shipping cost was higher than if it had gone on a big tanker, we worked with the right people and were able to produce a reasonably priced product. There are savings in the fact that we are cutting out the middle men and buying directly from our partners in Colombia. The price the farmers received for this coffee was way higher than the ‘fair trade’ price, by quite some margin,” Blake says.

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Wine logistics

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?

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Airline fuel use and operations strategy

Jan has been on a data kick lately (see here, here and, oh yeah, here) so here is a picture he might like:

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.

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Local Food Online Grocer Relay Foods is Expanding

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:

1. Emphasize local suppliers, and hence satisfy the “local food movement”.
2. Local supply allows daily deliveries which minimizes inventory risk.
3. 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.

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A sustainability index for apparel

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.

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Thin water bottles

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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Sustainability and vertical integration

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. 

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Executive Operations Experience: From Strategy to Execution

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.

A new collaboration between the Kellogg School of Management and McKinsey & Company.

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.

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On the ethics of fast fashion

Last week, I wrote about wedding gowns. Now it’s time to think of the other end of the fashion price spectrum: fast fashion. The Observer had an interesting piece on Swedish fast fashion retailer H&M and what they report in their annual sustainability report (Is H&M the new home of ethical fashion?, Apr 7). The report is notable because the Swedes have apparently set the goal for themselves of being “the ethical solution, the retailer that can make ethics and fast fashion synonymous.”  So how is that going?

“I don’t think guarantee is the right word,” says Helena Helmersson, head of sustainability, brightly. “A lot of people ask for guarantees: ‘Can you guarantee labour conditions? Can you guarantee zero chemicals?’ Of course we cannot when we’re such a huge company operating in very challenging conditions. What I can say is that we do the very best we can with a lot of resources and a clear direction of what we’re supposed to do. We’re working really hard.”

I believe her. Thursday’s report will show some impressive sustainable figures: for example nearly 2.5 million pairs of shoes were made last year using lower-impact water-based solvents; all building contractors have signed a code of conduct to ensure “good” working conditions; recycled polyester equivalent to 9.2 million plastic bottles has been used, and H&M uses more organic cotton in production than any other group. This year I am told, 7.6% of its cotton was organic (an industry insider estimates H&M’s overall cotton use to be around 200,000 tonnes a year). By 2020 100% will be sustainably sourced cotton. …

Does Helmersson still wake up worried they’ll be the subject of a sweated labour expose? “Yes, I worry about that sometimes. I lived in Dhaka for two years. You see how things happen down the chain in a country like Bangladesh. Remember that H&M does not own any factories itself. We are to some extent dependent on the suppliers — it is impossible to be in full control.”

And therein lies the rub. While H&M talks about responsibility, in the supply chain where retailers devolve power to factories it can be easy to distance yourself. Helmersson says H&M has invested in 100 people in CSR, 75 of whom are auditors (assessing social and now some environmental conditions in factories) and produced a series of groundbreaking short films, including one on fire safety that it claims more than 400,000 garment workers have seen.

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Light bulb economics

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:

Vodpod videos no longer available.

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