Supplement 5

Sustainability in the Supply Chain

Background
The area of sustainability is producing a variety of exciting and innovative solutions toward green
production. This supplement provides students with a snapshot of some of the important topics in
sustainability and unique solutions that companies implement. An important theme is that managers need
to be thinking about sustainability issues throughout the whole supply chain process—from product design
to what happens at end of life, and from the top of the supply chain through to the final customers.

Class Discussion Ideas

1. It can be interesting to hear if students, as consumers, pay much attention to corporate responsibility.
In particular, are they more likely to purchase more products from a company specifically because it
has a great reputation for being socially responsible? At what point would that not make a difference?
For example, how much more would they pay for a soda coming from a socially responsible provider
compared to one with a shady reputation?

2. Teaching Tip: The Steep Price of Bottled Water (Blog post by Barry Render)
https://heizerrenderom.wordpress.com/2016/11/04/teaching-tip-the-steep-price-of-bottled-water/

Active Classroom Learning Exercise

1. Split the class into small groups. Have each group identify situations in the community that have seemed
wasteful or environmentally unfriendly. How could those be improved? Whose responsibility is it (the
service provider, the government, the users)? Have each group report its ideas to the whole class.

Company Videos
1. Building Sustainability into the Orlando Magic’s Amway Center (8:30)
Orlando, Florida has a new state-of-the-art sports and entertainment center that, at 875,000 square feet,
is triple the size of the old basketball arena. The Amway Center is the first newly constructed NBA
facility to have Leadership in Energy & Environmental Design (LEED) Gold Certification in the U.S.
The project included a number of sustainability initiatives and outcomes, including: (1) 20% less energy
usage and 40% less water usage than arenas of similar size; (2) high-efficiency heating and cooling
systems; (3) ultra-low-flow toilets; (4) a reflective and insulated roof to reduce cooling costs; (5)
preferred parking for hybrids and other energy-efficient vehicles; (6) hi-tech monitoring of lights that
shut off when a room is empty; (7) recycling bins; (8) bike racks, showers, and changing rooms for
staff who bike to work; (9) storm water treatment systems to avoid pollution of nearby lakes; (10)
environmentally-friendly building materials—15% recycled, 20% locally sourced; (11) 83% of wood,
concrete, and steel construction waste recycled rather than going to landfill; (12) 100% use of their own
collected rain water to irrigate the property; and (13) fewer windows on the east and west sides to

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 Sustainability in the Supply Chain 107

provide insulation and to use less energy. The payback period is just three years on all of their
sustainability efforts. Annual savings include $700,000 for energy and 1 million gallons of water.

Prior to showing the video, instructors might ask students what types of sustainability tactics they are
aware of for the construction of new buildings (or houses). Their ideas may be similar to some of what
the Amway Center implemented. The video clearly presents an economic case for building a sustainable
building. But the managers seem to emphasize just as much the image and public relations benefits of
sustainability. It might be interesting to hear what students think about that. Does it matter to them
whether or not their favorite team plays in a sustainable building? Does sustainability make them more
likely to purchase a ticket? Another discussion line could focus on the accommodations for employees
who bike to work. Is that a good idea (i.e., those things aren’t built for free)? If such a program exists,
should the CEO and the top executives feel pressure to bike to work themselves? Finally, what do
students think about providing preferred parking for energy efficient vehicles? We are used to this
arrangement for disabled guests, but is it right/fair to offer it for hybrid owners? If someone doesn’t
own such a vehicle, would this policy make him or her less likely to go to a game? Or would it entice
him or her to actually purchase such a vehicle? What if every business in America had such a parking
policy?

2. Green Manufacturing and Sustainability at Frito-Lay (6:44)

Frito-Lay has a top-level commitment to “being green,” including conserving energy, minimizing
waste, and saving water. It has a long-term goal of zero environmental impact, including a goal of “zero
landfill waste,” defined as less than 1% of facility waste going to landfill. Three examples of
environmental tactics are described in the video: (1) the 2.2 million pounds of starch produced annually
at the Orlando plant through potato washing is treated and sold for other uses; (2) cardboard boxes are
reused, saving 5 million trees annually; and (3) the Modesto, California, plant runs on solar power.
Frito-Lay forms resource conservation teams to help support its sustainability goals. They are designed
to look, listen, and monitor usage of energy and utilities. The firm has received several awards and
recognitions for its sustainability initiatives, including from Leadership in Energy & Environmental
Design (LEED) and the Environmental Protection Agency (EPA). Frito-Lay is truly a national leader
in sustainability.

Prior to showing the video, the instructor might ask the students to guess what percent of waste at the
Frito-Lay plant in Orlando goes into landfill. Afterwards, they may be quite surprised to learn that it is
only 6.5% and on the way towards 1%. Further discussion could explore the pros and cons of
manufacturing firms making a concerted effort to become sustainable producers. While some initiatives
make money (through, for example, selling waste as inputs to other processes), other initiatives
certainly may involve a significant investment. While everyone is in favor of environmental
friendliness, at what cost should firms pursue this? Can only large market-dominating companies such
as Frito-Lay afford to go green? In the long run, can any firms afford not to? How much do consumers
care? Does watching this video make anyone in the class more likely to buy a snack from Frito-Lay
than from another manufacturer? Can students share any sustainability initiatives that they have
witnessed at companies for which they have worked?

3. “Saving the Waves” at Celebrity Cruises (4:47)

Celebrity Cruises pursues an aggressive environmental program to “Save the Waves” with a zero-
discharge policy. To encourage energy-efficient design, the full first year of fuel savings is transferred
to the shipbuilders. The firm collects 7 billion data points every day from its fleet to track efficiency
and utilization measures. Scrubbers have reduced engine sulfur dioxide emissions by 98%. Nothing
untreated is dumped at sea. The towel and linen reuse program is used by 25% of passengers. Celebrity
is looking toward hydrogen fuel cells in the future to reduce environmental impact even more. The
company also partners with the World Wildlife Fund to enhance (and market) its environmental efforts.

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108 Supplement 5

Prior to showing the video, instructors could ask students what percentage of cruise line guests that
they think reuse towels and linens in response to printed requests in the rooms to do so (Answer: 25%).
Is this number high? Low? How many loads of laundry might it save? Discussion after the video could
go in several directions. For example, instructors could ask students to identify specific measures that
other companies have taken to protect the environment. Or students might enjoy trying to come up with
catchy slogans such as “Save the Waves” for other industries. Anybody dealing with grass or the
outdoors, for example, might come up with “Rescue the Fescue.” Or something related to the beach
might be “Stand for the Sand.” Finally, environmental stewardship can have more impact than just
doing the right thing for the environment. Firms such as Celebrity get a lot of marketing value from
talking about their environmental stewardship. In some cases, environmental measures may even help
them save money. Certainly, programs such as encouraging towel reuse represent a win-win for the
company: less environmental impact coupled with lower cleaning costs. Designing ships to save fuel
provides similar benefits. On the other hand, installing scrubbers to remove sulfur dioxide emissions
may, in fact, increase costs. Class discussion could explore this issue. In particular, does the public
view all environmental efforts in the same positive light, whether they cost the company money or save
the company money?

Jay, Barry, and Chuck’s OM Blog

1. OM in the News: The Fight for the Eco-Friendly Space
The rise in sustainable goods has been prompted both by consumers who want brands that have a strong
purpose and by investors. The proliferation of a huge range of green and eco-friendly goods has worried
regulators and prompted questions about whether sustainability claims are always truthful or clear.
https://heizerrenderom.wpcomstaging.com/2020/11/30/om-in-the-news-the-fight-for-eco-friendly-
space/

2. OM in the News: The Hidden Problems of Recycling

The New York Times now reports (March 16, 2019) that “recycling, for decades an almost reflexive
effort by American households and businesses to reduce waste and help the environment, is collapsing
in many parts of the country.” Hundreds of cities across the country have quietly canceled recycling
programs in large part because China has stopped buying recyclable material from the U.S.
https://heizerrenderom.wpcomstaging.com/2019/03/21/om-in-the-news-the-hidden-problems-of-
recycling/

3. OM in the News: Going Green (and Light) for Amazon

Tide and Seventh Generation have introduced redesigned laundry detergents that are several pounds
lighter by cutting down on plastic in their packaging and using less water in their formulas. They’re
making the changes to please Amazon: Lighter packaging means it costs less to ship the detergent to
shopper’s doorsteps, making each sale more profitable.
https://heizerrenderom.wpcomstaging.com/2018/12/31/om-in-the-news-going-green-and-light-for-
amazon/

4. OM in the News: Plastic Water Bottles Threaten a Crisis

“Bottled water, which recently dethroned soda as America’s most popular beverage, is facing a crisis,”
writes The Wall Street Journal (December 13, 2018). A consumer backlash against disposable plastic
plus new government mandates and bans in many stores have bottled-water makers scrambling to find
alternatives. Existing recycling technology needs clean, clear plastic to make new water bottles, but
low recycling rates and a lack of infrastructure have stymied supply.

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 Sustainability in the Supply Chain 109

https://heizerrenderom.wpcomstaging.com/2018/12/15/om-in-the-news-plastic-water-bottles-
threaten-a-crisis/

PowerPoint Slides
INTRODUCTION (S5-1 through S5-3)

S5-1 S5-2 S5-3

COPORATE SOCIAL RESPONSIBILITY (S5-4)

Slide 4: Customers and policy makers are savvier than ever in obtaining information about how
companies make products. Internet-based technologies facilitate the rapid spread of bad news
when a firm misbehaves or ignores its social responsibilities. Firms need to consider all the
implications of a product—from design to disposal. A focus on the environmental impact of
a firm’s products and processes is a crucial element of its corporate social responsibility.
Shared value suggests finding policies and practices that enhance the firm’s competitiveness
while simultaneously advancing the economic and social conditions in the communities in
which it operates. Carmakers at the forefront of producing electric vehicles practice shared
value.

S5-4

SUSTAINABILITY (S5-5 through S5-13)

Slide 5: Sustainability involves thinking about all stakeholders. Three concepts to consider when
making sustainability decisions include a systems view, the commons, and the triple bottom
line.
Slide 6: This slide describes the systems view. Managers need to understand the inputs and interfaces
between interacting systems, and they need to be able to identify how changes in one system
affect others (e.g., laying off employees affects both morale within the company and the
economy of the community; dumping chemicals into a river affects general health and the
environment).
Slide 7: Companies or individuals may abuse, misuse, or hoard publicly owned resources for their
own benefit. Managers have an obligation to “care for the commons.”

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Slides 8-13: Profit maximization is not the only driver by which to measure success. Managers should
focus on the triple bottom line of the three Ps: people, planet, and profit (Slide 8—Figure
S5.1). Slide 9 addresses the people P. Slide 10 describes objectives that Walmart follows in
working with its suppliers to sell quality products that are safe, that create value for
customers, and that are produced in a sustainable way. Slide 11 addresses the planet P. To
gauge their environmental impact on the planet, many companies are measuring their carbon
footprint, as exemplified in Slide 12 (Figure S5.2). Slide 13 addresses the profit P and also
points out that measures other than profit can be used to gauge economic sustainability.

S5-5 S5-6 S5-7

S5-8 S5-9 S5-10

S5-11 S5-12 S5-13

DESIGN AND PRODUCTION FOR SUSTAINABILITY (S5-14 through S5-28)

Slide 14: The operations manager’s greatest opportunity to make substantial contributions to the
company’s environmental objectives occurs during product life cycle assessment. During this
process, he or she should focus on the circular economy, determining ways to use resources
for as long as possible and then recover and regenerate to the maximum possible value at the
end of service life.
Slides 15-16: Product design is the most critical phase in product life cycle assessment. Slide 16 (Figure
S5.3) illustrates the many green design features on a Celebrity Cruises ship.
Slides 17-19: These slides present an example (Example S1) of comparing two different speaker designs
based on their environmental attractiveness at the end of life. Such a design for disassembly
focuses on the circular economy. Here we examine the amount of revenue that might be

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reclaimed against the cost of disposing of the product at its end of life. In this example, the
Harmonizer appears to be the better environmental design alternative.
Slide 20: In addition to the products produced, the production process itself can have an enormous
impact on the environment. Opportunities to reduce environmental impact during production
typically revolve around the three themes identified in this slide. Successful reduction in
those usually results in lower costs for the company (lower utility and waste disposal costs)
and reduced environmental concerns.
Slides 21-22: Just like the production process, the storage and movement of goods can have an enormous
impact on the environment. Big trucks are everywhere! Logistics costs can amount to 10%
or more of total product costs. Proper scheduling and planning can reduce these costs and the
environmental impact of logistics efforts.
Slides 23-27: From Example S2, these slides present an evaluation of the “total life cycle cost” for two
different vehicles. In this example, the more expensive but environmentally friendly van
becomes the better alternative after 95,012 miles, or about 4.32 years (ignoring the time value
of money for simplicity). With the expected life of each vehicle equal to 8 years, the more
expensive Honda CityVan should be purchased.
Slide 28: Managers need to consider what happens to a product or its materials after the product
reaches its end-of-life stage. BMW uses parts made of recycled plastics and parts that can be
recycled. The 2012 Mercedes S-class was 95% recyclable! The concepts of reverse logistics
and closed-loop supply chains are revisited in Chapter 11.

S5-14 S5-15 S5-16

S5-17 S5-18 S5-19

S5-20 S5-21 S5-22

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S5-23 S5-24 S5-25

S5-26 S5-27 S5-28

REGULATIONS AND INDUSTRY STANDARDS (S5-29 through S5-39)

Slides 29-33: Organizations are obliged by society and regulators to reduce harm to consumers, employers,
and the environment. Nearly all industries must abide by regulations in some form or another.
These slides identify some of the organizations involved with the following: product design
(Slide 29), manufacturing and assembly activities (Slide 30), disassembly and disposal of
hazardous products (Slide 31), and industry-specific regulations (Slide 32). Slide 33 reminds
us of the hazards of ignoring regulations.
Slides 34-35: International organizations such as the United Nations Framework Convention on Climate
Change (UNFCCC) and the International Organization for Standardization (ISO), along with
national governments, are guiding businesses on ways to reduce the environmental impacts
of their respective activities. The European Union Emissions Trading System (EUETS)
(Slide 35) is a “cap-and-trade” system whereby a limit (cap) is put on the total amount of
greenhouse gases that can be emitted by factories, power plants, and airlines in EU airspace.
Within this cap, companies receive emission allowances, which they can sell to or buy from
one another as needed. Similar systems have been hotly debated in the United States.
Slides 36-38: After implementing the wildly successful ISO 9000 program for quality assurance (see
Chapter 6), the International Organization for Standardization (ISO) spun off a series of
environmental management standards (ISO 14001) that contain the five core elements
identified in Slide 36. ISO 50001 sets environmental standards for improving energy
performance and is designed to work alongside ISO 14001. ISO 14001 and 50001
certifications for a company have several advantages, as shown in Slide 37—some of these
are also advantages of ISO 9000 certification. As Slide 38 suggests, the ISO 14001 and ISO
50001 programs have seen widespread adoption all around the world, and they have led to
numerous important environmental and economic benefits.
Slide 39: ISO 14001 and 50001 address environmental management systems. A great example,
pictured in this slide, comes from the OM in Action box: “Subaru’s Clean, Green Set of
Wheels with ISO 14001 and ISO 50001.” Incredibly, the Subaru plant in Lafayette, Indiana
has not sent a load of waste to a landfill in more than 10 years!

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S5-29 S5-30 S5-31

S5-32 S5-33 S5-34

S5-35 S5-36 S5-37

S5-38 S5-39

Additional Assignment Ideas

1. Have students identify areas around campus that could be more environmentally friendly.

2. Have the students go to a website such as The Nature Conservatory’s carbon footprint calculator,
https://www.nature.org/en-us/get-involved/how-to-help/consider-your-impact/carbon-calculator/,
to calculate their own carbon footprint. If they are “average,” what does that imply for the class? For
the university? For the country?

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3. Have students search for and write about ways that one company’s waste has become another
company’s raw materials. Can they identify untapped possibilities for other firms?

Online Resources
Environmental Protection Agency https://www.epa.gov/sustainability/learn-
about-sustainability
Green Design Institute at Carnegie Mellon University http://www.cmu.edu/gdi/
United Nations Climate Action https://www.un.org/en/climatechange/what-
is-climate-change

Other Supplementary Material

Computing the Carbon Footprint
The second “Additional Assignment Idea” above asks students to explore a website to calculate their carbon
footprint. A similar website that instructors can show that calculates the “carbon footprint” for homes or
businesses is www.carbonfootprint.com/calculator.aspx. The home calculator does not require login
information and might be more immediately relevant to students. Tabs lead the user through “House,”
“Flights,” “Car,” “Motorbike,” “Bus & Rail,” and “Secondary,” with a final “Results” tab that adds it all
together and compares to the country average as well as the world target (impossible to attain). The
calculations are mostly point-and-click driven. Each subtotal has an “Offset now” button that tells the user
what kind of offset in activity and dollars would make up for the carbon footprint imposed on the world by
that person. Examples include reforesting in Kenya or funding to support renewable energy. Interested users
can donate money through this website.

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