To Sell or Not To Sell? That is the Question.

            During these past few years, Chicago Public Schools (CPS) has seen a significant decline in students attending their schools.  This has lead to drastic action to “close 54 schools, which will leave 61 empty”. Closing the underperforming schools and filling other schools help cut costs and make it more efficient for the schools if they are full.  Yet, the problem is what to do with the schools that are closed and empty.          

             In a business, or operations management, the manager or CEO’s job is to find ways to efficiently use products or make the most profit, but most importantly, efficiently run the business.  This means not letting money go to waste.  CPS is trying to do that by not running a school that has low attendance.  It would be more money wasted to heat that school and pay taxes if no one is using it.  Yet, what CPS is trying to do is also sell the lot that these former schools are on in order to make money to pay for their other schools.  This is a great idea because these schools, instead of being empty, can be used as a safe haven for kids who need a place to go, or like a senior center.  This actually happened in Milwaukee.  A former school called Jackie Robinson Middle School was sold in September of last year and turned into a senior center called the Sherman Park Commons Senior Living Center.  This is a place where seniors 55 or older that have a low income can have a place to live. Seniors who can’t afford housing have found a place to live and the city of Milwaukee was able to convert an old school into a beautiful place for others.  Yet, there is a catch.

            First of all, before this former middle school was sold to a developer, it was vacant for five years. Also, the groups that buy the school are mainly “[c]harter schools, other government agencies and nonprofitswho can afford to pay the money to first buy the property and then renovate it.  Yet, most importantly, there is a process that the qualified buyers must go through before they can buy the property.  The buyers go through meetings to describe about the renovations of the former school and what it will become, but also a selling price must also be negotiated as well.

            It is good that CPS wants to fix up these schools to cancel their debts and create efficiency, but who is getting hurt is the kids.  They are losing their relationships with their friends and teachers because they are forced to go to new schools because their old schools are underperforming.  Also, they are also scared to ask questions because they are not used to this new school and their new teachers which could hurt their grades in the future.   

 

Should Chicago Public Schools close and sell their schools so that that building could be used for other purposes or should the schools stay open?

Source:
Nix, Naomi. “Schools Often a Hard Sell.” Chicago Tribune 21 Apr. 2013, Final ed., sec. 2: 1+. Print.

Be GREEN, or be SQUARE!

More and more customers now are looking for companies to be transparent, but it’s kind of hard to be competitive and sustainable at the same time.  Companies are now using value chain processes to get the job done fast.  They are not only focusing on suppliers but also taking into account By-Product-Synergy, which is “taking waste from one part of the production process and using that waste in order to generate a new product.” But how can companies become more sustainable if only “80 percent of management uses just 20% of the available opportunities?!”  The remaining 80 percent is where management needs to focus the rest of their energy.

It’s crucial for management to set goals and assess their risks, thereafter they can easily seek out opportunities for future improvement.  The first step to become a transparent company is to implement a sustainability program, and of course to develop a strategy.  The next step is to identify the companies “main processes and map data throughout the value chain.”  By using life-cycle-assessment software, the companies will have a more clear idea of how to lower their costs.

A similar approach was taken by ThyssenKrupp (FWB: TKA), a German elevator company.  Since ThyssenKrupp uses a considerable amount of steel in the manufacturing process, they thought the operational aspect had the greatest environmental impact. To their surprise,  the “company’s elevators themselves left a greater carbon footprint then their manufacture or any of the company’s other operations.”

As a result, ThyssenKrupp dramatically changed their product line after implementing a sustainability program.  They made the following changes to their products and services:

  • Elevators use LED lights which reduce energy consumption by 80%, and automatic fan and light shutoff which reduces CO2 emissions by 193,000 tons per year.
  • Getting rid of harmful chemicals used to manufacture the elevator.
  • Using petroleum based biodegradable fluid, with a vegetable-based option called “enviromax.”
  • Elevators are equipped with regenerative technology, meaning that the energy generated from the braking system is put back into the building.

In a way the article gives motivation to other companies who are taking their first steps towards becoming a transparent company.  It gives them few ideas and pointers on “unlocking supply-chain opportunities.” It’s important for different industries to decipher various ways to be more environmental friendly.  After all, there is more to being sustainable than just showing off your environmental initiatives.

Do you think ThyssenKrupp can take additional measures to make their company more sustainable?  Or better yet, are there any companies that you want to see become transparent in the near future? How would they need to change there operations?

Links:

http://www.thyssenkruppelevator.com/Sustainability/products-services

http://www.greenbiz.com/blog/2013/04/26/whirlpool-thyssenkrupp-supply-chain-transparency?page=0%2C1

http://opsmgt.edublogs.org/2012/06/28/transforming-waste-into-profit/

 

Is the Oil-Tanking Industry Sustainable?

Due to the poor economy, the oil industry is having a rough time enduring transportation costs from country to country.  For decades, oil tankers have been the main source of transportation, carrying up to two million barrels of oil between the Middle East, Asia, and the United States. Unfortunately for the oil tanking business, operation costs over the past few years have been much more expensive than they have been in the past.  This increase in price makes the shipping of the popular and much demanded natural resource nearly impossible and not worth it.  Unlike what is usually the case, globalization in this situation for example is more costly to this particular industry than it would be to drill into our own soil.  The only problem is that we find a larger supply of oil in foreign countries than we do our own.

To get an idea of how much this is costing the oil firms, analysts look at the forecasts from previous years.  This collection of data has shown that the industry has lost more than $26 billion dollars in the past four years, and operation costs are higher than ever.  To operate one of these extremely large vessels, it costs anywhere from ten to twelve thousand dollars per day.  In 2007, operation costs peaked at $309,601 per day.  That is unbelievable! Because these carriers are only making roughly $7,000 a day, there is a huge deficit.  While such oil companies continue to lose so much money daily, they cannot possibly stay in business.  The supply chain is not working in favor of firms; therefore, sustainability of the business comes into question.  So what should these oil tanking firms do?  How can they cut costs?  Is it possible to adjust the supply chain or is it a lost cause?

I think that at such a loss like this, the amount of ships in operation should decrease drastically, causing less expenses to be paid.  That is the only way they can keep their heads above water, although they are already sinking in debt.  New York’s Overseas Shipholding Group filed for bankruptcy last year, and I am sure they will not be the last to do so.  I feel for these dying companies because many of them entered into contracts before the economic crisis occurred, and now they are stuck in a failing industry, losing more than they gained from the contracts to begin with.

Other possible options for consumers that effect the oil firms is innovation.  It is not uncommon to see on TV or read in the newspaper alternatives to oil resources.  At the Chicago Auto Show every year, concept cars are on display that use battery powered systems to replace oil.  These are more cost efficient and do not require the use of oil tankers.  What do you think will be the result of the oil industry failing?  How do you think consumers should react to this? How do you think the government should react to this?

Sources:

http://online.wsj.com/article/SB10001424127887323741004578418652461117968.html

https://www.google.com/search?hl=en&site=imghp&tbm=isch&source=hp&biw=1440&bih=686&q=oil+tankers&oq=oil+tankers&gs_l=img.3..0l7j0i5l3.1094.2780.0.2865.11.9.0.2.2.0.99.568.9.9.0…0.0…1ac.1.9.img.jaBIJkaaITU#imgrc=UIoFamHBsuSHxM%3A%3B47hJKcJOVD494M%3Bhttp%253A%252F%252Fwww.shippingherald.com%252FPortals%252F0%252FVessels%252Foil-tanker.jpg%3Bhttp%253A%252F%252Fwww.shippingherald.com%252FAdmin%252FArticleDetail%252FArticleDetailsTankers%252Ftabid%252F102%252FArticleID%252F8877%252FNordic-American-May-Double-Oil-Tanker-Fleet-as-Asia-Spurs-Demand.aspx%3B1190%3B1074

 

 

Wrong CEO, Crazy Damages!

Wrong CEO, Crazy Damages!

Someone might think that a big company might have all the resources and very intelligent people working because they can afford to do so. In addition, those people will make the right decisions to improve the quality of work and increase the profit in the long run. J.C. Penny is one of the big companies that with one critical decision they lost almost a billion dollar. The hired the wrong person, which lead to critical changes that did not work out in the favor of J.C. Penny and increasing their profits. When Ron Johnson was announced as the new CEO of J.C. Penny the stock prices was $34 and within 2 years, the current stock price is at $14. The reason behind such a dramatic change is the structure of J.C. Penny. The CEO made changes to update the entire store and eliminate the coupons. Johnson did not pivot the idea that start off small and once people accepted the change and wanted that change increase though out the nation. Johnson took a big leap and caused J.C.Penny’s regular customers to look elsewhere for their purchasing needs.

Myron Ullman who was the CEO before Johnson had agreed to go back to and reverse the changes implemented by Johnon. He has agreed to stay until J.C. Penny has the right CEO. The changes made by Johnson eliminated the middle-market customers, which where their target market. Even though someone might think that updating the store and keeping a low price while eliminating coupon will cause more people to come is not necessarily true. Ideally, any idea sounds good but pivoting the idea is to make changes without losing a lot of money. Ulllman’s plan is to change things back and bring back the lost customers what where their target market but getting someone to come back after they have lost the trust is somewhat hard. Ullman has the niche to fix things, which he has done before and J.C. Penny is counting on him to bring back the people and profit into the stores again. His biggest challenge will be to remind the customers that what J.C. Penny was before and nothing has changed.

Quality of management makes a huge difference in the success of any company. Being in this state and losing a lot of money is very critical for J.C. Penny. If they continue to do so they will soon have to declare bankruptcy and that is a whole other situation. Being in economic crises right now and extreme competition from places like Macy’s and Kohl’s’ it will be hard to J.C. Penny to gain the customers because the rivals are trying to take up as much market has they can of lost customers. J.C. Penny is at a critical position right now; the question now remains whether they will be able to reverse the damage.

Do you think the J.C. Penny will gain its customers back and be able to create profit that they use to?

http://www.businessweek.com/articles/2013-04-11/j-dot-c-dot-penney-rehires-myron-ullman-to-clean-up-ron-johnsons-mess#p1

Can the all-electric car reach mass market appeal?

Who killed the electric car is a term you sometimes hear when referring to motor vehicles that run exclusively on electricity. With the environment issues being a big concern for our society today, many car manufacturing companies have developed hybrid vehicles. Hybrid Car being a vehicle that uses two different power sources to move the car, most commonly the internal combustion engine which uses gas fuel and an electric motor that uses.  The hybrid cars have gained popularity among consumers, especially the Toyota Prius, this has resulted in many car manufacturers developing hybrid vehicles to gain some market share.

However some come car manufacturers such as Honda, Nissan, Toyota, and Tesla to name a few have taken it a step further by producing purely electric vehicles that run only on electricity.  Electric cars are nothing new, being created in the late 1800’s and early 1900’s,  however gasoline fueled cars gained increased popularity and have captured the market ever since.

So what will it take for the Electric Car to reach mass market appeal? What do the managers at these huge car companies have to do. Many executives believe the electric car has to gain trust amongst car consumers. For now many consumers foresee a future with the hybrid car because of its driving range which drives a certain amount of miles on electric power then gasoline power takes over, which is fuel efficient.  Compared with the limited driving range of the electric vehicles.  There are a few factors which  limit electric cars from reaching mass market appeal. First the limited Driving Range of some of the electric vehicles and niche battery powered cohorts is a main factor  stopping consumers from buying into the technology. Another factor is the high initial price of many of the Electric Vehicles, many times being more costly than gasoline powered vehicles. One more huge factor is the unavailability of electric charging stations compared to gas stations. Going to a gas station is very convenient for consumers and that is what they are used to.

Nevertheless there is much advancement taking place with the electric vehicle technology and the availability of electric charging stations. John O’dell, and Edmund’s analyst predict the following would constitute an electric vehicle that could be mainstream: an electric car with a driving range of 150 miles that could be completely recharged in about 10 minutes or and electric car with a driving range  of 300 miles that could be completely recharged in 30 minutes. The price of these vehicles should be in the range $25,000 to $30,000, so it could somewhat affordable to middle-lower income comsumers. Also it was suggested that there be a good national network of electric vehicle charging stations so that it could be convenient to charge your car anywhere.

These are all great suggestions to making the electric car more appealing to the mass market and I definitely know I plan on getting one in the future, being a big environmental guy myself. However what would make you switch from Gasoline powered vehicle to purely Electric powered?

 

http://business.time.com/2013/01/29/what-would-make-an-all-electric-car-appeal-to-the-masses/

http://inventors.about.com/od/estartinventions/a/History-Of-Electric-Vehicles.htm

Green Innovations – Affecting How and Where We Travel?

“When you travel these days, you’re doing so in a more environmentally friendly fashion than you did a decade ago- and you probably can’t even tell.”

Today, many business industries are changing the way they operate their business by placing more emphasis on environmental sustainability. For example, hotels are using motion sensors, key cards that control lights, fluorescent bulbs and ceiling fans aimed at saving energy. They are installing low-flow shower heads and toilets, while also recycling more and replacing individual shampoo bottles with large dispensers. Although these things may seem small and almost unnoticeable, they truly make a huge difference. “Green buildings use, on average, 26% less energy, emit 33% less carbon dioxide, use 30% less water, and produce 50% to 75% less solid waste, according to the building council.”

Element Hotels- use eco-friendly materials as often as possible and are applying for LEED certification.

When looking at other industries such as the airline and rental car businesses, they too are making a larger effort to surpass the minimum legal requirements and become more sustainable. Since 2000, Airlines have saved more than $33 Billion on fuel and prevented the release of 670 Billion pounds of greenhouse gases.  The Airline industry has adopted new technology and practices to reduce their carbon footprints. For instance, US Airways are replacing gas-powered ground vehicles that transport bags with electronic ones at its Philadelphia hub and adding a new building to house the vehicles at Philadelphia Airport that is made of 20% recycled materials.

Moving on, another industry, the car rental industry is also taking many new steps in order to be more “green.” Today the enterprise has more than 5,000 hybrids and electric vehicles for rent in 70 different locations. Lisa Marini, a spokeswoman says that “we will continue to add hybrids and EV’s to our fleet based on consumer demand and availability from manufacturers.” Furthermore, David Eastes, a director at VroomVroomVroom.com who tracks the industry, says he has seen an increase in the number of companies dedicated solely to renting out hybrid and electronic vehicles and “that’s never been seen before.”

Moreover, business in these three industries are making the change to be more green not only because they have been forced on the industry by the threat of government action, sheer economics or consumer demands, but some companies say its just good business. Paul Snyder, Vice President of corporate responsibility for IGH proclaims that, “we actually have customers who are asking, ‘What’s the carbon footprint of our meeting.” With so many people today becoming more and more knowledgeable and concerned about sustainability, making every effort to go more green, no matter how small, and even if it goes unnoticed, is extremely important.

In sum, How do you judge companies based on their sustainability efforts? And how do these efforts change your opinion of the company’s reputation? What sustainability efforts have you experienced from hotel, airline, and rental car businesses?

Reference: http://www.hotelmanagement.net/green/green-innovations-are-changing-the-face-of-travel-20076

To Green or NOT to Green that is the Question

A corporation’s decisions regarding sustainability impact both their brand and their bottom line.  There are direct and indirect strategic reasons for a corporation to “go green.”

 The global ecosystem has been threatened which makes reducing waste and increasing energy efficiency more and more important.  Corporations can conserve by cutting down on packaging, using energy-efficient lighting, recycling, purchasing energy-efficient office equipment, and adapting to alternative heating and cooling solutions.  Many companies are warming up to the idea of working in LEED Certified buildings.  “LEED is an internationally recognized green building program.  It provides building owners and operators with a framework for identifying and implementing practical and measurable green building design, construction, operations, and maintenance solutions” (https://new.usgbc.org/leed).  A 2011 study released by MIT found that sustainability is now a permanent part of 70% of the corporate agenda (www.earthshare.org). 

 Interbrand released their 2012 annual Best Global Green Brands report, and automotive and technology companies dominated the list.  Toyota, Johnson & Johnson, and Honda were the top three players.  This report “… examines the gap that exists between corporate environmental practices and consumer perception of those practices…” (www.interbrand.com).  Reports like this not only strengthen a brand, but also encourage and challenge corporations to further develop new energy-efficient practices.

 As more and more companies realize the financial benefits of “going green,” they also recognize the positive way that this strategy impact their customers, employees, and overall image.  A positive environmental message attracts superior associates, creating a healthier, safer, more team-oriented work environment.  92% of young professionals would be more inclined to work for environmentally-friendly companies (www.earthshare.org).  Many employers offer team members the option to work remotely which saves in vehicle maintenance, gas, and parking costs and may also relieve external family pressure and stress.  These factors, not only, cut overhead expenses, but also increase employee efficiency and overall morale. 

 A modern family tends to be more environmentally conscious than those from past generations.  Recycling and reducing waste have become commonplace practices.  A focus on sustainability attracts and engages customers and is a brand-strengthening asset.  35% of consumers are willing to spend more for green products as long as the product is comparable or better than the competitor’s product (www.earthshare.org).  “Going green” also tends to attract investors and can create a positive media buzz.  It is important, however, that a corporation does not misuse this asset.  “… A brand’s efforts in this area could serve as an under-utilized asset, or conversely, suffer due to accusations of ‘greenwashing’” (www.interbrand.com).

 It is clear that businesses no longer believe that “going green” is a fad.  Consumers demand green alternatives and illustrate this through their spending patterns.  The focus should always remain on the bottom line, but attention to sustainability has proven to be a way to positively impact these figures.

 

 Sources

http://www.earthshare.org/greening-business.html

http://www.interbrand.com/en/best-global-brands/Best-Global-Green-Brands/2012-Report.aspx

https://new.usgbc.org/leed

Where Products Go To Die

In a country where 90% of our consumer products become waste in about 6 months, sustainability is becoming a more pressing issue for companies operations.  A great example of a company that implements sustainable operations is Method a company that makes house-hold cleaning supplies, most popularly carried by Target. Method attempts to implement sustainability in their products, their process and their company itself. Their most important achievement in operations sustainability is being Cradle to Cradle certified.

Cradle to Cradle is the concept that a company can re-design products and change their manufacturing process in order to maximize positive impacts environmentally, economically and socially, where a company is less dependent on raw materials and energy and the supply chain is naturally more eco-efficient.  Most manufacturing processes are linear and considered Cradle to Grave, which is when a company uses raw materials to create a product, the consumer purchases the products and then eventually puts it in the trash where it is taken to a landfill or incineration. Cradle to Cradle attempts to create a cycle where a company pools materials to be re-used and products are returned from consumers and recycled back into products.

Method displays on their website their Cradle to Cradle certification and explains how they are certified in product design, product manufacturing and social responsibility. Method’s product design is evaluated by their ingredients which are comprehensively assessed for safety and environmental health and their packaging design and materials are evaluated for safety, effects on the environment and recyclability.  Method’s manufacturing processes are evaluated regarding their use of water and energy and their material recovery. Method’s social responsibility is evaluated through governance, ethics and transparency.

These are many ways companies can be more sustainable and the Cradle to Cradle certification is a great way to remain consistently sustainable. It also helps prove to consumers that your company is actually sustainable, rather than using the “going green” trend as a marketing ploy, which many companies have done.

Although Cradle to Cradle may be ideal for sustainable operations, it can also be very expensive, from redesigning products to tracking manufacturing in more granular ways. It almost attempts to challenge and change business models and the way products are produced. The only way to fight these challenges and expenses is to incorporate these practices from the beginning into the first business model. Which is why we should always challenge flaws in current business models and ask ourselves how we can create evolutionary business models.

Save Money. Live Better…and Greener

           The largest retailer in the world, Walmart, has a track record that displays their commitment to sustainability.  It is now aiming to improve this track record and in doing so may be the catalyst that the industry needs to shift towards sustainability as a whole.

As we all know, one of Walmart’s strengths is their supply chain management.  The multinational corporation has 100,000 suppliers and it has enough clout in the industry to pressure them into following their directives and initiatives.  This has been evident and will now be put to the test.  Walmart is beginning to include sustainability in its merchants’ performance reviews, which will be used to determine pay raises and potential promotions.

When put into perspective, these merchants are responsible for multibillion dollar buying decisions and are responsible for what stores have on their shelves.  Therefore, the inclusion of sustainability scores in performance reviews will undoubtedly shift some of the emphasis on price to sustainability when making buying decisions.

An example of this concerns the laptops that are carried at Walmart stores.  An estimated 30% of laptops sold at Walmart have advanced energy saving settings.  Walmart does not find this adequate.  Therefore the company’s laptop buyer set a goal to increase the percentage of laptops sold with advanced power settings from 30% to 100%.  Company research indicates this shift alone will reduce CO2 emissions by hundreds of thousands of metric tons and save the consumers money on electric bills.

Because Walmart’s buyers are now going to put a greater emphasis on sustainability, it will behoove the suppliers, in order to retain Walmart’s business, to do the same. The suppliers in order to meet the stricter criteria must find new methods to reduce waste in their own operations.  This will encourage leaner competition both among competing suppliers and the buyers of other companies as well.

Walmart’s Sustainability director, Jeff Rice, believes that although sustainability will not be all that is looked at when evaluating merchants, it will have enough weight to effect behavior.

It will be interesting to see the effects of this initiative not only on the company but the industry as a whole.  When the industry leader makes a dramatic change in operations it will most likely be emulated by the other players in the industry in order to keep up and compete.

I believe that Walmart must be commended for its efforts.  This is because sustainability is not always the most profitable route to take in the short run.  At times it may not even be economically feasible.  However, taking Walmart’s success in managing its supply chain into consideration, I believe that Walmart will be able to reduce waste and make its supply chain “greener.”

Any thoughts on this? Do you believe that this initiative is risky? If so, is it worth the risk?

Levi’s Making Jeans From Plastic Bottles?

American jean company Levi Strauss will be trying something different with their new line of jeans. They will be made of crushed brown and green plastic bottles. Each pair of Levi’s new Waste>Less jeans will contain a blend of eight plastic bottles. These new jeans will be unveiled on October 16 of next year and are part of Levi’s push to reduce the impact the jean making process has on the environment. Michael Kobori, the vice president of supply chain social and environmental sustainability, says Levi, “wants to build sustainability into everything they do.” He also goes on to say that the reason for this effort is because of resource scarcity and increasing volatility in cotton prices. Eric Olson, the senior vice president of BSR, an environmental group that works with businesses, comments on corporate social responsibility saying that, “we expect brands we trust to take care of us, to keep us honest. We don’t want to hear that we’re ruining someone’s life or destroying the planet. We don’t want to pay more, but we want companies to take care of it.”

Levi is the biggest maker of jeans in the world, with sales of $4.8 billion in 2011. A company of this size attracts attention and therefore helps to influence sustainability programs among other companies as well. That is why there is so much attention around their sustainability program. In 2007, Levi’s conducted a life-cycle assessment of some of its major products and found that 49 percent of the water use during the lifetime of a pair of 501 jeans occurred at the very beginning, with cotton farmers and another 45 percent. That’s when Levi created their Water<Less Jeans that significantly reduced the amount of water it takes to produce a pair of jeans from about 45 liters to 4. Soon after, Kirby began thinking about plastic. Cone Denim is the company that produces fabric for Levi’s 501s. They began to study plastic their director of product development had been testing fibers from recycled colored plastic bottles. These bottles were the brown beer bottles, green soda bottles, and the blue five-gallon jugs of water. Plastic bottles are recycled, sorted by color, cleaned, and turned into polyester flakes. These flakes can be stretched into fiber that can be spun into yarn and eventually woven into cotton fabric. There is a downside though because recycled fibers aren’t as strong or consistent as “virgin” fibers. Eventually, they devised proprietary processes that allowed them to strengthen the fiber.

The first Waste‹Less collection will include about 400,000 items include men’s jeans, women’s jeans and jean jackets. The price for a pair of jeans will range from $69 to $128. All together, about 3.5 million bottles were used in the first batch of Waste‹Less jeans. That’s a big accomplishment for Levi’s but the reality is that an estimated 33 billion bottles of soda are consumed in America every year and of those, only 29 percent are recycled.

So obviously Levi’s is doing a great thing by trying to reduce waste and save resources but they cannot change the world by themselves. That’s why their program is more about making a point and influencing others rather than making a purpose. If they can influence other companies and consumers to be more self-conscience about their effect on the environment, it would have a much greater impact than anything they could do themselves. Do you agree that their efforts are worth doing considering it doesn’t have a phenomenal impact?

Full Article Here  http://www.businessweek.com/articles/2012-10-18/levis-goes-green-with-waste-less-jeans