Reference no: EM13895175

The Problem with Plastics

"Lucy, I thought that you told me and the planning com- mittee that this move to recycle storage plastics was going to save us money. But, look here. I just got the bill for last month's disposal of our plastic. We wound up paying $3,000, rather than being paid for the value of the recy- cled material. This is the third month in a row that this has happened. I want to know what is going on and I want to know by Friday. If you can't solve the problem, we are going to simply throw out the plastic with the garbage, the way we used to do. It was less hassle for us and we would recover the space now being used for the recycling bins. Again, I want recommendations by Friday."

With those words, Fred Morgenstern, plant manager for the Novi plant of Voiture Automotive Supplies, turned around and walked out the door. Lucy Po, the environmen- tal, health, and safety (EHS) manager for this facility, sat in her office considering what had just happened. What a way to start the week. It was Monday and she knew that she had five days to get to the heart of the problem. It was her initial analysis that had led to the decision to sell the various plastics to a recycler. It should have been a win- ner, but she must have missed something. In her mind, she reviewed the chain of events that led up the meeting with Fred this morning.

The Novi plant, located in a suburb of Detroit, used over 40,000 square meters of 40 different plastics for storage. These various plastics were used to cover the parts during storage and in transportation. Once used, they were col- lected and thrown out. With landfills in Michigan becom- ing scarcer (especially in the Detroit area), landfill costs were increasing. Lucy could have recommended that the Novi plant truck the plastics out to Mount Pleasant, where landfill space was still available. But that seemed to attack the symptom of the problem, not the root cause.

As she looked around for options, she was approached by R-CYCL, a new start-up recently founded by a husband and wife team. The purpose of the start-up was to provide employ- ment for chronically unemployed people in Detroit. Their proposal was simple but attractive. R-CYCL would pick up the plastic and pay the Novi plant a recovery price, provided that the plastics were properly sorted. If the plastics were not properly sorted, then the personnel at R-CYCL would sort the plastic and charge the plant for the labor required. This charge would be deducted from any recovery prices.

There was the problem. The Novi plant used 40 differ- ent types of plastic. It seemed that every time a new part was designed, the engineers would specify a new storage plastic. Whenever a new plastic covering was introduced, a number of things happened: a new item master had to be developed and entered into the system; inventory storage locations had to be identified (the Novi facility generally used a fixed inventory location system); and operators had to be trained on the material. Because of the high usage of plastic, the purchasing department had been aggressive in looking for the lowest-priced suppliers. They were cur- rently buying much of the required materials from low-cost Chinese suppliers. Lucy was told that purchasing was gen- erally happy with these suppliers, though on-time delivery was an issue (causing an increase in safety stock).

When it came time to recycle the plastic, the processes in place clearly described what was supposed to happen. The operator was to take the plastic to the recycling storage area, where 40 large bins were located next to the opera- tion and parts storage areas. The operator was to review the code and then to put the plastic into the appropriate bin. Once a week, R-CYCL would empty the bins and recycle the material. Lucy remembered how plant management had almost rejected the recycling plan because of the space requirements to locate 40 storage bins. Facility manage- ment had argued that this space would have been better used for production.

That was the theory. The practice was different. Though each plastic item was stamped with a code, the material differences between the plastics were slight. Sometimes the codes got covered by grease or paint. Because the operators often could not read the codes (or they did not care), they often stuffed the plastic into the first bin avail- able. Operators could be "written up" if they persistently failed to put plastics in the wrong bin, but it was difficult to know when, or how often, this happened. When bins were nearly full, items often fell out onto the floor. This created problems for housekeeping, and plastic on the floor had contributed to several workplace injuries (thus increasing worker's compensation charges). In two cases the injuries resulted in fines being assessed against the plant. Lucy could see why Fred wanted to return to the old system. She had to recommend a better, more sustainable, approach. She also knew that the Novi plant was R-CYCL's biggest customer; if the plant stopped recycling plastic it would effectively put this start-up out of business.

The Proposal: After reviewing the facts, Lucy spoke to the engineers to get an idea of what types of plastic film they could consider at least minimally acceptable. With this information, she worked with purchasing to ask sev- eral suppliers for proposed solutions within 48 hours. Only one supplier responded-FilmTech.

FilmTech was located in Lapeer, Michigan (about 50 miles from the Novi plant). The company proposed to replace all 40 plastics with one plastic that could meet all of the technical requirements. Lucy wondered whether the engineers at the plant would accept the one substitute plas- tic material. An even larger problem with the proposal was that the new film, while recyclable, was higher quality and cost almost twice as much as the average material provided by the Chinese suppliers. Lucy figured that such a cost dif- ferential might make the FilmTech proposal a loser right away.

Questions

1. Review FilmTech's proposal from a triple bottom line perspective. What opportunities and costs are exposed that Lucy may have overlooked? How would these hidden costs affect the economic analysis being devel- oped by Lucy?

2. What else can Lucy do to reduce the cost of buying and using FilmTech's plastic?

3. What else can Lucy do make these operations truly sustainable?