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10.1 Overview
Learning Objectives
- Understand how operations management that incorporates sustainability principles can reduce costs and improve profits.
- Describe how sustainable operations management practice can contribute to cost reduction and enhance a company’s competitive position.
- Highlight best practices for reducing greenhouse gas (GHG) emissions in an industry.
- Show how lean manufacturing principles can contribute to sustainable, effective, and efficient management of a company’s carbon footprint.
Oakhurst Dairy’s profitability has benefitted from the company taking a leadership role in addressing greenhouse gas (GHG) emissions in the US dairy industry.The authors wish to thank Clean Air Cool Planet (CA–CP) and Bob Sheppard, chief financial officer and vice president of the corporate program, for assistance and permission to use the Oakhurst Dairy Case Study, “Taking All the Right Steps: A Maine Dairy Reduces Its Carbon Footprint,” as partial source material for this case. Oakhurst Dairy is a featured CA–CP Co-op Planet Corporate Partner. See http://www.cleanair-coolplanet.org/about/partners.php. In the process of its carbon footprint mappingProcess to identify and describe the level and intensity of carbon emissions for an activity, process, operation, enterprise, individual, animal, or other carbon dioxide-equivalent (CO2e) activity or process. the company identified how to reduce its GHG emissionsPollution released by residential, commercial, and industrial facilities. and also identified innovative ways to improve operational efficiencies, reduce operational costs (mostly energy costs), and enhance profits.
Oakhurst Dairy has changed over time. The long established northern New England dairy company no longer owns any dairy farms. It makes its money by processing milk bought from dairy farms. It owns no cows. It buys its raw milk from local dairy farmers and sells its processed milk to grocery stores and retailers such as Walmart and 7-Eleven.
The company, under the Bennett family ownership, has become one of northern New England’s largest independent milk processors. Oakhurst’s approach is to build brand equity and increase profits over time. This has been supported by investing in operation management practices that reduce costs and increase brand awareness and loyalty with the dissemination of information about the company’s practices that reduce its carbon footprint.
Oakhurst’s sustainable business approach includes (a) senior management commitment to sustainable business practices in its operations and its supply chain, (b) integration of sustainable goals and practices in the company’s business systems, (c) use of operating and financial reports and communications, and (d) monitoring of environmental results and implementation of continuous improvements.
This case will highlight how the company, by adopting sustainable business practices throughout its operations, saved more than $620,000 in annual fuel costs. These are savings that have contributed directly to Oakhurst’s financial bottom line. This includes savings from a $343,000 investment in solar panels at two of its facilities, resulting in annual savings of $52,500 (at a fuel cost of $3.50 per gallon) and representing a 6.5 year payback period on their investment. With an estimated life of thirty years, the solar panel investment alone will save Oakhurst $1.2 million over the life of the solar panels and lower its carbon emissions by 176 metric tons annually.