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Supply Chain Analysis for Plastic and Styrofoam To-Go Boxes

Melissa Greiman | Maddison Beckman

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Agenda

  1. Brief Overview of Styrofoam and Plastic Manufacturing
  2. Structuring the Supply Chain of To-go Boxes
    1. Product Driven Approach
    2. Market Driven Approach
  3. Analysis of Supply Base for Possible Biodegradable To-go Boxes
    • Commodity Matrix
    • Supplier Master List
    • Supplier Map
    • SWOT and Cost Drivers
  4. Cost Analysis for Styrofoam and Biodegradable To-go Boxes
    • Breakeven Analysis and NPV Calculations

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Product-Driven Approach*

Functional

Innovative

To-go boxes

Product Life Cycle

More than 2 years

3 months - 1 year

> 2 years

Contribution Margin

5 - 20%

20 - 60%

<1%

Avg. Margin of Error

10%

40 - 100%

<10%

Avg. Stockout Rate

1 - 2%

10 - 40%

Do not stockout much

Avg. Forced end-of-season markdown

0%

10 - 25%

0%

Lead time required for made-to-order products

6 months - 1 year

1 day - 2 weeks

<1 month lead time

Product Variety

Low 10 - 20 variants

High offers millions of variants

Low

*Adapted from “What in the RIght Supply Chain for a Product.” HBR 1993

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So, Functional or Innovative?

Functional

Innovative

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Market-Driven Approach

Physically Efficient

Market-Responsive

To-go containers

Primary Purpose

Supply predictable demand efficiently at the lower possible cost

Respond quickly to unpredictable demand in order to minimize stockouts, forced markdowns, and obsolete inventory

Demand can be predicted

Manufacturing Focus

Maintain high average utilization rate

Deploy Excess buffer capacity

Can hold a great amount of containers at a low cost

Inventory Strategy

Generate high turns and minimize inventory throughout the chain

Deploy significant buffer stocks of parts or finished goods

Buy a mass amount of containers at once

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Market-Driven Approach (con’t)

Physically Efficient

Market-Responsive

To-go containers

Lead-Time Focus

Shorten lead time as long as it doesn’t increase cost

Invest aggressively in ways to reduce lead time

Try not to increase costs greater

Approach to Choosing Supplies

Select primarily for cost and quality

Select primarily for speed, flexibility, and quality

Cost and Quality

Product Design Strategy

Maximize performance and minimize cost

Use modular design in order to postpone product differentiation for as long as possible

Cost effective and efficient

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So, Physically Efficient or Market Responsive?

Physically Efficient

Market Responsive

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Supply Market Analysis for Biodegradable To-go Boxes

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Side-by-Side Analysis for Styrofoam & Biodegradable To-go Boxes

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Costs

Fazoli’s use on average 83,200 entrée to-go boxes a year

Ordering Costs

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Ordering Costs (Styrofoam to-go boxes)

Cost per Case

$14.9911

# of Boxes in each Case

20011

83,200 boxes

200 boxes per case

= 416 cases

416 cases X $14.99 per case = $6,235.84

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Ordering Costs (Biodegradable to-go boxes)

Cost per Case

$33.99

# of Boxes in each Case

200

83,200 boxes

200 boxes per case

= 416 cases

416 cases X $33.99 per case = $14,139.84

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Triple Bottom Line Pyramid

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Health Effects

  • Styrofoam is made from Benzene and Styrene-both are human carcinogens
    • 90,000 workers exposed to Styrene each year
      • Mutations to central and peripheral nervous systems
      • Instances of people contracting Leukemia and Parkinson’s
  • Microwaving Styrofoam containers release toxic chemicals2

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Per Person Treatment Costs

Leukemia (AML)3

$104,386

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Acute Myeloid Leukemia (AML)

U.S. Population as of 2016

322,672,0186

Terre Haute Population as of 2016

60,7855

# of People Contracting AML Each Year

60,1407

# of Restaurants in Terre Haute

100

# of People in Terre Haute Contracting AML

= (# contracting/US Population)*TH Population

= (60,140/322,672,018)*(60,785)

≈ 11 people

Average Cost of AML per Person

$104,386

Cost of Treatment for 11 people

= Cost of AML per Person*11 people

= $104,386*11

≈ $1,148,286

Restaurant Contribution

= $1,148,286/# of Restaurants

= $1,148,286/100

≈ $11,482.46

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Acute Myeloid Leukemia (AML) - con’t

# of People in Terre Haute Contracting AML

= (# contracting/US Population)*TH Population

= (60,140/322,672,018)*(60,785)

≈ 11 people *

# of People Contracting AML from Benzene

= (# People in TH contracting AML * % of Benzene contribution to AML

11 people * 0.3613

≈ 4 people

Restaurant Contribution

= $417,544/# of Restaurants

= $417,544/100

≈ $4,175.44

Cost of Treatment for 4 people

= Cost of AML per Person*4 people

= $104,386*4

≈ $417,544

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Triple Bottom Line Pyramid

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Environmental Impacts of Styrofoam and Plastic

  • The environmental impacts of polystyrene production in the categories of energy consumption, greenhouse gas effect, and total environmental effects ranks second highest behind aluminum7
  • Styrofoam has a very low recycling rate9
    • At least 500 years for Styrofoam to decompose
  • 25-30% landfills filled from plastics
  • Main pollution of oceans, bays, and other US water sources
  • Primary source of urban litter2

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Environmental Costs Breakdown

Statewide disposal costs: $72 million per year for disposable cups and bags. 520,000 tons of material landfilled (50 tons recycled) multiplied by statewide average collection and disposal cost of $140 per ton.10

Fazoli’s Contribution to Disposal Costs = (# of to-go boxes*average weight)*Disposal Cost per Ton

= (83,200*0.000368*$140

= $4,286.46

.006% of Indiana landfills are filled with one year of Fazoli's to-go boxes.

30.6176(# of to-go boxes*average weight)/520,000(Total tons of material landfilled statewide)=0.00589%

Avg. Weight of Styrofoam To-go Box15

0.000368

# of Fazoli’s To-go Boxes

83,200

Disposal Cost per Ton

$140

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Costs

Fazoli’s use on average 83,200 entrée to-go boxes a year

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Ordering Costs

$6,300

Health Costs

$4,200

Environmental and Cleanup Costs

$4,300

Total

14,800

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Disposal Costs for Biodegradable To-go Boxes

Statewide disposal costs: $72 million per year for disposable cups and bags. 520,000 tons of material landfilled (50 tons recycled) multiplied by statewide average collection and disposal cost of $140 per ton.10

Fazoli’s Contribution to Disposal Costs = (# of to-go boxes*average weight)*Disposal Cost per Ton

= (83,200*0.00084)*$98

= $6,849

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People that Recycle (35%)16 =$6,849 * .65

=$4452

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Avg. Weight of biodegradable To-go Box14

0.00084 tons

# of Fazoli’s To-go Boxes

83,200

Disposal Cost per Ton

$98*

*140*.7=9817

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Cost Savings from Biodegradable To-go Containers

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Savings (Triple Bottom Line Considerations)*

Bottom Line (NPV)

(31,558.38)

Triple Bottom Line (NPV)

(22,942.12)

Payback Period

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* Consistent with ISO 9000 (product quality), ISO 14000 (environmental aspects), and ISO 21000 (social regulations) quality standards

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Environmental Benefits

Every ton of 100% Post-consumer waste recycled paper products you buy saves:

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12 trees

1,087 pounds of solid waste

1,560 kilowatts of energy

1,196 gallons of water

1,976 lbs. of greenhouse gases

3 cubic yards of landfill space

390 gallons of oil12

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Works Cited

[1]http://www.webstaurantstore.com/dart-solo-90htpf1r-9-x-9-x-3-white-foam-square-take-out-container-with-perforated-hinged-lid-200-case/30190HTPF1R.html

[2] http://sustainability.wustl.edu/wp-content/uploads/2013/02/Impacts-of-Styrofoam.pdf

[3] http://www.ncbi.nlm.nih.gov/pubmed/11276372

[4] http://www.pdf.org/en/science_news/release/pr_1363095060

[5] https://suburbanstats.org/population/indiana/how-many-people-live-in-terre-haute

[6]http://www.usnews.com/opinion/blogs/robert-schlesinger/articles/2016-01-05/us-population-in-2016-according-to-census-estimates-322-762-018

[7] http://seer.cancer.gov/statfacts/html/leuks.html

[8] http://www.pdf.org/en/parkinson_statistics

[9]https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&cad=rja&uact=8&ved=0ahUKEwjM5Yqoo63MAhWDRSYKHZriBEwQFggiMAE&url=http%3A%2F%2Fisites.harvard.edu%2Ffs%2Fdocs%2Ficb.topic967858.files%2FPolystyreneFactSheets.pdf&usg=AFQjCNEc2WeR5muAUSG1PsiCsjBxYLLzwA&sig2=EY1ANpuiSqkogpoj2LBUZw&bvm=bv.120551593,d.cWw

[10] http://www.earthresource.org/campaigns/capp/capp-economics.html

[11]http://www.webstaurantstore.com/ecochoice-9-x-9-x-3-biodegradable-compostable-sugarcane-bagasse-1-compartment-takeout-box-200-case/395TO991.html

[12] http://www.earthresource.org/campaigns/capp/capp-styrofoam.html

[13] http://www.jstor.org/stable/40964683

[14] https://www.goodstartpackaging.com/9-x-9-x-3-single-compartment/

[15] http://www.genpak.com/product/hinged-carryout-containers/

[16] http://recycleacrossamerica.org/recycling-facts

[17]https://www.americanprogress.org/issues/green/report/2013/04/17/60712/energy-from-waste-can-help-curb-greenhouse-gas-emissions/

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Interesting Link:

http://digitalcommons.calpoly.edu/cgi/viewcontent.cgi?article=1130&context=imesp

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Health Effects

  • Styrofoam is made from Benzene and Styrene - both are human carcinogens
    • 90,000 workers exposed to Styrene each year
      • Mutations to central and peripheral nervous systems
      • Instances of people contracting Leukemia and Parkinson’s
  • Microwaving Styrofoam containers release toxic chemicals2

​

Per Person Treatment Costs

Leukemia (AML)3

$104,386

Parkinson’s4

$22,800

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Parkinson’s Disease

U.S. Population as of 2016

322,672,018

Terre Haute Population as of 2016

60,785

# of People Contracting Parkinson’s per Year

60,0008

# of Restaurants in Terre Haute

100

# of People in Terre Haute Contracting Parkinson’s

= (# contracting/US Population)*TH Population

= (60,000/322,672,018)*(60,785)

≈ 11 people

Average Cost of Parkinson’s per Person

$22,800

Cost of Treatment for 11 people

= Cost of Parkinson’s per Person*11 people

= $22,800*11

≈ $250,800

Restaurant Contribution

= $250,800/# of Restaurants

= $250,800/100

≈ $2,508