Lorman Lumber Company
Case Study 2

Lorman Lumber Company is a publicly traded company located in rural Oregon in the town of Yamica on the Mohegan River. The Lorman Lumber Company is a producer of lumber products including plywood, wood studs and wood chips. Chemicals used in the production process include petroleum based creosote and pentachlorophenol (PCP) solutions that are applied to the wood to prevent moisture loss. The sawmill plant is somewhat outdated but is reasonably efficient and profitable. The company has a record of reporting good profits and paying generous performance based bonuses to executives. Ben Watson is an executive with the company and raises his family in the community and is faced with an interesting question. What is more important, his career and family or the Mohegan river and the surrounding area?
Recently the Mohegan river has had high readings of industrial chemicals including creosote and PCP solutions. These are the substances that are integral in the production of the lumber that Ben Watson’s company produces. These elevated readings were not included in the monthly reports to management and concerns have been raised by doctors about increases in miscarriages, birth defects and health disorders. Is Lorman Lumber Company effectively dumping chemicals into the Mohegan river? Since the company is adhering to all EPA standards the answer to that question is certainly no, however are chemicals “leaking” or being exposed to the river via the sawmill; possibly.
One possible solution to this problem would be a new “closed cycle” production technology. This technology would recapture and recycle plant wastewater. A “closed cycle” would consist of an initial investment of $65 million and the factory will be shut down for one year. There would be a reduced capacity of 8 million units in year 2, however beginning in year 2