5 rules for carbon-efficient shipping
Making sustainability central to logistics decisions is smart business but requires closer collaboration and creative thinking by shippers, suppliers, packagers and retailers. That's the conclusion of participants in a GreenBiz.com webcast this week.
"Start by thinking about savings opportunities," said Stephen Silva, senior vice president of global logistics for toymaker Hasbro, during the webcast, "Smart Moves: Supply-Chain Decisions that Save Fuel, Cut Costs and Reduce Emissions." "They will go hand-in-hand with the environment and emissions. … You have to drive a culture where people are always looking for better ways to do things."
At the same time, attention to service must be at the center of any new logistics or transportation strategy. "The only way that we can get buy-in is to demonstrate this," he said. "At the end of the day, customers are not going to accept slower deliveries or empty shelves."
Transportation and logistics activities typically account for 6 percent to 7 percent of global greenhouse gas emissions, or 2,800 megatons of emissions annually, said Edgar Blanco, research director at the MIT Center for Transportation & Logistics. Road freight accounts for the biggest percentage, followed by the footprint of logistics buildings, ocean freight, air freight and rail freight, Blanco said.
Typically, the percentage of emissions associated with transportation and logistics has grown in parallel with economic expansion, Blanco said. If logistics emissions continue growing as they have historically, they will triple by 2050, he estimated.
So how can your company put the brakes on logistics and transportation emissions?
The webcast discussion centered on specific ways businesses have been modifying logistics policies to cut fuel consumption, the single biggest contributor to transportation industry emissions. Those strategies include reconsidering the specific mode of transportation, introducing better regional forecasting, optimizing transportation networks, and changing packaging and pallet sizes so that more items fit within a single load.
Hasbro's Silva offered two examples of how his company has simultaneously addressed sustainability while improving service levels across its supply chain.
Silva's first example is focused on the way Hasbro moves laden containers in China, where they are typically transported one truck at a time. Recognizing the need to cut fuel consumption related to this process and to move multiple containers more efficiently, Hasbro began working with various in-country partners back in 2006 to switch to a rail transportation method for this function –- basically changing a standard industry practice.
In the United States, Hasbro has also rewritten the rules for how it stocks regional distribution centers. It now analyzes the orders originating from each geography, working closely with the sale planning and inventory teams to share this information. It uses that data to rebalance the items kept in distribution locations so that it can keep multiple shipments to the same location at a minimum.
Both changes required collaboration with industry partners as well as internal Hasbro teams, Silva said. "The key was to gain buy-in from everyone who was impacted," he said.
While some companies may have addressed the "low-hanging fruit" when it comes to running their transportation and logistics operations more sustainably, Jason Mathers, project manager for the Environmental Defense Fund and author of its recent Smart Moves report, suggested five rules to guide freight carbon efficiency.
- Choose the most carbon-efficient mode possible. For example, Michael Kors was able to use a guaranteed ocean freight service for time-sensitive fashion shipments that cut emissions by 90 percent per shipment and reduced its freight costs by up to $20 per bag.
- Collaborate with other shippers. Hershey's and Ferrero, competing candymakers, began collaborating in fall 2011 on warehouse, distribution and transportation needs in a bid to cut both emissions and logistics costs. It also helps that this is one of the most promising potential ways to cut logistics costs, in some cases by up to 30 percent, Mathers said. Actual data from the Hershey's and Ferrero relationship won't be available until late 2012.
- Redesign your own network for efficiency. Hasbro's example of more closely balancing items stocked at regional distribution centers with stocking needs of retailers in those regions is one example of this tactic.
- Get the most out of each move. Yogurt maker Stonyfield Farms began adjusting its policies for minimum truckloads in 2006. Among other things, the company has specified that carriers use 53-foot trailers that can accommodate up to 26 pallets in a unique "pinwheel" loading pattern. The company's efforts have helped save at least $7.5 million while cutting net emissions by approximately 46 percent, Mathers said.
- Increase energy efficiency in distribution centers. EDF cites the example of a distribution center that was able to realize substantial electricity consumption reductions by optimizing the sleep settings on its conveyor belt controls.
Many of these ideas will require members of the transportation and logistics supply chain to share ideas and collaborate in ways they have not previously considered, Mathers said. "It takes trust, data and insight," he said.