Logistics lessons from Home Depot and Walmart
Transportation is one of the biggest sources of carbon emissions in the United States and globally, and shipping goods, or freight, is a big contributor. How can companies keep up with growing consumer demand for home and in-store delivery, while also cutting their greenhouse gas emissions?
The answer, experts say, is a combination of high-tech data analysis and low-tech data gathering to figure out how to plan truck delivery and pickup routes that require the least amount of fuel and move the greatest amount of freight. This is known as smart logistics and supply-chain management.
Wal-Mart Stores Inc. doubled the efficiency of its freight delivery by doing much more than simply upgrading its trucks to more fuel-efficient models, Elizabeth Fretheim, Walmart’s senior director of supply chain sustainability, said during a Tuesday session at VERGE 2017.
"For us to improve the sustainability of our transportation network, it’s really about the network," Fretheim said. "The equipment is a big part of it, but it’s much bigger than that."
Walmart looked at its entire freight delivery network and made changes, such as increasing the amount of freight that each truck hauls and reducing total delivery miles for the fleet. Miles were reduced by adding drop-offs and pick-ups to a single truck’s route, rather than deploying multiple trucks to complete those tasks, among other changes.
Sophisticated data analysis and scheduling helped. But the company also used low-tech measures, such as asking truck drivers which routes had heavy traffic or hilly terrain, which requires more fuel. Training drivers on best practices and particularly how to use new equipment is key, as drivers can have an impact of as much as 35 percent on fuel usage, Fretheim said.
Home Depot also has transformed its freight transportation system over the last decade, from one that was "kind of a Flintstones model," in which delivery trucks drove directly to a store and often delivered more products than were needed to stock the shelves, said Ron Guzzi, the company’s senior manager of transportation carrier relations and sourcing.
"We flipped the model from a Flintstones model to something that’s much more efficient," he said, speaking Tuesday at VERGE 2017.
Now, 30 percent of trucks driving for Home Depot go directly to a store, down from 70 percent in 2007, he added.
The switch was necessary because trucks that drop off and pick up multiple batches of freight at different locations as part of a single route tend to burn less fuel than fleets of trucks that complete individual round trips, according to research results and company experience, Guzzi said.
As a result of the switch, Home Depot’s freight transportation operations cut 18 million miles off the routes driven by delivery trucks, reducing the fuel those trucks burned and cutting the associated carbon dioxide emissions by 37 million kilograms, according to the company.
Home Depot does not own its truck fleet. Instead, the company contracts with trucking companies to make its deliveries. To ensure that the delivery companies it contracts with are carrying out Home Depot’s efficiency initiatives, the company requires the carriers to join, and comply with, a federal program called "Smart Way" that provides incentives for logistics companies to operate efficiently to cut fuel usage.
The federal program, launched in 2004, has more than 3,500 participants, including all major U.S. trucking companies, said Karl Simon, director of the EPA’s Transportation and Climate Division, who also spoke Tuesday at VERGE 2017.
One key way that smart logistics enables carriers to cut their miles driven, fuel usage and related emissions, is by trimming empty miles, or miles that are unnecessary, generally because they duplicate miles driven by another truck, or because they are not delivering or picking up.
"Empty miles are by far one of the main challenges while solving the transportation problem," said Josue Velasquez Martinez, a research scientist at the Massachusetts Institute of Technology and director and founder of the MIT Sustainable Logistics Initiative.
"Fuel is usually the biggest transport cost, and it’s also the best way to estimate carbon emissions — CO2 and also black carbon," or particulate matter, he said, adding that black carbon has 3,000 times the global warming potential of carbon dioxide.
More companies are gravitating toward smart logistics as a way to reach their sustainability goals, he said.
"In green logistics, shorter distance does not necessarily mean less cost," he added.
These types of data points are included in data analytics models that Velasquez and his research team use to help companies determine the best ways to assign truck delivery routes in advance, to ensure fuel efficiency.
Each vehicle’s assigned route for a given day is devised based on a logistics profile that includes number of stores, density of each area of the route, traffic congestion, topography and number of trips, Velasquez said.
In one pilot program that he and his research team performed for one company, the company switched the routes of two trucks, one of which was a year older than the other, and achieved a 25 percent reduction in emissions, Velasquez said.
Asked when these types of smart logistics applications might become commercially available to medium and small companies, and consumers, he said he hopes it will happen soon, but could not predict when.