LTD Management
Logistics & Supply Chain Management Consulting Global Solutions That Work

THE GREEN SUPPLY CHAIN -- RECOGNIZING SOME REALITY

World Wide Shipping
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Green is a strong topic in the news and in publications. The discussion runs the gamut from personal to business to government. The importance is significant and goes beyond traditional business. With all the excitement in the carbon footprint and with sustainability, the interest is ahead of the pragmatics. There is not a commonly accepted definition for either carbon footprint or sustainability. Then it is not surprising that there are no agreed-upon standards for measuring green and what the base criteria are. All this makes it challenging and confusing for people and companies to know where they are now and how to proceed. But the situation demands that something must be done. The cost of energy adds to that demand.

Like supply chain management, the subject is complex and broad in today's globally interactive business world. Some present "the" solution or that firms should "just"; this oversimplifies the realities of what can be done now. Remedies are not applied across and to the entire supply chain in one fell swoop. They can be applied to parts of the chain.

Some of the logistics areas for improvement include:
Suppliers. Shortening the length of the inbound supply chain sounds good. No matter how energy efficient a transport mode is, less distance traveled is a way to reduce energy consumption and carbon dioxide emissions. The difficulty is that there are fewer supply options within the U.S. now. Factories have been closed, equipment has been sold and people have moved on. The significant production capabilities, both parts and finished goods, reside in China, India and elsewhere. Rebuilding manufacturing in the U.S. will take time.

What can be done now is to measure the carbon footprint of major suppliers as defined in the greenhouse gas (GHG) emissions. These emissions can be both direct and indirect emissions and where and how they are created. With that in place, collaborative dialogues and actions plans can begin to improve operations.

Transport. Freight movement is a visible way to see energy and GHG usage. Each mode of transport has different consumptions of energy and, in turn, creation of carbon dioxide.

As reported by the U.S. Department of Energy (DOE) in its Transportation Energy Data Book -

Transportation Energy Use by Mode, 2004 - 2006a
 Trillion BtuPercentage of total based on Btus
 2005200620052006
HIGHWAY22,177.522,207.080.6%80.3%
Light vehicles16,898.616,823.661.4%60.8%
    Cars9,578.79,277.734.8%33.5%
    Light trucksb7,296.27,518.326.5%27.2%
    Motorcycles23.727.60.1%0.1%
Buses190.7195.60.7%0.7%
    Transit93.293.20.3%0.3%
    Intercity28.329.80.1%0.1%
    School69.473.00.3%0.3%
Medium/heavy trucks5,088.25,187.818.5%18.7%
NONHIGHWAY5,344.45,463.119.4%19.7%
Air2,476.62,496.29.0%9.0%
    General aviation242.4256.30.9%0.9%
    Domestic air carriers1,861.51,833.66.8%6.6%
    International air372.7406.31.4%1.5%
Water1,369.41,455.25.0%5.3%
    Freight1,121.81,205.84.1%4.4%
    Recreational247.6249.40.9%0.9%
Pipeline841.6842.13.1%3.0%
Rail656.8669.62.4%2.1%
    Freight (Class I)571.4584.52.1%2.1%
    Passenger85.485.10.3%0.3%
        Transit44.944.90.2%0.2%
        Commuter25.926.00.1%0.1%
        Intercity14.614.30.1%0.1%
HWY & NONHWY TOTAL27,521.9027,670.10100.00%100.00%
Source: See Appendix A for Energy Use Sources.
a Civilian consumption only. Totals may not include all possible uses of fuels for transportation (e.g., snowmobiles).
b Two-axle, four-tire trucks.

Rail is a somewhat obvious choice for transport mode with some explanation. Box cars, once the primary way to ship products, are used very little. That derives from the few box cars still in service and the slow, erratic transit time for box car service that drove businesses to stop using them. In addition, distribution centers often no longer have rail sidings and railroads have abandoned much trackage.

The DOE does not distinguish, in the above, as to types of motor freight -- parcel, less than truckload (LTL) or truckload. Motor carriage has faced economic challenges with driver shortages and now with trucking companies shutting down because of fuel costs. Truckload is preferable over LTL. Businesses can work to build truckload shipments with multiple stops for different customers and different destinations.

Intermodal is a better option than truckload since the trailer moves by rail for much of the distance. There is a need for intermodal marketing companies and railroads to improve operations for distances of 500 miles or less. Trucking is used for this shorter distance. Being able to switch some of this freight from trucks to the rails will be good.

The shift from less use of rail and to more truck meant a shift to a greater energy intensive transport mode. Shifting back to more rail-related transport can have significant impact.

Air transport is energy intensive. Businesses may need to do more to reduce the use of air, especially with the long-distance imports. Better use of demand planning or sales and operations planning combined with process improvements, integration and collaboration can help this shift away from air freight.

Packaging. There are two parts to packaging-shipping carton and product. Much packaging is used with products to hold the contents in place for consumer appeal. Reducing this wrapping is needed for several environmental areas. Also, redesigning consumer product containers to enable more units to be loaded on a pallet is good. Examples of this are square containers for liquid products. Reducing the amount of water, a ubiquitous material, and making products have greater concentration is excellent. This reduces the amount of energy to be expended to transport the "water".

Distribution Network. Warehouse locations are established over a period of time as a company evolves and grows. Seldom are the locations and network revisited and reassessed as to whether they still meets the original purposes as to cost and service. Transportation costs and related GHG impact could drive a new network.

Carrying less inventory affects the network, and means a smaller footprint from less manufacturing to create the extra inventory. Less inventory also has the benefit of having less capital tied up. Reducing the carbon footprint is a good reason to analyze warehouse locations. In addition, other benefits and savings will likely develop from this exercise.

There are more things that can be done to reduce GHG, such as truck fleets, forklifts and warehouse layout and other topics. All of the items can create a smaller footprint, and that is important.

Green is a global issue. Regions of the world are approaching it in different ways. For example, Western Europe is more active and has a more developed base on many green topics. How the green initiative, required investments and changes in business strategy develop and progress across various industries and across global trading partners must be determined.