Wednesday, July 7, 2010

10 ways to reduce your environmental footprint and improve profitability.

Many companies talk about reducing greenhouse gas (GHG) emissions, but too often there’s a large gap between words and action. Most companies seem to be holding off on taking any real steps to reduce their environmental footprint because they believe the investment cost is too high.

Leading companies, on the other hand, are way ahead of the curve. They know that being proactive on the environment provides risk mitigation benefits. Why? Because they see that government legislation may soon be brought in to regulate CO2 emissions. They understand that external shocks such as wars, terrorist attacks, natural disasters, and pandemic outbreaks can have enormous impacts on supply chains and energy supply. They recognize that oil prices can only move upward. They believe that good corporate citizenship attracts investors and employees. And they see environment sensitivity as a way to differentiate themselves.

GHG emission reductions must be tackled the same way you achieve safety in the workplace. You need to implement a strategic plan and stick to it.

Greening a company requires commitment and support from the leadership team. Businesses need champions to lead their environmental initiatives… and logisticians may be the best people for the job. Not only are they involved in sourcing, but they make the critical transportation decisions that will contribute to the greening of the company.

Here are just some of the considerations they have to weigh:

1) Sourcing well – preferably as close as possible to the customer. We consistently examine the trade-off between cost of goods and transportation. However minimizing long-term costs may require us to consider other factors. What about flexibility – the ability to react quickly to market changes? What about consumer preferences? Ultimately if off-shore sourcing is the best option, the most energy-efficient transportation will be necessary. That might mean ocean freight rather than air freight – and this will require a thorough understanding of lead time.

2) Making domestic transportation decisions with a clear understanding of the benefits of rail versus truck, and what intermodal shipping makes most sense for the company. And, once again, this means understanding lead time and communicating time constraints to the customer.

3) Finding environmental programs like Fleet Smart/Smartway which certify leading edge trucking companies. Leading shippers are now incorporating this requirement into the Request for Proposals.

4) Sourcing energy-efficient equipment and a transportation management system that will optimize fleet routing and scheduling. Driver training will also have a huge impact in reducing GHG emissions. According to Claude Robert of Robert Transport, there’s a 35% reduction in the fuel consumption by the best drivers, compared to the worst.

5) Eliminating idling trucks at the shipping dock. Monitoring of idling engines can be done while checking that the wheels are chocked.

6) Using electric forklifts to load vehicles rather than propane or diesel.

7) Taking advantage of collaborative transportation. As discussed in this column last year, cooperation with other companies, even competing ones, needs to gain greater acceptance as a means to cut costs. It benefits everyone.

8) Converting large trucks to natural gas. Yes, capital costs are higher but, in the long run, there are tremendous fuel savings to be enjoyed while reducing harmful emissions.

9) Reducing packaging wherever possible. You’ll increase the density of your shipments, put more product on the vehicle, and reduce freight rates.

10) Reducing paper flow. Embrace the electronic transfer of information. It reduces costs both in supplies and labour.

These are just a few ways that logisticians can green the supply chain. Most important is to take a baseline of where you are today and track your progress. I’m sure you’ll find that environmentally friendly business practices definitely improve profitability.

Remember, as PricewaterhouseCoopers points out in its Transportation & Logistics, 2030 study, “He who focuses on carbon footprinting is stepping on the right foot.”

Thursday, April 29, 2010

Collaborative Transportation Management - Sharing the load

With today’s focus on reducing costs and protecting the environment, the time for collaborative transportation management may be here.

Canada, the second largest country in the world – about 5,000 km from Vancouver to Conception Bay – is one of the most challenging, high-cost countries in which to distribute goods.

Forty-two percent of the population inhabit five urban areas where manufacturing and distribution facilities face common transportation challenges. Meanwhile, disproportionate shares of transportation resources are required to service the balance of the population, scattered over 10 million square kilometers. The situation dictates a high use of less-than-truckload delivery, and all-too-frequently, pick-up and delivery trucks simply aren’t full.

On top of this less-than-efficient system, the cost of moving goods across Canada is bound to increase. Fuel prices will inevitably rise. Driver shortages due to an aging population, attrition, and a lack of new entrants is already occurring. When the economy picks up we’re going to feel these pressures even more acutely.
One solution to optimize productivity is collaborative transportation management (CTM) in which the traditional one-to-one relationship between a shipper and receiver, is replaced by a more efficient many-to-many approach. Shippers, receivers, carriers, and third-party logistics companies can gain tremendous efficiencies through cooperative forecasting, order consolidation, optimizing asset utilization, sharing routes, and streamlining carrier payment.

Pooling resources improves the supply chain, reduces mileage, eliminates unnecessary trips, and increases load factors – all of which reduces costs. At the same time, energy consumption is substantially reduced, resulting in huge benefits to the environment in the form of reduced carbon expenditure, pollution, and congestion.
Need an example of where this is already working? The Canadian Pharmaceutical Distribution Network involves 21 manufacturers who distribute their products to hospitals across Canada through a sophisticated collaboration system. Hospitals order and receive the products they need from multiple suppliers through a single order system managed by a third party.

In order for CTM to work, some key interactions need to develop between consignors, carriers, and consignees, as well as any intermediaries that are involved in managing the process. Collaboration eliminates inefficiencies and improves supply chain performances for all, but a degree of transparency is absolutely critical.
CTM is not a new concept but it has not been widely adopted. Senior decision makers are too caught up in gaining competitive advantage, focusing on marketing and sales, to set up a collaborative system that will benefit them in the long term. When orders need to be delivered they not to think about the bigger picture. Typically they can’t see past individual corporate objectives.

That’s why logisticians really have to drive CTM. Their involvement ensures that key operations and procedures will be analyzed for hidden efficiencies. Information sharing between organizations is critical and must be conducted with absolute honesty and openness – without crossing legal boundaries, of course. The process will require continual monitoring by committed champions who will solve problems jointly, rather than individually. The technology employed must not only be effective but must allow seamless information interchange. The billing process must be simple, with costing methods that ensure all participants pay their fair share. And most importantly, tangible benefits must be realized by all parties.
Change management is going to be critical here, as companies negotiate roadblocks and move from single-minded self interest (with the associated attitudes and practices) to a more cooperative approach.

So how can all of this be accomplished? Again, logistics will have to lead the way, organizing from within, meeting with company stakeholders, educating them on the threats on the horizon and the potential benefits of collaboration. Analysis will be helpful – particularly of the current ordering process, size, and cycle, and the efficiency of the shipping and receiving functions. And a list needs to be generated of companies that would provide synergy in collaboration. For this it’s always good to reach outside your organization, gleaning what you can from discussions at industry functions. Networking is excellent way to discuss collaboration with like-minded colleagues. Search the internet for buying groups coordinating on potential logistics efficiencies.

Third-party logistics providers who have embraced collaboration are in a great position to educate manufacturers, distributors, wholesalers, retailers, shippers, and receivers on the advantages of CTM. They can also get the ball rolling, providing essential services and distributing the savings.
Collaborated distribution is an opportunity whose time has come. We will all win with cost reductions and a better environment.

Friday, March 26, 2010

Affordable Transportation Management Systems

Transportation Management Systems over the internet
Transportation Management Systems (TMS) over the internet allows any company, regardless of size, to obtain the benefits of a good transportation management system.

Not long ago the high cost of Transportation Management Systems meant they were used almost exclusively by large shippers and carriers. Well, things have certainly changed - especially with the advent of "software as a service" or SaaS as it is commonly called. These days, companies of all sizes can pay a relatively low subscription cost to enjoy the benefits of a powerful TMS which will help them manage their transportation strategies - whether it is by road, rail, air or ocean.

With SaaS, software is not installed on a company-domiciled computer or server, but is accessed through the Internet. Companies
log on to a web-based program that is used simultaneously by many other companies. Hundreds or even thousands of users can work with a single program. Users are plugged into an instant network of shippers, carriers, freight brokers, third party
logistics providers, suppliers, consignees, and trading partners executing millions of transactions through a single system. The system is very secure, allowing each subscriber's personnel to be in control of their own transactions and managing logistics relationships through a common network.

Subscribing to a SaaS to manage your transportation functions allows a company to handle all the operations management processes. Not only can customer orders be converted instantly into optimized shipments, but the system stores and retrieves costs for all modes and types of movements, performing carrier selection, best rate, and most efficient routing based on shipment size and destination.

Subscribers can also tender freight through electronic data interchange (EDI) and monitor performance through electronic track and trace. Bill creation, bills of lading, manifests, and carrier audits are all part of the process. Report generation provides key performance indicators, visibility to costs by lane, customer activities and allows for claims management.

Benefits to using a SaaS system provider are many. Companies enjoy a return on investment without the start up cost, capital investment, or ongoing maintenance fees. Training is minimal and user friendly. SaaS providers are constantly upgrading their technology so you get the latest and greatest, without the hassle of having to develop it yourself.

You can also choose only the modules you need. And in most cases what you choose can be integrated seamlessly into your existing business processes, providing end-to-end workflow. Ultimately, you can have total visibility of your entire transportation operations.

SaaS also gives you better handle on carrier selection, performance, and payment.

The main drawback is that because a subscriber isn't purchasing the software, it cannot be customized. However most companies that have subscriptions believe this is unnecessary and the benefits far outweigh the concern. This becomes a platform for logistics benchmarking and continuous improvement.

Cost savings touted by SaaS vendor case studies indicate a 15% to 40% transportation spend reduction. Even at the low end of that scale, a company with an annual freight bill of $500,000 would save $75,000. This money flows directly to the bottom line. Think of the number of new sales dollars that companies need to gain for this kind of net profit!

SaaS is an important logistics tool for companies looking to reduce costs and optimize service.