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.”

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