Initiatives that cut the cost of distribution can also benefit the planet – and small and mid-sized organisations may have as much to gain as global giants, says Lesley Meall, FSN contributing editor.
Chocolate is big business. Worldwide sales of chocolate confectionary were worth $82.5bn in 2009, and there is no shortage of competition between the four biggest chocolate manufacturers: Kraft, Mars, Nestlé and Ferrero. So you might be surprised to find that in the run up to Christmas 2009, two of them worked together on an (albeit relatively small) supply chain management initiative, designed to reduce carbon emissions, with the support of the Efficient Consumer Response (ECR) movement.
Nestlé and Mars liased with the supply chain team of another ECR member, Tesco, to synchronise their deliveries to each of its three UK regional distribution centres, so that any part-load orders that either company received could be combined into one truck load. The Nestlé and Mars customer service and logistics teams then worked together to enable a single vehicle to collect from each company’s distribution centres, before delivering the consolidated order to the supermarket’s distribution centres.
As a result, Nestlé and Mars combined the delivery of more than 60 loads, and in just three months, they removed over 7,500 miles of duplicate truck journeys. ‘This is a great example of the industry working collaboratively in order to help benefit the environment,’ says Richard Hastings, head of planning and delivery at Nestlé. ‘This proves how food manufacturers can conduct business in a more environmentally friendly and efficient way,’ adds Heather Simpson, customer logistics manager, at Mars UK.
‘It is part of an ongoing campaign where Mars is continually looking for ways to reduce our impact on the environment,’ adds Simpson, by making internal processes more sustainable, and through joint-initiatives such as ECR. By working together, Nestlé, Mars, Tesco, and other ECR members such as Coca Cola Enterprises and Unilever, have used ‘collaborative green distribution’, to take 124 million heavy goods vehicle (HGV) miles off UK roads, and even more internationally.
Standing on the shoulders of giants
Behemoths have sizeable resources, system capabilities and freight volumes, that can be used to help cut vehicle miles, and their (environmental and financial) costs, but mid-sized and small entities can also take (and benefit from) a more sustainable approach to distribution. Making better use of technology within the supply chain, improving fuel economy, load fill optimisation, and using third party services that can support less-than-truckload consolidation and reduce empty return trips (by matching vehicles and loads), can all play a role.
If you want to improve your use of technology in the supply chain (and its sustainability), the technology workgroup of ECR (which is managed in the UK by the research and training body IGD) has created a free online resource that could help. It offers a practical support guide that can be used to identify solutions, supported by technology, that will best suit your needs. This includes a downloadable spreadsheet-based tool that can aid your decision-making by benchmarking your logistics operation in 14 key areas, and a similar tool to help you to map and optimise your load fill utilisation.
Technology can also be used to reduce the incidence of empty back loads. In Europe there are a number of online membership systems, such as Truckspace (from £5 per month) and Courier Exchange from the Transport Exchange Group (TEG). So as Lyall Cresswell, the MD of TEG observes: ‘Sending trucks and vans out on the road without a full load is simply wasteful when the technology exists to match loads that need transporting with empty vehicles heading along the right routes,’ and these systems can be accessed with devices ranging from PCs to smart phones.
There are similar systems in North America, such as the recently launched Empty Miles from Voluntary Interindustry Commerce Solutions and the not-for-profit body GS1 in Canada and the US. ‘VICS members and non-members can use the system, since the more participants Empty Miles has, the more closely it will match loads with return routes,’ says Joe Andraski, President and CEO of VICS. But access does not come cheap: it costs VICS members $1,600 per year and non-members $1,850 per year. So GS1 has created an ROI calculator to measure direct financial benefits and determine the associated reduced CO2 emissions.
Driving ahead
An ROI calculator can be a boon, particularly when it comes to putting together a business case. But even if hard savings can not be pinned down this exactly, the pay back can still make investment worthwhile, as the Burton-on-Trent brewer Marston’s discovered when it decided to make better use of technology in the supply chain. With the help of a satellite navigation and vehicle tracking system (from Navman Wireless), Marston’s has cut road miles and the associated financial and environmental costs, and become more agile – which has helped it through the recent economic turmoil.
Marston’s transport manager Des McCauley says: ‘Since we installed the system we’ve really noticed the increased efficiency of our fleet,’ and the benefits of being more flexible. ‘The pub trade is experiencing hard times and it’s quite unpredictable for everyone. One minute we can have clients making extra orders and then we might lose a client just as suddenly,’ but it is managing this with the help of vehicle tracking reports. ‘As these give detailed accounts of driver journeys, we can reorganise the fleet whenever we need to,’ he says, saving time, and improving service and reliability for customers, as well as cutting fuel costs.
Not that this is the only approach to making more efficient (and therefore more sustainable) use of fuel. ECR has issued a 10-point guide to increasing fuel economy, which can be used to save money and cut carbon emissions. In the US, the American Transportation Research Institute is doing research into fleets that use truck speed limiters to cut fuel consumption costs, and Navistar is working with NASA’s Ames Research Center, the Air Force, and the Lawrence Livermore National Lab to cut fuel consumption by improving the aerodynamics of long haul trucks – and the latter could eventually save an estimated 3.4 billion gallons of diesel a year, and $10.2bn.
The US National Research Council recently published a report, Technologies and Approaches to Reducing the Fuel Consumption of Medium- and Heavy-Duty Vehicles, (which can be read free online), that evaluates various technologies and methods that could improve fuel consumption over the next decade. And it is worth noting, that among the many recommendations it makes (some of which are appropriate only in the US, or for certain types of vehicle), is the sensible suggestion that fuel consumption can be lowered by training vehicle operators in efficient driving techniques – with fuel savings of between 2 and 17 percent.
Better together?
Although less-than-truckload (LTL) consolidation, or collaborative delivery, can also help small and mid-sized organisations to cut road miles, distribution costs, and their negative impact on the planet, it is not something they can easily organise between themselves, as the Tesco, Mars, and Nestlé’s of this world can, but third party logistics (3PL) providers can help. ‘One way for mid-sized companies to level the playing field is “co-opetition”, working together, with other companies, even competitors, to act as one large company,’ says Alex Stark, marketing director of consumer packaged goods logistics, with the US 3PL provider Kane Is Able.
Depending on how extensive their operations and services are, 3PL providers can offer a range of support services, to help mid-sized companies reduce their inventory and distribution costs; however, not all of them will be right for every business, sector, or geographical region. So although any food and grocery or consumer packaged goods supplier can benefit from some of the information provided on the KIA website, such as Stark’s white paper on how to leverage 3PL, and the eBook on collaborative distribution, finding the right 3PL logistics provider for a specific business can complex and time-consuming.
Commercial organisations such as Logistics Transport can provide a range of services, and help businesses to identify a supplier that can meet their needs; but so can the not-for-profit organisation ECR. Although the industry programmes on its website are aimed at food and grocery suppliers (and their specific range of needs) much of the information and tools it offers are more general. The Sustainable Distribution Group, for example, covers topics ranging from alternative fuels to water management, via consolidated distribution.
The Consolidated Distribution Guide merits reading no matter what types of goods you are distributing or transporting. It offers insights into the perspectives (aims and motivations) of different parts of the supply chain, an overview of various approaches to consolidation, challenges and obstacles, a (not exhaustive) map of consolidation providers in the UK, help finding the right consolidation solution for your business, plus case study material. So even if you don’t have the resources organisations such as Nestlé and Mars (and your only interest in chocolate is eating it) you can still learn from their experiences.
