More companies are planning, building, and operating DCs with an eye toward environmental sustainability. It's not just good corporate citizenship; it's also good business.
Peter Bradley is an award-winning career journalist with more than three decades of experience in both newspapers and national business magazines. His credentials include seven years as the transportation and supply chain editor at Purchasing Magazine and six years as the chief editor of Logistics Management.
The solar energy generated by current technologies may not be the cheapest source of electricity available, but it still has a lot to recommend it. It's clean, it's renewable, and it doesn't require unsightly turbines. It also presents enormous opportunities for the distribution community. Distribution centers across the United States have hundreds of millions of square feet of roof, almost all of it flat. Install electricity-generating solar panels on even a portion of that space and you've converted those rooftops to power plants.
No one expects a widespread conversion among DCs to solar power anytime soon. Still, the vision of these facilities' generating some or all of their electricity needs—or perhaps more than they need—is not unrealistic now that the growing worldwide movement toward "sustainable development" has reached the distribution center.
What exactly is "sustainable development"? While there appears to be no single, widely accepted definition, the general idea is to build in a way that will do no harm to the planet or to future generations. Thus, the concept of sustainability incorporates not only environmental, or "green," considerations, but also looks at the long-term effects that development will have on local communities and on resource consumption.
To some, sustainability equates to environmentally conscious development, while to others it means a focus on long-term issues, says Christopher Park, a principal with Deloitte Consulting and a registered architect who focuses on sustainability. Deloitte itself uses the following standards to define sustainability: the project must reduce waste and promote recycling; minimize consumption of resources for products and services; emphasize the use of natural and organic materials; and reduce what the consultant calls the "net global impact footprint." Toward that end, Deloitte is exploring ways to develop zero net energy and zero net emissions buildings that can internally generate all necessary power.
Sustainability's influence extends beyond the buildings themselves. It's also becoming a factor in the site selection process, says Park. Along with the traditional considerations like an area's labor pool and access to transportation, he says, companies are beginning to look at factors like the availability of mass transit service, which could reduce employees' dependence on cars for commuting. They're also looking at access to energy grids and local alternative-energy requirements. (Nearly half the states have set standards specifying that electric utilities generate a certain amount of electricity from renewable sources.)
As for what's driving the movement, Park points to three recent trends. One is the rapid increase in regulatory and legislative initiatives affecting the environmental impact of development. Another is the emergence of environmentally friendly technologies that are not only cost-neutral but also drive cost efficiencies. The third is increased public awareness of green practices. "All else being equal," he says, "customers would rather buy a sustainable product."
Pepsi takes the LEED
One of the leaders in promoting sustainable development is the U.S. Green Building Council, a Washington, D.C.-based organization that encourages construction of buildings that are both environmentally responsible and good investments for developers and their customers. Its principal initiative is the Leadership in Energy and Environmental Design (LEED) Green Building Rating System.
LEED, established in 2000, offers certifications for developers and end users based on evaluations of buildings for sustainable sites, water efficiency, energy and atmosphere, materials and resources, and indoor environmental quality. The council says that more than 1 billion square feet of facility space in the United States has been built to or is being built to the program's standards. (Details about LEED are available at the council's Web site, www.usgbc.org.)
PepsiCo and several of its subsidiaries, including Frito-Lay, have earned LEED certifications. In 2005, a newly opened Frito- Lay distribution center in Rochester, N.Y., earned a Gold certification, the second-highest award. What does it take to earn that distinction? According to Frito-Lay, the award-winning DC featured responsible site development, environmentally responsible construction management and materials, renewable energy sources, recycling programs, water efficiency, atmosphere and air-quality measures, alternative transportation for employees, and a reduction of the building's "heat island" effect. (A heat island is a building or area that is usually warmer than surrounding areas because of heat retention. Think of an asphalt parking lot under the summer sun.)
PepsiCo has been able to duplicate the DC's success elsewhere. Earlier this year, the council recognized its Gatorade division with a Gold certification for its 950,000-square-foot manufacturing facility in Wytheville, Va.
Developers come clean
Similar to LEED but on a broader scale is the Global Reporting Initiative (GRI), an Amsterdam-based program that is sponsored by the United Nations Environmental Program. GRI is a network of business, labor, and other groups that encourages organizations to report their economic, environmental, and social performance. Although GRI's sustainability reporting framework encompasses many types of business scenarios, companies can apply that standard to their distribution centers.
That's exactly what ProLogis did earlier this year when it issued its first annual sustainability report based on the GRI guidelines. In that report, the company, which is one of the world's largest developers of distribution and logistics properties, set targets for the next four years that include use of 20 percent recycled construction materials at all new DCs; diversion of 75 percent of construction debris from disposal in landfills or incinerators; a 50-percent reduction in the use of potable water in landscape irrigation at all new developments; installation of renewable energy sources with combined generation capacity of 25 million kilowatt hours per year; and achievement of "carbon-neutral" business operations through a combination of reductions and offset purchases (the process of balancing carbon dioxide emissions by buying a product or service that saves the equivalent amount of CO2).
On the design side, the company plans to emphasize the use of skylights and other types of windows that introduce more daylight into DCs. It also plans to take advantage of modern fluorescent lighting technologies that can reduce electricity usage by 35 to 70 percent compared to conventional lighting methods. Designs for new buildings call for greater use of "gray water," or retained rainwater, for landscape irrigation. And wherever possible, white roofing materials and white parking lot paving will reduce a facility's "heat island" effect.
ProLogis is also testing solar and wind energy technologies, with notable success. Solar projects in Europe generate enough electricity that the company sells some back into the power grid, says Jack Rizzo, a ProLogis managing director who's responsible for DC design and construction. A pilot wind-energy project at a building in Osaka, Japan, generates enough electricity to light the facility's common areas.
Carrots and sticks
Incorporating principles of sustainability into distribution centers carries a cost, however. "The challenge we have is that the cost of a DC is so much lower than malls and other developments that a dollar a square foot to us is a big deal," Rizzo says. "We have to be cognizant of that in selecting design elements."
Rizzo reports that initial construction costs for green DCs run 5 to 7 percent higher than those for traditional designs. To ensure that environmentally responsible elements provide a reasonable return on investment, his company focuses on design elements and components that pay for themselves in three to five years.
Though green building techniques may be more costly than traditional construction, companies may not have much choice in the future. "I think we will have federal mandates to reduce carbon footprints," says Rizzo, who adds that he expects to see similar initiatives at the state and local levels. At the same time, he believes that governments will offer more incentives for generating renewable energy from wind, hydro, and the sun within the next two to five years. According to Park, however, it's not yet clear whether federal, state, and local rules will lean more toward incentives or penalties to assure compliance.
Incentives can, in fact, make or break a project. Rizzo notes that solar projects work in Europe because of government incentives that, for example, pay a premium for renewable energy sold into the power grid. Such projects have been less successful in this country, he adds. "The only place solar works in the United States is a state like California, which offers rebates and tax incentives."
Even businesses that are fully committed to sustainable development have to balance short- and long-term cost considerations. The big question, Park says, is "Do I invest more now and pay a premium for construction for a lower lifecycle cost?" He reports that he is seeing fundamental changes in the way companies are making decisions about whether to retrofit or build new. "What is new about the analysis is that it is incorporating energy, water, and waste into what was a financial decision before," he observes. "We are seeing decisions that are a little more costly but are resulting in substantial reductions in energy and other footprints."
That's an indication that companies are realizing that sustainable development isn't just good public relations; it's also good business. Take risk management, for example. Companies today have to factor risk management into their site decisions, accounting for potential environmental changes that could have a negative impact on their business. Ensuring the availability of renewable energy and clean water is an important part of reducing that risk.
Government authorities, moreover, tend to look more favorably on sustainable projects. In Europe, for instance, developments that do not include renewable energy in their design face more hurdles in the approval process than their greener counterparts do, Rizzo notes.
As for what lies ahead, Rizzo says he's confident that the sustainable development movement will continue to gather momentum. ProLogis's clients are already starting to judge facilities based on sustainability goals, he says. And their interest in "green" features isn't limited to high-profile locations like corporate headquarters and retail outlets, he adds. "We are … now seeing companies request warehouses that are LEED certified."
States across the Southeast woke up today to find that the immediate weather impacts from Hurricane Helene are done, but the impacts to people, businesses, and the supply chain continue to be a major headache, according to Everstream Analytics.
The primary problem is the collection of massive power outages caused by the storm’s punishing winds and rainfall, now affecting some 2 million customers across the Southeast region of the U.S.
One organization working to rush help to affected regions since the storm hit Florida’s western coast on Thursday night is the American Logistics Aid Network (ALAN). As it does after most serious storms, the group continues to marshal donated resources from supply chain service providers in order to store, stage, and deliver help where it’s needed.
Support for recovery efforts is coming from a massive injection of federal aid, since the White House declared states of emergency last week for Alabama, Florida, Georgia, North Carolina, and South Carolina. Affected states are also supporting the rush of materials to needed zones by suspending transportation requirement such as certain licensing agreements, fuel taxes, weight restrictions, and hours of service caps, ALAN said.
E-commerce activity remains robust, but a growing number of consumers are reintegrating physical stores into their shopping journeys in 2024, emphasizing the need for retailers to focus on omnichannel business strategies. That’s according to an e-commerce study from Ryder System, Inc., released this week.
Ryder surveyed more than 1,300 consumers for its 2024 E-Commerce Consumer Study and found that 61% of consumers shop in-store “because they enjoy the experience,” a 21% increase compared to results from Ryder’s 2023 survey on the same subject. The current survey also found that 35% shop in-store because they don’t want to wait for online orders in the mail (up 4% from last year), and 15% say they shop in-store to avoid package theft (up 8% from last year).
“Retail and e-commerce continue to evolve,” Jeff Wolpov, Ryder’s senior vice president of e-commerce, said in a statement announcing the survey’s findings. “The emergence of e-commerce and growth of omnichannel fulfillment, particularly over the past four years, has altered consumer expectations and behavior dramatically and will continue to do so as time and technology allow.
“This latest study demonstrates that, while consumers maintain a robust
appetite for e-commerce, they are simultaneously embracing in-person shopping, presenting an impetus for merchants to refine their omnichannel strategies.”
Other findings include:
• Apparel and cosmetics shoppers show growing attraction to buying in-store. When purchasing apparel and cosmetics, shoppers are more inclined to make purchases in a physical location than they were last year, according to Ryder. Forty-one percent of shoppers who buy cosmetics said they prefer to do so either in a brand’s physical retail location or a department/convenience store (+9%). As for apparel shoppers, 54% said they prefer to buy clothing in those same brick-and-mortar locations (+9%).
• More customers prefer returning online purchases in physical stores. Fifty-five percent of shoppers (+15%) now say they would rather return online purchases in-store–the first time since early 2020 the preference to Buy Online Return In-Store (BORIS) has outweighed returning via mail, according to the survey. Forty percent of shoppers said they often make additional purchases when picking up or returning online purchases in-store (+2%).
• Consumers are extremely reliant on mobile devices when shopping in-store. This year’s survey reveals that 77% of consumers search for items on their mobile devices while in a store, Ryder said. Sixty-nine percent said they compare prices with items in nearby stores, 58% check availability at other stores, 31% want to learn more about a product, and 17% want to see other items frequently purchased with a product they’re considering.
Ryder said the findings also underscore the importance of investing in technology solutions that allow companies to provide customers with flexible purchasing options.
“Omnichannel strength is not a fad; it is a strategic necessity for e-commerce and retail businesses to stay competitive and achieve sustainable success in 2024 and beyond,” Wolpov also said. “The findings from this year’s study underscore what we know our customers are experiencing, which is the positive impact of integrating supply chain technology solutions across their sales channels, enabling them to provide their customers with flexible, convenient options to personalize their experience and heighten customer satisfaction.”
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
Two European companies are among the most recent firms to put autonomous last-mile delivery to the test with a project in Bern, Switzerland, that debuted this month.
Swiss transportation and logistics company Planzer has teamed up with fellow Swiss firm Loxo, which develops autonomous driving software solutions, for a two-year pilot project in which a Loxo-equipped, Planzer parcel delivery van will handle last-mile logistics in Bern’s city center.
The project coincides with Swiss regulations on autonomous driving that are expected to take effect next spring.
Referred to as “Planzer–Dynamic Micro-Hub w LOXO,” the project aims to address both sustainability issues and traffic congestion in urban areas.
The delivery vehicle, a Volkswagen ID. Buzz battery-electric minivan, will feature Loxo’s Level 4 Digital Driver navigation software, a highly automated solution that allows driverless operation. The van was retrofitted to include space for two swap boxes for parcel storage.
During the two-year pilot phase, Loxo’s Digital Driver will navigate a commercial vehicle several times a day from Planzer’s railway center to various logistics points in Bern's city center. There, the parcels will be reloaded onto small electric vehicles and delivered to end customers by Planzer’s parcel delivery staff.
Following the completion of the pilot phase, Planzer and Loxo will build on the program for rollout in other Swiss cities, the companies said.
The partners said the project addresses the increasing requirements of urban supply chains and aims to ensure the “scalability of their disruptive solution.” With largely emission-free delivery, it contributes to greater levels of sustainability for the city as a living space, they also said.
“The uniqueness of this project lies in the fact that it will have a direct impact on society,” Planzer’s CEO and Chairman Nils Planzer said in a statement announcing the project. “We didn't just want to integrate automated technology into existing systems, we wanted to develop a completely new concept and a new business model.”
As the hours tick down toward a “seemingly imminent” strike by East Coast and Gulf Coast dockworkers, experts are warning that the impacts of that move would mushroom well-beyond the actual strike locations, causing prevalent shipping delays, container ship congestion, port congestion on West coast ports, and stranded freight.
However, a strike now seems “nearly unavoidable,” as no bargaining sessions are scheduled prior to the September 30 contract expiration between the International Longshoremen’s Association (ILA) and the U.S. Maritime Alliance (USMX) in their negotiations over wages and automation, according to the transportation law firm Scopelitis, Garvin, Light, Hanson & Feary.
The facilities affected would include some 45,000 port workers at 36 locations, including high-volume U.S. ports from Boston, New York / New Jersey, and Norfolk, to Savannah and Charleston, and down to New Orleans and Houston. With such widespread geography, a strike would likely lead to congestion from diverted traffic, as well as knock-on effects include the potential risk of increased freight rates and costly charges such as demurrage, detention, per diem, and dwell time fees on containers that may be slowed due to the congestion, according to an analysis by another transportation and logistics sector law firm, Benesch.
The weight of those combined blows means that many companies are already planning ways to minimize damage and recover quickly from the event. According to Scopelitis’ advice, mitigation measures could include: preparing for congestion on West coast ports, taking advantage of intermodal ground transportation where possible, looking for alternatives including air transport when necessary for urgent delivery, delaying shipping from East and Gulf coast ports until after the strike, and budgeting for increased freight and container fees.
Additional advice on softening the blow of a potential coastwide strike came from John Donigian, senior director of supply chain strategy at Moody’s. In a statement, he named six supply chain strategies for companies to consider: expedite certain shipments, reallocate existing inventory strategically, lock in alternative capacity with trucking and rail providers , communicate transparently with stakeholders to set realistic expectations for delivery timelines, shift sourcing to regional suppliers if possible, and utilize drop shipping to maintain sales.