With their sprawling, energy-sucking DCs and carbon-spewing trucks, logistics/distribution operations may seem the very antithesis of green. But our exclusive reader survey tells a different story.
James Cooke is a principal analyst with Nucleus Research in Boston, covering supply chain planning software. He was previously the editor of CSCMP?s Supply Chain Quarterly and a staff writer for DC Velocity.
They may not be setting up wind farms or investing millions in hydrogen fuel cells, but make no mistake: DCV's readers are going green. In a recent survey, nearly three-quarters of the respondents reported that their companies had embarked on programs to make their transportation or distribution operations more eco-friendly. These ventures covered the gamut from water conservation efforts to initiatives aimed at reducing landfill waste to policies promoting the use of environmentally conscious truckers.
Those were some of the findings of our recent survey on sustainability initiatives. In total, 190 readers completed the online questionnaire. The respondents came from a cross section of industries, with the largest share working in wholesale distribution (19 percent), transportation and logistics (14 percent), or retail (10 percent). Seventy-three percent of the respondents told us their companies had undertaken some sort of environmental initiative, and nearly half—48 percent—said their companies had a formal sustainability plan in place.
As for where they're concentrating their efforts, the majority of the survey respondents said they had targeted their distribution center operations. Of those companies that have green programs under way, 64 percent said they had put warehouse-based sustainability programs in place. Other common areas of focus were packaging operations (37 percent), transportation operations (34 percent), and the overall supply chain network (26 percent). Last on the list were manufacturing operations (24 percent) and reverse logistics (14 percent). (Survey takers were allowed to select multiple responses.)
Tried and true
When it comes to specific green initiatives, the survey respondents appeared to favor time-tested strategies over experimental or venturesome pursuits. For example, when asked what steps they had taken to green up their DC operations, 55 percent of the respondents whose companies were pursuing green initiatives said they were working to reduce the volume of waste sent to landfills. Next on the list was the use of recyclable material and packaging (52 percent), followed by retrofitting the building for energy efficiency (47 percent). (For a look at what two companies are doing to make their DC operations more sustainable, see the accompanying sidebars.) Forty percent said they were working to reduce the amount of packaging material used, and an equal number reported that they were using recyclable containers or pallets. By contrast, only 13 percent said they were experimenting with using fuel cells to power their lift trucks. (For a complete list, see the accompanying chart.)
It was pretty much the same story with sustainability initiatives in the respondents' transportation operations. Here again, it was evident that the companies that have launched green initiatives have favored tried-and-true approaches over the experimental.When it came to transportation- related green programs, the top three choices (each of which was cited by 12 percent of the respondents) were using aerodynamic trucks, purchasing hybrid or electric trucks, and hiring only motor carriers that have joined the Environmental Protection Agency's SmartWay Transport program. (Truckers participating in the SmartWay program commit to reducing their fuel consumption and greenhouse gas emissions.) Programs involving relatively unproven technologies, like the use of biofuels (9 percent) and alternatives to diesel for powering refrigerated trailers (3 percent), appeared at the bottom of the list.
As for programs aimed at making the overall supply chain more eco-friendly, the survey respondents were more apt to be exploring ways to modify their existing systems or facilities than engaging in drastic network overhauls. When questioned about their efforts to green up their supply chains, 22 percent of the survey respondents whose companies had green initiatives under way said they were retrofitting DCs to make them more energy efficient. That was followed by redesigning the network (17 percent) and near-sourcing (11 percent). At the bottom of the list were relocating warehouses and plants (7 percent), opening new warehouses (6 percent), and opening new plants (1 percent).
Good citizens
What's motivating companies to undertake these initiatives? Of those respondents whose employers had green programs in place, the majority—43 percent—said it was because their company wanted to be a good corporate citizen. Another third—35 percent—said the motivation was to save money, while 9 percent indicated that they wanted to save the planet. A mere 4 percent said they had embarked on green initiatives in order to comply with existing or upcoming government regulations.
But as a practical matter, it's likely that many of the respondent companies actually had multiple motives for going green. One of the respondents may well have been speaking for many when he or she wrote that his/her company had undertaken a sustainability project "to achieve both business and environmental goals."
the right lights
For a shining example of how DCs can cut their energy bills, you need look no farther than Fellowes Inc. Last year, the office products maker replaced the lighting fixtures at two distribution centers with energy-efficient fluorescent lights—a project that paid for itself in a matter of months. "There's a strong ROI in replacing light fixtures," says Michael Kozak, an industrial engineer at Fellowes. "Our DCs run 24 hours a day, five days a week, so we've reduced our energy consumption by a significant amount."
Perhaps best known for its Bankers Box storage boxes, the Itasca, Ill.-based Fellowes makes and distributes office products like storage systems, computer accessories, and paper shredders. Much of its merchandise is manufactured overseas in countries like China and shipped to its three U.S. distribution centers—located in Itasca, Hanover Park, Ill., and Las Vegas—for distribution to customers throughout the United States.
At the suggestion of one of its suppliers, Fellowes began considering swapping out its old fixtures for fluorescent lighting a year ago. This past summer, the effort came to fruition when the company replaced the 400-watt metal halide fixtures in its Las Vegas and Hanover Park DCs with six T8 fluorescent lamps.
Kozak says that the T8 lamps put out more light per unit of energy than the metal halide fixtures did. In addition, the fluorescent lights increase the light levels inside the DCs while giving off significantly less heat than their incandescent or metal halide counterparts. "In the summer when it gets hot," says Kozak, "we don't have this contributing to the heat in the facility, which is important in a place like Las Vegas."
The conversion to fluorescents brought about an immediate reduction in the facilities' energy bills, but the savings didn't end there. Kozak reports that the company has also received rebates from its power companies in Illinois and Nevada based on reductions in its energy usage. "It helps the power company because it does not have to build another power plant," he explains. "For us, it was a significant amount of money." He adds that Fellowes has also benefited from provisions of the federal tax code that allow businesses to depreciate the cost of energy-saving improvements in one year rather than over a multi-year period.
For Fellowes, the result has been a speedy return on its investment, says Kozak. "The total project had a ninemonth payback, including the savings from energy consumption and rebates from energy providers plus some tax benefits from the federal government."
In fact, Kozak reports that the company is so pleased with the results that it plans to retrofit its main DC in Itasca with fluorescent lights this year. He adds that the company is hoping the project will provide not just cost savings but also a boost in morale. "Employees [in the retrofitted DCs] say it's a much more pleasant place to work," Kozak explains.
turning trash into cash
Making a distribution operation more eco-friendly doesn't necessarily require investing millions of dollars in solar panels or new material handling equipment. For specialty food maker Stonewall Kitchen, it was a simple matter of changing the way it disposed of discarded packing material from inbound shipments. Rather than sending it to a landfill, the company launched a program to separate out materials suitable for recycling and then selling them. That single step netted the company $50,000 in 2008.
Based in York, Maine, Stonewall Kitchen makes specialty and gourmet foods, including jams, jellies, and baking mixes. The privately held company, which recorded sales of more than $50 million last year, manufactures its products at a plant in York. After manufacture, it stores the products at the plant for about 48 hours to conduct quality testing before moving them to a 120,000-square-foot distribution center in Rochester, N.H., about 20 miles west of York.
Although the company had done some recycling in the past, it didn't launch a fullblown initiative until 2007. Supervisor Charlie Baker, who spearheaded the effort, says that a waste audit by the company's regional trash hauler prompted him to get serious about recycling. "It felt like we were doing the wrong thing throwing it in the Dumpster," says Baker.
The company started its recycling program in 2007 with cardboard, and then added aluminum and plastic in 2008. In 2007, the gourmet food maker recycled 165 of its 295 tons of waste—or 56 percent.
For Stonewall, the program has proved profitable on several fronts. To begin with, it is able to sell the discarded materials to its regional trash hauler, which also picks up the recyclables and hauls them away. Until this past October, when the market for recycled commodities tanked, the company was earning $125 a ton for recycled cardboard, says Baker. In the last quarter of 2008, the price for a ton of cardboard plunged to $15. Still, the recycling program netted the company $7,000 in 2007 and $30,000 in 2008.
Not only does Stonewall Kitchen receive cash for its recyclable material, but it also avoids waste hauling charges and the $90-a-ton tipping fees it would otherwise pay to dump the material in a landfill. In 2008, the company would have incurred about $14,000 in tipping fees along with another $5,600 for hauling that trash away. Taken together, the payments and savings netted the company $50,000 this past year.
Baker notes that while the environmental stewardship aspects of the program appeal to the company's managers, it's the cost savings that have really grabbed their attention. When he presented the recycling program's results to top management in October, the company decided to form a special "green team" of employees to find other environmental initiatives. "We're looking at changing lighting systems and other ways to save money," says Baker.
Congestion on U.S. highways is costing the trucking industry big, according to research from the American Transportation Research Institute (ATRI), released today.
The group found that traffic congestion on U.S. highways added $108.8 billion in costs to the trucking industry in 2022, a record high. The information comes from ATRI’s Cost of Congestion study, which is part of the organization’s ongoing highway performance measurement research.
Total hours of congestion fell slightly compared to 2021 due to softening freight market conditions, but the cost of operating a truck increased at a much higher rate, according to the research. As a result, the overall cost of congestion increased by 15% year-over-year—a level equivalent to more than 430,000 commercial truck drivers sitting idle for one work year and an average cost of $7,588 for every registered combination truck.
The analysis also identified metropolitan delays and related impacts, showing that the top 10 most-congested states each experienced added costs of more than $8 billion. That list was led by Texas, at $9.17 billion in added costs; California, at $8.77 billion; and Florida, $8.44 billion. Rounding out the top 10 list were New York, Georgia, New Jersey, Illinois, Pennsylvania, Louisiana, and Tennessee. Combined, the top 10 states account for more than half of the trucking industry’s congestion costs nationwide—52%, according to the research.
The metro areas with the highest congestion costs include New York City, $6.68 billion; Miami, $3.2 billion; and Chicago, $3.14 billion.
ATRI’s analysis also found that the trucking industry wasted more than 6.4 billion gallons of diesel fuel in 2022 due to congestion, resulting in additional fuel costs of $32.1 billion.
ATRI used a combination of data sources, including its truck GPS database and Operational Costs study benchmarks, to calculate the impacts of trucking delays on major U.S. roadways.
There’s a photo from 1971 that John Kent, professor of supply chain management at the University of Arkansas, likes to show. It’s of a shaggy-haired 18-year-old named Glenn Cowan grinning at three-time world table tennis champion Zhuang Zedong, while holding a silk tapestry Zhuang had just given him. Cowan was a member of the U.S. table tennis team who participated in the 1971 World Table Tennis Championships in Nagoya, Japan. Story has it that one morning, he overslept and missed his bus to the tournament and had to hitch a ride with the Chinese national team and met and connected with Zhuang.
Cowan and Zhuang’s interaction led to an invitation for the U.S. team to visit China. At the time, the two countries were just beginning to emerge from a 20-year period of decidedly frosty relations, strict travel bans, and trade restrictions. The highly publicized trip signaled a willingness on both sides to renew relations and launched the term “pingpong diplomacy.”
Kent, who is a senior fellow at the George H. W. Bush Foundation for U.S.-China Relations, believes the photograph is a good reminder that some 50-odd years ago, the economies of the United States and China were not as tightly interwoven as they are today. At the time, the Nixon administration was looking to form closer political and economic ties between the two countries in hopes of reducing chances of future conflict (and to weaken alliances among Communist countries).
The signals coming out of Washington and Beijing are now, of course, much different than they were in the early 1970s. Instead of advocating for better relations, political rhetoric focuses on the need for the U.S. to “decouple” from China. Both Republicans and Democrats have warned that the U.S. economy is too dependent on goods manufactured in China. They see this dependency as a threat to economic strength, American jobs, supply chain resiliency, and national security.
Supply chain professionals, however, know that extricating ourselves from our reliance on Chinese manufacturing is easier said than done. Many pundits push for a “China + 1” strategy, where companies diversify their manufacturing and sourcing options beyond China. But in reality, that “plus one” is often a Chinese company operating in a different country or a non-Chinese manufacturer that is still heavily dependent on material or subcomponents made in China.
This is the problem when supply chain decisions are made on a global scale without input from supply chain professionals. In an article in the Arkansas Democrat-Gazette, Kent argues that, “The discussions on supply chains mainly take place between government officials who typically bring many other competing issues and agendas to the table. Corporate entities—the individuals and companies directly impacted by supply chains—tend to be under-represented in the conversation.”
Kent is a proponent of what he calls “supply chain diplomacy,” where experts from academia and industry from the U.S. and China work collaboratively to create better, more efficient global supply chains. Take, for example, the “Peace Beans” project that Kent is involved with. This project, jointly formed by Zhejiang University and the Bush China Foundation, proposes balancing supply chains by exporting soybeans from Arkansas to tofu producers in China’s Yunnan province, and, in return, importing coffee beans grown in Yunnan to coffee roasters in Arkansas. Kent believes the operation could even use the same transportation equipment.
The benefits of working collaboratively—instead of continuing to build friction in the supply chain through tariffs and adversarial relationships—are numerous, according to Kent and his colleagues. They believe it would be much better if the two major world economies worked together on issues like global inflation, climate change, and artificial intelligence.
And such relations could play a significant role in strengthening world peace, particularly in light of ongoing tensions over Taiwan. Because, as Kent writes, “The 19th-century idea that ‘When goods don’t cross borders, soldiers will’ is as true today as ever. Perhaps more so.”
Hyster-Yale Materials Handling today announced its plans to fulfill the domestic manufacturing requirements of the Build America, Buy America (BABA) Act for certain portions of its lineup of forklift trucks and container handling equipment.
That means the Greenville, North Carolina-based company now plans to expand its existing American manufacturing with a targeted set of high-capacity models, including electric options, that align with the needs of infrastructure projects subject to BABA requirements. The company’s plans include determining the optimal production location in the United States, strategically expanding sourcing agreements to meet local material requirements, and further developing electric power options for high-capacity equipment.
As a part of the 2021 Infrastructure Investment and Jobs Act, the BABA Act aims to increase the use of American-made materials in federally funded infrastructure projects across the U.S., Hyster-Yale says. It was enacted as part of a broader effort to boost domestic manufacturing and economic growth, and mandates that federal dollars allocated to infrastructure – such as roads, bridges, ports and public transit systems – must prioritize materials produced in the USA, including critical items like steel, iron and various construction materials.
Hyster-Yale’s footprint in the U.S. is spread across 10 locations, including three manufacturing facilities.
“Our leadership is fully invested in meeting the needs of businesses that require BABA-compliant material handling solutions,” Tony Salgado, Hyster-Yale’s chief operating officer, said in a release. “We are working to partner with our key domestic suppliers, as well as identifying how best to leverage our own American manufacturing footprint to deliver a competitive solution for our customers and stakeholders. But beyond mere compliance, and in line with the many areas of our business where we are evolving to better support our customers, our commitment remains steadfast. We are dedicated to delivering industry-leading standards in design, durability and performance — qualities that have become synonymous with our brands worldwide and that our customers have come to rely on and expect.”
In a separate move, the U.S. Environmental Protection Agency (EPA) also gave its approval for the state to advance its Heavy-Duty Omnibus Rule, which is crafted to significantly reduce smog-forming nitrogen oxide (NOx) emissions from new heavy-duty, diesel-powered trucks.
Both rules are intended to deliver health benefits to California citizens affected by vehicle pollution, according to the environmental group Earthjustice. If the state gets federal approval for the final steps to become law, the rules mean that cars on the road in California will largely be zero-emissions a generation from now in the 2050s, accounting for the average vehicle lifespan of vehicles with internal combustion engine (ICE) power sold before that 2035 date.
“This might read like checking a bureaucratic box, but EPA’s approval is a critical step forward in protecting our lungs from pollution and our wallets from the expenses of combustion fuels,” Paul Cort, director of Earthjustice’s Right To Zero campaign, said in a release. “The gradual shift in car sales to zero-emissions models will cut smog and household costs while growing California’s clean energy workforce. Cutting truck pollution will help clear our skies of smog. EPA should now approve the remaining authorization requests from California to allow the state to clean its air and protect its residents.”
However, the truck drivers' industry group Owner-Operator Independent Drivers Association (OOIDA) pushed back against the federal decision allowing the Omnibus Low-NOx rule to advance. "The Omnibus Low-NOx waiver for California calls into question the policymaking process under the Biden administration's EPA. Purposefully injecting uncertainty into a $588 billion American industry is bad for our economy and makes no meaningful progress towards purported environmental goals," (OOIDA) President Todd Spencer said in a release. "EPA's credibility outside of radical environmental circles would have been better served by working with regulated industries rather than ramming through last-minute special interest favors. We look forward to working with the Trump administration's EPA in good faith towards achievable environmental outcomes.”
Editor's note:This article was revised on December 18 to add reaction from OOIDA.
A Canadian startup that provides AI-powered logistics solutions has gained $5.5 million in seed funding to support its concept of creating a digital platform for global trade, according to Toronto-based Starboard.
The round was led by Eclipse, with participation from previous backers Garuda Ventures and Everywhere Ventures. The firm says it will use its new backing to expand its engineering team in Toronto and accelerate its AI-driven product development to simplify supply chain complexities.
According to Starboard, the logistics industry is under immense pressure to adapt to the growing complexity of global trade, which has hit recent hurdles such as the strike at U.S. east and gulf coast ports. That situation calls for innovative solutions to streamline operations and reduce costs for operators.
As a potential solution, Starboard offers its flagship product, which it defines as an AI-based transportation management system (TMS) and rate management system that helps mid-sized freight forwarders operate more efficiently and win more business. More broadly, Starboard says it is building the virtual infrastructure for global trade, allowing freight companies to leverage AI and machine learning to optimize operations such as processing shipments in real time, reconciling invoices, and following up on payments.
"This investment is a pivotal step in our mission to unlock the power of AI for our customers," said Sumeet Trehan, Co-Founder and CEO of Starboard. "Global trade has long been plagued by inefficiencies that drive up costs and reduce competitiveness. Our platform is designed to empower SMB freight forwarders—the backbone of more than $20 trillion in global trade and $1 trillion in logistics spend—with the tools they need to thrive in this complex ecosystem."