Smart Transportation Equation: Leaner + Cleaner = Greener
By Hal Feuchtwanger
Sustainability in supply chain management is certainly not a new concept. Many companies have already worked to develop eco-friendly approaches that can also help to reduce costs, manage risks and even grow revenues. The pressure to become "greener" only continues to mount, however, as a growing percentage of total carbon emissions come from transportation, and companies face the likelihood of rising fuel prices, increased highway congestion, continued globalization and further government regulation.
Statistical Landscape
According to a comprehensive Environmental Protection Agency (EPA) study, transportation sources accounted for 29 percent of total U.S. greenhouse gas (GHG) emissions in 2006. This includes both light-duty (passenger) as well as heavy-duty (commercial) vehicles. The study cited transportation as the largest end-use source of CO2, as well as the fastest-growing source of total GHG emissions in the United States, accounting for 47 percent of the net increase since 1990.
Heavy-duty vehicles alone accounted for 23 percent of the on-road total GHG emissions in 2003 (up from 18 percent in 1990), while emissions from heavy-duty sources grew by 57 percent during the same period—the largest increase of any major transportation source. And according to the U.S. Department of Transportation Freight Management and Operations, "Freight shipment volumes are expected to increase 25-30 percent by 2020, with road transportation currently handling 70 percent of the freight carried in the U.S.—about five times more than rail." The "five times" truck to rail comparison is particularly noteworthy. With some variance by source and circumstance, trucks are estimated to require roughly five times more energy than rail, per ton-mile.
Four of the primary factors underlying the dramatic increase in heavy-duty freight hauling, according to the EPA, include:
Changing composition of shipments — The U.S. and world economies shifted toward more high-value, low-weight products, such as electronics, electrical, office equipment, pharmaceuticals, and food products, which are more conducive to haulage by trucks than by rail or ships.
Just-in-time inventory practices — This often requires smaller, more frequent and more reliable inbound shipments—characteristics that typically favor trucking over rail and also may diminish the loads of smaller trucks.
Declining labor costs — The costs of truck freight transport have decreased relative to other shipping modes, in part because of stiff price competition that followed trucking deregulation with the 1980 Motor Carrier Act.
Manufacturing and warehouse location patterns — Manufacturing and warehousing have migrated from urban areas to suburban or rural locations that often provide greater highway access and cheaper land and labor. Longer hauls by truck carriers are required to connect more distant supply, production, and consumption facilities, and these facilities are increasingly inaccessible by rail.
Government Programs
The EPA Heavy Duty Highway Diesel program became effective in 2007 and will be phased in through 2010. It regulates heavy duty vehicles and fuel as a single system. Once fully implemented, the EPA estimates an annual reduction of 2.6 million tons of smog-causing nitrogen oxide emissions. As a result, an estimated 360,000 asthma attacks and 386,000 cases of respiratory symptoms in asthmatic children will be avoided every year. And 1.5 million lost work days, 7,100 hospital visits and 2,400 emergency room visits for asthma will be prevented. In spite of this clearly positive environmental impact, it should be noted that this program does not address the primary source of GHG emissions—CO2.
The SmartWay initiative is a voluntary partnership between the EPA and the ground freight industry, with the goal to help companies enhance performance of freight operations, reduce GHG emissions and save money through sustainable transportation. SmartWay aims to save 3.5-6.5 billion gallons of diesel fuel per year—representing a savings of up to 150 million barrels of oil annually and nearly $10 billion in savings for asset-based carriers by 2012. This will eliminate 33-66 million metric tons of CO2 emissions—equal to removing 12 million cars from the road.
Examples of innovative initiatives being explored by the SmartWay program include:
- Truck stop electrification
- Idle reduction technologies
- Aerodynamic equipment design
- Low rolling resistance tires
- Alternative fuel vehicles
A SmartWay certified truck is estimated to be 20-25 percent more efficient than an average truck on the road today, and many leading shippers like PepsiCo and others are now starting to make SmartWay certification a requirement for all the carriers with whom they contract.
Companies Taking Action
Logistics service providers, particularly asset-based carriers, are among those companies most motivated to take action, as their emissions reduction efforts are frequently driven by increased efficiencies and produce direct bottom-line benefits. While YRC Worldwide has made a serious and comprehensive long-term commitment to sustainability, appointing a chief sustainability officer and establishing specific hard targets, nearly 30 percent of their reported emissions reductions to date have been the result of improved fuel efficiencies, linked to controlling truck road speeds to 63 mile per hour.
With regard to rail, sustainability efforts tend to more often mean a commitment to capital investments. GenSet locomotives reduce nitrous oxide and particulate matter emissions by 80 percent and can reduce carbon dioxide emissions by approximately 50 percent by monitoring engine idling and switching to a "sleep" mode after a period of inactivity. CSX has invested more than $1 billion since 2000 to upgrade its locomotive fleet with this technology, and it is in the process of upgrading additional engines to save another 9.6 million gallons of fuel.
BNSF will be the first rail carrier in North America to use zero-emissions electronic wide-span cranes at key intermodal facilities. Operating solely from electric power, wide-span cranes produce zero emissions on site. The wide-stance design of these new cranes also eliminates as many as six diesel trucks (hostlers) for shuttling containers within the intermodal facility. BNSF was also the first railroad to pilot the use of low-emissions, natural-gas hostler trucks to move containers at the Los Angeles Hobart Intermodal facility, the nation's busiest intermodal rail terminal. The 10 new hostlers reduce nitrogen oxide and particulate emissions by 90 percent versus standard off-road diesel tractors.
Looking at the shipper community, a 2009 AMR Research report on sustainable transportation found that consumer goods and retail companies were most likely to include "green" efforts as part of their transportation strategy, with 19 percent and 15 percent respectively reporting it as the key driver. No other industry even broke into double digits. As mentioned earlier, PepsiCo is one of the companies now requiring its contracted carriers to be SmartWay certified, and the company has worked very closely with the SmartWay program since its inception. PepsiCo also tests and implements new technologies as part of its own private fleet operations, measures and reports its total emissions from transportation, and has established hard targets for reductions across its supply chain.
On the ocean transportation front, Dolerecently reported great success within its fresh fruit operation in Latin America. It replaced part of its fleet with larger and more fuel-efficient vessels, as well as changing logistics to reduce the call on 'sub-optimal' ports. In addition, it updated its refrigerated container fleet with new compressor technology, substantially improving fuel efficiency.
Supporting Role of Software
According to the same AMR Research report cited above, 48 percent of supply chain executives surveyed believe that to achieve results in GHG emission/energy reduction, more mature technologies and innovations are still required. Interestingly, only 39 percent of those same respondents reported that there company had deployed TMS technology, and of those 39 percent, almost half had only deployed it in the past three years or less. Relevant technologies in support of sustainable transportation are described within the functional domains listed below.
Measure/Report — The first step for any organization should include the systematic capture of relevant data/analytics, particularly for the purpose of establishing an initial baseline for reporting. While the goal is to utilize this data to calculate GHG emissions from transportation, a recognized need still exists for establishing some industry-accepted calculation standards, as well as greater transparency and data sharing between shippers and carriers.
Design/Plan — The primary distinction between the two is largely based on scope and time horizons. Design refers to the more strategic (and holistic) process of rationalizing supply chain networks, based on constraint-based optimization. Besides cost and service, networks can be modeled and optimized based on costs and/or constraints linked to environmental factors like power usage, water usage, fuel consumption, etc. Plan is intended to apply to more operational or tactical circumstances. In the transportation domain, this means optimized shipment planning, mode selection, consolidation, etc. Again, environmental factors (like CO2 output) can also be considered as part of an optimization process within the transportation planning domain.
Collaborate/Comply — As leading shippers begin to reach practical limits in terms of optimizing operations within their own networks, they will increasingly look for collaborative cross-shipper or multi-shipper opportunities. A consortium-based technology model will be critical to supporting this process. And finally, advanced companies will need a scoring model to ensure their implemented strategies are meeting expected levels of improvement. Initially this may be necessary for internal purposes only, but the future could very well include compliance as part of a regulatory framework/mandate.
Hal Feuchtwanger is managing director for i2's Global Logistics sector.
