Driving a sustainable supply chain
Logistics businesses are keen to hit the road to sustainability. But there is a spectrum of approaches to consider. We investigate one leading company's efforts.The green agenda is gathering momentum. The drive for change is being shaped not only by legislation but increasingly by consumers. And they vote with their feet, so retailers are looking with concern at reducing their environmental footprint. One area for consideration is logistics. But, as David Hindson, director at supply chain company TDG pointed out to retailers at a recent Efficient Consumer Response board meeting, real change can only be achieved by working together.
As with most major challenges, building sustainability into distribution cannot be achieved in a single step. It demands a continued effort across many fronts. At one end of the spectrum are the quick wins - tactical improvements which are easy to achieve but have limited impact. At the other end, there is network redesign. Its potential is huge but it is more complex to implement, in part due to the need for collaboration between retailers.
Thus, logistics companies have to decide where best to concentrate their efforts. Should the focus be on activities that will make the biggest impact; on those that are easiest to achieve; or on those that will generate the highest profile? The answer is that they are all important. And whether service providers go for tactical improvements, modal changes, collaborative ventures or a complete network redesign will be as much a function of their own objectives and culture as that of the customers they work with.
Logistics company TDG's tactical efforts are focused on areas such as alternative fuels, driver training and vehicle specification. For example, all TDG's bunkered fuel is now 5% biodiesel, and the company is also involved in a pilot with Gasrec to use compressed gas from landfill.
This latter initiative will help to reduce the impact of waste disposal as well as supporting the principle of industrial ecology. And there is a sustainable future supply of biogas from food waste products such as manure and milk whey.
The driver training programme is something of a jewel in the TDG crown. It has been around for 14 years, and has won recognition and awards from a number of industry bodies. All drivers attend courses each year to develop safe but also eco-friendly driving techniques - meeting road safety needs and reducing fuel consumption and emissions through better planning, perception and anticipation skills. Process controls such as pre-driving circle checks pick up on issues such as fuel or air leaks, worn tyres, brake faults and black exhaust smoke - all potential safety and environmental concerns.
The combination of skills and procedure means that drivers can typically demonstrate a 15% fuel saving on completing their training.
Finally, TDG is looking at further options, including tyre design and maintenance solutions and specialised aerodynamic styling for vehicles and trailers to cut down on fuel consumption further. In all, these types of activities can potentially reduce the carbon footprint of grocery distribution by up to 25%.
A further 10-40% reduction in the impact of food miles can be achieved by switching from road-based to alternative forms of transport. The government has set a goal of increasing rail use by 80% between 2000 and 2010. TDG operates a number of rail services and recognises that there is significant potential to reduce distribution impacts especially over longer distances. But there are major constraints: regional and localised congestion, wavering confidence (particularly following major incidents such as Hatfield) and the risk-averse, inflexible mindset of the rail industry. Other options, such as inshore and inland water ways, can play a minor role but are realistically likely to be more attractive within mainland Europe than within the UK.
Moving up the sustainable distribution hierarchy, we arrive at projects such as network optimisation and hand-in-hand with this often comes the need for collaboration - either between clients or providers.
TDG's most notable success in this arena is with steel manufacturer Corus. Its transport spend of £76.4M was being bought and managed locally. This translated into 60 individual sites each contracting and working independently with a pool of more than 30 transport contractors.
The firm's solution was the creation of a managed distribution platform, which would coordinate effort centrally from Corus' site in Scunthorpe. The aim is to create an internal market that drives performance improvement over a number of dimensions including purchasing, planning, and health and safety.
Phase one of the project is already on target to deliver transport savings of around 8% mainly through better procurement and scheduling and it is also reducing transport miles.
The next phase will see further savings of up to 20% through four work-streams: client integration, process/IT simplification, fleet strategy and customer behaviour. Similar initiatives within the retail sector could reduce food miles by up to 25%.
The final piece of the puzzle is to look at one of the most complex areas to implement - network redesign. But in return it offers potentially the greatest reward - up to 40% reduction in food miles. In the pre-green economy, the aim was to reduce cost through initiatives such as fewer, centralised distribution centres, global procurement and dedicated scale facilities. In the new green economy, the focus is on minimising carbon, although not necessarily at the expense of cost. So business strategy might indicate more local production and stockholding, minimum carbon procurement strategies and greater supply chain collaboration. In practice, this could mean the creation of urban freight centres, more distribution centres (possibly shared-user) and a greater acceptance of collaborative private-transport networks.
These initiatives are all well and good but who is going to drive the change? As suggested earlier, the responsibility does not lie with one party or the other but with all players in the distribution operation. Logistics companies need to address the tactical opportunities but strategic change needs to be lead by clients - although services providers can support these endeavours. So what is stopping this happening now? One of the main barriers is the entrenched procurement-led approach to logistics buying that still predominates the retailing community. Invitations to tender, prescriptive performance measures and the need to conform to set behaviours are all constraints to progress. What is needed is new thinking and innovative approaches from third-party logistics providers as well as new industry-wide approaches. These include new ways of measuring supply chain effectiveness, using environmental benchmarks developed in conjunction with the industry and market mechanisms that promote the best overall solution for both the customer and environment.
In summary, government and consumer attention is rightly looking at distribution in general and specifically the issue of food miles in a bid to reduce carbon emissions. And some progress is being made, but collectively we need to be more aggressive. There are a range of areas we could attack. But we must be clear where to focus. Bigger opportunities present the greatest challenge, will take longer to deliver and require higher levels of collaboration. In order to unlock the potential prizes we need to remove the barriers. We need to move away from the procurement mindset and take a cross-sector approach to measuring environmental impact through collaborative ventures.
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