Emission Reduction In Logistics: A Positive Impact On The Company's Supply Chain

Sustainability practices were once adopted as a voluntary undertaking by firms to match the “Corporate Social Responsibility” agenda, catering towards specific stakeholders and consumers. Now, sustainability is creating tangible bottom line benefits in Heavy Manufacturing and the Fast Moving Consumer Goods industries.

Today, such practices have started transforming companies’ Supply Chains turning them into more cost effective, lean and profitable businesses and market differentiators.

GHG emissions reduction and control in a company’s Supply Chain and Logistics is one of the most widely pursued topics in sustainability. Logistics across industries can be categorized under Road, Ocean, Air and Rail Freight. In the United States alone, road transportation is one of the most preferred methods of shipment followed closely by Rail and Air Freight. Sea Freight is seen mostly in international routes with limited in-land water routes.

Between these 4 modes, speed of the mode and Carbon emissions are directly proportional, being least in case of ocean freight, to being highest in Air freight. From a monetary perspective, fuel cost as a 3rd factor, contributes to this equation through direct co-relation along with the speed and Carbon emissions. The fuel spend can vary greatly on how the mode is being selected. Mode selection and use is largely guided by the company’s Supply Chain and Logistics policies. These policies were once viewed more or less from a long term perspective and visited annually, at best.

However, in today’s dynamically shifting marketplace and ever increasing fuel costs, there is a growing need for a company’s Logistics division to continuously analyze and actively formulate optimal policies.

In the case of inter-modal routes, moving from a less efficient Road --> Sea/Air--> Road to a Rail--> Sea/Air-->Rail can yield benefits through lower transportation spend, lower fuel spend and lower Supply Chain emissions due to land consolidation through shipment grouping.

Many times, within Road Transportation, companies are driven by “On Time” delivery metrics and end up making a lot of LTL (less than truck load) or parcel shipments between their Supply Chains. Proper analysis of demand pattern and load leveling in shipment schedules can pave way for more cost effective FTL (Full Truck Load) shipments.

Other “quick wins” that go unnoticed lie in optimizing the packaging of products and how companies can save money by reducing unwanted packaging that goes into shipments. With proper understanding of customer requirements, touch points during transit and shipment lead times, shippers can evaluate suitable packaging options and optimize container or cube utilization, further improving Logistics efficiency.

Operational changes such as these help companies quickly realize benefits by reducing fuel spend and directly influencing carbon reduction in their Supply Chain.

From a strategic viewpoint, companies can see further ‘sustained’ cost savings, by taking a deeper look at their Supply Chain Network. Based on the Supply and Demand pattern, companies can re-think their distribution and warehousing strategies. Rather than having SKU dependent warehouses, and shipment routes, which are mostly underutilized, companies can consolidate these locations by mixing SKUs and outbound flows from LTL to TL shipments, better utilizing both their immovable as well as transportation assets.

Since some Logistics elements, such as Freight or Transportation Management may lay outside a company’s core business, these changes can be applied by collaborating with Shipper and Carriers in the network. For a more strategic undertaking, firms need to start by developing a thorough understanding of the company’s Supply Chain, the entities that are involved in the network and the overall market conditions. Only then can they accordingly charter such improvement projects.

CGN, with its in-depth experience, in the area of Supply Chain Management and Logistics Optimization, has successfully worked with Global clients from varied industry segments, and helped them to align their Supply Chain Strategies necessary for operational excellence, giving our clients a competitive edge in the market.  To learn more about our Supply Chain Offerings, please visit our website in the practice area of ‘Global Supply Chains and Operations.’

- By Saumitra "Saum" Sharma, Manager