Transportation & the Environment

Supply Chains are becoming longer and more complex every day. Parts from all over the world come together to create the products we use in our everyday lives, often however at a great cost to the environment. With global warming zooming in closer on the horizon and the popular movement for green solutions, hedged against the self interest of companies and their bottom lines, it seems harder and harder to find a compromise that will make everybody happy when it comes reducing the overall carbon footprint.

It seems like every attempt for companies to help the environment comes at the expense of their bottom line, and ultimately risks each of their employee’s livelihood.

I propose a win-win situation that could both be good for the environment and the bottom line, because I believe that ultimately, it is the continuous employment of win-win situations that will align these conflicting interests and and make a real impact.

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Effective transportation logistics management

Any company that moves products either through their own fleet or by sourcing carriers can provide alternatives to their clients to reduce the cost of transportation and carbon footprint using a few distinct methods.

  1. Consolidation.
    1. With the shipping requirements and the market costs remaining constant, consolidating smaller loads into full truckload shipment reduces the overall cost of transportation, and the need for multiple trucks thereby decreasing the CO² footprint and lowering overall cost. Consolidating shipments using Less than Truckload carriers with pre-built infrastructures across your Geo-Market can be an incredibly cost efficient way to move your products, while decreasing CO² Emissions
  2. Eco-Drive Practices
    1. The small investment costs to properly train your drivers in fuel friendly driving behaviors, can greatly pay off in the long run by decreasing overall fuel costs across company owned fleets, and minimize their carbon footprint. Toyota Efficient Driving Practices Article shows us a few tips to increase fuel efficiency. These driving practices can also lead to fewer crashes as they encourage slower accelerations, less hard breaks, consistent speeds, and conscious driving behavior, which in turn reduce the cost spent on accidents and insurance premiums.
  3. Fleet Management
    1. According to the European Automobile Manufacturing Association (ACEA) A 40-tonne truck built today burns around a third less fuel than one made in the 1970’s these creating to reduce fuel costs and CO² emissions by utilizing newer vehicles for commercial transport. Purchasing new fleets can be tremendous investments, but the fuel efficiency, the marketing opportunities, and the long term benefits of more reliable vehicles offsets the initial increased costs. The U.S. Department of Energy has a list of energy efficient technological developments that might help when making some fleet technology decisions Link Here. If your company contracts transportation getting to know and understanding your carriers and their capabilities can lead to mutually beneficial partnerships that can provide previously unseen competitive and environmental advantages.

Hub and Spoke Model

For more complex transportation needs utilizing a hub and spoke distribution model, combined with the previously mentioned practices above, could greatly decrease lead time, save money, and decrease emissions. Of course implementing a Hub and Spoke model can be a long term strategic investment that may not make sense to most companies depending on their shipping volume, Geographical distribution market density, demand needs, etc.

A strong data analysis case and feasibility study is recommended before making any decisions regarding major investments such as these but the overall market trend is pushing towards this model as more and more companies attempt to replicate the Supply Chain success of companies such as Amazon, Fedex, and UPS that use this particular model to lower the transportation costs.

Innovative solutions to complex problems

The environmental issues are oftentimes too complex and massive for few individuals to “fix” however with incremental improvements in a multitude of areas might alleviate some of the problem, and progress however small should always be recognized and encouraged. One example where a company uses an innovative approach to logistics to cut costs and save in fuel is UPS. According to CNN, UPS estimates it is currently saving approximately 10 millions of gallons of fuel by avoiding left turns and a total of 100,000 metric tons of CO² emissions each year by utilizing this practice. Avoiding left turns as much as possible, saves a lot of idle time, and decreases the risk of accident from turning into oncoming traffic.

CNN Article Here

While this technique doesn’t work for a lot of business models, it is important to recognize the ingenuity of a such a solution as an example of a business practice that helps the environment and the bottom line. As such, every business has hidden opportunities to similar impacts on both their bottom line and the environment.

Please feel free to email me with any questions at Hugo@dailygametheory.com

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Thank you

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