EDF Climate Corps fellow | August 7, 2014
By: Eric Chappell
As an increasing number of companies seek to reduce the environmental impact of getting their products to retailers and consumers, understanding the drivers behind current transportation and logistic decisions is crucial. Working with Ocean Spray Cranberries this summer, I’ve had the chance to build on the company’s work with Environmental Defense Fund and Massachusetts Institute of Technology (MIT). I’ve seen firsthand that increasing transparency between companies and their customers allows for a better understanding of purchasing strategies and greater efficiency. Opportunities for optimizing orders and inventory quantities emerge, and cost-saving, greenhouse gas-reducing practices have the potential to replace outdated ordering strategies.
In regards to transportation, reducing carbon emissions typically equates to reducing costs. The more freight shipments a company makes, the higher the truck miles and the greater the greenhouse gas emissions and costs. As a result, using alternatives to shipping via freight can have a significant impact on a company’s emissions portfolio. In 2013, Ocean Spray worked with third party logistics provider Wheels Clipper to identify where they could reduce emissions, eventually locating a backhaul rail opportunity to ship product from their New Jersey distribution center to Florida. The innovation led to a significant reduction in both cost and carbon for Ocean Spray, which was fully quantified by partnering with EDF and MIT in a transportation carbon efficiency case study.
Sharing information both up and down the supply chain can be beneficial to the producer and customer in three key ways:
1) Improved accuracy of forecasting- Forecasting demand is one of the most difficult and critical logistical challenges to navigate. Unexpected fluctuations in demand make sending product via rail difficult, as it typically requires longer lead times than freight transport. Advance notice from customers of upcoming promotions can help ensure that companies have the correct amount of stock in the correct locations.
2) Longer lead times- One of the main challenges in switching from freight to intermodal transport is the longer lead times that intermodal shipments typically require. For this reason, many companies (including Ocean Spray) choose to focus first on making intermodal transportation work for transferring stock between production and distribution facilities. Working with customers can be more complicated, particularly if promotions at the retail level are not shared well in advance with the supply chain. Advanced communication of potential shifts in consumer buying habits can help intermodal transport remain viable.
3) Minimum order sizes- Many retailers look to reduce their own inventory costs by using “just in time” (or JIT) ordering practices, a buying strategy whereby companies order just enough backfill that it doesn’t cost them additional storage costs but very rarely ever run out of stock. Instituting order minimum requirements (or creating a program whereby customers ordering larger orders receive an incentive) would reduce the number of “less than truckload” (or LTL) shipments and significantly reduce GHG emissions.
Identifying these areas where transportation and logistics can improve the carbon footprint of the organization is just the first step. My focus at Ocean Spray is quantifying these ideas so that I can engage other business units and ensure that everyone’s incentives align with the sustainability mission statement. As the transportation and sustainability teams help me explore these ideas, we can gauge the likelihood for successful implementation of each project. Part of the EDF Climate Corps experience is understanding that in order for sustainability to work in a company, it needs to transcend the traditional boundaries of business units, such as marketing/sales, strategy, operations and so on. Ocean Spray’s sustainability team succeeds because it understands that cross-functional communication is critical when exploring both traditional and non-traditional opportunities to improve the environmental impact of any company.
For further reading on supply chain logistics, check this out:
EDF Smart Moves – Creative Supply Chain Strategies are Cutting Transport Costs and Emissions
About EDF Climate Corps
EDF Climate Corps (edfclimatecorps.org) taps the talents of tomorrow’s leaders to save energy, money and the environment by placing specially trained EDF fellows in companies, cities and universities as dedicated energy problem solvers. Working with hundreds of leading organizations, EDF Climate Corps has uncovered nearly $1.3 billion in energy savings. For more information, visit edfclimatecorps.org. Read our blog at edfclimatecorps.org/blog. Follow us on Twitter at twitter.com/edfbiz and on Facebook at facebook.com/EDFClimateCorps.
Eric Chappell is a graduate student in the MBA/Master of Environmental Management joint degree program at Duke University. He is a 2014 EDF Climate Corps Fellow.