Into the green
With their sprawling, energy-sucking DCs and carbon-spewing trucks, logistics/distribution operations may seem the very antithesis of green. But our exclusive reader survey tells a different story.
They may not be setting up wind farms or investing millions in hydrogen fuel cells, but make no mistake: DCV's readers are going green. In a recent survey, nearly three-quarters of the respondents reported that their companies had embarked on programs to make their transportation or distribution operations more eco-friendly. These ventures covered the gamut from water conservation efforts to initiatives aimed at reducing landfill waste to policies promoting the use of environmentally conscious truckers.
Those were some of the findings of our recent survey on sustainability initiatives. In total, 190 readers completed the online questionnaire. The respondents came from a cross section of industries, with the largest share working in wholesale distribution (19 percent), transportation and logistics (14 percent), or retail (10 percent). Seventy-three percent of the respondents told us their companies had undertaken some sort of environmental initiative, and nearly half—48 percent—said their companies had a formal sustainability plan in place.
As for where they're concentrating their efforts, the majority of the survey respondents said they had targeted their distribution center operations. Of those companies that have green programs under way, 64 percent said they had put warehouse-based sustainability programs in place. Other common areas of focus were packaging operations (37 percent), transportation operations (34 percent), and the overall supply chain network (26 percent). Last on the list were manufacturing operations (24 percent) and reverse logistics (14 percent). (Survey takers were allowed to select multiple responses.)
Tried and true
When it comes to specific green initiatives, the survey respondents appeared to favor time-tested strategies over experimental or venturesome pursuits. For example, when asked what steps they had taken to green up their DC operations, 55 percent of the respondents whose companies were pursuing green initiatives said they were working to reduce the volume of waste sent to landfills. Next on the list was the use of recyclable material and packaging (52 percent), followed by retrofitting the building for energy efficiency (47 percent). (For a look at what two companies are doing to make their DC operations more sustainable, see the accompanying sidebars.) Forty percent said they were working to reduce the amount of packaging material used, and an equal number reported that they were using recyclable containers or pallets. By contrast, only 13 percent said they were experimenting with using fuel cells to power their lift trucks. (For a complete list, see the accompanying chart.)
It was pretty much the same story with sustainability initiatives in the respondents' transportation operations. Here again, it was evident that the companies that have launched green initiatives have favored tried-and-true approaches over the experimental.When it came to transportation- related green programs, the top three choices (each of which was cited by 12 percent of the respondents) were using aerodynamic trucks, purchasing hybrid or electric trucks, and hiring only motor carriers that have joined the Environmental Protection Agency's SmartWay Transport program. (Truckers participating in the SmartWay program commit to reducing their fuel consumption and greenhouse gas emissions.) Programs involving relatively unproven technologies, like the use of biofuels (9 percent) and alternatives to diesel for powering refrigerated trailers (3 percent), appeared at the bottom of the list.
As for programs aimed at making the overall supply chain more eco-friendly, the survey respondents were more apt to be exploring ways to modify their existing systems or facilities than engaging in drastic network overhauls. When questioned about their efforts to green up their supply chains, 22 percent of the survey respondents whose companies had green initiatives under way said they were retrofitting DCs to make them more energy efficient. That was followed by redesigning the network (17 percent) and near-sourcing (11 percent). At the bottom of the list were relocating warehouses and plants (7 percent), opening new warehouses (6 percent), and opening new plants (1 percent).
What's motivating companies to undertake these initiatives? Of those respondents whose employers had green programs in place, the majority—43 percent—said it was because their company wanted to be a good corporate citizen. Another third—35 percent—said the motivation was to save money, while 9 percent indicated that they wanted to save the planet. A mere 4 percent said they had embarked on green initiatives in order to comply with existing or upcoming government regulations.
But as a practical matter, it's likely that many of the respondent companies actually had multiple motives for going green. One of the respondents may well have been speaking for many when he or she wrote that his/her company had undertaken a sustainability project "to achieve both business and environmental goals."
For a shining example of how DCs can cut their energy bills, you need look no farther than Fellowes Inc. Last year, the office products maker replaced the lighting fixtures at two distribution centers with energy-efficient fluorescent lights—a project that paid for itself in a matter of months. "There's a strong ROI in replacing light fixtures," says Michael Kozak, an industrial engineer at Fellowes. "Our DCs run 24 hours a day, five days a week, so we've reduced our energy consumption by a significant amount."
Perhaps best known for its Bankers Box storage boxes, the Itasca, Ill.-based Fellowes makes and distributes office products like storage systems, computer accessories, and paper shredders. Much of its merchandise is manufactured overseas in countries like China and shipped to its three U.S. distribution centers—located in Itasca, Hanover Park, Ill., and Las Vegas—for distribution to customers throughout the United States.
At the suggestion of one of its suppliers, Fellowes began considering swapping out its old fixtures for fluorescent lighting a year ago. This past summer, the effort came to fruition when the company replaced the 400-watt metal halide fixtures in its Las Vegas and Hanover Park DCs with six T8 fluorescent lamps.
Kozak says that the T8 lamps put out more light per unit of energy than the metal halide fixtures did. In addition, the fluorescent lights increase the light levels inside the DCs while giving off significantly less heat than their incandescent or metal halide counterparts. "In the summer when it gets hot," says Kozak, "we don't have this contributing to the heat in the facility, which is important in a place like Las Vegas."
The conversion to fluorescents brought about an immediate reduction in the facilities' energy bills, but the savings didn't end there. Kozak reports that the company has also received rebates from its power companies in Illinois and Nevada based on reductions in its energy usage. "It helps the power company because it does not have to build another power plant," he explains. "For us, it was a significant amount of money." He adds that Fellowes has also benefited from provisions of the federal tax code that allow businesses to depreciate the cost of energy-saving improvements in one year rather than over a multi-year period.
For Fellowes, the result has been a speedy return on its investment, says Kozak. "The total project had a ninemonth payback, including the savings from energy consumption and rebates from energy providers plus some tax benefits from the federal government."
In fact, Kozak reports that the company is so pleased with the results that it plans to retrofit its main DC in Itasca with fluorescent lights this year. He adds that the company is hoping the project will provide not just cost savings but also a boost in morale. "Employees [in the retrofitted DCs] say it's a much more pleasant place to work," Kozak explains.
Making a distribution operation more eco-friendly doesn't necessarily require investing millions of dollars in solar panels or new material handling equipment. For specialty food maker Stonewall Kitchen, it was a simple matter of changing the way it disposed of discarded packing material from inbound shipments. Rather than sending it to a landfill, the company launched a program to separate out materials suitable for recycling and then selling them. That single step netted the company $50,000 in 2008.
Based in York, Maine, Stonewall Kitchen makes specialty and gourmet foods, including jams, jellies, and baking mixes. The privately held company, which recorded sales of more than $50 million last year, manufactures its products at a plant in York. After manufacture, it stores the products at the plant for about 48 hours to conduct quality testing before moving them to a 120,000-square-foot distribution center in Rochester, N.H., about 20 miles west of York.
Although the company had done some recycling in the past, it didn't launch a fullblown initiative until 2007. Supervisor Charlie Baker, who spearheaded the effort, says that a waste audit by the company's regional trash hauler prompted him to get serious about recycling. "It felt like we were doing the wrong thing throwing it in the Dumpster," says Baker.
The company started its recycling program in 2007 with cardboard, and then added aluminum and plastic in 2008. In 2007, the gourmet food maker recycled 165 of its 295 tons of waste—or 56 percent.
For Stonewall, the program has proved profitable on several fronts. To begin with, it is able to sell the discarded materials to its regional trash hauler, which also picks up the recyclables and hauls them away. Until this past October, when the market for recycled commodities tanked, the company was earning $125 a ton for recycled cardboard, says Baker. In the last quarter of 2008, the price for a ton of cardboard plunged to $15. Still, the recycling program netted the company $7,000 in 2007 and $30,000 in 2008.
Not only does Stonewall Kitchen receive cash for its recyclable material, but it also avoids waste hauling charges and the $90-a-ton tipping fees it would otherwise pay to dump the material in a landfill. In 2008, the company would have incurred about $14,000 in tipping fees along with another $5,600 for hauling that trash away. Taken together, the payments and savings netted the company $50,000 this past year.
Baker notes that while the environmental stewardship aspects of the program appeal to the company's managers, it's the cost savings that have really grabbed their attention. When he presented the recycling program's results to top management in October, the company decided to form a special "green team" of employees to find other environmental initiatives. "We're looking at changing lighting systems and other ways to save money," says Baker.
About the Author
James Cooke is a principal analyst with Nucleus Research in Boston, covering supply chain planning software. He was previously the editor of CSCMP’s Supply Chain Quarterly and a staff writer for DC Velocity.
More articles by James A. Cooke
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