From minor changes in packaging to wholesale DC network redesigns, savvy companies are leaving few stones unturned in their quest to cut fuel expenses.
Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.
At tech titan Hewlett-Packard Co., a program to redesign the packaging for notebook computers has trimmed package weight by 8 percent and increased the number of boxes per pallet by 25 percent—a move that has reduced the number of trucks needed and, by extension, the company's fuel costs.
At home improvement giant Lowe's Companies Inc., an initiative to increase private fleet utilization has allowed the retailer to use 4,900 fewer trailers to ship the same product quantities, cutting the company's annual vehicle miles traveled by 1.3 million and slashing its diesel fuel consumption by 285,000 gallons.
At mega-retailer Kohl's Department Stores, a re-engineered truck backhaul program has cut empty miles by creating nearly 19,000 backhaul trips from stores to distribution centers. By filling trailers with vendor merchandise returning to its DCs, Kohl's eliminates 3.6 million miles of formerly empty truck hauls.
Businesses are leaving few stones unturned in their quest to cut fuel expenses. Whether it's a minor tweak in product packaging or a wholesale distribution network redesign, they're finding ways to root out inefficiencies and reduce their fuel spend. For all their progress to date, however, it seems there's always more they could do. Significant opportunities still lie ahead to achieve the often-entwined benefits of lower fuel expenditures and carbon emission reductions, experts say. "There is a lot of low-hanging fruit out there," says Judy Glazer, director of global social and environmental responsibility at HP.
HP's own efforts to harvest that low-hanging fruit have extended well beyond its packaging redesign. The electronics company has also made changes to its distribution operations that will help conserve fuel. For instance, the high-tech giant, which each day ships more than 1 million products worldwide, says on its Web site that it has expanded its use of plastic pallets, which are 70 percent lighter than traditional wood pallets and which cost less to ship. (The company did not provide specifics on the extent of the initiative.)
HP has also re-jiggered its distribution network to reduce fuel consumption, according to its Web site. For instance, last year, the company restructured its operation so that Chinese-made inkjet printers imported through the Port of Long Beach, Calif., are received at a DC on the U.S. West Coast rather than in Memphis, Tenn., where they were handled in the past. The net effect has been to reduce vehicle miles traveled from the port of entry to the distribution point for the shipments.
Calm before the storm
HP, Lowe's, and Kohl's are hardly alone. Following last year's unprecedented oil price run-up to $147 a barrel in July (which was followed by an equally violent collapse to the $30-a-barrel level), interest in fuel-saving initiatives has been running high. Although oil prices have now settled into a trading range of between $60 and $70 a barrel, the transportation community remains wary. And many companies appear to be moving proactively to at least mitigate the damage from higher future oil prices while the current environment remains reasonably benign.
Last year's oil shocks exacted a particularly heavy toll on asset-based service providers. Truck fleets spent $151 billion on fuel in 2008, a whopping $36 billion increase from 2007 and more than double the amount spent in 2004, according to the American Trucking Associations.
Although diesel prices today stand at about $2.50 a gallon, almost 50 percent below the all-time high of $4.76 a gallon recorded in July 2008, carriers haven't forgotten last summer's pain at the pump. Like their shipper customers, they're taking advantage of what some believe is the calm before the next oil price storm to put fuel conservation initiatives in place.
For example, 3PD, a Marietta, Ga., company that provides pickups and "last mile" deliveries from retail stores and distribution centers to consumer residences, has refined its transportation model to limit the distance between pickup and delivery points on the average route to no more than 12 miles. Prior to last year's fierce run-up in oil prices and the subsequent economic downturn, the average distance between 3PD's stops was 21 miles.
Russell A. Marzen, executive vice president, warehousing and logistics, says the tweaking allows 3PD to maximize the number of pickups and deliveries in a typical day—the company's retailer clients pay it by the stop—while minimizing fuel burn. "It is simply not sufficient for us if we can't get the distance between stops down to 12 miles or less," says Marzen. He adds that the company continually strives to compress the distances even further, no small feat given the increasing demand it is experiencing for its services.
Helping hand
Truckers are also turning to technology in their quest to conserve fuel. For example, fuel optimization software, which directs truck drivers to the best locations to purchase their fuel, became a hot property during the long, hot summer of 2008.
The software remains in demand even though diesel prices have cooled off. On Aug. 4, truckload carrier Knight Transportation Inc. announced it had installed "IDSC ExpertFuel," a software program that Knight licensed from TMW Systems, a Cleveland-based developer. Phoenix-based Knight said it uses the software across its 35 regional operating centers.
"Whether diesel prices are high or low, pennies per gallon make a huge difference for our fleet," David Jackson, Knight's CFO, said in a statement. (Knight operates more than 3,700 trucks.) TMW customers generally save between 4 and 11 cents per gallon for each truck, said TMW Vice President David Schildmeyer.
Another solution, and one that seems quite basic, is addressing driver habits. Dedicated contract trucker Ruan Transport Inc., which consumes between 80 million and 85 million gallons of diesel fuel each year, says the difference between the behaviors of a competent and an incompetent driver is equivalent to a 30-percent swing in fuel spend per year.
Not surprisingly, Ruan puts driver training at the top of its priority list. "We believe that if you are safe, you are also efficient," said Jim Mulvenna, Ruan's vice president of administration and safety, in a recent webinar.
Other truckers have taken a similar tack. At carrier Stan Koch & Sons Trucking Inc., a program to reward drivers who reduce vehicle idle times helped the company cut idling by 75 percent from 2005 through 2007. Trucker Covenant Transport Inc. has taken a slightly different approach to the same problem: It charges drivers an hourly fee for idling in excess of a pre-set maximum level.
As these programs show, there are many ways to attack the oil monster. Which is a good thing, for companies will want to have plenty of arrows in the quiver for the next time they face the beast.
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
Serious inland flooding and widespread power outages are likely to sweep across Florida and other Southeast states in coming days with the arrival of Hurricane Helene, which is now predicted to make landfall Thursday evening along Florida’s northwest coast as a major hurricane, according to the National Oceanic and Atmospheric Administration (NOAA).
While the most catastrophic landfall impact is expected in the sparsely-population Big Bend area of Florida, it’s not only sea-front cities that are at risk. Since Helene is an “unusually large storm,” its flooding, rainfall, and high winds won’t be limited only to the Gulf Coast, but are expected to travel hundreds of miles inland, the weather service said. Heavy rainfall is expected to begin in the region even before the storm comes ashore, and the wet conditions will continue to move northward into the southern Appalachians region through Friday, dumping storm total rainfall amounts of up to 18 inches. Specifically, the major flood risk includes the urban areas around Tallahassee, metro Atlanta, and western North Carolina.
In addition to its human toll, the storm could exert serious business impacts, according to the supply chain mapping and monitoring firm Resilinc. Those will be largely triggered by significant flooding, which could halt oil operations, force mandatory evacuations, restrict ports, and disrupt air traffic.
While the storm’s track is currently forecast to miss the critical ports of Miami and New Orleans, it could still hurt operations throughout the Southeast agricultural belt, which produces products like soybeans, cotton, peanuts, corn, and tobacco, according to Everstream Analytics.
That widespread footprint could also hinder supply chain and logistics flows along stretches of interstate highways I-10 and I-75 and on regional rail lines operated by Norfolk Southern and CSX. And Hurricane Helene could also likely impact business operations by unleashing power outages, deep flooding, and wind damage in northern Florida portions of Georgia, Everstream Analytics said.
Before the storm had even touched Florida soil, recovery efforts were already being launched by humanitarian aid group the American Logistics Aid Network (ALAN). In a statement on Wednesday, the group said it is urging residents in the storm's path across the Southeast to heed evacuation notices and safety advisories, and reminding members of the logistics community that their post-storm help could be needed soon. The group will continue to update its Disaster Micro-Site with Hurricane Helene resources and with requests for donated logistics assistance, most of which will start arriving within 24 to 72 hours after the storm’s initial landfall, ALAN said.