there's one thing that Deverl Maserang believes passionately, it's this: Distribution and supply chain management is all about relationships. If you're looking to improve performance in your distribution network, says Maserang, who is vice president of North America product supply and logistics for Chiquita Brands, you're not going to get very far on your own. For truly meaningful results, you have to work collaboratively with your carrier partners.
when the fresh fruit and vegetable company launched a fuel efficiency program in 2007, it was a given that Maserang and his team would enlist their carriers' help. At its carrier conference that year, Chiquita brought in industry experts to talk about today's eco imperatives as well as techniques for cutting an operation's carbon footprint. The company also urged its carriers to sign on with the U.S. Environmental Protection Agency's (EPA) SmartWay Transport Program, a collaborative initiative between government and the freight sector to boost energy efficiency and reduce greenhouse gas emissions. In order to become a certified partner in the program, a carrier must agree to reduce emissions by a certain percentage each year.
The results have been impressive. Under Maserang's direction, Chiquita has cut CO2 emissions by 44 percent in its North American transportation/distribution network in just three years. At the same time, it has boosted fuel efficiency by 9 percent and reduced food miles (the distance food is transported from the place where it's grown to the point of consumption) by 8.3 percent.
Maserang, who previously held supply chain management positions at the information technology firm Freedom Pay and at Pepsi Bottling Group, joined Chiquita in 2003. He recently spoke with DC Velocity associate managing editor Susan Lacefield about the techniques Chiquita used to reduce its North American supply chain's carbon footprint.
Q: What led Chiquita to start looking at ways to boost fuel efficiency and sustainability in its transportation operations?
A: For decades now, Chiquita has looked for innovative ways to continue our efforts to be a good corporate citizen, especially regarding the environment. Even prior to the change in presidential administrations and the potential for a cap-and-trade policy, we were engaged in reducing our carbon footprint.
We also saw that fuel was not going to get any cheaper. If you remember back to the '06 to '08 time period, fuel was just going through the roof. We saw $4 dollar-plus diesel, almost $5 diesel. So we knew we were going in the right direction.
We're constantly looking for ways to drive efficiencies. That's partly because if you can drive efficiency, you can drive cost out, which is good for the customer and good for the carrier. But there's the sustainability side to consider as well. And that's more important because more people—at least from a consumer customer perspective—are focusing on food miles and on buying local. We just felt we needed to get as far ahead of that as possible to remain competitive in the market.
Q: How did Chiquita go about introducing its program to carriers?
A: For the last 18 years, we've held annual carrier conferences, and we decided that would be the ideal opportunity to get the word out. So at our 2007 conference, we started encouraging carriers to participate in SmartWay.
Then, we set a goal of 100 percent SmartWay miles [freight miles logged by SmartWay-certified carriers] and using 100 percent SmartWay-certified carriers in the network. We also put out a challenge that year to push the network to work toward achieving 10 miles per gallon with the new engines that were coming out in 2010 [to meet the EPA's new stricter emission standards].
During the conference, we talked about some of the things that carriers should be doing. Obviously, you need to be thinking about single-wide tires [as opposed to using two thin tires]. We'd done our own internal application of single wides on about a thousand chassis that year, and we've seen a 0.3 to 0.5 mile-per-gallon differential. So we were trying do within our own network—our private fleet and dedicated operations—some of the same things we were asking all the common carriers to do.
We also installed cowlings, which are aerodynamic devices that you put on the roof of a truck, and freight wings, which go underneath the vehicle. We looked at some APU (auxiliary power unit) technology, which eliminates the need for drivers to keep their engines idling during long stops to provide heat, light, and power.
That's what we did at first. We measured ourselves so we'd have baseline numbers. Then, we started introducing small, incremental improvements. Each year since, we've gotten a little stronger.
Probably the most impressive thing we've done is change the way we compensate carriers for fuel. A couple years back, we decided the only way we were ever going to drive the right behavior was to take a different approach to fuel surcharges. Basically, we pulled all costs related to fuel out of the base transportation rate. We then created a new fuel surcharge table for the carrier that incorporates all of the fuel costs that were previously embedded in the base rate. Doing it this way provides full transparency to all costs related to fuel. Bottom line: You cannot impact effectively what you cannot measure.
Q: Was there any grumbling from the carriers?
A: Oh, sure. Some didn't understand it or didn't want to change because they had been using the fuel surcharge to their advantage. I would always tell them, "You know, guys, I'm with you when it comes to competing in other areas of the business. But when it comes to fuel, I want all of us to be competing together to reduce fuel consumption levels or to achieve the highest miles per gallon. Now's the time for all of us as an industry to look at fuel because we've got to figure out how to use as little of it as possible."
Q: What else have you done in the past year?
A: We've outfitted vehicles in both our private and dedicated fleets with a simple device called an "Eco-flap." Instead of the traditional mud flap you see on tractors and trailers, the Eco-flap features an aerodynamic design that allows for optimal airflow through the flap but still protects the cars behind from rocks and such. You get a pretty interesting increase in fuel efficiency just from reducing rolling resistance and reducing drag in terms of the air that's being stopped by the truck, the tractor, the wheels, and the flaps.
We did two other major things this past year as well. First, we upgraded all of our reefer units and the gensets on our chassis. The genset is the unit that generates the electricity to power the reefer unit. That alone has saved us a tremendous amount of diesel.
Second, we installed more plug-ins for electrical reefer units. Normally, when you're hooked up to a truck, the refrigerated trailer runs off diesel. So we collaborated with a couple of our carriers on the West Coast, and we put electrical plug-ins at our dock doors. Then, we converted some of the fleet to get off of genset fuel and run those reefers on the electrical grid. So they plug into our facility when they're there, and that has had a dramatic impact as well. Taken together, these steps have yielded substantial results.
Q: What was the carriers' response to all of this? Were they willing to partner with you on these efforts?
A: People ask me that question a lot. We've had an incredible response from our carrier community. I think it's because of the way we manage our carriers. We're not in this for the short run. We've always taken a long-term view. We don't expect that they are getting disproportionately wealthy, nor are we getting disproportionately advantaged.
As an example, when we got into 2009, we voluntarily elected to hold our rates intact through the balance of the year, because we knew that our carriers were having problems. Everyone else was going out to bid constantly. The carriers were seeing more bids in the market than they had ever seen. But we take a long-term view with our carriers.
That long-term view has enabled us to gain their cooperation because they're more willing to listen to us and try to make things happen. We are constantly putting ideas in front of them, and we listen to them when they have a great idea. It's a nice give and take in terms of trying to push the network to a new level.
Q: What kinds of results have you seen from your sustainability program?
A: In our baseline year of 2007, 21 percent of our carriers were SmartWay-certified. We're now up to 88 percent. And in 2007, 75 percent of our miles were SmartWay miles. Now, that number is north of 95 percent.
Also, from 2007 to 2010, we reduced our CO2 emissions by 44 percent in our North America network. Plus, between 2009 and 2010, we improved our fuel efficiency by 9 percent. In addition to the fuel savings, we were able to reduce the total number of trucks. As a result, we consumed 17 percent fewer gallons of fuel in 2010 than we did in 2009. And we reduced our food miles by 8.3 percent.