3 Ways to Increase Sustainability and Profit through Smart Logistics

Nearly all of the 150 largest companies in the world have a Chief Sustainability Officer at VP level or higher. Corporate Social Responsibility (CSR) is a major talking point in many annual reports and conferences. This is all good and proper, but many of us have a feeling that it is simply window dressing we are witnessing, and not a lot of concrete action.

One sector to take real, hands-on action is in transportation. In the United States in 2011, 27% of the greenhouse emissions came from the transportation sector, and more than one-quarter of that is from the transportation of goods.

Smart logistics in transportation is about cutting costs and emissions by minimizing the miles trucks drive every day on our roads. It is improving sustainability, hands-on, and real, positive environmental impact can be achieved by three very straightforward methods:

 

  1. Distribution Network Optimization is about finding the right number and locations for your distribution centers (DCs) to create the optimal balance between the costs of transportation, warehousing and inventory to achieve the required service levels. Transportation, on average, accounts for about half of the total logistics costs so it is the primary consideration in determining the optimal distribution network. The results vary depending on situation, but a 15 – 20% reduction in payload distance (ton-miles) is standard. The reduction is due to trucks not moving, so you don’t have to fake any emissions tests. The bonus is that your cost savings are about as substantial.

  2. Freight Negotiation is about finding the carrier for whom your shipments will generate the least new miles driven by better utilizing existing capacity. The best example is that if a carrier has a flow in the reverse direction of your transportation needs, the carrier would then transport your goods rather than driving back deadhead. It is financially beneficial to both parties, as the carrier earns money it otherwise would not have and you get much better rates. You are of course negotiating the profit margin, too, but that is not where the major savings come from. The environment benefits from reduced emissions from having one less truck on the road during the former deadhead haul.

  3. Freight Planning is about making your shipments as efficient as possible. Three examples of smart logistics in freight planning are: pooling multiple shipments into one, load planning to perfect the balance between weight and volume to optimally fill a truck and route optimization of your own fleet. All three examples reduce the emissions in a way that makes an impact on the environment while improving your bottom line by minimizing the ton-miles you accrue.