LOGISTICS: In it for the long haul

Towing the global green line, logistics firms are upping their environmental credentials. Alexis Hercules asks whether an ecologically sound policy can also be a cost-effective one

The general attitude of the global population is moving more and more towards a real concern for the health, state and future of our planet. The past decade, with a particular concentration in the last five years, has seen issues such as climate change and carbon footprints move from the peripheries into the centre of both day-to-day and political life.

The Conservatives changed their logo to a tree with a green top, and the “green” issue looks like being a vital vote winner in the run-up to the next general election – which party will have the most members riding bikes to work? It is also set to be a major factor in the US presidential race, probably behind war and taxes, but still right up there.

So, if your business involves the integration of information, transportation, inventory, ware-housing, material handling, and packaging, sometimes across a supply chain that straddles the whole wheezing earth, how big a concern is your carbon footprint, or the impact you are having on the planet’s health?

Obviously such issues have to be balanced against the necessities of business, in both profitability and practicality, but the ever-growing global conscience must surely play a part. Although the media frenzy over climate change has gathered momentous pace recently, logistics companies both small and large must surely have known about the need for change for quite some time. Indeed, with the looming fuel and energy crisis, could environmentally centred measures now make good business sense too?

“I think we’ve been pretty active and we do take it very seriously,” says Michael Lainas, executive director of Cert Octavian. “We have an environmental policy that’s written up, which the managing director is responsible for. We have a local champion at each of our 10 locations and pledges and targets for improvement in each area. There is action on recycling of materials, a reduction-of-waste programme, water conservation actions and green travel plans. We also opened a very large new service centre with lots of energy-saving initiatives like PIR lights, heat recovery and grey water recycling built into it.”

Other companies have already made similar efforts and pledges. Martin Johnson was appointed the national environment manager of Kuehne + Nagel in January. He says: “We have had an environmental policy for a long time, even before my appointment. We’ve set up a carbon calculator to record all the emissions from our inland transport and buildings; we also have environment champions at each depot. By the end of this year we will have a carbon budget for each of our clients and a carbon reduction plan for each site. We’ve been working with a SAFED (safe and fuel-efficient driving training programme) for years now. Over 2,000 drivers have gone through the system. We also move 70,000 containers by rail within the UK. Five years ago we gained ISO 14001 certifications in 10 different locations, and today we have over 150 locations worldwide with that certification.”

Programmes of waste management throughout a company appear to be a must these days, as is the pursuit of ISO 14001 certification, a management tool enabling an organisation of any size or type to identify and control the environmental impact of its activities, products or services, improve its environmental performance continually, and implement a systematic approach to setting environmental objectives and targets.

“DB Schenker has implemented waste segregation and recycling programmes for paper, cardboard, wood, plastic sheeting, batteries, toner cartridges and other recyclable materials,” said Richard Sharrock, head of Schenkerwine. “We have been positively recommended for the 14001 Environmental Management System and we are awaiting receipt of the certificate. The next step is to have a survey completed by the Carbon Trust to identify where additional improvements can be made.”

Palletways has been particularly keen to move into greener modes of operating, as Craig Hibbert, the managing director of the UK Network explains.

“With a pallet network, the members, who are local hauliers, collect small consignments of palletised freight from their customers within their own catchment areas. These are loaded and consolidated onto trunking vehicles regardless of the final destination and delivered to one location, our hub in Lichfield. These consolidated loads maximise vehicle use, thereby reducing ‘empty’ miles.”

Less is more
Indeed the future of logistics may lie in the removal of more and more polluting vehicles from the roads, and alternative methods and times for deliveries. This is an area that JF Hillebrand has been keen to investigate further.

“We are concerned with minimising our own carbon footprint and we have implemented a number of initiatives to minimise our energy, paper and water consumption as well as address our waste recycling,” said joint managing director David Mawer. “Our task is to understand and implement methods by which we can work with our sub-contractors and partners in order to use less polluting vehicles and methods. Our most recent examples of greener alternatives include the Wine Train and Tesco Barge. Where feasible, we are reducing road miles by bringing product closer to the final destination, either by rail or sea, using coastal feeder services. And through the Transport Carbon Calculator, a collaboration with WSTA, we help our customers monitor the environmental impact of their actions.”

London City Bond has also seen the benefits that such moves can bring, as non-executive chairman Jeff Stanton explains. “At LCB we have always been conscious of the need to reduce our carbon footprint. Consolidation of deliveries to reduce road miles and recycling of packaging materials are just two of the initiatives that are already in place. Our unique position on the docks at Tilbury means that inbound delivery miles can also be eliminated.”

Despite the general acknowledgment that change is necessary, and that such implementations have been contemplated for some time, it is hard to shake the idea that the media and a desire for positive PR have also played a part. Would any company today really want to be seen not making an effort to reduce its carbon emissions, particularly one that uses, for example, a great deal of road transport and heavy goods vehicles.

“I don’t think that we’re necessarily media influenced,” says K+N’s Johnson. “Clearly we recognised the way that legislation was going, with respect to emissions, and obviously our customers are very keen to talk to us about the activities, with regard to reducing emissions, but there are also a significant number of people in our management team who are keen for us to take action for all sorts of reasons.”

“Some companies may feel forced,” said Sharrock, “but Schenker has embraced the need for change and sees this as a very positive step forward, not only for the company, but for the environment as a whole.”

Hillebrand’s Mawer agrees. “All companies are becoming more voluntarily environmentally aware. Principally this is commercially driven because environmental solutions have to be consistent with certain commercial viabilities. At some stage there will be a massive paradigm shift that occurs, so that someday everyone recognises the importance. Until then, we will continue to examine both the commercial and environmental options with reasoned judgments being made on both sides.”

However, Cert Octavian’s Lainas and LCB’s Stanton do acknowledge that both the media and other links in the supply chain do have an effect.

“The media has an impact on our customers and their customers, who are all keen to reduce their own footprint and place pressure on their suppliers to do the same,” says Stanton. “It is interesting to note that in the current economic climate, reducing carbon footprint appears to now be less important than reducing costs and thereby maintaining margins. Becoming more eco-friendly goes hand in hand with reducing energy and fuel costs, becoming more efficient and being able to maintain prices at a reasonable level.”

Lainas goes even further. “I think that most companies commit to environmental statements of intent from a fear of a backlash from suppliers and distributors, rather than a desire to improve the world we live in. I think that long-term success will only be achieved by implementing environmental strategies that do show some bottom-line return. People have to be able to justify what they are doing through what they’re doing instead of talking about it. And I think that starts with a company having a very clear environmental policy.”

Keeping an eye on costs
It would seem, understandably, that environmental initiatives are inextricably linked to cost analysis. Although something may make good sense for the planet, does it make good sense for your company? And, in the long run, is a largely superficial measure that creates a loss really worth it? The practicalities of such moves must also be taken into account. How easy is it to implement a unifying environmental policy when your business is a chain that links so many different areas?

“There are many cost-effective environmental opportunities, but this does require an openness by companies and a willingness to look holistically at the solution,” says Mawer. “We need to move away from the silo approach because a number of these solutions will deliver overall savings, but we have to recognise that to achieve this saving an additional cost in a particular area of the business may be incurred. What we see in the successful delivery of truly efficient supply chains is that the freight cost per case can increase, as stock is shipped and consolidated in smaller case quantities, more frequently. However, when the reduction in inventory is factored in, the overall saving to the business can be very significant. These savings are not just financial, but environmental.”

“Our experience is that companies are looking for value from the supply chain, and they’re looking for efficiency and improvements to service,” said Geoff Lippitt, commercial director of K+N drinks logistics. “We operate a shared user approach to business that has a positive effect on carbon footprints, reducing the number of vehicles on the road and increasing tons per mile, which means less miles per delivery. If you take a holistic approach and challenge your customers‘ standards and norms, that’s good practice, and that’s part of the value of a good supply chain partner. It’s a case of which area you concentrate on when you’re looking at a course of action.”

“The recent uplift in both energy and fuel prices has considerably changed the cost equation,” adds K+N’s Johnson. “Most actions that reduce carbon emissions also reduce costs overall. As ever, we have an obligation to our customers to keep our costs down, but at the moment most environmental initiatives that reduce carbon also save money.”

“We do all care about the environment,” says Lainas, “but you’re only able to commit to policies that offer some sort of return. If you take the complete supply chain of the drinks industry, every part can have an impact environmentally. Some people, anywhere along that chain, could make changes that they think are relevant for them, but if all it does is push the environmental impact somewhere else, then holistically we haven’t done anything at all. If a hotel or supermarket orders goods from suppliers who store with us, we might deliver to that supermarket or hotel or restaurant more than once a day for different suppliers, so we’re doing more deliveries than we necessarily need to. My plea is that we have to work cooperatively across the supply chain.”

Stanton concurs with the ideas surrounding cost. “There are severe cost pressures on all logistics companies. As a specialist in wines and spirits, LCB is subject to significant increases in input costs, some of which have to be offset by improvements in productivity and put pressure on our own profitability. As a result, there is an even greater need than before to reduce environmental costs as they are a major contributor to the severe inflation we are experiencing.”

Going forward
So, with a delicate tightrope to be negotiated, traversing necessary environmental changes and balancing the books, what future policies or technologies could logistics companies turn to in order to progress?

“We’re working with Carbon Trust and they will, by the end of this year, have produced a series of recommendations and an implementation plan for a substantial number of changes,” says K+N’s Johnson. “We are looking at new technologies such as electric vehicles. The restrictions on these are largely tonnage and distance based, but we do see some of our operations as being applicable and certainly by the end of this year we expect to be trialling vehicles in the London area. We need to be convinced that we can actually continue to provide the service to our customers and not increase the cost to them by using such vehicles. At the moment, over the vehicle’s life, there appears to be a benefit in terms of cost, especially with today’s fuel prices. Clearly there is a significant benefit in terms of carbon reductions, and that’s why we’re proposing this.”

Cert Octavian is also pursuing the electric path. “We’re currently testing the use of electric vehicles, which are exempt from the congestion charge, for deliveries in London,” said Lainas. “With that saving and the lack of fuel costs, we would hope that delivery costs could come down. Congestion is growing and forecast to grow dramatically in the next 10 to 20 years. The problem with that is delivery vehicles are on the road delivering, early morning and through the rush hour up to midday. It would be more logical and would have a lot less impact on the environment if we could do our deliveries overnight.

“A way forward could be for the government to gather hoteliers and restaurateurs together, asking them to galvanise themselves as a sector. We could be a lot slicker, reduce costs of delivery and reduce the impact on the environment if they were prepared to have someone to take deliveries between the hours of 12 and 4 in the morning.”

This is similar to the methods employed by Palletways. “Our trunking vehicles travel to and from the hub mainly during off-peak hours,” says Hibbert. “They leave their local depot out of business hours, after 5pm, and travel back in the early hours of the morning. The last vehicles leave our hub by 4am. This reduces time spent in heavy slow-moving traffic, making for quicker journeys and thereby helping to lower carbon emissions.”

It is good to know that logistics companies, like most modern businesses, are taking green issues seriously and planning for the future with the environment in mind. Whether the current economic uncertainties hamper any real progress remains to be seen. As has been noted, however, certain environmental, carbon reducing initiatives actually save companies money. If that fact holds true, it could be win-win all round.

db © August 2008