Fuel prices are back on the rise and companies are taking stock of opportunities to reduce costs and exposure to oil price spikes. The future trends in freight growth also call attention to the need to dramatically improve the efficiency of the current freight system.
From 2010 to 2040, global demand for energy to power freight movement is expected to increase by over 70%, according to Exxon. Freight movement already accounts for nearly three billion metric tons of heat-trapping carbon emissions each year. That’s equal to over 700 coal plants or the combined total global warming pollution from Japan, Germany, Canada and Mexico. Clearly, such growth in conventional energy demand is not sustainable.
Corporate action will ultimately determine the path forward for freight. By taking steps today to dramatically increase the carbon-efficiency of their logistics, companies can put freight on a path towards a more sustainable future. In essence, they can buy time for the technology developments and new policies that ultimately are needed.
A new report from Environmental Defense Fund, Smart Moves, documents a range of options companies can use today to reduce freight spend and associated emissions. In the report, we highlight over two dozen case examples of companies that have cut costs while increasing freight carbon-efficiency. From these stories, we’ve create five rules for a more carbon-efficiency freight supply chain. These are:
- Choose the most carbon-efficient mode possible. When it comes to carbon emissions per ton-mile, planes emit 47 times more than container ships and trucks emit six times more than trains. Clearly differentiating cargo that needs to be expedited from that which doesn’t is step one; other options include vendor-managed inventory and even moving final assembly closer to the client.
- Collaborate with other shippers. Are there opportunities to merge your warehouses and distribution assets with other companies? Ship products directly to the client and avoid warehousing altogether? Match “back-haul” lanes with other shippers to improve efficiency? All of these strategies are being used successfully.
- Redesign your own network for efficiency. New logistics tools can help to optimize warehouse locations, shipping routes and modal connections.
- Get the most out of each move. Set goals for trailer utilization, look for new ways to combine loads and use the best new software to optimize orders. Redesigning and consolidating packaging can also increase utilization while decreasing damage.
- Increase energy efficiency in distribution centers. These vital links account for 11 percent of the carbon footprint of goods movement. Changes to HVAC, lighting, motor controls and refrigeration can be quick payback ways to save energy and emissions.
Companies exercise significant control over the environmental footprint of logistics operations. Their decisions on where products are made and stored, how they are designed and packaged, and how much time is allotted for transit have a tremendous impact on carbon and cost efficiency. What smart moves is your company making?