The Formula for a More Carbon-Efficient Supply Chain – Part 1

By Stephanie Judd, MBA/MS candidate, Erb Institute, University of Michigan, EDF Intern

As an MBA/MS student at the Erb Institute for Global Sustainable Enterprise, I have the distinct pleasure of working with Environmental Defense Fund this summer.  I’ve been tasked by the Goods Movement team to explore more alternatives for companies to improve supply chain transportation without compromising service levels or increasing inventory management costs.  The project focuses on the retail and consumer packaged goods (CPG) industries, because those industries have a high degree of transportation mode choice (air, ocean or rail) due to the value density of the products. Major appliances, like washing machines, will always come from China by ocean freight because they’re big, heavy and have a low value density (are not worth that much).  iPhones, on the other hand, are small, light and boast high enough margins to justify the cost of moving them by air.  But somewhere in between the packages of socks and the trendy summer shorts, a line is drawn, and a decision is made about what sails and what flies.  I’ll be exploring that line, trying to find ways to push a few more decisions toward the slower but more carbon-efficient transportation options.  Over the course of the next few months, I will check in periodically to discuss the development of the project and the lessons learned.

The Theory Behind the Project

In an ideal world, demand for products would be constant and predictable, and companies would produce for that demand, eliminating waste or lost sales in the system. Instead, demand is variable, and companies must try to predict fluctuations in consumer preferences and anticipate unpredictable demand schedules.  To buffer against this variability, companies have three tools at their disposal: Time, Inventory and Capacity.

Time: Companies can ask customers to wait.  This concept works in the case of highly specialized products or with particularly reputable suppliers.  A boutique guitar maker can wait to build a guitar until an order has been placed, and a customized luxury sports car will take several months to manufacture.  However, in the general retail market, buffering with time is not the competitive choice.  Customers will go elsewhere for the products they need or find suitable alternatives.

Inventory:  A better strategy for buffering against variability is to build inventory during periods of low demand.  Then, when demand soars, companies are prepared to meet it.  There are, however, risks to employing this strategy, since building inventory can be expensive.  Some associated costs include: the cost of capital tied up in inventory that might otherwise be invested to earn higher rate of return; warehousing fees; the risk of inventory loss due to theft, natural disasters, fires, etc.; and a sudden shift if consumer preferences, leaving warehouses full of unwanted goods.

Capacity: The last way to address demand variability is to increase response times.  For manufacturing firms, this means equipping machines with the capacity to run at high speeds when demand is up and slower speeds when demand drops.  For retailers, however, it means adjusting lead times between placing orders with suppliers and stocking the shelves.  Lead times are largely determined by the amount of time it takes to transport goods, and it is here where decisions are made about transportation modes.

My objective for the summer is to identify solutions for businesses to use slower, cheaper and more carbon-efficient shipping modes without asking them to buffer against demand variability with inventory or time. Stay tuned for updates on putting this theory to the test.

QTS 2012: Continuing the Quest for Data Center Energy Efficiency

By: Neeraj Mokha, 2012 EDF Climate Corps fellow at QTS, MBA Candidate at Case Western Reserve University, Weatherhead School of Management

Organization: Quality Technology Services (QTS)
Opportunity: 3 million square feet of data center space
Challenge:Data centers require plenty of energy

Quality Technology Services (QTS) announced yesterday it hired Sukrit Sehgal, QTS’s 2011 EDF Climate Corps fellow, as its first ever director of sustainability. Sehgal will work in the company’s newly created Sustainability and Recoveries Group. Even more exciting (for me!), is that QTS hired me as its second EDF Climate Corps fellow to drive further steps toward energy efficiency this summer.

While many of Sehgal’s recommendations from last summer are either complete or underway at QTS, the company has challenged me to identify even more efficiency opportunities in 2012. It’s quite a task, and I’ve got big shoes to fill.

QTS is one of the largest and fastest growing data center providers in the United States, managing more than 3 million square feet of data center infrastructure coast-to-coast. In addition to conventional data center energy challenges, QTS also faces entirely unique challenges due to the nature of its service as a multi-tenant data center (MTDC) provider.

Conventional Data Center Challenges

Standard data center energy management is tough. Servers require consistently low temperature and low humidity for optimal performance. Plus, customers’ IT infrastructures need to be up and running 24/7. Hence, energy-intensive cooling and dehumidification technologies must work around the clock.

Multi-Tenant Data Center Challenges

To understand MTDC challenges, it is important to understand colocation.  Customers bring their servers to a colocation facility, where they are then managed as tenants by a colocation provider like QTS. Providers manage clients of varying sizes with highly diverse requirements for humidity, power, space, temperature, etc.

Solutions

Both types of challenges prove the need to constantly monitor energy use, as we do here at QTS. And we’ve seen enormous opportunities for even further operational cost savings through energy efficiency. Here are some of the steps we're focusing on this summer:

1.       Establishing Policies to Increase Employee Involvement

QTS conducts internal competitions among its 12 sites, offering monthly rewards for identifying useful practices at data centers and allowing innovative ideas to surface from across the organization.

2.       Recording Metrics

By increasing the number of sites that report data on Power Usage Effectiveness (PUE), Carbon Usage Effectiveness (CUE) and Water Usage Effectiveness (WUE), one can help quantify the return on investment for energy efficiency to senior management and stakeholders. As any Climate Corps fellow knows, energy efficiency leads to better business and greater sustainability, but that's hard to show without the measurements to back it.

3.       Staying Knowledgeable about Incentives and Rebates

Familiarity with tax credits accelerated solar projects at QTS’s Richmond and Atlanta facilities earlier this year. Continuing to be on the lookout for available energy incentives and rebates will help QTS prioritize future energy plans.

In addition to energy efficiency solutions, I’m also looking at utilizing “grey water”– recycled water used to cool facilities – which QTS already does in its Santa Clara facility and is looking to do at other sites.

It’s clear that continuously evaluating sustainability efforts has the potential to uncover hidden savings, especially when it comes to energy usage at data centers – and the QTS team gets this. I’m looking forward to seeing what we uncover this summer. Stay tuned!

EDF Climate Corps places specially trained MBA and MPA students in companies, cities and universities to develop practical, actionable energy efficiency plans. Sign up to receive emails about EDF Climate Corps, including regular blog posts by our fellows. You can also visit our Facebook page or follow us on Twitter to get regular updates about this project.

EDF Climate Corps Trains its Biggest Cohort to Date

By Andrew Willens, Marketing and Communications Intern, EDF Climate Corps

Nearly a hundred enthusiastic Generation Y professionals recently gathered in Charlotte, NC to soak up decades of Environmental Defense Fund (EDF) expertise at the fifth annual EDF Climate Corps Training. After a week of lectures, group exercises and building tours, these fellows are now scattered across the country, championing the financial and environmental benefits of energy efficiency in 88 companies, cities and universities.

This cohort has big shoes to fill. Since EDF started the program in 2008, fellows have identified $1 billion in potential energy savings, enough to power nearly 100,000 homes and avoid the C02 emissions of 200,000 cars. Beyond identifying even more tangible savings at host organizations this summer, this new class of fellows will multiply the growing influence of the program and carry this experience with them throughout their careers.

EDF Climate Corps Class of 2012

"Think of a pebble falling into a pond and making ripples," said Victoria Mills, Managing Director for EDF Climate Corps. "The initial ripple is the savings each fellow finds in his or her host organization. Then there are all the ripples that hundreds of EDF Climate Corps alumni make throughout their careers. Our alumni are taking leadership positions in corporate America and public institutions, and bringing their EDF Climate Corps experience with them."

That expertise is built upon the initial training fellows receive. After attending this year's training in Charlotte, I left knowing more about lighting systems than I ever imagined possible and with three unexpected takeaways:

1. The EDF Climate Corps Training is finely tuned and incredibly effective

The crux of the success of the EDF Climate Corps program is this comprehensive, hands-on educational summit informed by the EDF Climate Corps team's experience with more than a hundred organizations over the past four years. And it's clear that four years worth of fine-tuning has allowed EDF to shape this event into an extremely powerful tool. During the week, the fellows toured super-efficient buildings including Duke Energy's corporate headquarters – one of only two LEED-Platinum certified high-rise office buildings in the United States. They grappled with mock energy efficiency dilemmas, cutting their teeth on exactly what they'll be doing this summer. And perhaps most importantly, they got to know and learn from one another.

2. Don’t underestimate the power of connections

This year's 98 EDF Climate Corps fellows connected around lunch tables grouped by region, sector and project focus, and during formal receptions, informal breakfast chats and interactive group tasks. While EDF provides these fellows with an abundance of support and resources during the course of their fellowships, it is this network of relationships that will perhaps be the most powerful resource for them this summer and beyond. They’ll share learnings, challenges and "aha! moments" with one and other, magnifying the impact of their work. This year's class of fellows is our largest yet, growing the network of all current and alumni fellows to date to 285.

3. Even the most seasoned professionals find value in the fellowship experience

The expertise provided by the EDF Climate Corps training adds a valuable credential to the already impressive resumes of fellows, who hail from the nation’s leading master’s programs. They come to us boasting years of experience in fields like energy efficiency consulting, chemical and mechanical engineering, and international relations. Yet they opt to supplement these established careers with an EDF Climate Corps fellowship, which offers a unique opportunity to work across an organization to incorporate environmental and energy concerns into business strategy and catalyze tangible results.

"Many fellows told me that to actually go into a firm, run the numbers on specific investments and make recommendations," Mills said, "is a unique, and extremely valuable, career-building experience."

EDF Climate Corps places specially-trained MBA and MPA students in companies, cities and universities to develop practical, actionable energy efficiency plans. Sign up to receive emails about EDF Climate Corps, including regular blog posts by our fellows. You can also visit our Facebook page or follow us on Twitter to get regular updates about this project.

EDF and Greenbiz Present Supply-Chain Webcast: Join us June 13

New technology and fresh thinking are unlocking a raft of previously unattainable economic and environmental efficiencies in the commercial shipping industry. Environmental Defense Fund (EDF) has recently kicked off a new collaborative with logistics providers and shippers to glean and distribute knowledge of innovative trends. By making smarter decisions about mode matching, container utilization, collaborative distribution and network redesign, shippers can put their companies on a more sustainable path.

In the spirit of knowledge sharing, EDF and Greenbiz have partnered to host a Webcast with industry experts designed to discuss the strategies behind freight leading best practices, and we would like for you to join us.

SMART MOVES: Supply-Chain Decisions that Save Fuel, Cut Costs and Reduce Emissions
JUNE 13, 2012 AT 1:00 PM ET

In this free webcast, you’ll learn:

  • New ways supply-chain logistics can meet corporate sustainability goals
  • Creative solutions companies can implement to lower freight costs and pollution
  • Actions some of the largest shippers are taking to increase freight carbon-efficiency

Speakers include:

  • Edgar Blanco, Research Director at the MIT Center for Transportation & Logistics
  • Jason Mathers, Project Manager, Environmental Defense Fund
  • Stephen Silva, Senior VP Global Logistics at Hasbro

 Register to join us for this Webcast.