Caterpillar collaborates internally and externally to cut costs and carbon

All companies – from consumer products to manufacturers to retailers – can find significant cost and carbon emissions savings in their logistics network. The latest example is Caterpillar.  Its efforts were recently highlighted in Inbound Logistics – a leading industry publication.

Caterpillar, the world’s largest manufacturer of mining and construction equipment, cut carbon emissions and costs by switching to lighter-weight containers and consolidating inbound shipments of truck parts to its assembly facility. This Caterpillar story is the second in a series of EDF and MIT case studies about carbon-efficient logistics.

Caterpillar’s story is unique because it focuses on two key areas – inbound logistics and packaging. EDF has five principles for improving freight sustainability:

  1. Support “Hot Spot” Clean Up.
  2. Choose the most carbon-efficient mode possible.
  3. Collaborate with other shippers.
  4. Redesign your own network for efficiency.
  5. Get the most out of each move.

The Caterpillar case demonstrates three of the five, but with a twist.

Redesign your network for efficiency

Caterpillar redesigned its inbound logistics network for efficiency. Inbound logistics, in this case, refers to the movement of truck parts to Caterpillar’s assembly facility in Decatur, Illinois from suppliers. Because the parts are coming from many suppliers, relatively infrequently, and in low volumes to an area that is not heavily trafficked, it means the network consists of individual shipments of parts from suppliers on trucks carrying small loads. This presents an opportunity for Caterpillar to reduce truck miles by consolidating inbound shipments from multiple suppliers within close proximity to each other.

Collaborate with other shippers

Caterpillar collaborated with suppliers to consolidate inbound shipments from multiple suppliers. Also, in order to make the switch from heavy steel containers to lighter-weight plastic containers that the parts are shipped in, there was significant collaboration between the logistics team and other teams within the organization.

Get the most out of each move

In addition to consolidating shipments, Caterpillar also looked at the packaging that these parts were shipped in and realized that by switching from steel containers to lighter-weight plastic containers, they could reduce carbon emissions by 16.5 percent.

The combination of reducing the weight of packaging and consolidating shipments enabled Caterpillar to reduce overall truck miles and maximize the utilization of trucks. Caterpillar demonstrates how despite challenges of a unique network, companies can still find significant efficiencies with effective collaboration internally and externally. And that is Caterpillar’s goal:

"Internally, we are looking at ways to make our own operations more efficient. Externally, we are trying to find ways to make our customers more efficient." -Terry Goff, Caterpillar's director of emissions regulation and conformance.

The first case study in the MIT-EDF series described how Ocean Spray Cranberries cut their emissions by 20 percent  in their northeast distribution system by collaborating with a competitor and switching from road to rail transport.

The Caterpillar case study tells a story of quite a different challenge – collaborating with suppliers as opposed to competitors and making packaging changes as opposed to switching modes.

But, both companies were both able to bring carbon emissions down, while saving money.

Carbon emissions from freight transportation are on track to increase by 40 percent over the coming decades. The good news is that we can work together through a combination of strategies – stronger policies that allow for the manufacture of more efficient trucks, trains and ships, and smarter operational logistics practices that allow companies to see lower transportation costs and sustainability benefits – to bring the curve down.

All companies can find significant cost and carbon emissions savings in their logistics network. All you have to do is look. You can start with EDF’s five rules.

To read the full MIT case study click here. To read the EDF summary version click here.