Tag Archives: 3PL

Collaborative Competition + Sustainability = The 21st Century Supply Chain Solution

24 Mar

Last week, I was honored to be the dinner keynote speaker at the European Petrochemical Associations 2nd Interactive Supply/Demand Chain Workshop in Brussels, Belgium.  What a beautiful place, where cobblestones meet bullet trains- two completely differing eras of transportation systems still working (collaborating?) after all these years.  This years’ workshop theme was “21st Century Supply Chains for the Chemical Industry”.  2011 has also been declared by the United Nations Educational, Scientific and Cultural Organization (UNESCO) as the International Year of Chemistry (see the EPCA’s cool new video, “Chemistry- It’s All About You” here).

Throughout the highly interactive, roll up your sleeves workshop, the dialogue centered on innovative tools and value-added approaches to drive supply chain sustainability. Discussion focused on how the chemical industry and its supply chain can support an evolution from the old linear, materials economy mindset to a more circular, systems based sustainability minded economy, as Annie Leonard describes in the Story of Stuff.  As a matter of fact, that short film was the lead-in to my speech on supply chain sustainability and the nexus with consumerism, and the important role of chemical industry and its supply chain.

As I noted in last week’s post, consumer demand appears to be contributing (at least in part) to some of the gains in eco-friendly and sustainability focused design and manufacturing progress that’s being made in the global marketplace. In addition, shipping and logistics partners are showing leadership in embedding sustainability in the “source, make, deliver and return” product value chain as well.

The (Re) Emergence of “Co-opetiton”

The 21st Century Supply Chain is a rapidly evolving business landscape.  Prior to around 2005,   the supply chain landscape centered on vertical collaboration between subsequent actors in the same supply chain, or between suppliers, manufacturers and customers.  Since the mid 2000’s, collaboration has refocused along the horizontal axis.   What appears to be happening is more evidence of collaborative exchanges between companies in the same market, or alliances, partnerships, clusters, and networked organizations.  This represents a real paradigm shift” that collaboration between producers, service providers and their customers.

Another older term coined in the mid 1990’s, “co-opetition” (or cooperative competition), may now find its place in the 21st century supply chain lexicon.  Co-opetition occurs when companies work together for parts of their business where they do not believe they have competitive advantage and where they believe they can share common costs.   The basic premise of co-opetition strategy relies on leveraging alliances, partnering with other shippers (even competitors!) to control logistics  and transportation costs.   In  “games theory, this would be called a “plus-sum” scenario, in which the sum of what is gained by all players is greater than the combined sum of what the players entered the scenario with.  For instance, co-warehousing or load consolidation in transportation and warehousing are straightforward examples where collaborative competition has enormous financial and environmental benefits.  Co-opetition can in effect lead to expansion of the market and the formation of new business relationships, perhaps even the creation of new forms of enterprise.

Co-opetition partners typically include:

  1. Producers, Customers, Consumers who drive producer demand and determine product eco-footprint
  2. Shippers and Terminal Operators: who generate the freight flows and provide the critical infrastructure for product flow
  3. Logistic Service Partners (3PLs): who can design and implement optimized solutions and move the freight
  4. Fourth Party Providers: who can facilitate partnerships, referee blockages, find common ground; and
  5. Governments who can assure that legal and regulatory arrangements are in place to support seamless collaboration

At the same time, though for co-opetition to be truly sustainable, there must also be  a cultural fit, strategic fit,  economic and operational fit,  and, trust and resources.

Source: Adapted from GEMI, Forging New Links

Co-opetition implies that cooperation and competition merge together to form a new kind of strategic interdependence between firms, giving rise to a co-opetitive system of reciprocal value creation. This new era of globalization has opened the door to co-opetition for small to midsized businesses that lack the scalable resources that larger companies have.  So this makes me think that if competition is a key driver behind innovation, and collaboration is a key 21st Century supply chain success factor, then collaborative competition (co-opetiton) may be a new solution to drive supply chain sustainability. I posed this theory to a warm response by the 65-plus chemical industry logistics professionals in Brussels. Yes, it’s a bit of a heretical idea, but one that has shown in some industries to work.  Take Proctor & Gamble’s Connect + Develop or Nikes Considered Design and the Environment open innovation models.  Both offer opportunities to collaborate and drive innovative solutions that can benefit consumers, and open business channels to entrepreneurs lacking resources to bring new (possibly more sustainable) products or processes to market.

Summary: Forging New Links in the Chain

Co-opetition offers opportunities for manufacturers and their upstream suppliers and customers to strengthen each other’s performance, enhance differentiation and foster end-consumer brand loyalty in the following ways:

  1. By tapping into to customer and consumer preferences, industry can adapt its processes, products and services to enhance competitiveness
  2. By collaborating, customer-supplier teams can address Triple Bottom Line (3BL)-related technical challenges that affect the profitability and performance of the overall supply chain.
  3. Reciprocal value creation through vertical and horizontal “co-opetition” means recognizing and quantifying each other’s value contributions
  4. By sharing intelligence and know-how about 3BL issues & emerging technologies.
  5. By incorporating 3BL advantages into their products and services, e.g., reduced cost of ownership.

What ideas do you have to forge new links in the sustainable supply chain?  Let’s start the collaboration now, shall we?

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Consumerism & Supply Chain Meets Sustainability in the Chemical Industry

10 Mar

Next week, I’ll have the honor being the dinner keynote speaker at the European Petrochemical Associations 2nd Interactive Supply/Demand Chain Workshop in Brussels, Belgium. This years’ theme is “21st Century Supply Chains for the Chemical Industry”.  The topic is timely given how there’s been so much talk concerning over-consumption, consumer behavior, corporate social responsibility and increased growth of sustainability in manufacturing and supply chain management.  And the chemical industry indeed plays a large role in much of what we consume.  It reminds me of the old Monsanto commercial…”without chemicals, life itself would be impossible”.  It’s just that these days, chemicals in the global marketplace appear to be getting ‘greener’.

Consumer Demand for Sustainable Products

Consumer demand appears to be contributing (at least in part) to some of the gains in eco-friendly and sustainability focused design and manufacturing progress that’s being made in the global marketplace.  There is certainly a higher degree of consumer awareness and understanding of the need to make healthier, socially conscious and eco-friendly products.  However, the Green Confidence Index, a monthly online survey (~2,500 Americans by GreenBiz.com) noted last year that U.S. consumers cite price and performance as the principal reasons for not buying more green products- the flat growth was partially attributed to stale economy.  The slow economic growth of 2010 appeared to also be slowing widespread innovation by small to medium-sized businesses focused on green manufacturing.

In contrast, the consumer business disconnect appears to be alive and well in other parts of the world. In fact, it’s my thinking that businesses are significantly underestimating consumer interest and awareness in sustainability and green issues.  For instance, consumer demand for sustainably manufactured or ‘green’ products and services in China, India and Singapore are outstripping supply (according to an independent survey conducted by TÜV SÜD Asia Pacific). I’ve no doubt the same is the case in Europe, often considered way ahead in terms of consumer sensitivity regarding sustainability. The TÜV SÜD Asia Pacific found that:

  1. 84% of consumers prepared to pay an average 27% premium for green products, services.
  2. Only 43% of business believes consumers to be willing to pay more  or even produce or trade green products in China, India and Singapore.
  3. 74% of businesses either do not have a policy or guideline to  minimize environmental in place or are failing to clearly communicate  they have one.

Chemical Industry Response to Sustainability and Supply Chain Impacts

Manufacturers in the chemical industry and peripheral services have progressively been responding to end-consumer and customer driven pressures. The emergence of ‘green, (or sustainable) chemistry” and restricted materials initiatives over the past half-dozen or so years have propelled the chemical industry and global consumer products manufacturers to rethink how products are made, consumer health effects and long-term eco-impacts.  Traditionally, supply chain management of hazardous products has focused more on reducing the exposure to hazards than on hazard elimination. The advent of green chemistry has provided opportunities to refine supply chain management, including procurement policies and practices, by developing safer products. Redesigned products and processes can dramatically reduce the risks encountered in manufacturing, storage, transportation and waste control by mitigating the hazards associated with them. From a risk management perspective, since it is fundamentally better to mitigate hazards than to try to protect against them, green chemistry has proven to be highly beneficial and contributes by default to greener supply chain management and supply chain-related risk management

Many manufacturers have risen to the occasion in recent years to drive green chemistry and supply chain management to lessen their eco-footprints and support development of safer products.  Global chemical manufacturer BASF chooses its carriers, service providers and suppliers not just on the basis of price, but 0n their performance in the fields of environmental and social responsibility when making our sourcing decisions. In addition to following the internationally recognized Responsible Care program requirements for environmental, health and safety, BASF has established product stewardship goals designed to reduce its overall eco-footprint.

“What counts for us is acting responsibly throughout the entire supply chain because we want to build stable and sustainable relationships with our business partners. This is why we choose carriers, service providers and suppliers not just on the basis of price, but also include their performance in the fields of environmental and social responsibility when making our decisions.”

The company also maintains several key features of its global supply chain management program, including:

  1. Safe transportation to our customers
  2. Evaluate and support partner companies
  3. Monitoring of suppliers
  4. Product types and sources important
  5. Providing advice for better services
  6. China: sustainability in the value chain
  7. Minimum social standards for suppliers

Meanwhile, DuPont’s Mission is focused on “creation of shareholder and societal value while we reduce the environmental footprint along the value chains in which we operate”.  Throughout the production-supplier-consumer value chain, DuPont strives through end to end supply chain communication to 1) manage risk and be adaptable; 2) gain efficiencies & profitable flexibility; and 3) enable sustainable product performance and verification through its entire supply chain. Sustainability efforts are tracked and managed for continual improvement through a combination of business management integration approaches and supply chain design and operation.

On the retail side, Walmart has asserted itself in the past several years, by clarifying its stance about reducing toxics in products.  In response, American Chemistry Council members have pledged to lower GHG intensity by 18% by 2012 using 1990 as a base-reporting year and has exceeded that initial commitment and has reduced carbon intensity by 36%.  In addition, Dow Chemical’s is working to harmonize the Walmart goal with its own sustainability objectives of decreasing its environmental footprint and maximizing product performance throughout the supply chain.

“Given the challenges associated with running a global chemical manufacturing supply chain, we have been focused on sustainability for a long time – not just our own but also how we address sustainability with our customers and our customers’ customers,” – Anne Wallin, director of sustainable chemistry and life cycle assessment at Dow Chemical.

Logistics Providers Stepping Up to the Challenge

Among supply chain and logistics businesses, the 2009 14th Annual 3PL Study found that shippers want to create more sustainable, environmentally conscious supply chains. The survey found a need to strike a balance between labor & transportation costs.  Surveyed 3PL’s also noted the market value of carbon-reducing processes, compressed production cycles, and less carbon intensive transportation modes that beat the competition.

Most recently, American Shipper just published its Environmental Sustainability Benchmark Study of over 200 shipping companies.  According to the study, “survey respondents clearly see environmental sustainability has an emerging impact and increasing importance in their supply chain. On a scale of one to five (one lowest; five highest) the study average ranked sustainability as 2.42 two or three years ago, 3.41 today, 3.95 in five years, and 4.17 in 10 years”. Interestingly, customer demands, at 25% percent (see graphic below) are on a par with company policies as a leading driver of environmental sustainability adoption.  Most respondents saw potential return on investment (ROI) although ROI was clearly a potential barrier to sustainability adoption.

In response, leading 3PLs and fourth party logistics providers (4PL’s) are focusing more attention on business practices that are intentionally drive business efficiencies , but (perhaps unintentionally) enhance overall environmental performance, namely:

  • In-Store Logistics
  • Collaborative warehousing & infrastructure
  • Reverse Logistics
  • Demand Fluctuation Management
  • Energy/Fuel Use Management

End consumer preference certainly has its place in deriving sustainability in the 21st century, but as I see it, the chemical industry and its shipping and logistics partners are showing proactive leadership in embedding sustainability in the “source, make, deliver and return” product value chain.

My next post will explore how competitive collaboration, or “co-opetition”, is making resurgence in the supply chain sustainability conversation.  In the meantime, I’m looking forward to next week’s conference and all the hospitality that Brussels has to offer.

“Ch-Ch-Ch-Ch-Changes”: 3rd Party Logistics CEOs Priming for a Sustainable Future, Retooling to Compete

3 Oct

Last week in San Diego (my second hometown), the Council of Supply Chain Management Professionals (CSCMP) held their Annual Global Conference.  Over 3,100 supply chain professionals from 41 countries attended sessions from over 20 tracks.

At the Conference, the 17th Annual Survey of Third-Party Logistics Providers was presented by survey author, Dr. Robert Lieb, Professor of Supply Chain Management at Northeastern University, and Joe Gallick, Senior Vice President of Sales for Penske Logistics. The findings analyzed responses from 31 third-party logistics company CEOs across North America, Europe and Asia-Pacific.  The study was pretty comprehensive in its findings but me being the sustainability focused guy that I am, poured through the document in search of green stats. And as expected they were there.

With 87 percent of the companies reported to be rebuilding their workforces in 2009, CEOs revealed that green practices are still a major priority in the 3PL market.  Further, more than 80 percent of the companies surveyed now have formal sustainability groups within their companies. Even in the wake of the recession, most of the companies surveyed these are still heavily committed to environmental sustainability issues.  Take note of these numbers according to the survey:

  1. Fourteen of the 31 companies began new green initiatives during the year.
  2. Eighteen of the companies expanded existing sustainability programs.
  3. Twenty-five of the companies now have formal sustainability groups within their companies.
  4. Twelve of the 31 CEOs believe that their sustainability capabilities differentiate them from their competitors.
  5. Ranking second and third respectively in North America were opportunities related to potential differentiation based upon the companies’ environmental sustainability capabilities and opportunities related to expansion of service offerings.

Also, 27 of the 31 CEOs noted that some of their manufacturing customers have begun to move toward “near-shoring” options during the past year.  This type of “reversal of fortune” for U.S. manufacturing has been driven by quality control issues, fuel costs for transoceanic shipping and (wishful thinking perhaps) a desire to stand by corporate commitment to curtail carbon emissions associated with reduced fuel usage.

Additionally the report cited several business practice trends, related to risk management/risk sharing; business continuity planning; performance based contracts; and enhanced vendor qualifications.  Each of these growth areas fit well into the sustainable sourcing, accountability and risk management picture that I have spoken about in this space as essential elements of a green supply chain.

While the survey results are impressive, there is clearly room for improvement in terms of implementing actual “boots on the ground” solutions.  There are increasing examples everyday where 3PLs have demonstrably improved operations efficiency while lowering fuel use, energy use, air emissions and indirectly related resource consumption and waste generation. But at the same time, these efforts must be able to strike a balance between cost and benefit that CEO’s can understand, appreciate and rally around.  The stat about CEO’s belief in how sustainability can differentiate their companies (only 38% are on board) tells me that much still needs to be done to make a business case for greening of supply chains.

In another recent reportthis past spring by the Economist Intelligence Unit (EIU) of the Economist Magazine,   supply chains are in a massive state of flux.  Individual supply chains “have shrunk at the margins and the network has become denser”, according to the report. The report concluded that many companies are forced to choose between having supply chains that are simple and compact, or those that are complex, redundant and dispersed.  Efficiency versus resiliency, in effect.   But the report found it possible to increase both efficiency and resilience.

The EIU report cited that a more efficient supply chain enhances two drivers of value: operating margin and asset efficiency.  What was notable to me was a note in the report that said “efficiency also has the beneficial side effect of shrinking the carbon footprint”.  The report cited companies like Coca-Cola, that are looking at ways to move to central distribution, cutting back on empty loads (bringing back post-consumer recycled cans  for instance) as ways to ‘own’ its supply chain and drive efficiency (without losing resiliency).

Issues such as supply chain resiliency and agility are two criteria that should be evaluated as 3PL’s move down the sustainability path and create a business case for operational changes.  I am fairly certain, based on the Penske sponsored 3PL report that CEO’s and other top managers will be asking the tough questions, so be prepared to come to the table with some compelling ideas and numbers to back it up.

Green Supply Chain Gets a Boost from ULE 880- Draft Sustainability Standard for Manufacturing Organizations

14 Sep

Today marked the end of the initial 45 day comment period for ULE 880 – Sustainability for Manufacturing Organizations. [NOTE: the comment period has been extended until September 21st]. This draft sustainability standard is the culmination of a partnership between UL Environment (ULE), a division of Underwriters Laboratories, and Greener World Media.  The standard for businesses and other organizations, focusing on their environmental and social performance, was designed “to create uniform and global metrics for customers, stakeholders and trading partners”, essentially ‘harmonizing’  the wide variety of standards, guidelines and specifications for driving sustainability in organizations.

According to the draft document preface, “Our vision is to create a uniform, globally applicable system for rating and certifying companies of all sizes and sectors on a spectrum of environmental and social performance characteristics. ULE 880 will fill a major void in being able to consistently understand and measure how, and how well, a company is doing in understanding, addressing, and communicating its environmental and social impacts. It will also provide a standardized mechanism that allows organizations and their stakeholders to factor companies’ environmental and social performance into their core decision-making processes, thereby elevating the importance of these issues within companies.”

At its core, ULE  880 is designed principally as a procurement tool, allowing companies,  public agencies, and institutional buyers to assess the performance of  their supply chains and trading partners. It is intended to complement  existing and future product procurement specifications throughout many layers of an organizations supply chain.

ULE 880 covers five domains of sustainability:

  • Sustainability Governance: how an organization leads and manages itself in relation to its stakeholders, including its employees, investors, regulatory authorities, customers, and the communities in which it operates
  • Environment: an organization’s environmental footprint across its policies, operations, products and services, including its resource use and emissions
  • Workplace: issues related to employee working conditions, organization culture, and effectiveness
  • Customers and Suppliers: issues related to an organization’s policies and practices on product safety, quality, pricing, and marketing as well as its supply chain policies and practices
  • Social and Community Engagement: an organization’s impacts on its community in the areas of social equity, ethical conduct, and human rights

The 60-plus page draft standard contains 102 questions (or “indicators”), including 18 in Governance, 45 in Environment, 15 in Workforce, 15 in Customers and Suppliers, and 9 in Social and Community Engagement. Each of the indicators has certain “weightings” and not all of them equally distributed.  The Environment, for instance covers 80 points, Governance and Customers/Suppliers 40 points each, and Workplace and Social/Community 20 points each. In addition, there are also 18 “Innovation Points” — 3 points each for 6 different indicators — that reward companies for going above and beyond the standard.

Sustainable Supply Chain Elements

Direct sustainable supply chain elements mentioned in Section 6.5.3 of the standard include requirements and related point allocations for:

  • Supply Chain Policy
  • Tier 1 and Tier 2 Supply Chain Inventory (why not Tier 3 or Tier 4?)
  • Supply Chain Monitoring and Assessment (not a great deal of detail in this element)
  • Supply Chain Reporting

Also, like other elements of the proposed standard, ‘Innovation Points’ are allocated for Training and Targeted Continual Improvement Metrics.  In addition to this specific clause of the standard, there are specific elements associated with Environmentally Preferable Purchasing and ‘greener’, more efficient transportation planning and logistics…all of which represent vital parts of the sustainable supply chain.

The ULE 880 standard offers promise to take sustainability to a whole new level e.g. organization based certification, and acknowledges that supply chain considerations are vital to a ‘sustainability-focused’ organization.  The next step for the standard will be a peer-reviewed response to the more than 600 commenters from over 30 countries that have requested and reviewed the document to date.  In coming phases, a small set of manufacturers will be engaged to pilot  the standard and the verification/certification delivery model, prior to wider release and market implementation. Stay tuned!

This post was originally published on my New Green Supply Chain Blog, which can be found at https://community.kinaxis.com/people/DRMeyer/blog

What Motivates Suppliers to Meet Sustainable Sourcing Requirements- The Carrot vs. The Stick?

17 Aug

Are you old enough to remember the opening lines of the Buffalo Springfield song  For What it’s Worth? “There’s something happening here/What it is ain’t exactly clear/There’s a man with a gun over there/Telling me I got to beware”. I am thinking there is a green supply chain revolution in play, just as there was political unrest and turbulence of the mid to late 1960’s from which this song originated. Methinks Walmart may be “the Man”, but are they really holding a gun to suppliers?  I’m not so sure.

Walmarts efforts internally to establish its sustainability index continue to slowly progress along (I still predict a 2-3 year process before anything tangible emerges).  But, the company is as I predicted last year, changing the rules in how sustainability is felt up and down the supply chain- mostly for good.  Many companies in the retail and electronics sectors, such as Proctor and Gamble and IBM have most notably stepped up to the plate, but many others are learning from Wal-Mart’s green supply as well (see “The surprising success of the green supply chain” http://bit.ly/digXmH).  So how is this “cat herding” happening at such a rapid pace and what are the key issues being driven through the ‘value chain’.  Is this just a matter of keeping up with the next guy?

First- the ‘drivers”.  There are a number of factors and issues, both internal and external that can be attributed to this hot phenomenon in the supply chain space. In a 2009 study by GTM Research, sustainability was clearly a driving topic in supply chain management, ranking behind only three factors:  improving customer service, reducing supply chain risk and managing and optimizing an extended supply chain network  (Greening The Supply Chain: Benchmarking Sustainability Practices And Trends- GTM Research 2009 http://bit.ly/cl1QlU ).   The same study found that several factors were driving the greening of the supply chain across a number of vertical markets, notably:

  • Lost sales (projected to be in the billions of dollars) because products in the supply chain were not “green” enoug
  • Increased energy and transportation costs (accounting to over 50% of the cost increases)
  • Damage to reputation and
  • Supply disruptions

In response, Walmart and other major retail and industry giants are driving upstream and downstream performance based changes, designed to reduce suppliers environmental footprints and focused on several key areas:  energy management, fuel cost containment, carbon emissions, water use and waste generation.  New issues also factoring into the mix include green chemistry and management of restricted materials, depending on the geographic reach of global markets served.

To that end suppliers, from Tier One on down through the chain are responding to varying degrees and the early results appear favorable. As I reported last week, companies like Herman Miller, Walmart, P&G and Johnson and Johnson (http://bit.ly/cFBzjD) are showing marked reductions in most of the key metrics that they have been focused on, with much of the credit due to those suppliers who have found business sense in sustainability.

Now to that you may say that suppliers are goaded, cajoled, forced, strongly encouraged, or perhaps threatened to comply, or else risk losing millions in contracts.  Actually, what I am seeing with the likes of Miller, IBM, Hewlett Packard and others continues to be more of the carrot and less of the stick- more collaboration and performance based incentives coupled with onsite verification- that’s all good because it encourages accountability.  But that’s a topic for a future post.

In the meantime, to paraphrase another line in that Buffalo Springfield tune:  “Stop [vendors] what’s that sound /everybody look what’s going round”.  Until next time.

This post was originally published on my New Green Supply Chain Blog, which can be found at https://community.kinaxis.com/people/DRMeyer/blog

New Green Supply Chain Blog on Kinaxis Supply Chain Community

6 Aug

Friends- I want to let you all know that I have recently been invited to be the lead expert blogger on green supply chain issues for the Kinaxis Supply Chain Community. 3500 members and growing strong! As mentioned, The Supply Chain Expert Community is “Your social place for learning, laughter, sharing and connecting.”

LEARN—Read insights from our bloggers and members. Ask questions, discuss trends, research topics.

LAUGH—Visit the “Just for Laughs” section, and enjoy some supply chain humor.

SHARE—Impart the lessons you’ve learned and the obstacles you still face. Invite your friends and colleagues to join the discussion.

CONNECT—Meet peers who face similar challenges and opportunities. Give and receive support.

You can view my Green Supply Chain Blog here:

https://community.kinaxis.com/people/DRMeyer/blog

Green Transportation- All It Takes is Innovation and Drive

16 Mar

Framing the Issue

  • “Only 22 Fortune 500 companies have begun blunting their supply chain’s impact on the environment”
  • The amount of cargo shipped is “expected to triple in the next 20 years”
  • Measuring ghg emissions is the “fundamental starting point” of “any serious entity”
  • When reducing transportation emissions, “it is best to begin with the ‘low-hanging fruit’”
  • Rail transport is four times more efficient per ton than motor and 600 times more efficient than air transport

‘Greening” Transportation in the Supply Chain

“Logistics” is the integrated management of all the activities required to move products through the supply chain. Generally, “green logistics” focuses on seeking ways to manage the environmental footprint of the supply chain associated with your product, from point of manufacture through to the end user.  This translates often to taking a life cycle approach to manufacturing and distributing your product (as well as reverse logistics in some cases).

Transportation is a very key element of the logistics process and the supply chain which runs from vendors through to you to your customers. It involves the movement of product, service/speed and cost which are three of the five key issues of effective logistics. It also impacts with the other two logistics– movement of information and integration within and among suppliers, customers and carriers.

The 2009 14th Annual 3PL Study found that newer concepts and technologies are emerging to help both 3PLs and shippers cope with a “new, slower growth world”. The report advocated creating “horizontal, cross-company supply chains refereed by neutral third parties. This innovation is based on the concept that by clustering specific logistics activities and consolidating supply chains, significant economies of scale can be achieved in terms of efficiency (logistics cost), effectiveness (customer service) and environmental sustainability (carbon footprint)”, and as noted below.

Solutions:

From a logistics standpoint, 3PL providers might consider development of strategies to eliminate unnecessary materials handling or avoidable transport, and look for efficiencies that could move more product at a time.  Trucking, rail, marine and air modes of transport all have their up and down sides and it’s best to look at point to point options that will result in lower energy/fuel costs, use of modes that use cleaner fuels (LNG, ultra low sulfur diesel), and generate fewer greenhouse gas emissions (use of larger ships that employ more efficient equipment or operational practices).

Any number of “green” strategies to enhance the competitive position of freight-forwarding services are being implemented worldwide , including at key ports of entry here in the U.S.  Most freight related environmental issues generally involve solutions to reduce energy consumption and limit greenhouse gas emissions.  Naturally some carbon or energy intensive issues can be managed only if they are directly controlled by freight forwarding companies, while other activities not under direct control can only be influenced in practice (for instance contract carriers).

Business Case Examples

  • Freightliner Trucks. Freightliner Trucks addressed the issue of fuel savings by focusing on more efficient aerodynamics. The aerodynamic features to the company’s Cascadia truck result in 7.8 percent to 22 percent less drag than other aerodynamic tractors, resulting in annual fuel savings of $900 to $2,750 per truck.
  • Nortel: Nortel shifted from air to sea transportation to deliver significant cost reduction and took major adjustments in production planning and order scheduling to make it work For Nortel, the increased use of sea freight has saved more than $1,000,000 versus the more expensive air freight cost, as well as the opportunity to negotiate improved pricing that has realized approximately $500,000 of cost reduction.
  • The 2009 14th Annual 3PL Study: This study found that shippers want to create more sustainable, environmentally conscious supply chains. That means striking a balance between labor and transportation costs and the market value of carbon-reducing processes, compressed production cycles and less carbon intensive transportation modes that beat the competition.

Summary

Eyefortransport’s Green Transportation & Logistics European Report  (2008-09)  indicated the “The results from this year’s survey show that the supply chain industry has increased its focus on green initiatives from last year, and anticipates this trend to continue for some time yet. This has been shown in most of the topics of the survey, from increased adoption of initiatives, greater awareness of options available, growing incentives for greening whilst barriers are diminishing, to greater anticipated ROI and effectiveness of supply chains. …While those companies who have adopted strategies are gaining, those who have been left behind are finding it harder to implement changes. “

A 3PL green logistics strategy, regardless of whether you are involved with domestic or international, to be effective in gaining a competitive foothold, must recognize the criticality of:

  • Customer requirements
  • Mode selection
  • Carrier relationships.
  • Measuring/benchmarking
  • Regulatory impact.
  • Carrier mergers and alliances and closings
  • Flexibility

Looking at these basic challenges through a sustainability lens offers greater opportunities to find innovative opportunities to optimize resources, leverage risk and maintain cost volatility through enhanced supply chain relationships

It goes to say that a sustainability-focused 3PL strategy one innovative way to respond to the dynamics of your business, its customers, suppliers and operation through cost-effective, value added supply chain solutions.