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Logistics and the environment

By Lou Smyrlis QUEBEC CITY, Que. - Greening the supply chain is such a Herculean task one can be excused for likening it to the rather unecological sounding "eating an elephant." Especially if that so...

By Lou Smyrlis QUEBEC CITY, Que. –Greening the supply chain is such a Herculean task one can be excused for likening it to the rather unecological sounding “eating an elephant.” Especially if that someone is Lesley Smith, who as vice-president of supply chain with Wal-Mart Canada, is involved with some of the most forward thinking corporate greening strategies on the continent.

And particularly when that someone has a sensible solution to the daunting task and a catchy phrase to go with it. How do you eat that proverbial elephant representing the daunting task of greening the supply chain? According to Smith: one bite at a time.

Smith was the first of several leaders in green supply chain practices to share her insights at a half-day summit on logistics and the environment dubbed Turning Green into Gold.

The summit, which included three different panels on the environment, kicked off CITT’s well-attended annual conference in Quebec City.

The summit brought together shippers, carriers, academics and government representatives to openly discuss the challenges, costs and benefits of moving towards more sustainable transportation and logistics practices. Smith’s panel mates included Peter Robinson, CEO of Mountain Equipment Co-op, another company with a strong reputation for showing leadership on the environmental sustainability front; Robert Johnson, president and CEO of Purolator, a courier that has captured the transportation industry’s imagination with its willingness to experiment with bold green vehicle designs; and Lynda Harvey, who as senior manager of Natural Resources Canada’s FleetSmart program is tasked with administering the right incentives to help transportation stakeholders improve their sustainability practices.

Harvey outlined the breadth of the task ahead. Transportation on its own accounts for 26% of greenhouse gas emissions in Canada, and is the fastest growing contributor. Although our affection with the automobile is the largest component of transportation’s contribution to greenhouse gases, heavy-duty vehicles used to transport freight contribute close to a third of transportation’s total.

Wal-Mart, which has 6,759 retail stores around the world (296 of them in Canada) staffed by 1.6 million workers (70,000 of them in Canada) has been making headlines with its lofty sustainability goals, which include: to create zero waste, to be totally powered by renewable energy, and to stock more environmentally preferable products where available.

“We knew this was a huge project and we had to break it down into little bite sizes. There are things that can be done that are not huge but can make a difference,” Smith told the audience, explaining that 14 networks were formed within the company and they included outside help from government and non-government organizations, suppliers, vendors and even environmental groups.

Wal-Mart’s packaging reduction initiative has garnered much attention over the past year. The company’s sustainable scorecard system is pushing 60,000 of its suppliers worldwide to lower the amount of packaging they use 5% by 2013, use more renewable materials and slash energy use.

If the packaging reductions are met, this will be an effort equal to removing 213,000 trucks from the road, saving approximately 324,000 tonnes of coal and 67 million gallons of diesel fuel per year, Wal-Mart claims.

Wal-Mart Canada held its second packaging expo in November where vendors and merchants got together to discuss and share best practices and look for ways to reduce their packaging.

Keeping with the one-bite-at-time theme, Smith related how even a small reduction in packaging can have a large impact down the line.

She pointed to the example of a package for a toy that was reduced by just 1.5 inches, without impacting the size of the toy.

In doing so, Wal-Mart figures it has saved the equivalent of 5,190 trees in packaging material, needed 727 fewer shipping containers and saved 1,358 barrels of oil through reduced transportation needs. The bottom line impact: Wal-Mart saved $3.5 million in transportation costs worldwide, just by reducing the size of one of its packages by 1.5 inches.

“Supporting the environment and being a profitable organization are not mutually exclusive,” Smith said, echoing the frequently- quoted mantra of Wal-Mart’s CEO.

Another initiative, this one originating in Canada, involves moving to plastic shipping crates for break pack items rather than cardboard boxes.

The plastic boxes are tough enough for 60 or more trips while the cardboard boxes were good for only a couple. The move has saved the company about $4.5 million over the last five years and reduced waste by 1,400 tonnes, according to Smith.

Wal-Mart Canada has also been heavily involved in discussions with its transportation partners aimed at reducing their environmental footprint.

A sustainability scorecard was launched this fall which addresses the equipment, operations, facilities and corporate commitment of companies that haul for Wal- Mart.

In July 2006,Wal-Mart and shipping supplier SCM changed how many products were delivered to 10 stores in Nova Scotia and Prince Edward Island, from road to rail, reducing carbon emissions by 2,600 tonnes, according to the supermarket.

For products where road haulage is necessary, 20 truck generators were converted to electric, saving 40,000 litres of fuel.

The combined measures are expected to save about $2 million in costs each year, according to Wal-Mart.

In the future, Smith said Wal- Mart is considering solar panels for its distribution centres, some of which are in excess of 1.5 million sq.-ft.

“What else is out there? It’s an exciting time we are in and we’re looking forward to what the future has to offer. We can’t be afraid to look forward,” she advised.

Mountain Equipment Co-op, which has 2.7 million members, has been imbedding sustainability practices in its corporate strategy years before the issue captured the national spotlight, according to president and CEO Robinson.

It has been developing a comprehensive program since 1999 and many of the practices have actually been driven by staff rather than from the top down.

The company procures products from more than 600 factories based in 49 countries. All factories must sign a code of conduct and are audited for compliance.

Next year their environmental performance will also be audited, Robinson said.

He added that the company has also been working with its transportation vendors to first establish a baseline measurement of greenhouse gas emissions.

“If you are looking for a place to start, that’s the best place because then you can set targets,” Robinson advised. “Our target is to reduce our total greenhouse gas emissions from transportation by 5% over the next the next five years, while continuing to grow our business.”

Other transportation-related initiatives include choosing ports of entry to avoid traffic gridlock that add to emissions and re-evaluating the use of air freight in situations where moving goods by marine container is feasible.

The company has already reduced emissions from its own building operations by 52% since 2003 and is close to completing a new facility in Surrey built on green design principles that Robinson said aim to be 70% more energy efficient than the national model.

Some of the strategies included retaining some of the initial structure’s building material which reduced construction costs from $100 per square foot down to about $60 per square foot, implementing insulated re-useable steel panels, and setting a goal to use 30% less water than standard, in part by capturing and using rain water.

“If you’re thinking about greening the supply chain, it’s worth thinking about your buildings,” Robinson advised.

Purolator is another company that embarked on a path towards improved environmental practices years before the issue received national p
rominence and is credited with experimenting with some of the most innovative commercial vehicle designs on the road today.

Company president and CEO Johnson explained that Purolator began looking for ways to reduce its environmental footprint back in 2001, analyzing its activities and services with two main objectives: to identify which areas of its business produced the largest environmental footprint and to figure out how it could reduce the impact of its operations and improve efficiency and profitability.

It got started by implementing a route optimization program which reduced overall distances travelled by its vehicles as a way to cut fuel consumption and emissions.

It also introduced a strict noidling rule that imposed an automatic 60-second maximum idle time on all its road vehicles and an energy efficient lighting program at its terminals which resulted in a 40% reduction in energy consumption.

To reduce packaging, it introduced PuroLetters and boxes made from 50% recycled fibres.

Purolator moves 275 million pieces of freight each year, using more than 3,500 delivery vehicles, 800 highway trailers and 15 chartered aircraft moving between 275 operations and shipping centres.

“We knew that if done right, introducing a greener fleet would help us cut fuel consumption, reduce costs and improve efficiency,” Johnson said, adding the company opted for a three-phased integrated approach that allowed it to test different technologies and determine their impact on its system as a whole.

Over a five-year span, Purolator explored hybrid electric, fuel cell and electric technologies.

In the initial phase of its green fleet program, Purolator considered a hybrid electric vehicle base design that would reduce emissions by up to 50% and not change the driver interface or truck.

It now has 49 such vehicles in its fleets, running in urban areas such as Toronto, Montreal, Ottawa and Vancouver.

In phase two, the company advanced to a fuel-cell technology that would produce zero emissions by using non-carbon based fuel. It partnered with Hydrogenics Corp. to test a fuel cell hybrid electric vehicle and an on-site hydrogen production, storage and refueling station.

The fuel cell project was also one of the first in a series of early deployments of fuel cell technology as part of the Hydrogen Village program, which is a partnership of some 40 companies dedicated to the development of a sustainable commercial market for hydrogen and fuel cell technologies in the Greater Toronto Area.

“Phase three, is where things got even more interesting,” Johnson said. “Not only did we advance to fully electric power sources but also played an active role in the design of a completely new courier vehicle, called the Quicksider, which we introduced this September in Toronto.”

Operating on a battery with fully electric motors, the Quicksider, developed by Unicell, is the first vehicle of its weight class to be used in the courier industry in Canada.

Because it’s fully electric, the vehicle produces zero emissions while in operation.

And its electric drivetrain with no transmission may mean less maintenance than would be required with a conventional diesel or gas powered delivery vehicle.

The Quicksider is currently being tested in Purolator’s Toronto Metro West facility.

Purolator piloted its first hybrid electric fleet in the Toronto market in 2005. After more than 700,000 kilometres on the road, the vehicles have saved Purolator more than 120,000 litres of fuel and prevented the emission of more than 380 tonnes of greenhouse gasses, Johnson said. In terms of fuel consumption, all this translates into a more than 40% fuel economy improvement as compared to Purolator’s base fleet.

“We’ve learned quite a bit over the past five years. We’ve learned that making the transition to greener technologies doesn’t happen overnight. We learned that a stepped, integrated approach is critical if we want to test and accurately measure impact on operations. And we also learned that support from and collaboration with third parties plays a key role in helping accelerate the pace at which a company can make environment-friendly conversions that make good business sense. But perhaps most importantly, we learned that a greener fleet can achieve improved fuel economy and lower emissions without compromising reliability or customer service.”

But Johnson also cautioned that while he believes transportation can implement new green technologies and “there is no time like the present to do so”, there is no silver bullet to addressing the issues affecting the environment. So he plans to continue investigating and testing a variety of new technologies.

In fact, he has already placed an order for 105 gas-parallel hybrid electric vehicles suited for highway driving.

“We will also continue to push for more government funding for early adopters of hybrid electric vehicles and other green technologies, so they can be a viable option for more businesses,” he said.

To that end, Natural Resources Canada’s Lynda Harvey outlined the federal government’s initiatives. Although all programs are voluntary at this stage and Canada has not set up any cap and trade initiatives, there are some monetary incentives for industry stakeholders looking to improve the sustainability of their supply chain practices.

ecoFREIGHT is a $61-million initiative jointly run by NRCan and Transport Canada and has six components:

• The National Harmonization Initiative aims to remove the legislative obstacles to efficient transportation of truck freight posed by conflicting provincial regulations.

• With the Freight Technology Demonstration Fund, Ottawa has set aside $10 million to help companies fund the demonstrating of new green technologies in real world conditions;

• With Freight Technology Incentives, another $10 million has been earmarked to help companies fund the purchase and installation of proven green technologies

• Another $7 million is available under the government’s ecoFREIGHT Partnerships initiative which engages shippers and forwarders on capacity building issues

• A Marine Shore Power program has a $6 million budget to demonstrate the GHG and air pollutant emissions reduction potential of Marine Shore Power equipment in Canadian ports

• The ecoEnergy for Fleets initiative includes the $22-million FleetSmart program run by NRCan and designed to help commercial and institutional fleets reduce fuel consumption and emissions through improved energy efficient practices.

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