Proving Sustainability Progress in Warehousing and Distribution

Summary

The outbound supply chain–sometimes called distribution or logistics–involves anything that occurs after manufacturing to move finished goods to customers. It’s relatively easy for supply chain professionals to prove success in cost and service level improvements in this channel, but more difficult to validate progress in another key area: sustainability.

One challenge is that the industry doesn’t yet agree on the most accurate measurement methodologies to quantify sustainability outcomes. Another is that much of the Scope 3 (indirect) emissions data needed to demonstrate distribution-related sustainability performance is either not tracked or unavailable from suppliers or other third parties.
 
Yet the savings in both emissions and operational costs can be significant. That’s because looking at the supply chain through a sustainability lens can identify new opportunities for identifying and reducing waste beyond those triggered by process improvement methodologies like Lean and Six Sigma.

The ability to provide data-based evidence of these waste reductions can help supply chain teams demonstrate their contributions to meeting corporate sustainability goals. It can also pave the way for approval of new or expanded green initiatives. Here are a few examples of how to approach these projects in three main areas, including how to begin collecting metrics to both predict and prove the business impact.

Sustainability in warehousing

First, identify areas where your warehousing facilities can reduce waste and associated costs. For example:

• What materials does the warehouse dispose of in substantial quantities, and what is the source of those materials?
• Is there substantial replenishment from warehouse to warehouse, providing savings opportunities by stocking the warehouse network more holistically?
• What is the source of the warehouse’s energy?

Next, quantify your utilization and costs in these areas by collecting data such as:

• What’s the resource consumption reported in your electricity, water and other utility bills?
• What is the approximate volume of the waste produced?
• What is the exact source of resource consumption (coal? solar? etc?)
• What is the precise waste production by weight, the distance the waste travels to disposal, and the type of disposal (landfill? incineration for power generation?).

For easily trackable items, establish a system to collect, aggregate and analyze your resource consumption and waste production. (Automating this process saves time and avoids mistakes.) For the more difficult items, consult suppliers such as your utility and waste disposal companies for assistance.

If you know the warehouse disposes of approximately 100 pounds of plastic shipping material per day, for example, you can calculate the long-term savings of investing in a system of reusable containers (if that is an option for your company) versus continually purchasing and disposing of the plastic. Those hard numbers can help greenlight that investment as well as provide “before and after” costs if the project proceeds.

Sustainability in packaging

In the packaging area, explore opportunities to reduce your company’s carbon footprint by asking questions such as: 

• Is the warehouse regularly shipping similarly sized containers to the same locations? If so, can you consolidate or implement a returnable container system?
• Are your container sizes larger than your product? Can you optimize container sizes to reduce empty space?
• Can you transition to or increase recycled content in your packaging materials?

Then start to assemble line-item data including:

• Number of packaging pieces used
• Approximate weight of packaging used
• Precise packaging weight consumed (including waste) by material
• Recycled content in packaging materials as a percentage of total weight

For the easy-to-track items, measure the weight and type of packaging used and link it with purchase data to track the exact volume consumed. For items like precise packaging weight and recycled content, ask your packaging suppliers for information.

Let’s say a packaging operation uses 15 pre-defined corrugated cardboard box sizes, and 10% of the outbound volume is odd-shaped or -sized products requiring oversized boxes. Comparing current costs with the price of installing a box-on-demand automated machine to create custom box sizes will help make the business case for the project, which can sharply reduce wasted corrugate along with associated manufacturing, disposal and shipping costs and related emissions.

Sustainability in transportation

There are multiple strategies for improving sustainability when moving finished goods from the warehouse or another origin point to the next node of the supply chain. For example:

• How much space is wasted when packing a trailer? Can cube utilization be improved to decrease shipment numbers?
• Are trailer packing procedures resulting in crushed or damaged goods that require product replacement, increasing shipping costs and related emissions?
• What percentage of shipments requires rush fulfillment, especially air freight?

Data that can support these initiatives includes:

• Lines shipped by mode
• Total shipments
• Approximate distance traveled
• Trailer cube utilization
• Fuel consumption by fuel type
• Fuel consumption by fuel type and engine type

For easy-to-find metrics like the first three, create a tracking mechanism and convert data provided to carriers or your own fleet into a standard format. For the rest, work with carriers and your fleet (if you have one) to grow toward tracking this level of detail. Providers like the Fleet Sustainability Index can convert this data to sustainability outcomes.

Consider a scenario where roughly 15% of customer orders are rush shipments because of stockouts in nearby warehouses, forcing next-day air shipments from other locations to maintain customer service levels. In this case, supply chain managers can use these findings to show that the additional costs of increasing inventory levels can be offset by eliminating overnight air shipments, simultaneously reducing the high greenhouse gas emissions associated with jet travel.

Initiatives like these can play a vital role in helping companies meet corporate sustainability targets while also generating real savings that can be proved by proper measurement and tracking. These savings, in turn, can be reinvested into further sustainability projects.  As always, money talks. In this case, it can also advance companies’ climate-friendly efforts.