Environmentally Sound Transportation Best Practices

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1 Environmentally Sound Transportation Best Practices Joe Gallick Senior Vice President of Sales Penske Logistics Tom McKenna Senior Vice President of Engineering & Technology Penske Logistics

2 Discussion Agenda 2009 CEO Survey 3PL Sustainability Key findings from the PL Provider CEO Perspective survey as presented at the Council of Supply Chain Management Professionals Annual Global Conference. Penske Logistics Green Initiatives Summary of the Sustainability Initiatives being undertaken by Penske Logistics, and review of the challenges that remain for Global Supply Chain business leaders. Copyright 2010 Penske. All rights Reserved. Page 2

3 A continuation in annual surveys of major 3PL service provider CEOs that began in Thirty-five CEOs were involved in the surveys, and collectively their companies generated in excess of $64 billion in 3PL revenues during Dr. Robert C. Lieb Professor of Supply Chain Management Northeastern University Dr. Kristen J. Lieb Assistant Professor of Marketing Communication Emerson College Copyright 2010 Penske. All rights Reserved. Page 3

4 2009 3PL Industry CEO Survey Results CEOs with sustainability programs in place. Companies with written formal sustainability statements. Companies established a management position. Copyright 2010 Penske. All rights Reserved. Page 4

5 Respondents indicate various reasons for establishing sustainability programs. a corporate desire to do the right thing pressure from customers a desire to enhance the company s image a desire to attract green customers competitive pressures Copyright 2010 Penske. All rights Reserved. Page 5

6 CEOs are responding to these pressures with actions throughout their organizations. Administrative Analytical Transportation Set specific sustainability goals. Establish committees to oversee efforts. Develop a formal sustainability statement. Establish pilot programs. Reducing emission levels. Instituting 4x10 hour work week for staff. Other Copyright 2010 Penske. All rights Reserved. Page 6

7 CEOs are responding to these pressures with actions throughout their organizations. Administrative Analytical Transportation Other Invest in evaluation software. Use checklists to control service providers. Benchmark company s carbon footprint. Develop environmental KPIs. Reconsider network design. Measure carbon impact of network & transportation strategies. Copyright 2010 Penske. All rights Reserved. Page 7

8 CEOs are responding to these pressures with actions throughout their organizations. Administrative Analytical Transportation Other Experimenting with alternative fuels. Purchasing more fuel efficient vehicles. Reducing vehicle mileage operated. Participating in SmartWay. Promoting freight consolidation. Shifting freight to more fuel efficient modes. Limited road speed. Sharing vehicles across multiple customers. Reducing vehicle idling time. Copyright 2010 Penske. All rights Reserved. Page 8

9 CEOs are responding to these pressures with actions throughout their organizations. Administrative Analytical Transportation Other Reduce company-printed materials. Recycle office supplies & packaging. Install solar panels in warehouses. Promote use of LEED certified facilities. Install energy efficient lighting. New recycling initiatives. Windmills at distribution centers. Copyright 2010 Penske. All rights Reserved. Page 9

10 CEOs report positive outcomes as a result of implementing these sustainability steps. Administrative Analytical Transportation Other Positive employee impact fostering a green culture. Reduced operating expenses. Substantial savings in fuel costs. Increased business with customers. Positive PR; useful marketing material. Copyright 2010 Penske. All rights Reserved. Page 10

11 Sustainability efforts are yielding operational benefits, but how do they impact sales? Reduce carbon footprint. Enhance return logistics. Reduce fuel, water & electricity. Were sustainability issues a factor in your 3PL outsourcing decision? 36 Compliance. Hazmat disposal. Develop recycling programs. Improve fleet performance. Develop renewable energy sources. 3 0 Frequently Infrequently Very Infrequently Copyright 2010 Penske. All rights Reserved. Page 11

12 Despite the seemingly negligent impact to sales, companies remain committed. 63% 71% Expanding existing programs. Launching fresh initiatives. companies should position their brands for inevitable recovery by preparing now for possible long-term shifts in customer values, attitudes and purchasing behaviors Harvard Business Review Quelch & Jocz 2009 Copyright 2010 Penske. All rights Reserved. Page 12

13 Challenges remain for companies implementing sustainability efforts. Balancing sustainability efforts with customer expectations for low-priced 3PL services. Generating accurate company information. Establishing sustainable priorities within the company. Identifying appropriate environmental benchmarks within the company. Developing an organizational sensitivity. Copyright 2010 Penske. All rights Reserved. Page 13

14 There are many partners that can help to address the challenges of going green. Government Agencies Transportation Companies Trade Organizations Consultants Copyright 2010 Penske. All rights Reserved. Page 14

15 Despite the challenges, third party logistics companies are expanding their efforts. Robust analytics to measure carbon footprint. Review process for impact of new technologies. Real-time performance diagnostics. Improved fleet routing. Improved fuel consumption. Reduced road speed and idle time. Improved driver shifting patterns. the 3PL industry [will] become greener and the green issues [will] become considerably more important in terms of increased regulations [and] the 3PL selection process Bob Lieb 3PL CEO Survey 2008 Copyright 2010 Penske. All rights Reserved. Page 15

17 Penske acknowledges the responsibility that comes with environmental stewardship. Equipment Facilities Partners Engineering Provide the newest vehicles, equipped with the latest technology & engines to conserve fuel and meet clean-air standards. Maintenance program keeps trucks running at peak performance to maximize fuel efficiency & reduce emissions. Vehicle options that improve fuel economy: Gates shrink wrap hose clamps, extended life coolant, synthetic transmission and rear axle lubricants, synthetic motor oil in reefers, glass mat batteries. Idle shutdowns set at 5 minutes. Collaboration with OEM s on next generation of clean engines being deployed in Copyright 2010 Penske. All rights Reserved. Page 17

18 Penske acknowledges the responsibility that comes with environmental stewardship. Equipment Facilities Partners Operate responsible facilities that go above, and beyond, stated requirements. Recycle and properly dispose of the waste byproducts related to servicing and maintaining vehicles as required by regulations. Continuously evaluate opportunities to make our facilities more environmentally friendly. Facility lighting initiative using energy efficient fluorescent lights. Implementing a solid waste reduction production program. Engineering Copyright 2010 Penske. All rights Reserved. Page 18

19 Penske acknowledges the responsibility that comes with environmental stewardship. Equipment Facilities Partners Engineering Actively involved in the EPA SmartWay Transport Partnership Program. PTL is an Affiliate Member. PL & PTL are both Carrier Partners. PL achieved outstanding SmartWay ranking. Support our customers Sustainability Efforts. Hybrid Demo Program. Fuel Savings Best Practices webinars & forums. Measurement of carbon footprint and logistics design to reduce emissions. Copyright 2010 Penske. All rights Reserved. Page 19

20 Penske acknowledges the responsibility that comes with environmental stewardship. Equipment Facilities Partners Engineering Measurement of logistics solution environmental / energy impact. Assess alternative transportation modes. Shipping material redesigns: Expand use of returnable containers. Reduce landfill-bound material. Improve transportation utilization and efficiency. Frequent network design changes. Support product & sourcing design decisions. Copyright 2010 Penske. All rights Reserved. Page 20

21 Example of network design change yielding value Trailers 28 Trailers 6 Straight Trucks 506,044 Reduction in Annual Miles Reduction in Tons of CO 2 Emissions 86,000 Reduction in Gallons Annual Fuel $900,000 Annual Cost Savings Copyright 2010 Penske. All rights Reserved. Page 21

22 When leveraged on a single customer, these efforts produce quantifiable results. Cube Data Accuracy Pallet footprints based on product dimensions, yielding accurate counts for each order. Routing Effectiveness Implementing daily dynamic routing enabled 2% reduction in miles; cost & emissions. More accurate / precise routing which drives reductions in mileage and fuel consumed. Returnable Containers Expanded use of returnable trays, reducing expendable packaging to landfills. Packaging changes and loading rules created $1.2M in transportation savings for one region. Hybrid Truck Equipment Testing use of hybrid diesel engines which produce lower carbon output. Piloting RFID to track returnable trays out of plant/dc and onto/off trailers. Copyright 2010 Penske. All rights Reserved. Page 22

24 The question we must face is: what do we want? We should want to expand the options of those who will follow us. We don't need more dead clutter to entomb in landfills. We need more options. Bruce Sterling Copyright 2010 Penske. All rights Reserved. Page 24

US EPA SmartWay Transport Partnership. 14 th Annual Freight and Logistics Symposium - U of MN December 3, 2010

US EPA SmartWay Transport Partnership 14 th Annual Freight and Logistics Symposium - U of MN December 3, 2010 Today s Presentation SmartWay program overview Key program components Looking toward the future