Category Archives: Carbon GHG

Key Priorities for Ethical Supply Chains – An Interesting Study

Software Advice, a software review company which covers the supply chain management space, recently posted the results of its Key Priorities for Ethical Supply Chains Industry View 2014 that discussed the results of two surveys distributed to over 1,100 consumers. The findings are interesting, generally indicative of the current state of affairs, but, as far as SI is concerned, specifically off, though not due to any fault of Software Advice or the methodology employed by the researcher. What do we mean? Read on.

In the first survey, the group of over 1,100 consumers was split into three and each group of consumers was asked how much more they would pay for a product, normally priced at $100, that was produced more ethically with respect to one of three ethical initiatives: ethically sourced materials, carbon emission offset, and good working conditions. The first group said they’d pay an average of $18.50 more if the raw materials were ethically sourced, the second group said they’d pay an average of $19.70 more if the product had its carbon emissions offset, and the third group said they’d pay as much as $27.60 more if the product was made by workers working in good working conditions. A deeper dive revealed that 35% of consumers would not pay a penny more for products made under these ethical initiatives. And while the second finding does not surprise the doctor, he does not believe the first finding in its entirety. But more on that later.

In the second survey, the respondents were asked which of the three broad ethical initiatives would make them more likely to purchase a company’s products: working conditions, reduced environmental impact, or community involvement. The results were more-or-less evenly split. This does no surprise the doctor either.

So why doesn’t the doctor believe the average consumer would pay considerably more (an average of 21.93% if the above survey is to be believed) for an ethically sourced product? Three reasons.

  1. In the vast majority of verticals, it is not the most socially responsible company that is the market leader.
  2. Fly Research’s recent survey, which attempted to determine what factors are really important to consumers in their purchasing decision, found that only 9% of UK and 16% of US consumers rank “ethical company/brand” in their top 3 attributes but the vast majority are more concerned with value for money (86%), price (76%), and quality (73%). (See SI’s recent post on Do As I Say, Don’t Do As I Do!
  3. The study did not take into account the inherent bias of the consumer. As a result of recent disasters and media storms — including the fire in Bangladesh, the BP oil spill, and underground sweatshops in Russia — not only is corporate ethics and supply chain sustainability on the mind of many caring consumers, but it is stirring up their emotions. And an emotional subject is not an unbiased one. While a consumer might try her best to be unbiased when responding to a survey, when all of the questions stir emotional responses, her responses are going to be skewed relative to what they would be compared to the situation where only a small portion of the survey contains questions or answers that stir emotions. So had these been just three factors in a pool of ten or more that she is asked to consider when defining what is most important to her when selecting a product for purchase, and the other seven plus do not stir any emotion, she will be able to better balance her emotion with her objectivity. And this is why when you compare the results of this survey with the Fly Research study, you find a discrepancy (that cannot be easily accounted for unless there is emotional bias in the consumer responding to the surveys). How else do you explain that a third of consumers expressed a wilingness to pay over 10% more (and up to 100% more) while another third expressed a willingness to pay up to 10% more when the Fly Research study found that less than 43% would pay more than 5% extra and the percentage of respondents who would pay more than 5% declined much faster than the percentage of respondents in the Software Advice Study.

In other words, consumers are starting to care, aren’t necessarily sure which issue they care about the most, will definitely choose a socially responsible product over one that is not socially responsible if all things are equal, but if the cost differential is too high, the average consumer will not be swayed to a more socially responsible product, despite their desire for social responsibility. So while the issues are likely spot on, the relative worth to the average consumer is still in question.

However, in addition to confirming our suspicions that there is no high level issue with respect to social and environmental responsibility that is considerably more important than the others, the study did reveal that if you drill down, there are some specific issues that concern consumers more than others. For example, where environmental responsibility is concerned, more consumers care about reduced water use and biodegradable packaging than reduced carbon emissions. Where community involvement is concerned, 43% believe that the best thing a company can do is to open a factory where jobs are needed (and not outsource to another country). And where working conditions are concerned, 45% believe workers should be paid a fair wage. This gives you starting points in your CSR efforts that will earn you brownie points and increase your brand’s reputation if appropriate initiatives are undertaken. It will be interesting to see how these trend over the coming year.

Procurement Trend #21. Increased Raw Material Scarcity

Eighteen anti-trends from the bush country still remain. As much as we’d like this series to be nearing the end of its run so that LOLCat can come out of the bag and once again explore the world, this lunacy has to stop. We have to shine the light on all these half-truths and lies and put an end to them once and for all. We will continue until each one is laid bare in the hopes that the boondock futurists run back into the bush lands from once they sprang and leave us alone to push forward.

So why do so many historians keep pegging increased raw material scarcity as a future trend? Besides their inability to recognize the twenty first century, there are a few reasons, but among the top three are:

  • We’re burning fossil fuels like there’s an endless supply
    and there isn’t. New drilling technology might allow us to tap more reserves then we thought we could, but this only gives us two or three extra decades before we run out. Since most of our current fossil fuel reserves formed over hundreds of millions of years, and are from plant remains before the time of the dinosaurs, it should be obvious that they are not renewable.
  • We’re using rare earth minerals as fast as we can mine them
    and demand is still increasing as mobile mania hits the world!
  • Global food reserves recently hit an all time low
    back in 2009 and with population steadily increasing, the situation is not going to improve.

So what does this mean?

Fossil Fuel being burned like there’s no tomorrow might mean there is no tomorrow

Non-renewable energy reserves are running out, pollution is on the rise, and if you aren’t already being hit with rapidly increasing energy costs, expect to be taxed to the hilt by way of carbon credits. At some point, where fossil fuels is concerned, there will be no tomorrow. Thus, you have to start moving towards renewable energy resources — wind, solar, water — as soon as possible and make sure that you are only using fossil fuels for transport, at least until such time as there are suitable hybrid bio-fuel/battery-powered transport options for you to choose from.

Rare Earth Minerals are on the verge of extinction

They are called rare earth minerals for a reason — they are few and far between compared to regular earth minerals and in a very limited supply. You need to find alternate designs that, at the very least, require less of these materials if you can’t eliminate the need for them completely. And you definitely need to start designing for recycle and reclamation.

Food Reserves at an all time low

Food costs are going to increase through the roof, and severely impact your bottom line, unless you do whatever you can to eliminate waste through the supply chain end-to-end. In many countries, a third of food is needlessly wasted. Not only can we do much better than this, but we need to. Even though there are now almost 7.3 Billion people in the world, we are still able to produce enough food to feed everyone, but yet over 870 Million people are chronically undernourished. Simple math says that if 2/3rds of global food production feeds about 6 Billion people, then we can easily feed 7.5 Billion people with sufficient nourishment. However, it also says that as the population grows, our ability to produce more than we need decreases substantially and any natural disaster that wipes out a major crop will have huge repercussions if we cannot eliminate waste. So you need to review all of your transportation, storage, and production processes to make sure you get total supply chain waste as low as possible as soon as possible.

Can Trucking Clean Up Its Act?

A recent article over on Inbound Logistics on Going Green to Save Green (which you all know is true after reading SI for years) had a scary statistic: freight trucks are on pace to increase their carbon emissions by 40 percent over the coming decades, according to the Department of Energy’s Annual Energy Outlook. Ouch!

With strict new fuel economy standards for passenger vehicles, which were never the big emission culprit in the first place (they just took the blame for all the pollution caused by ocean shipping, which contributes approximately 3,500* times the pollution produced by all personal automobiles on the planet, and ground transport), this means that trucks are going to become the biggest producer of road sector emissions. The logistics sector constitutes about 6% of the total man-made GHG emissions, with transport as a whole constituting about 12%. This says that the personal automobile, which is 50% to 60% of road sector emissions, depending on the source, accounts for less than 2% of total CO2 and GHG emissions as road transport is only about 25% of logistics emissions (with the rest coming from rail, aviation, and ocean shipping) and that trucking will soon account for more than 2% of total CO2 and GHG emissions.

This does not bode well for the trucking industry which is already hard hit with an impending driver shortage of 240,000, a 100%+ annual turnover, and onerous regulations. With the growing desire of the Millennials (Generation Y) to only work for companies that are socially responsible, this is going to make it even harder to recruit young drivers (which is a must! How long do you think an industry with an average new graduate age of 54 can last without fresh blood?)

So what can it do? While hybrid is an option for smaller trucks, such as UPS and Fedex parcel delivery trucks, it’s not a great option for 18 wheelers (which have to roll on, and will have to continue to do so even after America rediscovers rail). The first thing the trucking industry needs to do is switchover to clean diesel (ULSD) vehicles as fast as possible. Not only is it 97% cleaner than regular diesel, but a well-designed diesel engine can be 40% more efficient than a gasoline engine.

The next thing it needs to do is switch to lightweight pallets and containers. For example, as illustrated in the Inbound Logistics article, a heavy-duty plastic container has only one third the weight of a steel container, and is just as effective. Lower shipment weight translates into a lower fuel requirement which translates into lower emissions.

The third, and most important, thing it needs to do is eliminate empty miles. An empty trailer can weigh as much as 7.5 tons / 15,000 lbs, which is almost 20% of the maximum allowed weight of 40 tons on most US highways. This says that if a truck has to return to its origin point empty, it’s using 120% of the fuel requirement. So how does it do this? First of all, it only works with buyers who recycle containers and pallets so that at least one trip out of every X is full just with reusable containers and pallets. Secondly, it balances its routes by way of the right mix of contract and spot-market deliveries. As hinted at in our recent post on which noted that you could expect to pay an average of 15% less on the spot market, an optimization-powered spot-market hub which analyzes a buyer’s need against all of the “empty miles” of all carriers in the area can help a carrier identify the right customers to insure that it’s trucks stay full.

And while trucking may not be able to keep pace with the passenger automobile, if it does these three things, it will be pretty close. Clean diesel has at most half the sulfur content of gasoline (which has to average 30 ppm from any single manufacturer, compared to 15 ppm for clean diesel), diesel engines will be (on average) one third more efficient, lighter weight packaging has the potential to reduce emissions by one sixth, and eliminating empty miles by 80%+ (which spot-market hubs have have the potential to do) will reduce GHGs by another one-sixth. Put this altogether and the GHG emissions from clean diesel engines, which are already twice as clean as gasoline engines, can be effectively reduced by about another five sixths, or 83%. In other words, a 40% GHG reduction is within reach, and close to the mandated 45% reduction from the federal vehicle standards which mandate a fuel economy increase of new passenger vehicles from approximately 30 mpg in 2011 to 54.5 mpg in 2025.

So, if it wants to, Trucking can clean up its act. The question is, will it?

* As per this historical post on SI, 15 of the world’s biggest cargo ships emit more pollution than the roughly 750 Million cars in operation around the globe. The world fleet in 2011 was 104,304 ships. Some are Post-Panamax and emit more pollution than 50 million cars, some are much smaller. Given the average size, the factor of 3,500 is a good approximation.

If You Really Want to Reduce Carbon (And Costs) in Your Logistics

The answer is really, really simple.

Don’t waste miles and
Don’t waste space.

Every mile you have to travel burns fuel, which burns cash and produces carbon. Thus, the best way to minimize your logistics cost is to reduce the amount of fuel, which is best done by reducing the number of miles you have to travel and maximizing the return from every mile. This is clarified by a recent article over on the Supply Chain @ MIT site on Delivering Green which presents three case studies in low-carbon logistics.

The article, which studied logistics operations at Ocean Spray, Caterpillar, and Boise found that each could reduce cost, and carbon, by optimizing their logistics network to reduce the number of miles travelled and optimizing the shipments to maximize the use of the space available in the truck, railcar, or shipping container.

For example, in the Ocean spray case study, when Ocean Spray partnered with the rail operator and fruit shipping companies to ship more product intermodally, they were able to reduce the n umber of empty boxcars that were returning empty to the Florida region, reduce transportation costs by 40%, and reduce emissions by 65%.

In the Caterpillar case study, when shipping and packaging efforts were combined and streamlined, which resulted in denser and more efficient shipments, Caterpillar, which imports parts from all over the globe for assembly at its Illinois manufacturing facility, was able to reduce its overall carbon emissions by over 340 tonnes of CO2 per year.

In the Boise Inc case study, Boise was only loading its railcars two pallets high and leaving a significant space between the second pallet and the roof. When it redesigned its pallet, it was able to fully utilize the capacity of the railcar. Doing so allowed the company to reduce its overall CO2 emissions by 190 tons.

Efficiency makes a big difference.

Will Factories in a Box Revolutionize Sustainability Initiatives?

Gizmodo just ran a very interesting, and vey insightful article on how The Next Industrial Revolution Starts in this 20-foot Shipping Container about Re-Char and their Shop-in-a-Box that can perform rapid fabrication of steel parts by way of software and a CNC plasma torch. With the Shop-in-a-Box described in the article, Re-Char can produce 600 lids for Climate Kilns. This is a specialized lid-and-chimney integration that adapts a 55-gallon drum to produce the soil amendment biochar. (In Kenya, farmers burn sugarcane debris in an open field and release tons of carbon. A Climate Kiln controls the burn to produce the carbon-rich charcoal biochar that, mixed into soil, reduces the fertilizer requirements for crops by half.) This required the precision cutting of 18-gauge metal, which, in East Africa, leaves you the option of using a guy with an oxy-acetylene torch on the side of the highway or importing a full production run out of China, one full shipping container at a time. But for 30,000, Re-Char was able to produce a Shop-in-a-Box metal cutting and joining setup that could be run by two two people and produce 600 lids as a time, when needed, where needed (as the shop in a box can be moved to a new community when the needs of the current community have been fulfilled).

From a sustainability perspective, this is incredible. It’s lean, green, and completely against the routine. Actually, lean is an understatement. The power requirements are limited to what is needed to produce the lids. The energy required just to light, cool, etc. an average factory typically takes a 600 V feed … or two … or three. It’s green in that it can be powered by sustainable energy, including wind power, water power, or solar power – whatever is available. (Transformers come with the standard kit, along with generators for [natural] gas power for stability. Just add batteries and a UPS and it’s 100% green power most of the time.) And it’s completely against the routine. When the industrial revolution started, you can be that the robber barrons never predicted a moveable factory.

To date, the most (wide-spread) innovative use of containers has been data center modules, with Google a leader in this technology. (But this has been taken to the next level. For example, Green Data Center has designs for completely self-contained data center modules that you can drop anywhere. Just hook-up a power feed and an internet feed, and you’re literally good to go. (And since you can easily put a generator, or two, in a second container, you don’t even need a power feed. Just a natural gas feed, split between a couple of generators if you don’t have a sustainable power feed, for a primary feed.)

But we don’t have to stop at data centers and steel-part fabrication shops. Especially when we are talking about the developing world (which still includes much of Africa, South America, and parts of Asia). Do we really need to refine cane sugar 2,200 kgs at a time, for example? Or how about water purification? If we’re talking about a small community of a couple of hundred people, and the primary focus is clean drinking water, we don’t need to purify 100,000 liters a day! Purifying 1,000 liters would do nicely! Both processes would fit nicely in a container system. (After all, the sugar refinement process is not radically different from micro-brewing in terms of what is needed, and you could fit that nicely in a container too — although we can’t necessarily bring the same humanitarian arguments if we did.)

And when we’ve insured that everyone has the absolute necessities of clean air, clean water, and healthy food — we could ship them clothing factories in a box. It doesn’t make sense to sew shirts in sweat-shops on another continent just to ship them to small communities in Africa, or South America, or Asia, where the living wage is $2 a day or less. Considering the shipping costs alone, you couldn’t set the price at a point where you’d make many sales. Just ship a container to the town, train a few locals on the cloth-cutting production lines and find a few budding seamstresses to do the stiching, and produce the clothing where it will be sold. A zero-mile supply chain that emits zero-carbon and has zero shipping costs. And since you don’t have time-sensitive fashion industries in developing economies, you could even rotate it between a few small communities in the beginning while the consumer base and local economy built up. (Hopefully you’d also move the employees too if they were willing, as you could outfit another container as temporary living quarters without much cost or effort.)

I think the physical manifestation of the Solution-in-a-Box approach has the potential to revolutionize manufacturing, distribution, and sustainability. And it’s not like we have a shortage of containers thanks to the outsourcing craze of the last fifteen years. They’re just sitting there waiting for a good use. And with all the super-panamax ships, and super-panamax capable ports, that we have at our disposal, we can get them from any continent to any other continent with ease, in bulk, and pretty close to where we want them. And then we just need a freightliner to haul them, and there’s no shortage of those.