Category Archives: Sustainability

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 BuyTruckLoad.com 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.

Ten Years Ago Today China Demonstrated a Major Commitment to Renewable Energy

It was ten years ago today that China began to fill the reservoir behind the Three Gorges Dam. A hydro-electric dam that spans the Yangtze River in the town of Sandouping in the Yiling District of Hubei Province, the Three Gorges Dam is the world’s largest power station in terms of installed capacity at 22,500 M or 22.5 GW. (To put this in perspective for North American readers, this dam alone could easily power one-sixth of Canada, or the entire GTA — Greater Toronto Area — which is roughly one-sixth of Canada’s population.)

In comparison, the largest hydro-electric dam in the US, Grand Coulee Dam, only has a capacity of 6,809 MW or 6.8 GW, which is only 30% of the capacity of the Three Gorges Dam. This gives China 2 of the 10 largest power stations in the world, the other being the Longtan Dam on the Hongshui River in Tian’e Country of the Guangxi Zhuang Autonomous Region which produces 6,426 MW, or 6.4 GW. The only other countries to have 2 power stations in the top ten are Brazil (with the Itaipu And Tucurui Dams in second and fourth place) and South Korea (with the Uljin and Yeonggwang Nuclear Power Stations in ninth and tenth place).

It may have taken almost 20 years and 180 Billion Yen (26 Billion US), but this project was definitely worth it as it will generate approximately 100 TWh per year! While it will likely only produce 2% of the electricity required by China (which is a country of over 1.3 Billion people), it demonstrates the power of renewable energy sources and how a relatively small number of appropriately placed hydroelectric dams on China’s many rivers could generate a significant amount of the energy China requires!

What Risks Lurk in Your Supply Chain?

Do you know what risks are hiding in the dark and dreary basements of your supply chain? Are your suppliers using sweatshops that will ruin your image if they are discovered? Did your primary supplier build the only factory that can provide you that custom make chip on the ring of fire? Do floods threaten to wipe out supply routes over low-land sub-sea level plains? Does civil unrest threaten to close off borders? Is your primary carrier on the verge of financial bankruptcy? Are you sure? Really?

Risks in your supply chain are not like the Ravenous Bugblatter Beast of Traal — they’re worse. They don’t assume that just because you don’t see them coming that they can’t suddenly appear and swallow your organization whole. They are there, and for four out of every five companies, they are going to materialize over the next year and send shockwaves that reverberate and echo through the entire supply chain, causing millions of dollars of loss and damage along the way.

And, even worse, it seems that the risks are multiplying. A quick review of the eighth annual risk report from the World Economic Forum (Global Risks 2013) gives one the impression that, like memes, risks have learned to mate and multiply at a pace more rapid than ever thought possible. (Even LOLCats will soon be left in their wake if risk management continues to be ignored in 2/3rds of organizations.)

You need to be aware of sub-tier risks in your supply chain and, more importantly, you need to know how to assess them. If your supplier of corrugated cardboard goes out of business, that’s no big deal as there are dozens of corrugated cardboard suppliers. But if your custom control chip manufacturer can’t produce your chips because of a rare earth shortage, you need to know well before the shipment doesn’t arrive and you have to shut down an entire automotive production line.

For every relevant risk, you need to be able to get a grip on both the consequence of the materialization of the risk and the potential cost of the disruption it will create. There are likely more risks than you can enumerate, but there are only so many likely to happen, and only so many of those with dire consequence. As long as you can properly identify, assess, and develop mitigation plans for those with dire consequence, you can rest assured that, whatever happens, you will survive the storm. But if you can’t …

So how do you identify and assess sub-tier risks? We’ll get to that in a series of posts on visibility that will begin this summer, but if you want a leg up on your competition, I would suggest that you strongly consider the forthcoming webinar on Assessing Sub-tier Risks by Resilinc, who will be doing a deep dive into a proper process, the benefits it will produce for your organization, and the high cost of doing nothing in today’s global economy.

You can Register for the webinar, which will take place on June 19, 2013 @ 11am PDT / @ 3 pm EDT, at your earliest opportunity.

The webinar will be hosted by Reslinc’s founder, Bindiya Vakil, who has a Master’s of Engineering in Logistics from MIT with a thesis that addressed Design for Logistics, Planned Obsolescence, and Recycling long before Supply Management realized the importance thereof and the need for visibility in order to achieve these goals. (the doctor knows this first-hand as he has been preaching this, mainly on deaf ears, since the beginning of SI — see this early post on Design for Recycle from back in 2007) As a result of this work, and work since, Bindiya has found that visibility is not only key to long term supply chain viability, but also to resiliency in an age of rapid supply chain globalization and the risks that come with it. In this webinar, Bindiya will share what she, and Resilinc, have learned over the last decade about assessing, and managing, risks in your supply chain.

Are You Ready for Africa?

Probably not. Should you be?

Probably not yet. But it should be on your radar.

A recent article over on Inbound Logistics declared Africa an attractive target for foreign exploration, especially in Europe and Asia, due to abundant natural resources, a growing labor force, and its proximity to the European and Asian consumer markets. And while I agree that it looks attractive from an exploration perspective, I don’t think its ready from an expansion perspective. For starters, there’s the social unrest, the need for more government collaboration, and the (utter) lack of logistics infrastructure (in many places), as pointed out in the article. In addition, there’s the rampant piracy (which appears to be a sanctioned activity and standard operating practice in the Somali government who jailed a US pilot for bringing money into the country to secure the release of foreign vessels held by Somali pirates), the child and slave labour along the Ivory Coast (especially in the chocolate supply chain), and the constant (civil) conflicts in many of the African nations.

Simply put, Africa just isn’t ready to join the global economy on the main stage, and won’t be for at least a decade (or two). Unless you have a large bank account and are willing to build your own infrastructure, hire your own private security army (of soldiers to hire), and set up your headquarters somewhere where there is no Foreign Corrupt Practices Act (FCPA) or Bribery Act because you will have to grease the hands of the local (underpaid) civil servants to get anything done, you’re probably not going to succeed.

In other words, if you’re not a Global 500 multi-national that has already conquered China and India to the extent possible and needs to start preparing now for the 2025 African conquest, it’s too early. The only exception SI can see is if you’re a Chinese or Indian Company and believe that you need to outsource to lower costs. Then, since the rest of Asia is in the same cost bracket, Africa is the only place left that potentially has lower labour and overhead costs. The article states you should also be looking at Africa if you need gold, diamonds, precious metals, timber, oil, coffee, cotton, and cocoa — but all of this you can get elsewhere. There are big Diamond mines in the North (with Russia being the largest producer and Canada finding new deposits in the arctic as well). Australia is the second largest Gold producer in the world (as well as the third largest diamond producer). Everyone knows that Canada has rocks and trees, so you can get your timber in the North too. China controls the precious metals market. And nine countries produce more oil than Nigeria, the biggest oil producer in Africa. (They may tap out some day, but there are lots of oil sands and tar pits in the North that can be tapped.) Get your coffee from Brazil or Venezuela or even Vietnam. China and India are the world’s biggest cotton producers. Cocoa? Africa, and the Ivory Coast, leads here but the Republic of Indonesia is the second largest producer and Brazil is the sixth. Ramp up production in those countries. Grow a few less soybeans if you have to. 😉

Obviously you’ll need to be in Africa someday if you’re big, but not in the next decade. Let the wealthy global multinationals pave the way and make the mistakes and expand when the economy is ready for it. For now, you still have to get Asia under control.

Poor Working Conditions in the Supply Chain Start at Home!

Last month, we told you that new estimates put the driver shortage at 240,000 drivers and that it’s all our fault. Why? Despite the fact that 40,000 new commercial licenses are granted annually by the DOT (Department of Transportation), turnover is 100+ percent per year due to poor working conditions.

But it seems that poor working conditions aren’t limited to our drivers. It seems that our dock and warehouse workers are also getting the short end of the shaft when it comes to working conditions (to the point where the high salaries commanded by the dock workers, which can exceed $120,000 in the Port of LA for example, might not be worth it). As per this article in the National Business Review on why we should “stop hurting our container opening dock and warehouse workers”,

  • imported sea containers increasingly have toxic substances in them
    such as glues (from shoes), emitted gasses (from wood or MDF), and residue from fumigants,
  • unprotected workers who enter these containers can die
    and those who don’t typically get very sick and some develop long term health issues, including cancer, and
  • up to 30% of shipping containers contain dangerous levels of toxins
    with 18% of containers containing toxins at a level legally reportable as unsafe and almost 90% contain some toxic fumigant or volatile organic compound. WTF?

Kind of puts the salary demands in perspective when you consider that their jobs contain more potential dangers than a coal mine!

And if this isn’t bad enough, we also have the warehouse workers who, according to this recent infographic on Warehouse Safety and BLS data,

  • have a 14% of being injured on the job,
  • have a 3% chance of being seriously injured in a forklift accident on the job, and
  • have a 0.02% chance of being killed, most likely from a forklift accident!

Ouch! Our dock workers have it bad. Our drivers have it bad. And our warehouse workers have it bad. I think it’s time to stop focussing exclusively on the outsourced supply chain in a search for poor working conditions. There’s plenty of poor working conditions to fix here at home!