Performance: Transportation and Logistics
Ocean Spray Redesigns its Logistics to Cut Costs and Emissions
When creating or redesigning logistics networks companies should increasingly focus on creating more localized, denser centers of operation, that minimize distances traveled and provide for future growth. In addition to reducing sustainability impacts this approach creates a more resilient network that can withstand fuel shortages or sudden changes in demand. Companies should then leverage information systems to analyze and optimize their logistics networks and approach to vehicle loading. For example, Ocean Spray recently redesigned its distribution network by opening a new distribution facility to serve growing demand while also shifting its transportation to rail from road. Together these changes reduced emissions by 20 percent and saved more than 40 percent in transportation cost, according to a recent review by the MIT Center for Transportation and Logistics.
Encouraging Sustainable Commuting
Northeast Utilities created the Eco-Miles program, which allows employees to record in its payroll system the miles they avoided driving during their commute– such as through carpooling, using public transit or telecommuting. In 2012, the company reached over 2 million Eco-Miles—the equivalent of saving 100,000 gallons of gasoline and 1,000 tons of carbon dioxide.
Driving Fuel Efficiency
The U.S. Corporate Average Fuel Economy (CAFE) and GHG vehicle emissions standards are continuing to drive product innovation for auto companies and their suppliers. Citi Investment Research in collaboration with Ceres and other experts has been analyzing the economic impacts of the development of fuel economy/GHG emission standards on the industry for several years. The latest analysis examines the impacts the second phase of the program might have on the industry in 2020.
In 2012, the Administration released new standards for 2017-2025 that will require automakers to raise the average fuel economy of new cards and trucks to 54.5 miles per gallon by 2025. The standards will reduce the amount of GHG emissions by half for 2025 vehicles (compared to 2010 vehicles), and would save approximately 4 billion barrels of oil.
The new standards could largely be met by using existing technologies that improve the performance of cars powered by traditional internal combustion engines. Some of these technology improvements include turbocharged direct injection, advanced transmissions, electric power steering, low-rolling-resistance tires, turbo charging and variable valve lift. Many of these are available now and are cost-effective.
Overall, the Citi report found that automakers would likely see increased sales and profits (4 and 5 percent increases respectively) under the new standards in 2020. Suppliers of key fuel saving technologies would also stand to benefit.
The report found that the technology required to meet the 2020 standard would be cost-effective for consumers when gas costs $1.50/gallon. This is a clear example of the business case for developing more sustainable products.
Producing more fuel-efficient cars benefits not only consumers and the environment, but also the auto industry’s bottom line.