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Environmental Sustainability in Logistics

Supply chain sustainability can mean a lot of things to a lot of people. As I have written about before, supply chain sustainability, or the notion of going green, is a hot topic as companies and countries look at their overall carbon footprint and look for ways to be more environmentally friendly. A few ways companies can begin to offset their carbon footprint is to take a deeper look at product packaging, energy efficiency, alternative fuels, route optimization, and returns and recycling programs. However, sustainability in logistics goes well beyond these initiatives.

Today’s article is the third part in a series featuring surveys from APQC on supply chain topics including last mile and digital transformation. APQC conducts research on supply chain and logistics to help organizations assess the performance of their own processes and functions compared to their peers. Most recently, the APQC has conducted best practice and benchmarking research on environmental sustainability. The report provides a cross-industry perspective on environmental sustainability in logistics including fuel consumption, screening logistics providers, packing material, sales order delivery, and reverse logistics based on 1,157 valid participants.

In the survey, APQC used a series of performance metrics, including net promoter score, customer retention rate, perfect order performance, and on-time delivery among others, to identify the top performing companies. Below are the results from the cross-industry report for environmental sustainability.

Sustainability in Logistics Results

Logistics providers contribute to the total picture of sustainability for many organizations. However, at the median, only 42 percent of respondents screen new logistics providers using environmental sustainability criteria and only 50 percent regularly assess existing logistics providers for environmental sustainability. However, for top performing companies, these percentages jump to 52 percent and 60 percent respectively.

One area of concern for the long-term health of the world is the use of packaging in both the manufacturing and shipping of products. Many companies have seen both the inefficiencies of their packaging, as well as the wastefulness, and taken this as a direct challenge for major improvements. One way that companies are trying to alleviate packing waste is through the use of recycled, re-used, and renewable packing materials. For respondents at the median, 80 percent of total annual packing material consumed comes from recycled or re-used materials and 60 percent comes from renewable sources. For the top performers, however, 90 percent of total annual packing material consumed comes from recycled / re-used materials, and 74 percent comes from renewable sources.

A TMS can save shippers money in a lot of ways, including simulation and network design, load consolidation and lower cost mode selections, and multi-stop route optimization. Load consolidation means less trucks on the road to deliver the same freight, which is important as far as carbon emissions. With an eye toward reducing carbon emissions, for respondents at the median, 75 percent of sales orders are delivered to customers all in one delivery (as opposed to multiple trips/deliveries to the customer for a single order). By comparison, 85 percent of orders are accomplished in one delivery for those at the 75th percentile.

Companies are also looking at ways to make last mile deliveries more sustainable, and vehicle capacity plays a key role. This measure refers to capacity utilization when the vehicle has been loaded at a departure location (such as a plant or fulfillment center) and is departing to deliver products to their final destinations.  The average vehicle capacity for vehicles departing for the last mile delivery is 85 percent for respondents at the median, while top performers hit 90 percent average vehicle capacity.

The APQC report on sustainability in logistics finds that renewable energy from alternative fuels can play an important role as organizations seek to reduce greenhouse gas emissions. As a percentage of the total fuel consumed in transportation and warehousing, respondents report that currently only 7 percent comes from renewable sources (at the median). This percentage does not vary much for those respondents at the 25th or even 75th percentiles. This shows that all companies still have a long way to go when it comes to fuel consumption from renewable sources.

A final way to improve supply chain sustainability is by optimizing returns at the store and warehouse level. According to research I did around omni-channel returns management, it became clear that sustainability practices are also an important aspect of returns management.  Companies need to decide what they will do with the returned item, which will vary based on the type of product.  Per our survey, 64.2 percent of respondents indicated they re-use the returned item, and sell it “as is.” According to the APQC report, reverse logistics can also play a role in helping organizations reduce their environmental footprint. The percentage of total annual logistics and warehousing costs associated with physical transportation, storage, or handling of returned product is typically quite low – totaling just 5 percent of costs for those at the median. However, as the use of e-commerce increases, so does this percentage. Currently, only about half of respondents are using the same network for reverse and forward logistics, but as supply chains become more circular, this will likely change.

Final Thought

The APQC report on sustainability in logistics sheds new light on a hot topic. While we all know about the importance of sustainability, it is critical for companies to continue to innovate and push for more sustainable packing and delivery options. The results of this survey are a starting point for being able to measure the impact of sustainability in logistics, and hopefully we will be able to update this article next year to see how the market has changed.

The post Environmental Sustainability in Logistics appeared first on Logistics Viewpoints.

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