Retails' Climate Change Responsibility —Part Two: Diverse Strategies for Rapidly Reducing Transportation Emissions
on May 18, 2022
We examine strategies and techniques for making near-term reductions to carbon emissions from transportation, such as improving driving behavior and vehicle performance, minimizing and optimizing returns, increasing first-attempt delivery rates, consolidation and mix-mode strategies, integrating private fleet with purchased transportation, and forecast accuracy and inventory optimization for hyperlocal distribution.
In Part One of this series, we examined why retailers are coming under increasing intense pressure to reduce carbon emissions now, not just in the future. We discussed some of the low-hanging fruit techniques to lower carbon emissions in transportation in the near-term, including transportation optimization, tracking carbon emissions, and supporting an increasing variety of delivery vehicles and modes. Here in the final installment of this series, we examine a number of other strategies such as improving driver behavior, reducing returns, first-attempt delivery rates, consolidation strategies, integrating fleet and for-hire, improving forecast accuracy, and inventory optimization.
Leveraging Telematics to Improve Driving Behavior and Vehicle Performance
Driving behavior, such as hard acceleration, hard braking, and excessive idling, can make a substantial difference in fuel consumption and thereby carbon emissions. A good training program is a key element of improving driving habits. Telematics, such as from mandated ELD devices,1 can also help. ELDs provide data2 such as Engine RPM, motion status, mileage, engine hours, and much more. These can be combined with GPS data to reliably record when the vehicle is in motion and directly measure the habits of each driver, including acceleration, braking, idling, cornering, gear shifting patterns, and route compliance. These measurements can be used to identify drivers that need additional training and pinpoint the specific habits that need to be improved.
Telematics, combined with driver inspections, maintenance, and route data, can also be used to detect maintenance issues (such as an improperly tuned engine), as well as predict future failures.3 A program of consistent vehicle inspections is a key piece of this puzzle. A mobile app that makes it quick and easy for the driver to check and record tire pressure and other aspects of vehicle condition can help ensure inspections are done consistently.
Minimizing and Optimizing Returns
As the number of returns has skyrocketed,4 the ability for retailers to reduce unnecessary returns and optimize the returns planning process is another opportunity to reduce carbon footprint. An avoided return saves both the outbound and return shipments. Ecommerce website design can go a long way to reducing the number of returns through things such as making it extremely intuitive to find the right size and providing the right descriptions and tools to ensure customers know that what they are ordering is exactly what they intended to buy.5
A program to continuously reduce the number of unnecessary returns should be put in place. Such a program could include monitoring the rate of returns, evaluating the reasons for and causes of returns, and crafting and implementing strategies to address those specific causes. Analytics can help identify carriers, routes, and drivers that have a higher rate of damaged goods. Retailers can work with those carriers and drivers to diagnose and rectify the issues. Insufficient or improper packaging and packing can be identified and remedied. Suppliers that have high defect rates can be notified and provided with information and incentives to fix the issues.
Most retailers also have ample room to improve their own returns and reverse logistics operations. This includes various methods to consolidate returns, such as the use of third-party partners as drop-off points, as well as encouraging customers to make returns at stores by making it extremely convenient (e.g., curbside drop-off or other no-wait solution). Store replenishment deliveries should be coordinated with returns to utilize the same trucks that are returning to the DC anyway. Analytics can determine the most profitable course of action for each return request, such as: a) let the customer keep the item, b) redeploy or dispose at the store, c) transship to another store, d) return to DC. This can help further reduce reverse logistics volumes and carbon emissions.
Increasing First-attempt Delivery Rates
First-attempt delivery rate (FADR) is an important metric. For deliveries that don’t require a signature there are a few things that can help improve FADR, such as incorporating order-time shipping address validation into the website, easy-to-use ways for customers to indicate special instructions (e.g., specific door, porch, etc. for drop-off), and the ability to accumulate institutional knowledge on how to successfully deliver to confusing or difficult locations. Photo-based proof-of-delivery allows the driver to drop-off with confidence.
For deliveries that require a signature, or over-the-threshold or white-glove delivery, coordination with the customer becomes critical. It starts with a UI design that ensures the customer clearly understands what drop-off window they are agreeing to at the time of order placement. Then non-intrusive reminders of an upcoming delivery via the customer’s channel of choice (text, phone call, email, etc.) with the ability for the customer to confirm or change the delivery window. Finally, providing the option for the customer to have real-time visibility on the day of delivery; an accurate view of where the delivery vehicle is and when to expect arrival. This can also be an opportunity for a final confirmation. A good example of improving FADR is how parcel carrier Blue Dart increased their first attempt delivery rates by 22% using FarEye’s Intelligent Delivery Visibility and Intelligent Delivery Orchestration software to provide better visibility to customers and improving their route planning and optimization.
If delivery is going to be delayed beyond or accelerated before the agreed window, then the customer must be notified as early as possible, preferably by a live operator. Intelligent routing and dispatching systems will detect deviations early, to give the customer as much early warning as possible. These systems accommodate adjustments during the day of delivery, including coordinating in-the-field transfers of specific shipments between vehicles, resulting in increased FADR. Improving a company’s FADR results in lower carbon emissions, reductions in fuel consumption, lower driver labor costs, and increased customer satisfaction. Intelligent Customer Experience provides many of these capabilities.
Consolidation and Mix-Mode Strategies: Zone Skipping, Pool Distribution, and Inbound Consolidation
Consolidating shipments can reduce carbon emissions by defragmenting shipment patterns and increasing vehicle utilization. For parcel or LTL shipments that are bound for the same region, retailers may implement zone skipping or pool distribution.6 Instead of sending multiple individual shipments, a single full truckload is sent to either a parcel hub or to a consolidator. The parcel carrier or consolidator/pool distribution service provider then takes care of the final delivery.
Inbound consolidation is a similar concept, consolidating inbound shipments from suppliers within a specific region into a single full trailer to the retailer. Inbound consolidation typically requires coordination by the retailer.
Using rail whenever possible can also lower carbon emissions considerably, since rail transport emits four to six times fewer GHGs per ton-mile compared with truck transport. Rail and these other strategies will not work for every shipment. All deliveries—whether to a DC, store, or end customer—have a required delivery time window. The route optimization system needs to take into account whether the service window constraints can be met when deciding which, if any, of these consolidation and mode-mixing strategies should be used.
Integrating Private/Dedicated Fleet Optimization with Purchased Transportation
Private or dedicated fleets are typically managed separately from for-hire transportation, creating isolated ‘islands of capacity’ and missed opportunities to optimize across modes. By integrating fleet routing and for-hire transportation management systems (TMS), new opportunities are realized, often through seemingly counter-intuitive choices, using carriers where you previously used the private fleet or vice-versa. This not only reduces costs but lowers carbon emissions as well.7
Forecast Accuracy and Inventory Optimization for Hyperlocal Distribution
The trend to hyperlocal distribution and micro-fulfillment centers increases inventory fragmentation in the distribution network, i.e., smaller pockets of inventory stocked across many more locations. That fragmentation greatly increases forecasting and inventory optimization challenges.8 When inventory is not held in the right place, it increases the distance to ship to the customer, thereby increasing the carbon footprint of delivery. Improvements to hyperlocal forecasts and inventory optimization reduce wasted moves (transshipments and returns) thereby further reducing the carbon footprint. A better forecast reduces the carbon emissions resulting from reverse logistics and the wasted embodied carbon for products that are returned for liquidation or disposal.
Encouraging Customer Pickup
Companies may encourage customers to pick up orders at stores or delivery lockers by providing free and user-friendly click and collect options. Customer pickup lowers the carbon footprint of the retailer, compared with home delivery. However, the question of whether customer pickup results in a lower overall delivery carbon footprint is a more complicated one.9 Retailers may provide customers with simple tools to calculate the lowest carbon delivery option for their specific order.
Emissions Tracking Dashboard and Reports
Retailers that are serious about reducing carbon emissions will implement an emissions dashboard and reporting system. Such a system should allow different views, slicing and dicing in dimensions such as by product line, geography, and lifecycle view (e.g., manufacturing, transport, storage, use, disposal, etc.). The drill down for emissions from transportation should support all modes, including multi-mode shipments,10 and provide further segmentation by region, distribution center, driver, and mode.
The system should support GHG measurement and reporting standards, such as the GHG Protocol Corporate Accounting and Reporting Standard and ISO 14064.11 Reports should help measure progress for specific programs and initiatives, to ensure stated goals are being met. These kinds of tracking systems are key to continual improvements, as well as supporting transparency and visibility to all stakeholders, including consumers, investors/owners, regulatory bodies, and employees.12 To this end, it is helpful to find transportation optimization systems that accurately measure carbon emissions for each shipment.
FarEye provides an example of software that provides very capable transportation emissions tracking and a wide array of transportation GHG emissions reduction tools, including long-haul and last-mile route optimization with green vehicle capabilities, carrier allocation, vehicle inspection, delivery visibility, and returns management.
“Sustainable supply chains grant companies benefits beyond reduced carbon footprints and operational costs. They can boost consumer loyalty and satisfaction, improve investor relations, and even attract employee talent, all of which provide compelling competitive advantages across industries.”
Jorge A. Lopera, Vice President,
Head of Global Strategy · FarEye
Reducing Emissions is Good for Business
The good news is that virtually all of these methods for reducing GHG emissions, also increase profits by reducing miles driven, optimizing maintenance, improving safety, and reducing returns. Furthermore, they help the company demonstrate, in a concrete measurable way, their contributions to tackling climate change. Reducing emissions is good for the triple bottom line (financial, environmental, society) and can help drive the growth of the company.13