Over the last few years, when I heard the talking heads on TV blab about global warming, my eyes reflexively rolled upward. It's just that this red meat has been chewed over by so many talking heads it has become mushy. Disgusting.
But lately I've been reading reports about sustainability that have made the topic easier on my eyes. That's because sustainability is being tied to hard numbers that not only mean environmental benefits, but meet business needs as well.
According to research published recently by the Carbon Disclosure Project and Accenture, the proportion of the companies they surveyed that use incentives for suppliers has increased more than threefold since the CDP's last report three years ago. Incentives can be anything from positive word-of-mouth to preferential treatment for suppliers who exhibit good carbon management. 62% of responding companies reported an incentives policy for those suppliers with effective emissions reduction strategies, a figure which stood at just 19% in 2009 and 28% in 2010.
On top of that, half of responding companies have, or are developing, contractual obligations for suppliers to include information on their greenhouse gas (GHG) emissions management in response to requests for proposals (RFPs). My eyes didn't roll over for this because when I read it I had just interviewed Grant Opperman, president of D.W. Morgan, a supply chain and logistics services firm. He told me that he first started hearing clients ask questions about greenhouse gas emissions a couple years ago. These are customers in high-tech, bio-tech, healthcare, aerospace, and other industries where there's a high value of goods and a responsive supply chain. Traditionally these companies haven't worried too much about using their transportation assets efficiently. That's why a quarter of the trucks on the road are empty.
Now that Opperman's customers are getting more sensitive to the costs of such waste, his company is evolving toward a sustainability model to which businesses can relate.
“We do all of the North American drayage for one of our clients inbound and outbound from factories and DCs,” Opperman told me. “Prior to using us they had a situation where they had 20 different carriers who were all subcontracted to carry goods in and out of those facilities. Each one of those would have from one pallet to half a truckload. So now you have 20 trucks that are all running at very low utilization and not only does that end up being a waste of resources but also creates dock congestion and difficulty managing all those relationships, as well as the ability to see where all your goods are in transit.”
The model Opperman and others serving such high-tech customers is adopting is where they act as a single point of contact for consolidating their loads and running full truckloads. Now instead of having 20 trucks at their dock they can do the same job with three or five.
“We can get a good margin because we're cleaning up a lot of inefficiency, our client is able to get better visibility and control over their goods, and we're able to reduce use of resources and costs because I'm not paying to move a lot of air around the country.”
This may work for high-tech, high-value goods, but is it sustainable for low-margin businesses like food and grocery?
“It may be 10-20 years before we get to that level of synchronization in the banana business, but let's start where there's higher value,” Opperman says. “Then as we build these systems and this infrastructure we can begin to roll downhill to some of the more basic transportation areas.”
In MH&L's February issue, which will be out soon, we'll introduce you to someone who not only envisions this happening sooner for the lower-margined, but he's working with allies in industry and academia to make it happen for everyone.