Cost Cutting Initiative

In another cost cutting initiative Wal-Mart's marketing team ran a very creative TV commercial during the second quarter of this year. In the commercial a Wal-Mart truck driver states that their "Green Initiatives" of reducing empty miles and consolidating shipments were a major reason Wal-Mart was able to roll back prices for the consumer. A very powerful message because most people do not associate "green initiatives" with cost savings. We are here to tell you that all of these "Green Initiatives" will provide additional greenbacks in the corporate pocket.

Many other corporations have implemented cost savings "Green Initiatives". For example, Kraft Foods took on a huge green supply chain initiative when it implemented an environmental effort by taking 50 Million truck miles out of their distribution network. The process involved moving truck shipments to barge along with consolidating loads and eliminating empty miles.

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To put this into perspective, on average long haul trucks get about 6 miles per gallon on diesel fuel so this effort by Kraft alone saved over 30 Million gallons of diesel fuel.

At PepsiCo, environmental sustainability has been called "performance with purpose". Pepsi's supply chain executives from their four major business units are accountable for defining and driving the company's environmental goals which include reducing water consumption by 20% and fuel consumption by 25% by the year 2015.

PepsiCo works with each of its 210 national carriers to score and track mileage efficiency and CO2 emissions per mile. One PepsiCo unit installed shut-off equipment on tractors to prevent idling for more than five minutes. This process alone is saving about 17,500 gallons of fuel annually.

The company is also expanding its use of intermodal transportation and is building alliances with other shippers. They're looking for partners to fill up boxcars to take trucks off the road because rail transportation is more efficient from a fuel consumption and emissions standpoint. Do you think Warren Buffet knew something about these efficiencies when he purchased the BNSF Railroad a few months back!

It is clear the major shippers are driving these environmental processes with their freight carrier partners. Therefore the carriers are being forced into these green initiatives whether they like it or not.

On the carrier front, UPS has more than 100,000 delivery trucks on the road each day. They travel more than 1.3 billion miles annually and deliver billions of packages, combusting millions of gallons of fuel each year. UPS' Green Fleet today contains over 2000 vans running on everything from Compressed Natural Gas to Electricity. The CNG vans shave 15% in fuel costs over the former diesel fuel powered engines.

Recently UPS added 200 new Hybrid/Electric vehicles to its Green Fleet. The combined fuel savings for these 200 vehicles alone is equivalent to saving 176,000 gallons of diesel fuel per year.

UPS' Package Flow Technology optimizes the routes for every package before it is loaded onto a delivery vehicle. Since its inception this technology has eliminated 100 million miles driven.

UPS' Delivery Information Acquisition Devices (DIAD's), which electronically records delivery information, saves over 89 million sheets of paper each year, the equivalent of 7,308 trees annually.

UPS and FedEx who combined operate over 150,000 plus delivery vehicles are looking into a variety of cleaner technologies including diesel-electric hybrids, and hydrogen fuel cell vehicles. They're doing this to satisfy Washington's push to cut emissions since trucks produce more than 30% of urban smog. Don't let anyone fool you; in addition to the Green Effect the biggest motivator is cost savings!

The numbers are beginning to add up. JD Powers and Associates estimates there are more than 500,000 hybrid vehicles on the road today with 40% of them trucks.

YRC Worldwide, one of the nation's largest LTL carriers, is aggressively addressing Green House Gas reduction strategies by limiting truck speeds to 62 MPH; implementing extensive use of intermodal services with railroads; setting limits on daily truck idling and enforcing tire pressure inflation and monitoring programs.

YRC has also recently introduced the Green Balance Calculator to measure a company's emissions and voluntarily offset the carbon footprint of its shipments. The calculator evaluates eight transportation activities that produce carbon emissions, among them, fuel usage, rail miles, air miles, and other factors.

YRC has taken direct aim at the airfreight industry. Airfreight tends to be very expensive and less environmentally friendly than ground transportation. A shipper might consider using YRC's or other carriers' expedited ground service which would reduce costs and carbon emissions. For example, shipments that are picked up on Thursday and Friday in California, and are delivered in New York City on the following Monday. Just think of the cost savings this change alone would bring along with its carbon reduction initiative.

Tony Nuzio

Cost Cutting Initiative

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