Shipping: Six Steps to Achieving Retail's Holy Green Grail

The urgency to "go green" has permeated the retail industry on everything from store lighting to packaging.

For instance, Tesco and other retailers are already working on carbon labelling that will record the amount of carbon dioxide emitted during the production, transport and consumption of the 70,000 products it sells.

But while the focus has been on energy conservation and recycling, retail's elusive Holy Green Grail remains shipping. In the world of just-in-time delivery, the idea of offering green shipping options may seem to be anathema to a retailer's traditional view of customer service. And it may even scare the wits out of inventory and transportation managers given the charge of making it happen.

But what if - instead of just offering overnight, two day or ground shipping - a retailer could offer green shipping that saves dozens or even hundreds of pounds of carbon emissions that won't be released into the air? In today's Inconvenient Truth world, can you imagine the impact on the eco-friendly shopper buying products online who gets a message that says: "Your order is scheduled to arrive on Tuesday. However, if you want to reduce greenhouse gas emissions by 100 pounds of CO2, click here and your package will arrive on Thursday instead."

There are a lot of shoppers out there who would click on that option in a heartbeat. This is a great way for a retailer to integrate customers and partners into its green decision making. And it doesn't only have to be for online shoppers - it can also be used for special orders done in-store.

In an ultra-competitive market like retail, the ability to leverage green shipping can help to not only gain the trust and loyalty of green-focused customers and partners - it can also significantly impact the P&L ledger. However, it presents uncharted waters for inventory and transportation managers at companies that decide to take on a green shipping initiative.

The reality is that most customers and businesses have some flexibility when it comes to receiving shipments, such as First Thing in the Morning, 10 am, and Second Day Delivery options. However, there also is a rapidly growing awareness of the need to minimise the environmental impact of shipping.

The first retailers who can incorporate environmentally conscious shipping choices - both to consumers, and upstream to their supplier base - will not only reduce the costs of bringing a product to market. They will differentiate themselves to consumers, strategic partners, and yes, even investors, in a way that could provide a significant competitive advantage in the marketplace.

So what should retailers do to shape an effective green shipping strategy? Here are six key factors that can make the difference in the success or failure of green shipping strategies:

1. Metrics rule - Both consumers and partners will want to understand the environmental impact of all available shipping options at the time an order is placed. That means that retailers will need to clearly calculate the carbon impact in the order entry process. Will a shipment save 90 pounds or 190 pounds of carbon using the green shipping option?

CEOs and CFOs are focused on metrics, and so the person responsible for driving a green shipping strategy will need to provide rigorous measurements for the carbon emissions. This data will also put a retailer far ahead of other companies who do not track carbon emissions by shipment.

2. Disciplined load planning - Because green shipping options require a disciplined approach to load planning, retailers can significantly reduce capacity excess throughout your business. One of the biggest challenges facing retailers and their supply chain partners is getting the most out of their truckloads. That's why an industry-wide goal has been to minimise or even eliminate un-utilised space within shipping containers.

The norm today is for trucks to hit the road with 50 per cent or more capacity to meet projected delivery timeframes. In some cases, these half-full trucks are sent out because of customer or business delivery demands. But many times, those factors don't come into play in the customer's mind.

A balance needs to be struck on meeting service levels and on-time orders, but there is still room for order flexibility for environmentally-conscious buyers. Sure, many businesses could not afford to run with broad delivery timeframes. But many other businesses would probably consider alternatives that extend delivery options by as little as several hours if presented with the cost benefits of doing so.

3. Visibility - Idle waste government regulations that aim to reduce engine idle time during the pickup and delivery process are all the rage across the country. One of the side benefits of taking a green approach that tracks carbon emissions throughout the entire shipping process is that retailers and their supply chain partners will have a better view of idling time.

Our research has found that companies that implement some form of anti-idling software, such as that found in fleet management software, can reduce idling time by up to 30 per cent.

4. Making the Right Turns - One of the biggest hidden costs in any supply chain comes from inefficient route planning that results in trucks sitting in traffic with profits leaking right out of the gas tank. Newth Morris, president of the Telogis' GeoBase Group, which provides mapping, routing and geocoding software for transportation companies, points out that routes that are designed to avoid left turns can greatly reduce idling, and thus fuel costs. Right turns at intersections are also faster than left turns, due to " right-on-red" laws and the fact that drivers only have to turn into just one lane of traffic when making a right turn.

Retailers and their supply chain partners can also help reduce fuel consumption by pre-loading vehicles in the morning; routing drivers according to volume; considering alternate pick-up and delivery times to avoid congestion; and using the communications tools available in fleet management solutions to immediately re-route drivers stuck in congested areas.

5. Alternate Modes - Studies have shown that truck deliveries are the most expensive form of transportation and distribution, and that cost is only going to go up as the cost of fuel continues to spiral out of control. Companies that can consider alternative modes of transportation and distribution, such as rail or ocean, can substantially reduce their environmental impact, and incorporate those savings into the green shipping option for customers.

6. Flex Those Schedules - As cited in the example given at the start of this story, it has already been proven by the likes of FedEx, UPS, Amazon and others that customers are willing to examine cost trade-offs when it comes to delivery times. The visionary company that figures out the vast amount of brand capital it could generate by offering green trade-offs for flexible delivery times will be hailed as a conquering hero by green shoppers around the world.

This may involve bundling deliveries in the same area at the same time, or making deliveries during off-peak traffic hours. Either way, the cost savings to the customer and the retailer, and the transportation company making the delivery will benefit everyone involved. The customer will feel she has done something for the environment. The retailer will benefit from the brand loyalty with that customer because of the green shipping approach. And the transportation company will save on fuel costs.

How to Get Started

Since the concept of Green Shipping is relatively new to the industry, here is some concluding advice on steps retailers and their supply chain partners can take to go green when it comes to shipping: In order for green shipping to be successful, the transportation management system (TMS) should have load optimisation capabilities that link directly with a fleet management system. Think of load optimisation as the Rubik's cube of TMS. It takes pieces of different shapes and sizes and fills them in a truck with no leftover space. In order to implement a green shipping option, this capability is critical because it helps maximise fuel usage and shipments.

The TMS has to be outfitted with a carbon emission dashboard that calculates carbon output by measuring a number of factors, including but not limited to the type of truck executing the delivery, the number of miles travelled, and the type of fuel used.

Many retailers are also looking to give the consumer visibility into the carbon emitted to create the product. That means retailers need enterprise-wide visibility into the environmental cost of producing and transporting the goods, and they have to be able to segment those costs out on a per purchase basis.

Finally, it's important for retailers to work with any delivery partners throughout the supply chain - whether it is a third party logistics (3PL) company or a parcel delivery service. These partners need to not only be able to measure carbon output, but also have to work hand-in-hand with the retailer to make the green shipping option viable and desirable for customers.

Todd Mallett has been providing technology-based solutions for complex distribution networks for the past 10 years at RedPrairie. Previously, he worked in Operations Management with Caliber Systems and FedEx's Supply Chain Solutions division.

This article first appeared at Greenbiz.com

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