Easier than reducing carbon footprint – 5 Steps to make a dent in the Huge and Hidden Cost of CPG Sustainability
Calculating the carbon footprint of a company’s comprehensive logistics framework is tremendously complex. WorldShipping.org cites data from The Network for Transit and the Environment that shows that measured by grams/kg/km air freight as the largest carbon footprint impact and steamships as the lowest. Diesel rail is twice that of steamships, and the impact from trucks, while a fraction of air, is three times rail.
According to the American Trucking Association, in the USA trucks move 11 billion tons of freight each year; deliver 100 percent of all consumer products and 70 percent of all freight tonnage; and deliver to the 80 percent of U.S. communities that receive their goods exclusively by truck. While trucks have a smaller carbon footprint/kg/km than air freight, the enormous volume of truck freight explains why reducing the carbon footprint is a priority goal.
Small parcel and air carriers frequently offer customers offset opportunities for the carbon footprint of shipments which they carry. The carbon footprint of trucking is a bit harder to quantify because of volume and inconsistency in how emissions are calculated for truckloads. LTL gets even trickier according to a report by the MIT Center for Transportation and Logistics.
Add in emissions from fork trucks, yard trucks, 3PLs and there’s almost no way for a shipper to easily assess, track and reduce their carbon footprint.
That’s potentially frustrating. However, while technology evolves to allow better tracking of carbon footprint, there’s a potential to substantially improve overall logistics sustainability by addressing a less often discussed but insidious problem. Waste resulting from damage in transit.
Goods damaged in transit
There’s an alarming paradox in the world of consumer packaged goods sustainability. The hard-won progress in incremental reduction of packaging material and waste is reduced by the related increase in damaged and unsaleable product. Throwing a single complete unsaleable product in a landfill naturally, obviates even large percentage reductions in packaging which is itself a relatively small portion of a complete product.
It’s seemingly an intractable problem that represents, according to some data, nearly .1% of US GDP. It’s out of sight of the commentators and activists, and none of the supply chain stakeholders will realize a financial gain by solving it. In short, nobody owns it, and therefore according to the immutable laws of management it will remain unsolved.
Public awareness and mass retailer initiatives have driven major sustainability efforts over the last two decades among CPG manufacturers. Driven by aggressive targets and retailers’ “supplier scorecards”, their progress has been enabled by advances in materials engineering and manufacturing technology.
We’ve seen increases in recycled content and reduced material requirements through thinning of container walls and replacement of voluminous corrugated with minimal plastic for unitizing distribution units. Products themselves are more environmentally friendly (aerosol free for instance); primary packaging is reduced (pouches compared to jars), and secondary packaging has been slashed (beverages are often now wrapped rather than encased.)
This sustainability effort has carried innovation and implementation costs which have been gradually offset with procurement and operational savings. And the effort has certainly reduced the volume of primary and secondary packaging which enters the waste stream. From shareholders to consumers, sustainability has created broad value.
But that has come at a hidden cost which may obviate all the benefits and is tough to overcome. The volume of product damage occurring in between manufacturing and retail is substantial - a 2008 study by Deloitte estimated “unsaleable” product cost manufacturers $15 billion annually or 1-2% of gross sales. While that includes spoilage, expiry and other factors beyond damage, the problem is clear. Even a tiny percentage of damaged product entering the waste stream can quickly diminish the sustainability progress achieved with the hard-fought incremental reductions packaging volume.
At Lantech we’re observers by nature. Our folks have spent much of the last 45 years on factory floors across America. And as an early adopter and proponent of manufacturing practices that later became known as Lean, we’ve observed enormous improvements in manufacturing quality and consistency. Eliminating physical and process waste in manufacturing is key to sustainability - and while an ongoing challenge, lean is widely practiced.
So we’ve spent time observing - where is the damage occurring? The answer, frankly, is after the product passes through the literal and figurative wall from the manufacturing to logistics realm. And once beyond that wall, a complex set of organizational and business factors conspire to make it devilishly hard to resolve.
Among the challenges:
- in the bright light, Pareto optimized world of the manufacturing area, targets for quality, output, and uptime are measured and achieved through rigorous management and defined ownership of responsibility but there are no equivalent tools and processes for evaluating secondary and tertiary packaging processes and effectiveness.
- with the production of quality products creating less waste, the ‘scorecards’ for source reduction targets are met, provided to mass retailers and promoted but there are no metrics dealing with in-transit shipping damage.
- in an idiosyncrasy of bureaucracy over efficiency, many claims for damage in transit are covered under sales and marketing allowances - rather than directly billed to an operational P&L where a manager would be compelled to “find the cause and fix the problem”
The casualty of this system is the process and science of packaging for truck shipment; a discipline often accorded far less emphasis than it deserves based on the potential impact. More specifically, the seemingly routine process of stretch wrapping is often reduced to a go/no-go assessment: simply does a pallet load have stretch film on it or not. Very few companies have established realistic and proven standards for stretch wrapping, much less periodic empirical confirmation of the maintenance of those standards. It’s natural, therefore, that the standards devolve to wrapped or not vs. wrapped properly effectively.
The problem is that this often falls into the “space between.” The public-facing measurable targets are met. While the overall organizational ROI might be quite high, no single stakeholder sees financial incentive to resolve the problem because a solution is expected to be revenue negative or neutral at best at a unit level. The public isn’t aware of the huge volume of waste that compromises the reductions for which they successfully clamored. There are many causes of damage in transit and even effective stretch wrapping will only eliminate part of the problem – albeit according to our research a large part. And finally, we as a society continue to plow new product, totaling somewhere around 1% CPG production, into landfills.
While a different type of impact than carbon footprint, this is nevertheless an enormous opportunity as part of a comprehensive sustainability program- and it’s one that companies can start quickly and easily.
How to fix (or at least begin to reduce) the waste
All's not lost. Just as technology and education are gradually making a difference in understanding the carbon footprint of logistics, gradually the same influences are increasing visibility into the sustainability impact of product damage.
Companies can take 5 simple steps to reduce damage which might be attributable to inadequate stretch wrapping:
- Implement the 3 keys of proper stretch wrapping (correct containment force, no film tails >4” and locking the load to the pallet) 2.Establish written, realistic and measurable standards
- Establish written, realistic and measurable standards 3.Systematically test wrapped pallets to compare them to the standard
- Systematically test wrapped pallets to compare them to the standard 4.Develop reporting for damage claims AND credits which
- Develop reporting for damage claims AND credits which aggregate data and identifies the cause, and involve traffic, logistics, warehouse and manufacturing in the analysis of the data 5.Calculate what unsalable product costs the company (not a department)
- Calculate what unsalable product costs the company (not a department)
Those steps will improve the quality and create the awareness and data necessary to continuously improve.
Carbon footprint and waste in landfills are very different varieties of a comprehensive sustainability program. Neither should be emphasized at the expense of the other – but one may be much easier to impact with an enormous net benefit.
Stretch wrapping could well hold the key to greater profitability and vast reductions in waste.
"David Hoerig is a Systems Sales Manager with Lantech, the Louisville, KY based inventor of stretch wrapping. Dave has a degree in mechanical engineering from Sinclair College and has been with Lantech for 14 years. He’s an expert at designing and integrating high performance automatic stretch wrapping systems with a wide variety of upstream and downstream equipment."