Logistics providers, manufacturers and retailers are increasingly turning to collaboration for environmental - and cost-based - reasons

Logistics providers, manufacturers and retailers are increasingly turning to collaboration for environmental - and cost-based - reasons

Long before concerns were raised about climate change, greenhouse gas emissions and global warming, an empty truck was anathema to any logistics operation.

The "business case" for introducing a more environmentally or socially sustainable approach can sometimes be rather loosely defined or involve a very long-term "pay off". This is certainly not the case with regard to carbon reduction in the logistics sector.

One critical facet of the drive towards greater sustainability in logistics is that, with fuel accounting for anywhere between 30% and 40% of a logistics provider's total operating costs, there is a direct and immediate read-across from carbon emissions reduction to cost efficiency. 

Sustainability in the customer relationship

Such is the focus on sustainability among retailers and food producers that logistics companies which fail to address a customer's requirements on sustainability now put themselves at a severe disadvantage. 

"It varies from client to client," says Dan Myers, business unit director for food at Norbert Dentressangle, "but what is very clear is that it has become a much higher priority for many of our customers, both retailers and manufacturers alike."

Sustainability would have been part of the discussion with customers five years ago, says Steve Tainton, group energy sustainability manager at Wincanton, "but the sophistication of what they ask for has changed".

Myers adds: "Certainly some customers have become much more rigorous in terms of what they expect from us."

However, logistics providers are keen to stress that, while they are responsive to customers, they are acting proactively as well. "It's a case of being on the front foot and actually taking the initiative and driving the agenda ourselves," says Myers.

Nevertheless, what Tainton calls a "good environmental story" is not yet a "deal maker". He says: "It wouldn't enhance the offer as much as being cheaper. Money talks." However, he points out a poor showing on sustainability can be a "deal breaker".

Because of the direct correlation between carbon and cost Tainton points out that companies with the strongest carbon reduction programmes may well be the most cost-efficient too. "There's a very strong chance that if you are good on environmental issues you are probably very good on cost management as well. The company with the lowest cost structure is probably the company with the lowest carbon per mile."

There are many ways in which greater fuel - and consequently carbon emissions - efficiencies can be sought and achieved, such as the use of alternative fuels, engine and gearbox innovation, better route planning and vehicle deployment and enhanced driver training. But, given the environmental value of maximising efficiency, there is no more direct or effective way of reducing carbon emissions than minimising instances where lorries are running empty or with a less than full payload.

The idea of improving efficiency through back-haul is not new for the cost reasons outlined above but today the carbon agenda has given this a new imperative. Moreover, to maximise environmental and cost benefits, collaboration between different logistics providers and between service providers and their retail and manufacturing customers is becoming increasingly desirable.

Collaborative transport

In fact, Tainton believes collaborative transport, which has both "cost and sustainability benefits", to be one of the key environmental initiatives the industry is working on. What makes it particularly attractive is that it offers substantial carbon reductions with virtually no upfront investment. "It's something we know we can do with the tools we've got available today. It doesn't require massive investment."

Tainton continues: "The logistics provider is in a unique position because they have a vast number of clients who are diverse in terms of their requirements and their delivery profiles, and it is that diversity that allows it to work. You need scale and you need diversity." By the same token, smaller firms are clearly at a disadvantage. 

However, collaborative transport is not without its challenges. "You have to negotiate with at least two clients," says Tainton, which can be "quite a big challenge". Furthermore, when it involves using trucks from liveried fleets on permanent contracts, bringing some customers on board is even more problematic.

"There are restrictions around this," Tainton concedes, adding that it would be "unlikely", for example, that a retailer would allow a delivery at one of its stores with the branding of a competing chain emblazoned on the side. Nevertheless, he says Wincanton has quite a few examples where collaborative transport is "working really well". 

Myers points out that cost can again be a compelling factor in persuading another company to partner in a collaborative transport arrangement. "It makes sense for both parties. It identifies an area which either saves us empty running or saves them empty running and therefore we're able to offer a more competitive rate." However, identifying opportunities is the "easy bit", Myers adds. "Getting everyone around the table and agreeing is more challenging. That takes the time because there are always sensitivities."

Logistics Carbon Reduction Scheme

The potential benefits of collaborative transport underline the importance of cooperation and dialogue between companies and different sections of the industry, and the UK logistics sector has been something of a pioneer in this regard.

The Logistics Carbon Reduction Scheme (LCRS), launched by the UK's Freight Transport Association (FTA) in 2009, collects and aggregates information on carbon emissions from participating companies. 

As well as providing aggregated data through which the industry's progress can be tracked, FTA climate change policy manager Rachael Dillon believes the LCRS offers practical benefits to companies in sharing information on carbon emissions reduction. The Logistics Carbon Working Group meets every other month, two annual reports have so far been published, while this month the FTA launched the LCRS Awards that will showcase particularly significant achievements. 

In addition, Dillon stresses the scheme's importance in providing "evidence to government that we are trying to improve our efficiency". With the UK government carrying out its Freight Carbon Review this aspect is particularly significant.

Companies participating in the scheme not only include the major logistics service providers but significantly many of their customers, which in addition to buying the services of logistics companies also run their own fleets. However, owing to the fragmented nature of the haulage business, the scheme still only represents 10% of all the HGVs on UK roads, Dillon points out.

By making the scheme free of charge and available to non-FTA members, Dillon says the FTA has tried to make it "as inclusive as possible". She also points out the scheme has relatively simple reporting requirements with "operational data sets that any operator of any size should know". While pointing out the scheme is in its infancy and represents something of a pioneering initiative, she admits that "we definitely have got some way to go in terms of gaining new members". 

However, Dillon believes the LCRS could become an important conduit for spreading best practice and information from larger companies, which by dint of their scale and greater resources are in the vanguard on sustainability issues, to the many smaller-scale operators.