Large logistics providers are leveraging technology-based tools to save energy and make their businesses more efficient, and they’re increasingly sharing that expertise with smaller companies in the supply chain.
Firms such as United Parcel Service (UPS) are making “big data” solutions accessible to more small businesses and middle market companies, and that’s helping to drive industry-wide change, sources said.
With the cost of implementing these new technological tools and sustainable business practices becoming more manageable for smaller players in the supply chain, the logistics industry as a whole can realize greater energy efficiency gains. These improvements also come as more logistics firms are both considering alternative fuel vehicles and identifying other energy cost savings to maximize the bottom line benefits.
With the rise of big data in logistics that’s been driven by large companies such as UPS, carriers and others in the supply chain have new tools to manage routes, optimize load capacity, track shipments by the minute and develop more strategically located distribution centers.
The success of efficiency measures for those larger companies relates in part to their scale.
“One of the reasons our information is so good is that we have a great sample size and can formulate better methodologies,” said Matt Szukalowski, manager of small business marketing for UPS’s Great Lakes district. “We’ve always had a certain focus on sustainability and that goes hand in hand with efficiency. In the last seven to 10 years, we’ve been more aware of what we can do in these areas to drive the goals of the business.”
As MiBiz reported in October, logistics firms use big data — a deluge of almost real-time information from smartphones to data exchanges — to improve their decision-making, accountability and overall performance. In today’s logistics industry, the ability to crunch metrics is driving growth and the information is helping companies cut costs, starting with energy use.
The margins for shippers like UPS that have massive vehicle fleets have long been at the mercy of fuel costs, Szukalowski said. With traditional fossil fuels prices predicted to continue to increase in the long term, UPS has prioritized maximizing efficiency and investing in proven, new technologies to mitigate those costs, he said.
Speaking at the Michigan Energy Conference hosted by The Right Place Inc., the Michigan Manufacturing Technology Center and Ferris State University at Frederik Meijer Gardens in late October, Szukalowski told local business leaders the choices aren’t always clear for smaller logistics providers looking for a way forward on energy efficiency improvements.
He said companies need to look at energy efficiency with a long-term view, even though the return on investment period is shrinking. The benefits don’t happen overnight, and it takes weekly, monthly or year-to-year analysis to really streamline operations.
Many of UPS’s achievements in energy efficiency are attributed to the big data and IT investments that the company continues to make in package routing technology and telematics. Importantly, the benefits of these investments and the development of new methodologies aren’t being kept inside UPS. Rather, the company is offering its knowledge to other firms looking to increase efficiency and make operations more sustainable, Szukalowski said.
Alliance Beverage Distributing LLC, formerly Kent Beverage until the company merged with B&B Beverage in February, worked with UPS representatives in 2002 to implement two proprietary technologies, Roadnet and Territory Planner, to plan routes and schedules on a daily or seasonal basis, respectively.
Since implementing the technologies, Alliance Beverage’s volumes have tripled, but the company has been able to reduce the miles its fleet travels and has minimized its carbon footprint, said Brian Gary, the distributor’s vice president of logistics.
“We’ve been able to stave off the number of trucks we would have otherwise needed to purchase sooner along with new driver hires and temporary hires and other conditional equipment until capacity showed we needed it,” he said. “(The systems) are certainly saving us on our bottom line, helping us reduce our fuel costs and get to customers in a more efficient manner.”
Fuel costs have gone up dramatically over the last decade, but the systems continue to provide significant savings that make it worth the investment, Gary said.
Now, the company is considering adding more alternative fuel vehicles to its fleet as well as a telematics system, he said. The company recently went through a GPS pilot program but is waiting for next-generation devices to hit the market before adding that technology.
“We certainly believe in sustainability, and we are investigating the viability of alternative fuels now,” Gary said.
With a new high-speed compressed natural gas (CNG) filling station installed in Wyoming in July 2012, Alliance Beverage might consider an investment in a CNG-powered vehicle, he said.
“With the infrastructure in Grand Rapids getting built, we’re lucky to have (CNG stations) here,” Gary said. “We only haven’t (added more vehicles) yet because alternative fuel vehicles are 50 percent more expensive.”
If the federal government offered a tax incentive to invest in those alternative-fuel vehicles, Gary said it would start to make more sense for the company.
“The infrastructure for CNG is coming on pretty good,” he said. “We’ve done some limited looking already.”