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Blog for updates and happenings in logistics in the Asia-Pacific region

February 19, 2013

MIT case study shows benefits of Combined Distribution Networks

MIT has recently authored a case study that shows cost and greenhouse gas reductions from the implementation of Combined Distribution Networks.

Based on the study, Ocean Spray Cranberries gained a 20 percent reduction in greenhouse gases on top of a 40 percent savings in transportation costs by making smart process changes to one of its primary transportation and distribution routes. The study, conducted by the Center for Transportation & Logistics at the Massachusetts Institute of Technology (MIT CTL), measured the sustainability improvements after Ocean Spray, a $2.2 billion agricultural cooperative and household-name fruit juice and food manufacturer, opened a new distribution centre and partnered with a competitor to improve transportation efficiency.

Ocean Spray’s first process change to reduce transportation costs, shave delivery distances and, ultimately, trim emissions, was to open a new distribution centre in Florida, bringing product supply closer to demand. The company was looking for a more cost-efficient and environmentally sustainable way to transport finished products to the new distribution centre, when they learned of a competing juice company’s New Jersey to Florida back haul opportunity. Ocean Spray investigated whether it was possible to fill the competitor’s vacant rail cars with Ocean Spray product already headed in that direction by truck.

Taking advantage of the back haul opportunity involved working with a logistics partner as intermediary and coordinating shipments with each other’s schedules. With only a modest investment of time and money, Ocean Spray realized both financial and greenhouse gas emissions savings over a 12-month period:

•  A shift of 80 percent of its freight traffic between New Jersey and Florida to a new rail route

•  A 20 percent overall carbon footprint reduction in that lane

•  An estimated 40 percent savings on transportation costs in that lane –about $200 per truckload

•  A savings of 1,300 metric tons of carbon dioxide, a 68 percent reduction–contributing to the overall reduction of 20 percent identified by MIT–the equivalent to saving over 100,000 gallons of fuel

“We recognize the importance of managing our food and juice business in a way that advances our environmental sustainability performance. We needed a more efficient way to haul products south. Our competitor was spending money and energy moving empty rail cars in that direction.  It made good business sense for us to collaborate,” said Ken Romanzi, Ocean Spray’s Senior Vice President and Chief Operating Officer, North America. “Ocean Spray has a history of innovative partnerships, and this case study shows how collaboration in freight operations can boost efficiency and identify opportunities for environmental benefits.”

“This is a great example of how a company can be driving savings to the bottom line and find they’ve improved sustainability at the same time,” said the report’s author, Dr. Edgar E. Blanco, Research Director at MIT CTL.

Companies regularly redesign their transportation networks to better serve their customers. These network adjustments usually translate into cost savings due to reduced mileage or the shifting of transportation modes. As the Ocean Spray case study demonstrates, such improvements also often result in significant CO2 emissions savings since they are related to the same drivers that reduce transportation costs: lower mileage and more fuel-efficient modes.  Ocean Spray is so impressed with the overall benefits of logistics sustainability, it plans to include emissions reduction methodologies in future transport and distribution plans.

Jason Mathers, Senior Manager, Supply Chain Logistics at Environmental Defense Fund (EDF), which sponsored the study, said, “Ocean Spray has shown that concrete and measurable sustainability results can be found within projects that were previously identified for cost savings only. We encourage all companies who identify cost cutting opportunities within their logistics operations to also calculate potential emissions reductions to add greater overall value to their organizations”

The concept of CDN’s or what is termed as horizontal collaboration has real life implementation success but is still to gain traction here in the Asia Pacific region.

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