In case you missed it, Kraft Foods issued a press release a couple of weeks ago highlighting how it “eliminated more than 50 million truck miles since 2005 through [a] focus on transportation sustainability efforts.” In North America, for example, the company “saved more than a million miles (1.6 million km), replaced 10,000 truck shipments and reduced 2,000 tons of CO2 emissions by shipping wheat via waterways to its Toledo, Ohio, flour mill. Now, ships make bigger deliveries less frequently.” The press release highlights other examples, many of them with a common theme: replace trucks with other modes of transportation, or as stated in the release, “Riding the Waves (and Rails) to Environmental Efficiency.”

Kraft is also using technology, specifically transportation management software, to reduce costs and emissions in transportation. Back in May, Oracle (an ARC client) issued a press release highlighting how Kraft is using its Oracle Transportation Management solution, including the Oracle Cooperative Routing module, as part of an initiative Kraft calls “Project MOST (Management of Optimized Sustainable Transportation).” By using optimization technology to minimize empty miles, Kraft eliminated more than 500,000 miles (800,000 km) last year. The company also removed the equivalent of 1,500 trucks off the road and more than a million miles (1.6 million km) off the highway system by maximizing product per truckload.

Minimizing empty miles and maximizing load factors… basic “blocking and tackling” stuff in the world of transportation, but not easy to do if you’re still managing your transportation operations with spreadsheets and fax machines.

A couple of years ago at Oracle OpenWorld, a representative from Kraft presented the key elements of the company’s approach to transportation, which I believe is good “food for thought” for other shippers:

• Re-engineer our freight management practices to address the industry’s current capacity shortages [true at the time, will be true again down the road], rapidly escalating costs, and increasing emphasis on service levels
• Embrace a more strategic approach to freight movement
• Move away from “one-way freight” as an outdated approach
• Seek more permanence in lane assignment to increase service and allow optimization of moves and hence total cost
• Increase service and decrease costs through optimization

Moving away from “one-way freight” is a common objective for many forward-thinking shippers. As I wrote back in April (“Reading the Transportation Tea Leaves”), many shippers are moving away from one-way truck freight and shifting more volume to intermodal and dedicated fleets as a way to “take freight off the [truckload] grid,” as one of our shipper clients put it. For many shippers, this mode shift is in anticipation of trucking capacity getting very tight again when the economy recovers, as evidenced by the actions JBH, Werner, and other carriers are taking to reduce their fleet capacity.

The decision to shift modes, however, often involves collaborating with customers. For example, as I highlighted in a previous posting, Wausau Paper has been working with several of its customers, including Staples, to convert more shipments to rail and intermodal. This shift typically adds a day of lead time, but the cost and ‘green’ benefits are usually worth it. Before approaching customers, however, you need to educate your internal sales team on why mode conversion is beneficial and get their buy-in.

The bottom line: Few shippers have the scale and scope of Kraft’s transportation network, but the lessons learned apply to every shipper: think strategically and holistically, re-engineer your network and practices, and leverage optimization and execution technology.