The current headlines about Walmart paying bribes in Mexico to obtain building permits has overshadowed (and tarnished) an important announcement the company made last week: the release of its 2012 Global Responsibility Report. The scope of the report is so broad — including initiatives related to the environment, diversity, associates, global supply chain, health and safety, and corporate giving — that it’s impossible to summarize it all here. Instead, I will focus on a couple of topics that caught my attention.
First, Walmart improved the efficiency of its private fleet by almost 69 percent last year compared to its 2005 baseline. Here is an excerpt from the report:
Throughout our network, we delivered 65 million more cases, while driving 28 million fewer miles, by increasing our pallets per trailer and better managing our routes [emphasis mine]. The heavier loads have minimal impact on our fuel-efficient equipment, which includes an average tractor age of three years and the addition of more than 13,000 skirted trailers. Our network efficiency improvement equates to avoiding nearly 41,000 metric tons of CO2 emissions, the equivalent of taking about 7,900 cars off the road.
Reading this reminded me of the significant transportation savings and sustainability benefits Del Monte Foods has achieved by increasing its trailer utilization via packaging changes and other initiatives (see “Del Monte Foods: Packaging, Transportation, and Sustainability”). Another example is IPC-Subway, which was awarded 2nd Place honors at CSCMP’s 2010 Supply Chain Innovation Award competition (along with its logistics partner CH Robinson) for its “Green Logistics” initiatives that also included a focus on improving trailer capacity utilization.
Optimizing the utilization of trailer capacity (as well as containers and other conveyances) is one of those “white spaces of TMS” that I wrote about several years ago. Here is an excerpt from that 2009 posting:
An aspect of transportation management that isn’t very sexy and doesn’t get much attention, but in my mind is probably one of the most critical aspects of the process, is load planning and containerization. You have an asset (a trailer or a container) and you have some product that you need to load into that asset (cases, pallets, drums, rods, you name it). On the surface, this seems like a trivial task, but there’s actually a lot of complexity in doing this right. You have to take all sorts of factors into consideration: weights, dimensions, densities, stackability constraints, compatibility constraints, etc. (which implies you need accurate data for these factors, a problem in itself). Also, these factors vary by product and conveyance. The net result is that many “full truckloads” today are actually only 80-85 percent full, and some of this “leakage” is caused by poor load planning. Improving load factors by 5 or 10 points could lead to significant cost savings (e.g. fewer shipments or equipment required).
In terms of better managing routes, continued enhancements in routing and scheduling software, coupled with advancements in GPS and mobile technologies, are making this possible.
Another “low hanging fruit” opportunity for companies to reduce transportation costs — which always seems to stay on the tree no matter how much we talk about it — is eliminating empty backhauls. Walmart reported success in this area too, specifically in Mexico:
Over the past five years, our transportation department in Mexico has demonstrated continued improvement in the area of efficiency. In 2011 alone, our focus on backhauls, the practice of picking up a load from a vendor and delivering to our distribution centers (DC), rather than running an empty truck between our store and DC, saved more than 56,000 trips. Combined with other initiatives across our transportation department, we saved more than 86,600 trips and nearly 3.2 million miles, while avoiding 4,878 tons of CO2 emissions.
And Walmart continues to test a variety of fleet technologies, such as hybrid assist tractors and liquid natural gas trucks (see the report for more details).
The other item in the report that caught my attention was a small call-out box on page 41 on “Subcontracting”:
Undisclosed subcontracting is defined as factories in our supply chain that produce merchandise or component items for Walmart in a facility that is improperly disclosed and/or unknown to Walmart. There are signs that this practice may be on the rise in countries including, but not limited to, Indonesia, China and Pakistan. The potential impact of undisclosed subcontracting is that illegal and unethical practices can be more easily hidden. To more effectively monitor undisclosed subcontracting, we have taken steps to enhance our Standards for Suppliers, audit reporting and training processes.
This is arguably the biggest supply chain problem all companies face, which directly affects everything from quality, to the ability to respond to recalls effectively, to having timely and accurate visibility to supply chain activities, to creating a safe and secure supply chain. Fix this one problem and you fix many others. Except, of course, bribery issues.