Dr. Bronner’s, a socially responsible manufacturer of organic soaps, has seen its sales boom during the coronavirus pandemic. The San Diego headquartered company was deemed an essential manufacturer. The company followed the Centers for Disease Control guidelines and continued to manufacture. Year over year, hand sanitizer sales grew 3 times, liquid soap – which is 70 percent of the company’s business – spiked by 50 percent, and the company by over 30 percent.
The demand for sanitizer was much higher than the company could fulfill. They are bringing on more manufacturing capacity so that by the end of the year they can grow sanitizer sales to over times what it was last year. One of the impediments to manufacturing hand sanitizer is that the facility needs to have a drug license, which Dr. Bronner does not currently have.
The company has a global supply chain. They import organic oils from nations such as Sri Lanka, Ghana, India, Samoa, and Palestine. These imports were not a problem. The President of Dr. Bronner’s – Michael Bronner – told me getting the necessary packaging has been their biggest headache during the pandemic.
The company’s creation story includes Nazis, concentration camps, and the founder being thrown in a mental institution for too forcefully promoting social issues. Nevertheless, as a supply chain professional, what I found most interesting was the company’s socially responsible value chain. I have never talked to a more progressive company. For Dr. Bronner’s, social responsibility encompasses progressive business practices, producing organic soaps, fair trade, and environmentalism.
Progressive Business Practices
Dr. Bronner’s is a Benefit Corporation with the State of California. A Benefit Corporation is a for-profit corporation whose goals include having a positive impact on society and the environment within a legally defined framework. Mr. Bronner explained, that as a “legal entity we can put it in our bylaws that we don’t just have to maximize the returns of shareholders.” Other goals and constituencies also matter.
The company is also a Certified B Corporation. Certified B Corps are for-profit companies certified by the nonprofit B Lab to meet rigorous standards of social and environmental performance, accountability, and transparency. B Corp Certification provides a third-party measurement of performance. Mr. Bronner explained “being a Benefit Corporation gives us legal protection to do good things with our profits. Being a B-Corp shows the public that we are actually doing those good things.” Mr. Bronner explained that the B Corp serves as the independent third party validator that a Benefit Corporation is living up to its social and environmental commitments. The company scores very highly as a B Corp.
Additionally, Dr. Bronner’s caps the total compensation of the highest-paid executives at five times that of the lowest-paid vested employee. There is no difference between the benefits offered to company leaders and those offered to eligible workers.
It never occurred to me that modern soaps could be organic. I just assumed soaps were made using synthetic chemicals. That, Mr. Bronner explained, is true for most soaps. Many commercial soaps are made from petrochemicals. Castile soaps, the type of soap made by this consumer goods company, are made of plant-based oils. Dr. Bronner’s soaps are made from coconut, palm, olive, mint, or palm kernel oils. All soaps are made by combining oils with alkalis. Dr. Bronner’s alkalis are either sodium hydroxide (lye) for bars or potassium hydroxide (potash) for liquids. Alkali is made by running electricity through saltwater. Potash is a mineral that is mined. The company does not add any dyes, whiteners, or synthetic fragrances to their soaps.
But even if Dr. Bronner’s soaps are not made from synthetic chemicals, does that make them organic? The term “organic” can mean different things to different people. Dr. Bronner’s soaps are certified as being part of the USDA National Organic Program (NOP). Products with more than 95% organic ingredients carry the USDA label on the front. The company’s soaps are over 90% organic and carry a “Made with Organic Oils” statement.
When I mentioned Dr. Bronner’s to my wife, she had heard of the company and did know its soaps were organic. When she backpacked through Europe during a college summer break, she used the soap to wash her hair, her body, and BRUSHED HER TEETH with the soap.
Dr. Bronner’s engages in fair trade. What is fair trade? Fair trade is an arrangement designed to help farmers in developing countries achieve sustainable and equitable trade relationships. Members of the fair trade movement pay higher prices. Laborers work in better social and environmental conditions than are common in that nation. The movement focuses in particular on commodities.
At Dr. Bronner’s, fair trade means that the consortium that produces the natural oil products get above-market prices. Dr. Bronner’s pays a 10% premium on the cost of raw materials and labor. The premium goes into a fund administered by a committee of farmers, farm workers, factory workers, agricultural field officers. This fund then pays for local development projects like schools, hospitals, and bridges as well as vital equipment.
At Serendipol in Sri Lanka, where coconut oil is farmed and processed, the company works with more than 1,200 farmers and employs 250 workers for processing the coconuts. In some cases, like in Sri Lanka, Dr. Bronner has set up the consortium and the natural oil operations are vertically integrated into the firm. In other locations, they work with third-party fair trade organizations. Benny Andrade, the Senior Manager of Logistics at Dr. Bronner’s, told me that to be successful in setting up a fair trade consortium, the company needs to learn the culture. Dr. Bronner’s offers a fair trade internship program. The interns, Mr. Andrade said, learn that “fair trade not as easy or as fun as it sounds. It is hard work.”
At Dr. Bronner’s, environmentalism encompasses reducing greenhouse gases, using recycled packaging, reducing water usage, and landfill waste. For those interested in the organic soap maker’s progress in these areas, the company produces an All-One! Report.
I initially set up my interview with Dr. Bronner’s executives to discuss an initiative to reduce greenhouse gas emissions from trucking. That will be the focus of the rest of this article.
The Issues with Less-than-Truckload Shipments
In terms of their supply chain, 80 percent of what the company sources comes from abroad. Those goods travel via ships most of the time. Ocean is the most environmentally friendly mode of transport. But when goods get to the US., there will always be an inbound shipment from ports to their factory involving trucks, and outbound shipments usually travel on trucks as well. 80 percent of the company’s sales do occur in the US, so this is a not insignificant source of their GHG emissions.
Dr. Bronner’s is a relatively small company, $129 million in annual revenues. This means that domestic packaging supplies bound for the company’s factory often travel less-than-truckload (LTL). Further, when they ship goods to retail customers, those goods usually move less-than-truckload as well.
Less-than-truckload carriers operate using hubs with spokes. The carriers’ trucks leave from a hub, pick up a few pallets here and a few pallets there. They bring the pallets back to the hub where the goods are unloaded, and then pallets headed in the same direction are loaded back into a full truckload shipment. The truck then departs and makes several deliveries to different shipper’s destinations or proceeds to another hub. A cross country shipment can involve a shipper’s pallets moving on several trucks and through several hubs before getting to the destination.
This is a less costly but less efficient mode of delivery than full truckload (FTL) shipments. FTL shipments move in a direct path from an origin to a destination. Not surprisingly, less-than-truckload shipments generate higher greenhouse gases and are more prone to being late, which leads to fines from big retailers. These shipments also result in more damage to goods because the pallets are unloaded and then reloaded several times.
Mr. Andrade, the Senior Logistics Manager, ran into a colleague in the industry that mentioned a startup logistics provider that offers a shared truckload shipping solution for businesses called Flock Freight. A truck broker is a middleman that connects shippers that need trucks with carriers, often small mom-and-pop operations, that need loads. I also talked to the CEO of Flock Freight, Oren Zaslansky. Flock Freight, it turns out, is a very interesting logistics company that is working to transform the way freight is shipped in a way that benefits carriers and shippers.
The freight industry is undergoing a digital transformation. Technology is being used to speed the process of confirming that a carrier will transport a shipper’s load, predict how long it will take to deliver a load not yet tendered and whether loads already on the road will arrive on schedule. Technology is also being used to forecast what lane rates will be in coming weeks, to allow shippers to benchmark whether they are paying above or below market rates on a lane, and in an attempt to drive down the number of empty miles – miles without a load – that truckers drive. This is a Big Data game, the more freight spend a broker or managed transportation provider has visibility to, the better they can do these things. This is both a technology and a Big Data play.
Flock Freight does not have a billion dollars of freight under management, but because of the way they are using routing optimization, risk forecasting, price elasticity, and machine learning, their CEO says they can be an effective digital broker without that much freight under management.
What Flock Freight does is get tenders from shippers, for example a load a shipper wants to move from Los Angeles to New York City. Flock Freight will instantly commit to a tender at a given price. Flock Freight’s algorithms go to work on predicting whether it is likely that other shippers will have freight they will want to add into a shared multi-stop truckload delivery. Flock Freight is using its historical data to predict what the likelihood other shippers will want to combine their less-than-truckload shipments onto a truck along the general route the truck is taking in the pertinent time period. If the likelihood is high that the load can be combined with other loads, they charge a rate that is only marginally higher than what a less-than-truckload carrier would charge. For a very low-risk shipment, the charge would be about 10 percent higher than what an less-than-truckload carrier would charge. The shipper is willing to pay more than a less-than-truckload rate because they get better service and suffer less cargo damage than what they can get from a less-than-truckload carrier.
If the math suggests that it is unlikely that they will be able to add other cargo along the route, Freight Flock charges a rate only slightly lower than what a full truckload carrier would charge. This high charge is likely to discourage most shippers from accepting the price, reducing the company’s risks.
What I’ve described is a very hard mathematical problem. What makes it insidiously difficult is that they do not load and unload cargo like less-than-truckload carriers do. If a few pallets from a shipper are loaded in the nose of the trailer, the first cargo on the truck, that cargo will be the last cargo taken off the truck at the final stop. Similarly, the second shipper’s pallets, loaded right behind the first shipper’s load, will be the second to last load that is unloaded. In other words, they use first on, last off sequencing to minimize cargo damage. Many logistics firms are hiring more data scientists. But data science is at the heart of Flock Freight’s business model.
Dr. Bronner’s is in the early stages of a relationship with Flock Freight. They use Flock Freight primarily on the inbound side, where they have more control over the supply chain. Mr. Andrade reports they like the savings/service level tradeoffs – lower fees than truckload, better service than less-than-truckload. Mr. Andrade also believes they will have less cargo damage. Flock Freight’s more direct routing will lower Dr. Bronner’s’ greenhouse gas emissions associated with transportation, although Mr. Andrade says that Flock Freight will need to do some work to provide the kind of reporting they want for their sustainability reporting by the end of the year. Flock Freight, like Dr. Bronner’s, is a B Corp, which did play into the company’s decisions to partner with them in freight shipping. The soap producer likes working with other socially responsible companies. Finally, the trucking industry is very fragmented. It is often reported that more than 90 percent of trucking firms have six or fewer trucks. Dr. Bronner’s likes supporting small companies and innovators changing the status quo; Mr. Andrade sees it as analogous to their Fair Trade initiatives.
Being a socially responsible company can create a strong brand, a committed workforce, and loyal customers. It comes at a cost. The products will generally be more expensive, limiting sales. Progressive companies are often small, requiring them to use less-than-truckload. Less-than-truckload has adverse service and environmental impacts. In short, fair trade and environmental initiatives lead to socially responsible manufacturers having more complex supply chains.