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Promoting Green Supply Chains in North America

Promoting Green Supply Chains in North America. Progress and Perspective Arnold Maltz, Ph.D. April 22, 2008. The Two Sides of the Issue. Resource Use Enforced by price The “Easy” Sell Subject to the customer test Environmental Impact An “externality” from the firm’s perspective

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Promoting Green Supply Chains in North America

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  1. Promoting Green Supply Chains in North America Progress and Perspective Arnold Maltz, Ph.D. April 22, 2008 Promoting Green Supply Chains

  2. The Two Sides of the Issue • Resource Use • Enforced by price • The “Easy” Sell • Subject to the customer test • Environmental Impact • An “externality” from the firm’s perspective • Enforced by regulation • Trade-offs Promoting Green Supply Chains

  3. Rail vs. Truck (1)Fuel Efficiency • Fuel efficiency – measured inton-miles per gallon • Rail current state:400 ton-miles per gallon (AAR) • Truck current state:130 ton-miles per gallon (estimate) Promoting Green Supply Chains

  4. Rail vs. Truck (2)Accessibility Promoting Green Supply Chains

  5. Rail vs. Truck (3)Service Performance • On time delivery (anecdotal)Truck 92%-95%Rail 83%-87% • Transit time ??? • Other customer issues Promoting Green Supply Chains

  6. Rail vs. Truck (4)Results • Market Share – Ton-miles (w/o pipeline) 1996 2005Rail 42.8% 47.7%Truck 33.0% 35.6% • Market Share - $ (2006)Rail 6.7% Truck 79.3% Promoting Green Supply Chains

  7. Rail vs. Truck (5)Cost Drivers • Fuel costs per ton-mileRail $.009Truck $.031 • Labor cost (wage only)Rail $.0003 (rough estimate)Truck $.0170 (rough estimate) Promoting Green Supply Chains

  8. Expectations • Rail will take share of longer haul business, but gradually. • Infrastructure growth limited by access to capital and environmental acceptability • Work force issues • Availability of equipment • Customer acceptance • Rail impact on the environment is not negligible. Promoting Green Supply Chains

  9. Regulatory Actions for aGreen Supply Chain Promoting Green Supply Chains

  10. Highway Diesel Engine • Rule made in 2000, in effect with 2007 engines. • Lower sulfur fuel content from 500 ppm to 15 ppm (97% reduction) • 90% reduction in particulate matter • Significant reduction in Nox • Additional reduction in 2010 • Higher costs per truck ($8,000-$12,000) and for fuel and maintenance. • Lower fuel efficiency (7 mpg-6.5 mpg) Promoting Green Supply Chains

  11. Highway Diesel - Mexico • As of July, 2008, new Mexican trucks to meet 2004 U. S. standards; OK unitl 2011. • ULSD begins in 2008, but long term conversion. Promoting Green Supply Chains

  12. Port Cleanup (LA/LB) • 80% decrease in emissions by 2012 (mix of DPM, Nox, Sox) • $35/teu fee to penalize non-conforming, finance upgrades • Disagreement on owner-operator vs. licensed drayage company approach • Increased cost, but much higher under LA approach Promoting Green Supply Chains

  13. Non-Highway Diesel • Locomotive and marine diesel to conform to 2007 standards, over time. • Must use ULSD fuel, a major change • Final results by 2012 and 2014 Promoting Green Supply Chains

  14. Some Company Programs Promoting Green Supply Chains

  15. Wal-Mart • Fuel efficiency improvement for private fleet • “No idle” and APU programs • 25% initial effort (end of 2007) • 100% improvement by 2015 • Better network and packaging design, as well as supplier score cards • Store redesign??? Promoting Green Supply Chains

  16. UPS • Phasing in compressed natural gas (CNG) for urban deliveries • 20% less emission than optimal diesel • 10% better efficiency than optimal diesel • Approximately 1,000 currently deployed in U. S., and 700 overseas, with multiple alternative models Promoting Green Supply Chains

  17. DPWN • Reduce carbon footprint by 30% by 2020 • Upgrade aircraft • Improve warehouses and sorting centers • GoGreen shipping service allows customers to offset shipping related emissions (in Europe since 2006) Promoting Green Supply Chains

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