Green on the Ground

Tags: Trucking, Green Logistics, Rail

When comparing environmental sustainability solutions, which ground transport mode is greener?

Environmental sustainability has become a central issue in the transportation and logistics sector. While consumer transportation experts debate gas-electric hybrids, alternative fuels, or straight electric-powered vehicles, logistics professionals must make sense of claims from transport providers in all modes touting improved efficiency, lower costs, reduced emissions, and a smaller carbon footprint. On the high end, air is the most fuel-intensive mode; on the low end, pipelines are significantly limited in what they can carry. In the middle fall ocean, inland waterways, rail, and truck.

For non-contiguous international moves, the choice is simple. If your shipments have to cross an expanse of water, you must use air or ocean.

That focuses the sustainability discussion on domestic moves, or the domestic portions of international moves. And that discussion can grow loud when arguing the sustainability and environmental impact of using truck versus rail.

CSX, along with others in the rail industry, repeatedly voice this simple claim: “Trains can move one ton of freight nearly 500 miles on a single gallon of fuel. Efficient use of fuel means less greenhouse gases or carbon emissions for our planet.”

Voices grow louder when the railroads pit their performance against trucks. “The Environmental Protection Agency (EPA) estimates that moving freight by rail emits three times less nitrogen oxide and particulates per ton-mile than highway transportation,” CSX says. “Shifting 10 percent of long-haul freight from the highway to rail would reduce annual greenhouse gas emissions by more than 12 million tons.”

Sounds good. But then CSX adds, “Railroads are the most environmentally friendly way to move freight across land.”

As motor carriers are quick to point out, not only do trucks carry 70 percent of the freight that moves in the United States, but railroads don’t reach 80 percent of communities across the country— which clearly contributes to the first-mile and last-mile portion of a freight move that accounts for some of this 70-percent claim.

If you want a truck vs. rail argument, you’ll find a heated one. But if you want efficiency, cool the claims and counter-claims, and look for opportunities to cooperate and collaborate. And that’s really where the modes are when it comes to dealing with the freight community. Generally, rail works best for long-haul, volume moves of commodities such as bulk and aggregates. For other commodities and types of moves, a variety of factors enter into the modal decision. The combination of long-haul efficiency and close-in adaptability helps optimize the freight move and its environmental impact.

For all their posturing over environmental impact, railroads and truckers actually work well together. For example, like many motor carriers, Ann Arbor, Mich.-based transportation provider Con-way has been steadily increasing its use of rail intermodal.

“But don’t turn our use of rail into a ‘green’ argument,” says Randy Mullett, Con-way’s vice president of government affairs, “because the shift is occurring for a combination of reasons.”

Carriers and third-party logistics providers strongly committed to environmental sustainability and reducing their carbon footprint admit shippers don’t always share their attitude. Sustainability initiatives and key performance indicators are often part of shipper requests for proposals, but their absence is largely not a deal breaker.

Companies whose customers have a strong commitment to driving sustainability initiatives up and down their supply chains will be more diligent about ensuring the carriers and logistics providers they use are pursuing environmental sustainability.

But for others, the requirement has been described as “almost perfunctory.” Few companies are willing to engineer for sustainability or pay more for green. That isn’t a new development; the attitude precedes the recession and has continued into the recovery.

There are exceptions, however. Some industry sectors have adopted stronger positions on environmental sustainability. Regional differences also come into play, especially in global supply chains.

In a study for the Academy of Marketing Science, Nathan Meacham, Cheri Speier, and David Closs of Michigan State University’s Eli Broad College of Business present four dimensions of sustainability: environmental, ethical, educational, and economic.

The study reports that employing effective, globally sustainable enterprise strategies can result in:

  • Increased profit through significant operational efficiency gains— reducing global waste and cost.
  • Enhancement of people and their communities— commitment to acceptable global working conditions and compliance with regulatory requirements.
  • Minimizing reliance on scarce environmental resources— water and raw materials— while minimizing waste, thus ensuring long-term global viability.

Taking this broader approach to defining sustainability puts environmental efforts into perspective. “Further, there is a widening belief that managing the triple bottom line— focusing on economic, social, and environmental performance (profit, people, planet)— will lead to improved efficiency and profitability over the long term,” the study reports.

So, environmental sustainability is part of a larger strategy to build a sustainable company with sustainable results and profits. Much of this is due to eliminating waste and improving supply chain efficiency.

Intended Consequences

Where does that leave the truck vs. rail argument? Without “green washing,” carriers have to be saving ton-miles, says Mullett. Better equipment utilization is one opportunity. Not only do carriers look for ways to put more freight in trailers and containers, they are using technology to reduce vehicle weight to allow more freight to be carried. Simple technologies start with using lighter materials to construct trailers, and designing tractors and trailers with more aerodynamic profiles.

While these and other design and construction techniques have provided some improvement, Mullett says it is increasingly important to reexamine size and weight limits to achieve even greater savings. That’s an argument that becomes both politically and emotionally charged, and not only between motor carriers and railroads. But, with fuel prices rising and falling with greater frequency, and plateauing at an incrementally higher level at each drop, the size and weight limits issue will stay on the table for motor carriers.

Con-way uses approximately 150 million gallons of fuel per year— the company’s single largest operating expense, Mullett notes. When the carrier takes steps such as setting its fleet’s speed controls back five miles per hour, it realizes a savings of six million gallons of fuel. That’s the equivalent of taking 15,000 cars off the road for one full year, he adds. In the broader sustainability model presented by the Academy of Marketing Science’s study, there’s also an impact on helping to sustain the carrier’s profits.

As if Con-way’s consumption isn’t a large enough number, the trucking industry will consume more than 35 billion gallons of diesel fuel in 2011 and is on pace to spend $135.8 billion. That’s about $35 billion more than the industry spent in 2010, noted Bill Graves, CEO of the American Trucking Associations, in recent congressional testimony.

Companies participating in the EPA’s SmartWay program have saved more than 50 million barrels of oil since 2004, helping businesses cut fuel costs by $6.1 billion. SmartWay equates the fuel savings to taking three million cars off the road for one full year.

The average length of haul for trucks has been decreasing. “Only 13 percent of truck trips are longer than 500 miles,” Mullett notes.

Some of that decrease may be due to the trend by shippers to site more and smaller distribution centers closer to end markets, but it also reflects the times. Long-haul trucking is challenged by extremely high labor turnover rates, and a critical driver shortage. With freight volumes expected to increase 30 percent by 2020, that problem will only grow worse.

The Intermodal Option

Long-haul drivers are becoming a less sustainable workforce. So, when coupled with the environmental efficiency of rail and lower fuel costs contributing to more sustainable profits, rail intermodal is a good fit for motor carriers.

Motor carriers are some of the railroads’ biggest customers. And that’s true not only of the large Class I railroads but also of Jacksonville, Fla.-based regional rail carrier Florida East Coast Railway (FEC), which counts motor carriers as a major part of its business.

“The 351 miles the railroad covers from Jacksonville to Miami suffer from significant freight imbalances— one northbound load for every four southbound loads,” notes Husein Cumber, FEC’s executive vice president for corporate development. “Truckers can go into south Florida with a load, but because it’s not a manufacturing center, not as many loads come out of the region.”

One train can haul the equivalent of 280 trucks. Because the majority of those return trucks would be empty, having FEC carry the freight substantially improves fuel savings and environmental impact. “It’s a win for both modes,” Cumber says.

Florida East Coast Railway’s geographic advantage goes further. The Port of Miami is making a series of investments that could improve its position as a gateway port: extending its on-dock rail connection and other rail capabilities, and dredging its ship channel to 50 feet. That makes way for more ocean traffic from the larger vessels that will be able to transit the Panama Canal after its expansion is completed.

These improvements could make Miami more attractive to ocean carriers who might make it their first port call on the U.S. East Coast after transiting the Canal, Cumber notes. South Florida is a large consuming market, so those carriers are likely to have destination cargo for the region.

But, with improved rail intermodal capabilities to move containers up to Jacksonville or Atlanta where they can connect with truck or rail to reach other inland destinations, Miami could improve its position as a gateway port.

Moving cargo from efficient ocean vessels to efficient long-haul rail clearly fits environmental sustainability goals. An additional benefit comes from ocean carriers reducing their port calls to one Southeast port and one Northeast port. A number of East Coast ports have signed agreements with the Panama Canal Authority and are positioning for the potential growth resulting from larger ships coming from Asia to the East Coast via the Canal. But, Cumber notes, Miami is currently the only port south of Norfolk with funds committed to deep-dredging its ship channel. That could make it attractive to the ocean lines.

It’s not only carriers who are focusing on green logistics. Dallas, Texas-based third-party logistics provider Transplace, for example, was an early adopter of selecting carriers participating in the EPA’s SmartWay program.

“The importance of selecting SmartWay carriers depends on each shipper and its customer base,” notes Kyle Alexander, director of strategic carrier development for Transplace. “Demand for SmartWay carriers gathered steam when shippers encouraged supplier participation and began scoring them on sustainability issues.”

Transplace encourages customers to participate in SmartWay, and sees a benefit in pushing the environmental agenda in both directions along the supply chain.

Some carriers were reluctant to take the plunge, says Alexander, but due to consumer, market, and customer pressure, it has become mainstream. In some ways, he continues, SmartWay is becoming a victim of its own success as it tries to cope with the substantial growth in certification requests. Currently, 65 percent of the shipments Transplace handles move on SmartWay carriers, Alexander estimates. In 2006, they were in the 50 percent range.

Key Drivers

If shippers are key to driving the move to more environmentally sustainable transportation, does it have a direct benefit? For those with private fleets, fewer miles and lower fuel consumption pay direct dividends. Increasing asset utilization by filling backhauls with brokered loads clearly offers revenue contributions as well.

But even for those shippers using only for-hire transportation, there are some benefits to choosing sustainable carriers, Alexander points out. In many cases, having a sustainability strategy and making use of programs such as SmartWay can open up new market opportunities serving customers who measure environmental initiatives.

Shippers also recognize the importance of carrier compliance, which reaps hard and soft rewards. Hard rewards include increased business with environmentally conscious carriers. On the softer side, some shippers offer more beneficial fuel surcharge programs for SmartWay carriers. They recognize that SmartWay carriers have invested in tools, technology, and processes to improve efficiency.

Environmental sustainability is good business for logistics. And good business practices yield improved environmental impact through greater efficiency, improved use of assets and resources and less waste. That contributes to a better working environment for workers and a sense of pride. It also translates into lower costs and better profitability. All along the supply chain, the impact of the four dimensions of sustainability— ethics, environment, education, and economic— make a positive contribution.

The ultimate question is not whether truck or rail is greener; the question is how to make the whole supply chain greener. Using each mode and combination of modes more effectively contributes to a greener, more sustainable supply chain, which has a wider impact on the environment we all share. Looking at it that way, in the truck vs. rail debate, we have to declare the supply chain the real winner.