June 2015 | Case Studies | Casebook

Ocean Spray: Tastes Good, Good for You and the Environment

Tags: Green Logistics, Supply Chain Management, Specialized Logistics, Transportation, Logistics

When companies get serious about cutting costs by reducing their carbon footprint, they call in the Climate Corps.

When the bottom line needs boosting, savvy companies seek to cut, cut, cut. Not jobs. Not prices. Not investments, or dividends to stockholders.

Instead, they cut carbon emissions. And in the process, they slash costs. It's a move that's not just friendly to Planet Earth, it's downright benevolent to the operating budget.

Cutting carbon emissions may seem daunting, however, because nearly every activity associated with producing, storing, moving, and selling products relies on consuming fossil fuels, a main source of carbon emissions. When companies need help identifying ways to shrink CO2 emissions—and the expenses associated with them—they can turn to the Climate Corps fellowship program run by the Environmental Defense Fund (EDF).

Through Climate Corps, the EDF provides participating companies access to a high-achieving, innovation-minded graduate student hand-picked from one of the nation's leading universities. In creating the project, the EDF wanted to identify "some really smart MBA students, pair them with our experience, and match them with a company," explains Jason Mathers, the non-profit organization's senior manager of supply chain logistics.

Armed with the EDF's intensive training on best practices, fellows spend one summer with their host company, collaborating with on-site teams to identify ways to slice carbon emissions and the costs associated with them.

Since its inception in 2008, the Climate Corps program has helped identify roughly $1.4 billion in potential energy savings for host companies. That translates into more than 1.9million metric tons of greenhouse gas reductions. When using Environmental Protection Agency and EDF calculators, this is equivalent to avoiding the annual emissions of 400,000 cars or 10,000 tractor-trailer trucks, Mathers says.

Originally, the Climate Corps program focused on finding cash and carbon savings in commercial buildings, because, as Mathers notes, "about 40 percent of our energy consumption in this country relates to commercial buildings."

But a staggering amount of energy is also consumed distributing products—in fact, moving goods from Point A to Point B accounts for about 16 percent of corporate emissions in the United States, Mathers adds. And the movement of freight accounts for about six percent of human-generated global warming, the EDF reports.

"We want to bring down this source of carbon emissions," Mathers says. With that in mind, he introduced a green freight initiative to the Climate Corps program. Its first foray into the transportation realm, which occurred in summer 2014, paired a Duke University graduate student with Massachusetts-based Ocean Spray Cranberries, Inc.

From Mathers' perspective, the fellowship was the perfect kickoff to what he hopes will become a fruitful initiative that reaches hundreds of companies across the nation, particularly major brands with the highest potential to achieve dramatic results. "We haven't met a company yet that hasn't had an opportunity to reduce emissions," Mathers says. "Wherever the emissions are, we want to get them."

For Ocean Spray, the decision to participate in the Climate Corps' green freight fellowship program was a no-brainer. In fact, the company has periodically turned to outside organizations—EDF included—for expert advice on meeting its challenges.

"Ocean Spray has long sought to capture efficiencies, drive down costs, and reduce the carbon impact of our complex distribution network," says Ocean Spray's logistics manager, Keli Sanford. "EDF, along with MIT's Center for Transportation and Logistics, have been important partners in this area, and we knew that the Climate Corps program would underscore the important work that has already been done, while bringing fresh ideas and thinking into the process."

Fresh ideas came in the person of Eric Chappell, a student in a three-year graduate program combining course offerings from Duke's Fuqua School of Business and Nicholas School of the Environment. With an undergraduate degree from the University of North Carolina at Chapel Hill, where he majored in economics and Mandarin, Chappell also had internships and some professional experience on his resume, having worked with an international research company analyzing market challenges facing Afghanistan and Eastern Europe.

In addition to his experience and education, he brought an intense passion for sustainability—and for logistics challenges—to the fellowship. The supply chain, he says, offers a wealth of opportunities for cost and carbon cutting. "If you are serious about fighting climate change, the supply chain will have great impact," he says, adding that the process will result in "making a company more resilient and competitive, as well as more sustainable."

Going into his summer at Ocean Spray, Chappell kept resiliency and economic viability top of mind. To add momentum to the company's sustainability efforts, he aimed "to make proposals with a low barrier for capital expenditures," he says. Such proposals would reinforce the value of sustainability, and the savings could possibly fund additional efforts.

Ocean Spray was just as interested in making the most of the fellowship. To prepare for Chappell's 10-week fellowship, the company identified several areas for him to target.

"First, we needed him to become familiar with Ocean Spray's logistics network and internally developed carbon-tracking tool," Sanford explains. "We then gave him the chance to review optimization opportunities with a fresh set of eyes and external expertise, with the goal of identifying three to five projects that would be prioritized based on potential for cost and carbon reductions.

"Eric was then charged with developing and refining tools to support future projects and prioritizations such as our Green Freight Guidelines and a project evaluation tool. Finally, we asked him to provide recommendations for a carbon-efficient logistics strategy and to set targets, activities, and recommendations—all in support of final reporting."

Reporting to the company's sustainability manager, Chappell plunged into the Ocean Spray trenches, where he made it a point to learn about how the company deals with its freight issues day-to-day.

"My office was in the transportation department," he recalls, "so I could work with them more frequently than the sustainability manager did. And that was probably the number-one factor that led to this project's success. I could understand their motives, and their alternatives. I asked everybody, 'what keeps you up at night?'"

The answers—which encompassed a wide range of black-swan, perfect-storm, and nature-run-amok events—helped him understand the thinking behind decisions related to everything from stocking levels to transportation modes.

Getting on Track

While working in the transportation department, one of Chappell's first tasks was to evaluate Ocean Spray's greenhouse gas emissions tracking tool. This, in turn, led to an analysis of the firm's truckloads and transportation lanes.

A review of truckloads pointed to a number of strategies that could lead to significant cost and carbon cuts. Chappell's analysis revealed that Ocean Spray would cut costs if it dispatched full truckloads to their final destination, which would result in fewer trips, and fewer greenhouse gas emissions.

To present his case, Chappell asked two questions: What's the cost and value of stock on the shelves? And what's the cost of dispatching partially filled trucks? The cost of partially filled trucks exceeded the cost of warehousing the goods. In other words, it made sense for Ocean Spray to position itself to deliver more goods less frequently.

What's more, Chappell argued, partially full shipments put the company at risk for lost sales. What if bad weather prevented the timely delivery of products from the East Coast to a regional distribution center? That could result in a shortage of product on grocery store shelves. "You risk losing the sale, and the customer," Chappell says.

That argument resonated with Ocean Spray. It also resulted in immediate action. "Eric brought to light inefficient ordering strategies within our Canadian market," Sanford says. "He identified frequency and size of orders as drivers of excess energy demands. With this data, we were able to begin discussions with an important Canadian customer in order to reduce spend and increase consolidation."

Changing Lanes

While inefficiencies in ordering strategies provided a sizable opportunity for cutting emissions and costs, the biggest potential for savings resulted from Chappell's examination of transportation lanes. Here, he saw that in certain regions—particularly the Southwest, with its vast expanses of open country between major markets—it made more sense to ship products via rail rather than truck.

When Opportunity Knocks

"Eric found that shifting to intermodal from over-the-road was the largest opportunity to reduce emissions," Sanford says. "By utilizing the GHG Emissions Tool that Eric refined during his fellowship, we were able to identify the lanes contributing the highest percent of total emissions.

"We identified 34 lanes, representing 31 percent of total emissions from transportation," Sanford adds. "Of these, 17 were identified as being particularly optimized for switching to intermodal, based on a number of criteria including length of route, and readiness for optimization."

Chappell credits Ocean Spray with having an open mind and eagerness to revisit conventional wisdom. "Some sustainability concepts haven't been in the market long enough," he says, "so I think a lot of companies are nervous about moving into the sustainability space. But Ocean Spray was ready for the next step. It was ready for some kind of disturbance."

While that may not be the case everywhere, Chappell says more companies will come to see that cutting carbon emissions is good not just for the environment, but critical for future viability. "You can grow by raising prices or reducing costs," he says. "Reducing costs will be a lot more popular."

For any sustainability-minded company considering a partnership with the Climate Corps, Sanford offers this advice: "EDF fellows provide immediate, hands-on help to reap sustainability's financial and environmental benefits, but you need to recognize that you're on a journey. There is much more that can be done, and needs to be done, to measure environmental impacts."