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For a lighter logistics footprint


Companies are choosing smarter shipping and packaging options for sustainability, says S Muralidhar

One of the questions I am constantly asking my grocer during every trip to his store is whether the fruit that I am eyeing is locally grown (by that I mean Indian). There is such a flood of...

Companies are choosing smarter shipping and packaging options for sustainability, says S Muralidhar

One of the questions I am constantly asking my grocer during every trip to his store is whether the fruit that I am eyeing is locally grown (by that I mean Indian). There is such a flood of fruit from around the world — apples and pears from the US, grapes from Australia, blueberries from Mexico — and I’ve found them in small roadside stores in the deepest towns of our country. Worse, most often they are cheaper than fruit that is locally grown.

This story is not about the muscle power of multinational produce companies and their wax-coated delicacies being sold at cut-throat prices after being shipped to the other side of the world. But it begs the question about the cost and complexities of global logistics, even as demand-supply pressures may skew the shipped products’ price tag.

The cost of shipping produce across geographies is complex enough, now imagine what it would take to ship cars or automobile parts or for that matter tyres. All of them are voluminous, basically occupy a lot of space in a cargo ship or a truck; and people in the logistics business will tell you that it is effectively like moving a lot of air, trapped inside the cars or components. The incredibly high cost of shipping is also the reason why it just doesn’t make sense to manufacture mass market cars with low profit margins and ship them halfway across the world. But, expensive luxury cars make sense because of the significance attached to being manufactured in one iconic or historical location (like a Ferrari from Maranello) and because their demand is price inelastic. This piece then is about how companies manage to use logistics to their advantage. How lateral thinking and plain out ingenuity enables automobile companies to squeeze every penny’s worth from their massive, expensive logistics businesses.

Lateral thinking solutions

The automobile industry is one of the most globalised businesses in the world. Extreme specialisation and unique economies of scale make sourcing from multiple vendors in multiple locations inevitable. With wafer thin margins and an extremely competitive environment, a company that can think laterally and save on logistics costs simply adds to its bottomline. Also, today there is a lot of pressure on the auto industry to reduce its carbon footprint, not just in terms of the tailpipe emissions of its vehicles, but also from its choice of logistics and the geographic spread of its sourcing operations.

One of the most oft quoted, popular examples of such lateral thinking solutions from the auto industry is about how Lexus ships its cars in special crates from Japan to the US (its biggest market). And instead of shipping back these expensive crates empty, Lexus sends them back filled with soybeans. The US is the world’s largest producer of soybean and Japan is one of the biggest consumers.

The logistics department of automotive companies are huge, both in terms of complexity and budgets; and often they complement the manufacturing operations’ efforts at reducing the carbon footprint. At many auto companies, one of the ways by which cross-functional efficiencies work is between the logistics and the corporate social responsibility (CSR) departments. So, what do ‘desi’ companies do along the same lines to save costs? Are there other examples of lateral thinking from their logistics department?

Like most other multinational automakers, Hyundai Motor India (HMI) too gets a lot of parts from vendors located in South Korea, where its parent is based. One of the cost saving measures that the Indian subsidiary adopts is by using the same containers in which components are imported to also export cars manufactured at its plant near Chennai.

Reduce recycle reclaim

Reusing packaging material is regularly adopted to cut costs, and reduce the environmental impact at the logistics department. Hyundai claims that as a standard policy the company and its vendors ensure that packaging material is put back into use, often for export consignments. Packaging material is also chosen with the idea of recycling it later for fabricating storage racks and bins for components, say HMI officials.

As part of its CSR initiatives, Hyundai also uses wood from packing materials to make tables and benches, which are then donated to schools adopted by the company near its plant.

Similarly, Tata Motors says that a number of products are recycled or reused to ensure a lower environmental footprint and lower costs. For example, the paint sludge coming out of paint shop is used to manufacture low grade industrial paints and primers, incinerator ash is reused in the manufacture of paver blocks to be used in the company’s plants and buildings and foundry sand is used in brick making and other construction activities.

Further, Tata Motors in 2015 joined the RE 100 initiatives, one of the first automobile companies to do so. The intent is to migrate it’s operations from traditional thermal power to renewable power. Till now the company has replaced 17 per cent of its power with renewable sources.

A straight-forward cost reduction measure is simply choosing a more efficient logistics option.

Turnaround time

Maruti Suzuki India, for example, has started experimenting with using inland waterways for transporting its cars. This has the potential to reduce both costs and, from the big picture perspective, reduce congestion on our national highways. In the meanwhile, the market leader has worked with the Railways to quicken the logistics involved in the transportation of its cars via dedicated rakes. It reduced the transit time and turn-around time by 40 per cent, meaning faster delivery of cars and more trips per train per month. The turnaround time has reduced from 18.1 to 10.2 days.

As part of its multi-modal transportation initiatives, Maruti is also simultaneously working on improving the efficiency of its road transport logistics. One of the initiatives in this direction is the intensive truck and carrier driver training. Special simulator based training ensures that the transporters moving the company’s cars focus on fuel-efficiency and safety as part of their driving habits.

Recycling and reclaiming can also be an efficient cost saving strategy, both in the logistics department and elsewhere. Ford India for example, cuts its environmental footprint by reducing the amount of solid waste and water its manufacturing operations generate and consume. Ford says that it had a 90 per cent reduction in waste per vehicle sent to landfill in 2016 compared to 2011. The company also used 15 per cent lesser water per vehicle produced in 2016 compared to 2015. Highly toxic Volatile Organic Compound emissions were also down by 40 per cent since 2009. In all, manufacturing related CO2 emissions were also cut down by ten per cent per vehicle produced in 2016 compared to 2015. At its Chennai plant, high cost inputs like energy and water consumption per vehicle produced have been reduced by 16 per cent and 30 per cent respectively since 2009.

(This article was published on July 4, 2017)

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