MK.

Sustainable Supply Chain

Arinda Soraya Putri
S801608003

Video Title : Webinar: How Sustainable Supply Chains Decrease Costs and Increse
Performance
Duration Length : 00:38:40
Date : June 4, 2015
By : Sarah Flagg, Global Head of Sustainable Logistics at Damco
Jobs : Helping costumers to integrated sustainability into logistics supply chain

Topics
1. Damco and Sustainability
2. Logistics Sustainability = Efficiency and Examples
3. What Drives Logistics Sustainability? (Business and Regulatory Drives Around
Sustainability)
4. Integrating Sustainability into Logistics Operations

First, about the context of the world as it is today and how it will be tomorrow. The world
is changing very rapidly and sometimes in ways that are very unexpected. The population of
the world is growing. Consumption patterns of shifting, wealth, is being concetrated and the
way that we consume goods is changing. How does that impact your business and how does
the impact sustainability?
By 2050, they estimate that nine billion will be on this planet. We will need the resource of
two and a half earth to sustain and we don’t have it. So we have to figure out how to do things
smarter and more efficiently. Each year until 2030, at least 150 million people will be entering
the middle class. This will bring almost 60% of the world’s population into a middle income
bracket. Over the same period enegy demand is projected to increace by 40%, and water
demand is expected to outstrip supply by 40% (World Economic Forum Sustainability
Consumption Initiative).

DAMCO AND SUSTAINABILITY

Damco Overview
Damco is one of the world’s leading providers of freight forwarding and supply chain
management services. For more than 100 years, we have been providing our customers with
transportation and logistics solutions that support the way they want to do business, wherever
they are in the world. Work in many areas: Ocean Freight, Air Freight, Landside Services,
Supply Chain Management, Supply Chain Development, Wearhousing and Distribution.
Damco is an end-to-end logistics company that is part of the Mirth Group. We work in
many different areas, including supply chain development and work with many of the leading
retail lifestyle technology, industrial mining, chemical companies around the world. Damco
have set up our own sustainability priorities, which connect back to the Mirth Group, and the
Mirth Group has a sustainability strategy that was published last year and is focused on three
pillars, which are economic, social and environmental. The priorities are linked, but very
specific to the industries that we work in.
 Damco focused on anti-corruption, engaging in local community and development and
diversity, environmental, health, safety and security and then finally sustainable logistics.
Damco work with many different companies on our sustainable logistics services, which are
focused in two areas. First, they are focused on providing end-to-end visibility and tools to
allow companies to see how their business decisions are connected or have an impact to their
sustainability performance. Second, is working with companies to actually understand what
what that result means. Damco helping them to develop KPIs, develop strategies and then
actually figure out how those can then be integrated into logistics efficiency.

LOGISTICS SUSTAINABILITY AS EFFICIENCY

The important thing that most people understand but don't quite understand, a scale of is
how mode selection in impacts the sustainability and the carbon. So the energy intensity of
each of the modes is quite different. Air freight is about 80 times more carbon and ocean freight
and how companies end up, making the decisions on which mode to choose which carrier to
select how much packaging is shipped and how effective utilize. Network and equipment also
feeds into this. It's all connected into how much companies use how efficient their operations
are and how much the waste affect the costs and therefore affects their carbon.
An example of this is a case study on the DC Bypass, which companies don't think of as a
sustainability project, but actually because companies are increasing the efficiency, and this
will have a direct impact on how much fuel is consumed to move their containers. From point
A to point B, and what you will see here is that, by cutting out certain up activities within this
supply chain, you're having an operational impact of reduced lead times, a cost impact of ten
and a half million dollars saved and a carbon impact of 1,800 tons reduced, which is actually a
significant amount.
Another example is in CFS Utilization, not a sustainability project, one done for to gain
operational efficiencies and cost reductions, but it also has a significant carbon reduction. If
companies can reduce their costs by 1%, their can reduce their carbon by 1%, so it's all tied
back to how much fuel is consumed. What the efficiency of the network is and how your
logistics decisions then tie back to making sure that companies are using everything as
effectively as possible.
The different modes of transport have different energy intensities and because air freight is
so much more carbon intensive than. For example, ocean. In international end-to-end supply
chains, there's a significant amount of domestic trucking that contribute to the overall global
picture. Just because ocean freight shows that seventeen percent and air freight as nine percent,
we could look at this and think. That's not really a problem i'll focus on road freight and figure
out ways to make that more efficient. However ocean freight actually globally represents. Has
the same carbon footprint as the country of Germany, which is the sixth largest emitter of
carbon in the world? Small changes can add, it can make big impacts.

WHAT ARE SOME OF THE DRIVERS AROUND SUSTAINABILITY?

(BUSINESS AND REGULATORY INFLUENCES)
Companies facing or influences to their decision making the sustainability does continue
to be on the executive asst agenda for logistics. One of the largest barrier is understanding,
when that a way to look at sustainability is not as a box that comes down and tells their
operations how to work. But it's used as a way to gauge the operational excellence of their
supply chain and as a way of innovating new ways of reducing waste and reducing costs.
Sustainability is inherently embedded into supply chain goals.
 Reducing operation cost
 Reducing overall inventory levels
 Improving the quality of products or services
 Improving customer service
 Getting products or services to market faster
 Reducing capital costs
 Reducing risk
 Reducing carbon foodprint / creating a “greener” supply chain
Sustainability is inherently embedded into supply chain goals. Reducing operating costs
and improving quality as being one of the top or the top concern for many logistics managers.
Why should we look at sustainability within our supply chain? It is not something that is a
capital intensive investment that needs to be made. It it can be purely out of reducing getting
up with with logistics. Managers do every day which is making sure that they run their supply
chains in the way that's the most efficient as possible, and even reducing carbon footprint and
greening the supply chain has become one of the areas as a goal for supply chain managers.
Who are companies that have been leading the way or really taking this agenda and
integrating it into their operation? This has been with consumer facing brands, and that is
because these brands have very strong sustainability programs. Already they have customers
that are very interested in how what choices that they make with their purchasing power. They
want to buy from companies that are more environmentally socially responsible and they are
global brands that have unique challenges they want to get into new markets. It can be a
competitive edge for them, so many of these companies have started out in a journey. How
integrate sustainability into logistics operation? They decided to make commitments. Public
commitment to reducing CO2 in the supply chain.

INTEGRATED SUSTAINABILITY INTO LOGISTICS OPERATIONS

Linking operational and sustainability performance
Phase 1 Data Collection, operational adata including:
 Volumes
 Transport modes
 Carriers
 Business units/brands
Phase 2 Analysis
 Data cleansing and integration
 Mapping of volumes and flows
 Network and operational modelling
Phase 3 CO2 Calculation
 Customised CO2 reporting
 Indentification of efficiency improvement
 This is a high-level slide from a case study that we have with Marks and Spencer. It is their
sustainability strategy to become the world's most sustainable retailer. It has a 180 different,
ethical, environmental and socially responsible points for which Marks and Spencer measures
of their performance against, including their transport and logistics. Marks and Spencer is able
to look at their information on a half yearly basis and determine what their carbon intensity is
against. How much Freight was moved. It also allows them to see the impact of different
operational initiatives, such as reducing air freight volumes, has had on their overall total.
This information can be used to implement the operational changes. These operational
changes generally fall into that logistics projects are not a sustainability project. The same thing
on the left is a case study for improving container utilization. Where we change around the
house, full the containers are and what kinds of containers were being used. The operational
costs and carbon impacts are all within the same percentages. This is connected to that. Cost
and carbon being a one to one ratio, we're reducing costs. More percent can reduce carbon one
percent, because, if companies are moving more goods in fewer containers, companies are
using less fuel on the right hand side.
This is a case study of a modal shift from origin in Peru to North America. The vendor was
missing there lines and the plan to ship ocean freight from Peru to North America could not
happen because the goods were late from the vendor and the only solution was air freight. In
order to make the delivery time, Damco works with this customer to implement two solutions.
The first was a temporary solution to do that the goods can could go from Peru to Panama and
Panama to North America and still make the delivery times but be able to have a mostly ocean
journey. The second was to work with the vendor and the customer to implement a vendor
management program that allowed for the vendor to actually meet their agreed upon delivery
dates, which then allowed for the original plan of shipping from all ocean from Peru to North
America. The carbon impact was even greater than the cost savings, and that is because of the
very high energy intensity of air freight.
The example from Kroger, which is a company based in United States and also has brands
of Ralphs Fred Meyer on food for less. This is a food waste digester at their Compton DC. That
process is 150 tons of food waste every day and turns it into liquefied natural gas for their local
distribution fleet. Not only dealing with waste that would go to a landfill, but also finding an
alternative fuel source that is cleaner and saves the company money. The Nike Warehouse, our
DC, in Villa Brook Belgium. The wind turbines so that the facility can be powered by wind
energy and also a canal can have large shipments delivered. Instead of truck shipments, which
is more environmentally friendly. A truck developed by Walmart called the advanced vehicle
experience concept truck that has a number of different technologies, including microturbine
hybrid engine and mike carbon fiber construction. So it's much lighter and energy-efficient.
Reflection: how can sustainability improve logistics operations?
 We are doing this because it is what you want us to do. It is also the right thig to do.
We are calling it Plan A because we are believe it is now the only way to do business.
There is no Plan B.
 We are clear on our ultimate destination: to decouple profitable gwoth from constrained
resource.
 How to grow sustainability is the biggest challenge facing companies everywhere.