Facing greater pressure to be more sustainable, companies are looking for ways to make their supply chains more environmentally friendly. While efforts focused on transportation, warehousing, and procurement practices can have a major effect, so too can initiatives addressing packaging, reverse logistics, and technology.
Society is demanding that companies and the products they sell become more sustainable. Logistics management has a significant role in making that happen. By making changes in how they transport, store, package, and source products, companies can significantly reduce their environmental footprint.
In the first article on this topic, which appeared in our Q1 2023 issue, we defined “sustainability” as the ability to meet the needs of current generations without compromising the ability of future generations to meet their needs. To accomplish this, many experts recommend thinking about sustainability from a “triple bottom line” perspective, where companies consider their impact in three key areas: “people, planet, and profit.”
But although there is growing pressure from consumers, shareholders, and employees to increase sustainability in the supply chain, many companies struggle to know which initiatives to pursue. This two-part series attempts to provide a collection of best practices that could be implemented by multiple organizations and accomplished quickly and/or at a reasonable cost. For our first article, we examined sustainability best practices in: (1) purchasing/procurement; (2) transportation; and (3) warehousing. In this follow-up article, we examine additional areas of logistics management sustainability: (1) packaging; (2) reverse logistics, product returns, and recycling; and (3) technology.
Sustainability has been a driving trend in the packaging space for many years and is only expected to grow in importance. Environmentally friendly products and packaging is especially important to millennials, who will represent the largest consumer segment by 2026, with an estimated 46% of the market.1
Packaging utilizes many materials, including paper, cardboard, and plastics as well as a number of others. Many sustainable packaging initiatives are focused on plastic packaging due to the climate and environmental pollution issues associated with plastic’s creation and disposal. The production of the majority of plastics used today currently requires the consumption of nonrenewable fossil fuels and produces significant carbon dioxide emissions. At the other end of the product life cycle, almost 95% of plastic packaging is lost to the economy after being used one time.2
There have been several research efforts focused on making plastic production more sustainable. Chemists at the University of Toronto and Stanford University, for example, have produced small quantities of plastics from CO2, water, and electricity instead of using fossil fuels.3 However, there is still a long way to go in these and other approaches to creating renewable plastics.
In the meantime, many companies, industries, and governments have attempted to reduce the use of these materials. Both large companies and small entrepreneurs have implemented innovative approaches to minimizing packaging, reducing plastic waste, and identifying substitutes for plastic packaging.
Below are brief descriptions of some innovative ways that organizations have addressed the issue of packaging sustainability within logistics management. Some organizations have shifted from plastic packages to various forms of nonplastic packaging. Others are reducing their packaging, and still others are utilizing reusable packaging.
- Use returnable corrugated packaging. P2 Packaging has developed a returnable corrugated package for the automotive industry as an alternative to the plastic totes and one-time use cardboard containers that were traditionally used. The P2 boxes can be collapsed for return and can be reused more than 10 times. P2 customer Yangfeng Automotive Interiors has calculated the costs to reuse the packages as $0.60 to $1.10 each. P2 estimates that by using its packaging, a company can save 2,134 trees (or 53 acres) and reduce CO2 emissions by 372,000 pounds.4 Because the P2 packages are stronger than normal corrugated boxes, they can safely carry more parts in the same footprint. Yangfeng, for example, was able to use 58 fewer truck shipments to move parts from its facility in Michigan to a Tesla plant in California simply by switching to P2 packaging.
- Explore plant-based packaging. The deodorant brand Each & Every has switched from plastic to new sugarcane packaging, which has reduced the company’s carbon footprint. Not only is the deodorant’s primary packaging recyclable but the product is also mailed to customers in compostable envelopes.5Similarly, the Italian food company Pedon, which makes snacks from legumes, partnered with the paper company Favini to create paper made from the vegetable waste accumulated during the cultivation and processing of its legumes. This paper is then used in the company’s primary packaging. The packaging is 100% recyclable and is certified for direct contact with food. As a result of the switch, Pedon was able to eliminate the inner sleeve within the pack. The packaging reduces the use of virgin tree pulp by 15% and decreases greenhouse gas emissions by 20%.6
- Eliminate unnecessary secondary packaging. e.l.f. Beauty eliminated 650,000 pounds of secondary packaging material in its cosmetic line by getting rid of secondary cartons, vacuum-formed trays, and paper inset cards. It was a win-win for the company and its customers. In total, packaging was reduced for more than 200 stock-keeping units (SKUs).7
- Reduce packaging weight and dimensions. An international manufacturer of consumer products has achieved significant material and cost savings by “light-weighting” cardboard and paper from its carton and item packages. Many of its products are placed on cards that can be attached to hangers on vertical displays. For one product, which contains cutting blades, the item slides into the card-locking package for transport to retail stores. That packaging design change has reduced the product’s shipping footprint, allowing more items to be included in a carton. Once the items reach the retail stores, they are slid out of the card-locking package and hung on the pegs. This innovation has resulted in 30% more efficient pallet loading and reduced transportation and warehousing space requirements. For other products, the company has reduced the amount of cardboard packaging by 16.2%, resulting in a raw material savings of 16,500 pounds. Additional cartons and item packaging have also been redesigned to reduce their dimensions.8
- Conduct a packaging audit. A European grocery chain conducted an audit of its SKUs to determine if packaging costs could be reduced and, at the same time, a sustainability advantage could be gained. Based on its initial research, the company selected a single product supplied by Nestlé. The company developed a research team with representatives from all of the companies that had some impact on the item’s supply chain, including the manufacturer, road transporters, warehousing companies, logistics software providers, packaging providers, and others. The firm invested $35,000 in the project and netted first-year savings of almost $100,000. The $100,000 savings were achieved through various retailer savings, warehousing and transport efficiencies, and packaging reductions in weight.9
REVERSE LOGISTICS, PRODUCT RETURNS, AND RECYCLING
Throughout the world’s economies, getting rid of waste has been an issue for centuries. However, it was not until the 20th century that organizations began to think about new ways of disposing of waste materials, minimizing the creation of waste, and the possible reuse of waste materials.
With the advent of omnichannel retailing, which was accelerated by the COVID-19 pandemic, the number of products being purchased online has increased significantly, and concomitantly, the volume of products being returned has increased dramatically. Given the rising importance of reverse logistics, firms that are able to innovate in this area will reap market advantages. Some innovative practices include the following:
- Repurpose your trash. A classic example of the overlap between reducing waste materials, marketing strategy, and logistics management is the story of how Doritos, a highly successful snack food manufactured by Frito-Lay, was invented. In 1955, a Mexican restaurant called Casa de Fritos that incorporated Fritos into most of its meals opened in Disneyland. When a sales representative from the restaurant’s tortilla vendor, Alex Foods, visited the restaurant, he noticed that stale tortillas were being thrown into the garbage. He suggested to the chef that instead of throwing the tortillas away, Casa de Fritos could fry them and sell them as chips, similar to what the restaurant was already doing with Fritos. The restaurant tried it, and the chips became very popular with customers. A marketing executive with Frito-Lay noted the popularity of the new product and made a deal with Alex Foods to start mass producing it. The chips were branded as “Doritos.” In this way, an item that was once garbage at Disneyland became a billion-dollar product for Frito-Lay.10Another example of remanufacturing waste comes from clothing manufacturer Sea Threads. Sea Threads has become one of the first companies to make clothing from 100% Certified Ocean Plastic. Sea Threads sources raw plastics for textile production directly from the ocean, a source from which very few plastics are recycled. The company collects ocean plastics from the region around Indonesia, where 60% of plastic pollution occurs. The plastics are cleaned, broken down, and extruded into fibers for yarn. They are then woven with textiles and shipped primarily to U.S. companies that then cut the fabric and sew and/or print it into finished garments. One shirt requires one pound of plastics. The effort thus far is limited, but it has significant potential growth as more companies shift toward marine plastics, resulting in economies of scale and the potential for greater growth in various types of clothing. While this company is utilizing marine plastic waste, all types of recycled or used plastic could be utilized. The firm hopes to be a catalyst for companies to move away from the use of virgin plastics to make clothing.11
- Utilize other companies’ waste as raw materials for your products. A chemical company in Europe views resource efficiency as an innovation-driver and source of competitive advantage. It takes waste materials, including chemicals, from other manufacturing sectors and utilizes them as raw materials for the production of many of its standard product offerings. The firm utilizes a full-time committee of scientists, manufacturing personnel, engineers, and other company personnel to identify and investigate raw materials that could be obtained at low cost from other companies’ scrap. By using those waste products, the firm has been able to reduce the cost of manufacturing its chemicals. The company is presently buying more than 50% of its raw materials as scrap from other companies at a much lower cost than acquiring those raw materials in the traditional way. It is interesting to note that this approach has also been employed by a few other chemical companies in Europe and Asia, but it is not yet a widespread practice.12A similar thought process is utilized by the ethical and sustainable clothing enterprise Progetto Quid. Quid uses production surpluses and end-of-series fabrics that are either donated or purchased at a low cost from other fashion and textile companies to create its own line of limited-edition “unique casual-chic clothes.”
- Consider “advanced recycling” for plastics. Advanced recycling goes beyond the traditional process for recycling plastics, which involves grinding up and melting down plastic and then compounding it into new material to replace virgin plastic. While the traditional or mechanical recycling of plastic is effective, it can only be used for specific types of plastic. Advanced recycling, according to an article by the chemical company Dow, “works by breaking down plastic through pyrolysis-based heating (thermal heating in the absence of oxygen) into its original molecules to rebuild them into new products.”13 The molecules can be reused over and over without any deterioration in quality of the plastic. According to Dow, this process can be used for almost all types of plastics.
- Recycle and resell products that aren’t your own. There are economies of scale associated with reverse logistics, product returns, and refurbishing. For this reason, a large general merchandise retailer in Europe takes back not only all the products that it sells but also products in certain categories (such as electronics and kitchen equipment) that it doesn’t sell. The retailer is able to sell these products to various companies that remanufacture and/or refurbish the items.14
- Take a zero-waste approach. According to ReFed, a nonprofit focused on reducing food waste, U.S. restaurants send 11.4 million tons of food waste to landfills each year. Rhodora, a natural wine bar and restaurant in New York City, however, chooses to dispose of food trash a bit differently. Taking a “zero-waste approach,” Rhodora does not send any trash or food waste to landfills. To reach zero-waste, the restaurant has eliminated all vendors that wrap deliveries in single-use plastics. It also shreds its wine boxes into composting material and has a dishwashing setup that converts salt into soap. Instead of plastic wrap, it uses beeswax wrap, which can be reused or composted. Paper menus and anything customers do not eat are composted. All glass products, such as wine bottles, are recycled. Corks are donated to a firm that repurposes the material for shoe soles and yoga blocks. One financial benefit of the restaurant’s zero-waste efforts has been a monthly savings of $300 because trash pickup is not needed.15 Rhodora can serve as a model not only for other restaurants but also for organizations operating their own in-house lunchrooms or cafeterias.
- Reduce the price of products nearing their “best by” date. Forty percent of all food produced in the United States ends up in landfills, where it rots and emits methane.16 Landfills currently account for approximately 14% of total U.S. methane emissions.17 Some companies are implementing innovative strategies to reduce the amount of food that is unsold. The grocery chain Albertsons marks down prices or uses “buy one get one” (BOGO) deals to get customers to buy food items nearing their “best by” date. Albertsons also takes blemished food items and remarkets them under its Fresh Cut program, which repurposes the item, without the blemish, into an item that customers will purchase.18
- Implement a closed-loop return service for your products. Touchpoint Oy is a clothing company that manufactures sustainably produced workwear for a variety of businesses in Finland. The company also wants to be “a leading pioneer globally in building textile recycling value chains.”21 According to Touchpoint, Finland produces approximately 100 million kilograms of textile waste every year, with most of that waste being incinerated rather than recycled. Touchpoint is trying to reduce that waste by providing a closed-loop return service for the textiles it sells. The firm takes back the used clothes and recycles them into new textile fiber in its own recycling plant in Rester, Finland. Touchpoint uses the recycled fibers to make yarn and fabric as well as insulating materials for the shipbuilding and construction industries, acoustic panels, composites, nonwoven and filter materials, and other technical textiles, such as the geotextiles.
Customers and companies utilize many connected devices that can sense, measure, order, and send alerts to all members of the supply chain. Just as these technologies are changing consumer behaviors, technology is changing the end-to-end supply chain. Companies are finding innovative ways to use not just these new digital solutions but also older technology to address sustainability concerns by improving manufacturing processes, forecasting future technological breakthroughs that have sustainability implications, optimizing transportation routing and scheduling, and calculating carbon emissions. A few examples of innovative approaches include the following:
- Install solar panels. In 2019, Nestlé unveiled the world’s first solar-powered ice cream kiosk in Malaysia. Each kiosk utilizes solar power from panels installed on its roof. Enough power is generated to keep the ice cream at -25 degrees Celsius and to keep the kiosk operating for three days. Because the kiosk generates its own power, each unit saves up to 263 kg of carbon dioxide emissions each year. From a marketing perspective, kiosks can be set up in remote areas and at high-traffic locations. There is no need to have a source of electricity, which makes the kiosk ideal for recreational locations such as parks and beaches.22
- Proactively forecast future environmental legislation and regulations. A food company in Europe created a permanent working group that is charged with tracking and forecasting potential country or EU environmental legislation and regulations that could impact the firm’s products and supply chains. The working group utilizes the firm’s existing management information systems (MIS) coupled with various external published databases to capture market information about what various national, regional, and local government entities are considering with respect to environmental and sustainability laws, regulations, and directives. As part of the process, it identifies not just potential laws and regulations but also proactive strategies and tactics that would optimize the company’s response to the potential regulation. By doing this, it ensures the company is not caught off guard. The group can develop calculated and structured responses that benefit the firm whenever those laws and regulations are implemented by the country or the EU.23
- Use Google Maps to find the most sustainable route. To reduce fuel consumption of consumers and businesses, Google implemented a new routing model for Google Maps that identifies the most sustainable routes that use the least amount of fuel.24
- Use software to calculate carbon emissions. C.H. Robinson, one of the world’s largest freight brokerage companies, has developed Emissions IQ, a self-service software that calculates carbon emissions across all forms of transportation. The software analyzes past shipments and calculates an “emission intensity,” or carbon, score. Emissions IQ is available for all truckload and less-than-truckload shipments, as well as rail movements and air and ocean shipments. During the pilot phase, the 125 companies that used Emissions IQ were able to reduce their carbon emissions by 350,000 metric-tons, according to Angie Freeman, chief human resources officer and environmental, social, and corporate governance officer at C.H. Robinson.25
As the examples in this article show, logistics sustainability initiatives are increasing and are not limited by geography or industry. The examples included in this article are illustrative of the many innovations occurring around the globe. Furthermore, these innovations are happening at small entrepreneurial operations as well as global Fortune 500 companies. It is hoped that readers will gain a broader understanding of the breadth and scope of innovations taking place in logistics management and incorporate them into their own innovative practices and strategies.
This article originally appeared in CSMP’s Supply Chain.