The Better Goal: More Fuel Efficient Trucks or Using Fewer Trucks?

Last Friday, the U.S. Environmental Protection Agency (EPA) and the Department of Transportation’s National Highway Traffic Safety Administration (NHTSA) jointly proposed standards for medium- and heavy-duty vehicles that would improve fuel efficiency and cut carbon emissions. According to the press release:

The proposed standards are expected to lower CO2 emissions by approximately 1 billion metric tons, cut fuel costs by about $170 billion, and reduce oil consumption by up to 1.8 billion barrels over the lifetime of the vehicles sold under the program.

The proposed vehicle and engine performance standards would cover model years 2021-2027, and apply to semi-trucks, large pickup trucks and vans, and all types and sizes of buses and work trucks. They would achieve up to 24 percent lower CO2 emissions and fuel consumption than an equivalent tractor in 2018, based on the fully phased-in standards for the tractor alone in a tractor-trailer vehicle.

In supporting documents, the EPA goes on to say:

The buyer of a new long-haul truck in 2027 would recoup the extra cost of the technology [approximately $12,000] in under 2 years through fuel savings…The agencies estimate the proposed standards would result in approximately $230 billion in net benefits over the lifetime of the vehicles sold in the regulatory timeframe, while costing the affected industry less than one-tenth that amount (about $25 billion over the same period).

Although the announcement did not specify a miles per gallon target, the Environmental Defense Fund estimates that the proposal will result in about 9.5 mpg for tractor trailers (compared to 6 mpg for 2010 tractor trailers).

The American Trucking Associations (ATA) is generally supportive of the proposal, while the Director of Government Affairs at the Owner-Operator Independent Drivers Association (OOIDA) stated that “[it] still needs to examine the proposal to see if the input from small-business truckers was truly taken to heart. However, based on reviews of initial summaries, we do have concerns that the rule will push truckers to purchase technology that is not fully tested and may lead to costs such as maintenance and downtime that will eclipse the potential savings estimated in the proposal.”

Regardless of your point of view on truck fuel efficiency standards, the reality is that it only addresses part of the opportunity available to shippers, carriers, and third-party logistics providers (3PLs) to reduce transportation costs and carbon emissions. The other big opportunity, which despite all the talk over the years remains on the table, is reducing the number of trucks required to ship products by eliminating empty miles and backhauls, developing smarter packaging, optimizing trailer loading, collaborative shipping, and other approaches. In short, it doesn’t matter if a truck gets 1 mpg or 30 mpg, it’s impact on costs and carbon emissions would be the same — zero — if it never hits the road.

Coincidentally, the Wall Street Journal published an article last week (two days before the EPA announcement) highlighting how IKEA is designing its packaging with shipping in mind, which for one product alone is translating into almost 7,500 trucks being removed from the road annually. Here’s an excerpt from the article (emphasis mine):

In 2012, IKEA lowered the price of its Textur lamp by 34% after slimming down the number of components to nine from 33. That cut packaging weight by 28% and allowed IKEA to fit 128 lamps on a pallet that previously took just 80.

In 2010, IKEA changed its Ektorp sofa from one solid piece into several, with detachable armrests and a hinged back. The move translated into a package size that is 50% smaller, removing 7,477 trucks from the roads annually, and a price tag that is 14% lower. IKEA also changed the base of its Jules swivel office chair: Rather than looking like a starfish out of the box, it now comes in several separate pieces. The redesign has saved the company €1.2 million a year.

I’ve highlighted other case studies over the years. Back in 2012, for example, Walmart highlighted in its 2012 Global Responsibility Report how it improved the efficiency of its private fleet by almost 69 percent in 2011 compared to its 2005 baseline. Here are a couple of excerpts from the report :

Throughout our network, we delivered 65 million more cases, while driving 28 million fewer miles, by increasing our pallets per trailer and better managing our routes. The heavier loads have minimal impact on our fuel-efficient equipment, which includes an average tractor age of three years and the addition of more than 13,000 skirted trailers. Our network efficiency improvement equates to avoiding nearly 41,000 metric tons of CO2 emissions, the equivalent of taking about 7,900 cars off the road.

Over the past five years, our transportation department in Mexico has demonstrated continued improvement in the area of efficiency. In 2011 alone, our focus on backhauls, the practice of picking up a load from a vendor and delivering to our distribution centers (DC), rather than running an empty truck between our store and DC, saved more than 56,000 trips. Combined with other initiatives across our transportation department, we saved more than 86,600 trips and nearly 3.2 million miles, while avoiding 4,878 tons of CO2 emissions.

I also moderated a panel discussion at the 2010 Transplace Shipper Symposium titled, “Reengineered Packaging and Its Impact on Transportation and Trailer Utilization,” where an executive from Del Monte shared how the company, through its packaging changes and other initiatives, had taken 29.4M miles out of its network from 2007-2010 and had increased its CWT per truck from 382 in FY 2007 to 415 in FY 2010, an 8.6 percent improvement. Put differently, in FY 2007, Del Monte left 11.2 percent of the truck un-utilized and by 2010 only 3.5 percent of the legal maximum was un-utilized.

Also in 2010, IPC–Subway, C.H. Robinson and TMC earned second place in CSCMP’s Supply Chain Innovation Award. The three entities “worked together with IPC vendors to create greener, leaner supply chain that has revolutionized the way that IPC–Subway does business. Benefits of the redesigned supply chain strategy include reduced carbon emissions and supply chain costs that have ultimately delivered fresher products to Subway customer.”

The bottom line: Although improving the fuel efficiency of trucks and reducing the number of trucks required to ship products are not mutually exclusive goals, the reality is that shippers, carriers, and 3PLs could achieve significant cost savings and sustainability benefits today even if fuel efficiency standards remained the same.

Why are empty miles (28 percent by some estimates) still so high? Why aren’t more shippers engaged in collaborative shipping? Are your trailers loaded in the most optimal way possible? Can small changes in package design significantly increase your load factor?

If you’re not asking those questions and working on solutions today, you’ll continue to leave significant money and sustainability benefits on the table, regardless of what happens with truck fuel efficiency.

For related commentary, see Transportation Collaboration: Optimizing Freight Costs by Sharing Capacity and 5 Principles for Greener Freight