Energy price volatility is one of the top three supply chain risks identified by the World Economic Forum in its newly released report, “New Models for Addressing Supply Chain and Transport Risk.” In fact reliance on oil was identified as the greatest supply chain vulnerability. That’s why energy efficiency is becoming one of the key criteria for many logistics managers when selecting transportation and distribution technology.
However, as these technologies evolve, energy efficiency is becoming a side benefit to other qualities that are giving companies competitive advantages in their markets.
Propane on the Road
Wright & Filippis offers a great example. This full-service home medical equipment supplier, headquartered in Rochester Hills, MI, has developed sustainability programs over the last two years, including cardboard, paper and plastic recycling and sensored lighting systems. Most recently it started converting its over-the-road fleet of delivery trucks to propane gas.
This company has been using propane to fuel its lift trucks for many years; however, it first came to the company’s attention as an option for fueling its delivery trucks via a cab ride CEO A.J. Filippis took while attending a trade show in Las Vegas. He learned from the driver that the cab was powered by propane.
The company worked with Roush Cleantech to convert its new vehicles to propane autogas. Because it also has propane lift trucks in its fleet, Wright & Filippis learned quickly that the benefits of this fuel extend beyond environmental sustainability.
“We learned that it burns cleaner which helps your engines last longer and incur less maintenance cost,” says Tom Hopkins, distribution and fleet manager for Wright & Filippis. “We also wanted to extend the longevity of our vehicles. With propane there’s less carbon buildup in the fuel and it burns at a higher BTU. We used to do an oil change once every three months, and now we go once every five to six months. That has driven cost out of the maintenance of our fleet as well.”
Hopkins estimates his company saved $27,000 on the nine service vehicles it converted the first year of deployment. The company installed an onsite refueling system to service these vehicles. By letting the drivers refuel at a central on-site location rather than going to a service station, they save road time. He adds that the price of propane has remained fairly stable compared to diesel.
“When fuel costs around the country spiked to $4 a gallon, propane did not spike as much,” he says. “Here in Michigan traditional gas has risen 25 cents in the course of a day and from the time we first started with propane the low price and high price has been within 10 cents. You can count on your fuel costs that way and plan your fuel budget.”
Lift Truck Efficiencies
On the lift truck side of the discussion, efficiency is as much a matter of how the vehicle is designed and maintained as how it’s powered, according to Susan Comfort, of the Raymond Corporation.
“We’re now giving lift trucks more power and acceleration and faster speed while using less energy,” she says. “It’s a matter of selecting the right components, the right tuning of software, the right controllers and testing so it operates faster while using less energy. According to objective testing done on our equipment by U.S. Auto Club and PosiCharge, our newest reach truck used 21% less energy to perform the same amount of work as other trucks. That’s a pretty big number considering forklift charging represents roughly 10% of the electricity costs to run a warehouse.”
She estimates that adopting three such lift trucks for one shift can be the equivalent of taking one automobile off the road for a year in terms of CO2 emissions.
David Spears, manager of business development for Yale and Hyster lift trucks, adds that just by managing lift trucks better fleet owners will use fewer resources. That means using the right number of lift trucks, servicing them at the right intervals and making sure they’re replaced before becoming too inefficient.
What about the promise of fuel cells? Spears recommends looking at them more for productivity than for efficiency—for now. That will change, however.
“The costs are coming down incrementally,” he says. “The fuel cell companies are doing a good job of slowly bringing their costs down to meet the market.”
In the meantime, fuel-cell-power providers like Plug Power are proving the productivity benefits with customers like Procter & Gamble, which is in the process of applying 200 of the company’s GenDrive fuel cell products to power lift trucks at three P&G manufacturing facilities in California, Louisiana and North Carolina. P&G built the case for these on savings from process efficiencies.
“A full cost analysis was done to justify this using P&G’s desired internal rate of return,” says Jeff LeRoy, P&G’s corporate external relations manager. “Changing to fuel cells was compared to the current system of purchasing batteries every few years and maintaining the battery charging equipment. Faster fuel cell filling and longer times between fillings also contributed to productivity savings. We hope for the cost of fuel cells to decrease over time so this can be cost effective in other states that have lower electricity rates.”
Andy Marsh, president and CEO of Plug Power, says right now it’s the size of the fleet that determines efficiency.
“Food distribution centers, especially our original customers, are fairly large sites where they use the products hard, so the productivity savings can be seen more rapidly on the bottom line,” he says. “As pricing decreases for our product and for the energy, the number of trucks you can address at a single site will become smaller. Today if you have more than 35 trucks and run multiple shifts and your electricity cost is over 7-8 cents per kWh, there’s a high possibility we could offer you value.”
One food distributor Marsh visited recently has an annual peak electricity demand cost of $200,000. He says such end users may be able to reduce their load on the grid by 30-40% by replacing battery-power in their lift truck fleets with fuel cells, depending on the kind of business they have. By comparison, heavy freezers or manufacturing equipment at such a site typically represent 15% of the load.
Refrigerated Spaces
Environmental sustainability is about more than energy efficiency. Logistics professionals have to be equally conscious about pollutants in their supply chain, and in the food and grocery industry where refrigeration is essential at every link in the chain, they also have to be conscious of regulations.
Until recently, the options for refrigerating cold storage warehouses and distribution centers have been mostly limited to ammonia-based and synthetic refrigerant systems. That option is no longer viable, especially for companies trying to achieve LEED (Leadership in Energy and Environmental Design) certification.
Longo’s Supermarkets is one of those companies. When it set out to build a LEED Gold certified head office and distribution center, it knew it would have to change its refrigeration systems to a more environmentally friendly, cost-effective method.
It was already using glycol systems (Hill PHOENIX’s Second Nature) on the retail side of the business, so Paul Collette, Longo’s project manager for real estate and construction, already knew what direction he wanted to take.
“We started using glycol three or four years ago in the stores and have become more and more comfortable with glycol as a refrigeration medium,” he says. “We also like the green aspects such as a lower amount of refrigerant use.”
But just as the justification for investing in propane and hydrogen involves more than just environmental sustainability, Longo’s knew that its new warehouse installation would yield additional advantages such as increased useable warehouse space (by eliminating a compressor room); decreased installation, capital and maintenance costs; and improved system redundancies.
Another incentive for change was the fact that code requirements on ammonia systems often call for full-time, on-site engineers for safety and other operational reasons. And synthetic refrigeration systems require large amounts of refrigerants—which are increasingly regulated and can be costly to install.
Furthering the energy efficient benefits of Longo’s new system, the company is recycling waste heat from the refrigeration system racks. Waste heat is used to heat glycol, which is then circulated through pipes underneath the freezer to keep the ground from freezing and heaving. The same waste heat process is used to pre-heat air for the office space.
Tim Henderson, industrial commercial program manager for Hill PHOENIX, says that for many companies, even ones that don’t use their waste heat, the prospect of new regulatory requirements where refrigerants are concerned is leading clients to discover benefits that go beyond environmental. In fact savings in other areas are causing companies to look beyond energy efficiency.
“As time goes on and the fear of refrigerant taxes in states like California grows, more companies will be looking to reduce their exposure to using synthetic refrigerants,” he says. “Some are even willing to take a slight energy penalty on equipment if they can reduce the synthetic refrigerant use because they see that as a bigger detriment to them being sustainable than the possible use of a little extra energy.”
At the CEO level in industries, U.S. reliance on oil is being factored into long-range business plans. But at the operational level, where trucks must move perishable products quickly and safely to meet today’s customer demands, material handling and logistics managers are finding ways to be both energy efficient and productive. Those efforts will help ensure their CEOs survive to see their long-range plans bear fruit.
