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Logistics
November 20, 2017
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Collaboration bears fruit

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By working with a competitor to boost transportation efficiency, Ocean Spray cut freight costs by 40 percent and greenhouse gases by 20 percent in one major lane.

You could call it a classic case of serendipity. Agricultural cooperative Ocean Spray had just hit a major milestone in its supply chain sustainability program when it received an unexpected proposal that promised to take its carbon reduction efforts to the next level.

As part of a network redesign, the Lakeville, Massachusetts (USA)-based producer of fruit juice and food—most notably its iconic cranberry juice—had recently opened a new distribution center (DC) in Lakeland, Florida, to serve customers in the southeastern United States. By centralizing supply closer to its customers, the company had already slashed millions of miles from its distribution network, cutting both freight costs and carbon emissions.

But soon after the Lakeland facility opened in 2011, Ocean Spray was approached by Wheels Clipper, a third-party logistics service provider (3PL) that specializes in intermodal, truckload, and refrigerated shipping. The 3PL had an intriguing business proposition for the cooperative. One of its clients, Tropicana, which is also one of Ocean Spray's competitors in the fruit juice business, was already shipping fresh fruit by boxcar on CSX Transportation trains from Florida to New Jersey—and sending empty boxcars back to Florida. Since much of Ocean Spray's Lakeland-bound freight originated in Bordentown, New Jersey, Wheels Clipper suggested that Ocean Spray could take advantage of that backhaul capacity. That would mean a substantial savings in both transportation costs and carbon emissions.

Both are significant goals for Ocean Spray. "For us, sustainability is an enterprisewide focus," says Kristine Young, who leads the cooperative's sustainability efforts. She works with growers and suppliers on a variety of sustainability efforts that encompass energy and water use, packaging, and transportation, among others.

Young believes that Ocean Spray's commitment to sustainability may be what attracted the attention of the third party. Ocean Spray has been a partner in the U.S. Environmental Protection Agency's (EPA) SmartWay program for several years, as are 95 percent of the company's carriers. Participants in the program commit to benchmarking their shipping operations and taking steps to reduce fuel use and emissions. "Our SmartWay participation was a clear indication we are interested in sustainability," she says.

Cost and emissions reductions
Ocean Spray decided Wheels Clipper's proposal was worth pursuing. After looking into the matter further, it determined it could indeed take advantage of the backhaul opportunity—though it would require a few minor adjustments in its shipping patterns.

"One thing we had to look at was our load planning," Young recalls. Each truckload shipment held 19 pallets of goods, but boxcars handle 38. "We had to take that into consideration in our order fulfillment planning," she says. "We had to do a little bit of work on the pallet size and the configuration of the pallets."

Delivery schedules also required some adjustment. Shipping goods by truck takes three days, while the journey by rail takes four to five days. That meant asking the Florida distribution center to carry more inventory than it might otherwise have done.

The payoff, however, promised to be enormous. The arrangement that eventually was put in place resulted in Ocean Spray's shifting 80 percent of the New Jersey-to-Florida shipments to rail over a 12-month period, yielding reductions in both shipping costs and emissions.

The emissions cuts attracted the attention of the nonprofit Environmental Defense Fund (EDF), which was putting together a series of case studies on companies that have cut freight costs and carbon emissions through improved logistics practices. EDF, in turn, approached the Massachusetts Institute of Technology's (MIT) Center for Transportation and Logistics (CTL) and asked it to conduct a study of the Ocean Spray program under EDF's sponsorship. In January, the CTL released its study on Ocean Spray and the results it achieved.

Among other findings, the report, Case Studies in Carbon-Efficient Logistics: Ocean Spray—Leveraging Distribution Network Redesign, showed that by shifting the traffic from truck to rail, Ocean Spray slashed transportation costs in the lane by 40 percent.

The emissions reductions in the lane were also impressive. According to the MIT analysis, the shift resulted in a savings of 1,300 metric tons of carbon dioxide—or CO2—a 68-percent reduction in the lane, meaning an overall emissions reduction in Ocean Spray's distribution network of 20 percent. The MIT study says that was the equivalent of cutting fuel use by 100,000 gallons.

Success factors
In addition to quantifying the savings, the CTL report looked at the factors that made the program successful. In Ocean Spray's case, the company had a number of things working in its favor, says Dr. Edgar A. Blanco, research director for the CTL and leader of the study.

First, Ocean Spray owned the facilities at each end of the lane. That was crucial, Blanco explains, because it meant the company could increase inventory at the Florida distribution center and not ask customers to adjust their own order patterns. "Without opening the Florida DC, they would not have had the flexibility to move that many goods by rail to Florida," he says.

Second, Ocean Spray had the right kind of freight profile. Rail shipping works well for products that move in fairly regular volumes. Although Ocean Spray had all kinds of shipments, Blanco says, much of its freight consisted of what he characterizes as "constant and continuous" shipments. "The warehouse still had to plan for some products that don't [fit this profile], and those still move by truck," he notes. "While that increased complexity, it was worth it from a cost perspective and an environmental perspective."

Third, the shift to rail proved workable because of the rail terminals' proximity to the Ocean Spray DCs at each end. The dray from the New Jersey distribution center to the CSX rail terminal is about 60 miles, and the dray from the Florida terminal to the Lakeland DC about 65 miles. "That's crucial for a couple of reasons," Blanco says. "One is simply the ability to coordinate shipping. But it is also crucial from a CO2 perspective." Longer drays would quickly have eroded the cost and emissions savings, he explains.

The success of the project has led Ocean Spray to begin evaluating other lanes for possible conversion to rail. "It took us a little while to work through [the program]," Young says, "but it has been a huge success. Internally, we talk about how we can [identify] other high-volume lanes where we might be able to find rail opportunities.

"This whole project shows there are real savings in both cost and carbon," she adds. "It just makes good business sense for us to collaborate."

Editor's note: The report Case Studies in Carbon-Efficient Logistics: Ocean Spray—Leveraging Distribution Network Redesign can be downloaded here.

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