Reducing the Carbon Footprint

"The shortest distance between two points is not a straight line – it’s a middleman."

--Ayn Rand

In 300 BC, Euclid, often referred to as the “Father of Geometry”, proved that the shortest distance between two points is a straight line.  Supply chain models ignored that principle and focused instead on the cheapest solution between two points is a full truck.  This led to the development of the “network model” which created a solution consisting of 4 to 7 manufacturer regional mixing centers to service US retailers.

Manufacturers shipped all of their products, produced in various plant locations, into the mixing centers.  This allowed retailers to order full or partial truckloads comprised of the manufacturer’s full product line.  Once the manufacturer received the order, the products were selected, loaded, and shipped to the retailer’s distribution center.  Fast-moving products were usually shipped in full pallet quantities while slower-moving items were often selected by hand to build pallets of selected cases.

Once the product is received at a retail distribution center, the product is put away into storage locations – full-pallet reserve locations for the fast-movers and roller rack or other pick locations for the slow-movers.  The put away process is expensive, particularly for the slow-movers, as it costs as much for a fork lift drive to put away a full pallet of 100 cases as it does to put away a layer of 10 cases.  As the retail distribution centers receive orders from the stores, the product is selected, typically in single cases per item, pallets, are built, loaded, and shipped to the stores.

The madness is the cost of handling and selecting product multiple times and often the manufacturer trucks drive by the stores that will eventually receive the product on the way to the retailer distribution centers.  Time, energy, and product life are all wasted as everyone works to make sure that the trucks are always full.

The key is to get rid of the middleman.  If you put the manufacturers’ mixing centers in the same facility as the retailer’s distribution center magic happens.  Handling, inventory, and transportation costs are dramatically reduced as the supply chain becomes more streamlined and efficient.  If manufacturers do not have to wait for retail orders, product can be shipped straight off the factory line, improving efficiency at manufacturing plants.  Inbound product to retailers that once had to travel on trucks can now travel at a lower cost via rail.  Retailers once had to protect their fill rates to the shelf by buying safety stock.  They now pull their product from the manufacturers’ pool of inventory for the entire region – this reduces the need for safety stock and lowers inventory throughout the supply chain.

ES3 replaces two warehouses, the manufacturer mixing center and the retail distribution center, with one more efficient facility.  Automation is used to optimize travel paths and reduce wastes. Robots don't require as much lighting as humans, allowing much of the facility to operate in the dark.  ES3's collaborative warehouse is about 35% more efficient, on a kilowatt hour per pallet basis than a conventional facility.  Combine those energy savings with the elimination of a warehouse and a leg of transportation and the energy cost of getting product from the manufacturer to the store is reduced by more than 50%.