1. Production & Sourcing
A heavy equipment OEM, who runs a global supply chain, established a program to incorporate sustainability factors when deciding on the original source of products to be sold through aftersales channels. This OEM incorporates the transit distance (and cost) into the purchasing decision and will source the same product from multiple suppliers depending on its destination. This is atypical; most OEMs single source the vast majority of aftersales products.
The UK passed the Producer Responsibility Regulations law to improve recycling rates. It has targets for recycling that increase annually. Businesses in the UK must comply by the end of January 2022. This requires an immediate shift in packaging: OEMs should look for suppliers who can deliver on UK packaging goals (even if they’re not operating in the UK).
3. Inbound Transportation (to the aftersales network)
In a case that has a unique geographic nature, an abroad OEM established an inbound transportation network that coexists with their outbound network. The same trucks that do inbound deliveries to this OEM also do outbound deliveries to dealers. This requires that the suppliers, the warehouse, and the dealers be located close together – many OEMs may see this as an option around manufacturing hubs with many suppliers that also have a tight density of dealers.
More than 25% of OEMs have at least one aftersales warehouse that has some level of LEED certification, as of 2020. We have four OEMs participating in our parts benchmarking studies that all have one or more LEED warehouse(s). One OEM’s LEED Gold certified warehouse saves millions of gallons of water versus a comparably sized warehouse, just as one example of the improvements made.
5. Outbound Packaging
OEMs constantly come up with cost reduction initiatives in outbound packaging. There are two ways to reduce cost: simplify the packaging, or use less packaging material. Packaging engineers look at existing packaging by complexity, and by packaging weight compared to part weight, to identify opportunities. They then work to reduce packaging quantity. One automotive OEM started bulk packaging low-risk parts (that are hard to damage) to save packaging cost and also to increase sustainability.
6. Outbound Transportation
Reducing miles driven is the simplest and biggest contributor to sustainability that an aftersales organization can make. The automotive OEM example from Inbound Transportation is one way to reduce environmental impact. Here are more examples:
- Multiple OEMs bypass nodes of their aftersales network to get products to the customer faster and with lower environmental impact. Rather than routing a part through two warehouses, if there’s sufficient volume, it may make sense to skip a warehouse or send parts straight to dealers. It’s important to note that although miles traveled may be lower, impact may be higher depending on cube utilization, so sufficient volume has to exist on the bypass
- OEMs often switch carriers to balance cost and service. One automotive OEM switched away from air shipping from Asia to North America and began using ocean freight
- This same automotive OEM (in number 2), in a different circumstance, added a consolidation center to consolidate multiple truckloads together. They saved 1.5 truckloads per day and expect the savings to continue for at least two years – this saves cost and a substantial amount of carbon emissions
- Another automotive OEM established an interline route that relied on tightly-scheduled truck relays rather than slower and less efficient modes. This OEM saved considerable money, cut damages, and drives fewer miles doing this.
7. Customer Use
We lack compelling stories of cases where aftersales organizations created or sourced a product that encouraged customers to use it in a more sustainable manner. These impacts are usually best designed into the product by the engineering team.
8. End of Life
Most OEM aftersales groups have recycled the supplier packaging that arrives at their location for decades. One automotive OEM established a Scrap Team that looks for such opportunities. They perform dumpster dives to measure the amount of material that gets thrown away. They also have waste treasure hunts where staff from other sites come to each location to look for opportunities for further savings.
As if the customer preference towards sustainability wasn’t enough, many companies and specifically OEMs have publicized aggressive sustainability pledges that the organization has to meet. One of the challenges that companies face is that these sustainability pledges are high level, as they should be. But there’s not yet a clear path to move from high level goals to tactical solutions that can make a measurable impact.
This series provides a link between high level goals like “Achieve Carbon Neutrality” to tactical actions like assessing different supply chain options on a sustainability basis. If the high level goals are the destination, think of this series as the road map. It provides multiple ways a company could reach the destination. But it doesn’t prescribe one single route.
What we’ve shown is that there are multiple ways to improve sustainability outcomes. Companies can focus on using less raw product, or using more environmentally friendly raw product. Companies could use less energy or different sources of energy. The same is true for water, reclaimed products, and human costs.
And even within those five categories, it’s up to each company to decide where to focus, based on its unique circumstances and priorities. For one company, maybe the easiest target is outbound packaging – using less raw material and energy to produce. For another company that might be currently redoing it’s distribution network, the best target might be outbound transportation which can be restructured around a goal of sustainability.
The examples of real-world improvements we provided in this final installment of our sustainability series are also points along the map. Not every route goes through each point. They’re not required, they’re not necessary, but they may be helpful as examples or thought starters.
What we do know is that the destination matters. Company sustainability goals, no matter exactly how they’re written, are a major step forward. They’re important for customer acquisition and retention, they’re important to motivate employees, but most importantly, they’re required for all of us to be good global citizens.
This four-part series serves as a helpful roadmap for OEMs to follow when determining how to achieve sustainability goals that are targeted at the supply chain. In understanding a brand’s overall impact on the environment and attempts to achieve sustainability goals, it is also important to evaluate the brand’s service operations and what can be done. Chad Walker, a Managing Director at Carlisle, discusses what brands can do from a service and dealership perspective. For more information, check out our post “Sustainability in the Context of Aftersales Service.”