distribution logistics trends

8/3/2019 Distribution Logistics Trends

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Slide 1

Distribution and Logistics Trends

CSCMP Annual Global ConferenceSeptember 21, 2009

Sid Brown, CEO NFI

Jordan Brown Solare DevelopmentMitch Trellis Solare Development

Jay Todisco Ware Malcomb


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Slide 2

Seeing Green


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Slide 3

Thinking Green

IDEC announced completion of its Greening project at its

US headquarters in Sunnyvale, CA - January 2009


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Slide 4

Greening yourNew Warehouse

Elements in new

commercial buildings:

Solar panels

geothermal heating/cooling

wind turbines

high-reflectance roof membranes


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Slide 5

Greening an existingwarehouse:

Electric forklifts

Plastic pallets

Motion sensor lighting & water

Day lighting

Paperless

CVS Caremark uses electric forklifts in its DCs

Motor-driven roller conveyors power down when not in use

Greening yourExisting Warehouse


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Slide 6

LEED certification

1.) Site planning (minimize transportation)

2.) Energy efficiency

3.) Water management

4.) Material use (recycled/post-consumer

5.) Indoor environmental quality.

Buildings can incorporate LEED criteria during construction, or beretrofitted


7/47Slide 7

NFI operates the largest LEED certified DC in Southern CA on

behalf of Hanesbrands Inc.

Reduced energy usage by 18% via natural skylighting and daylighting

motion sensor lighting

roof insulation

energy efficient design

In addition - water consumption in the building is 40% lower than abuilding of similar size due to landscaping design and low-waterbathroom fixtures.


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Installed new energy-efficient lighting in 5 DCs in Columbus (combined total of3.5 million sf)

anticipate an annual savings of $775,000 $650,000 reduction in lighting costs

$125,000 reduced maintenance costs due to new lamps longer life

a 50% reduction in lighting energy consumption

The installation included new T5 and T8 lamps and T8 ballasts that offersignificantly longer life than the older models and motion sensors in low-trafficareas


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Then and WOWChanges in Products and Packaging


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Package Reduction Leaders

In 2005, Wal-Mart and their suppliersreduced packaging on almost 300 toys.

Wal-Mart saved:

3,425 tons of corrugated materials

1,358 barrels of oil

5,190 trees

727 shipping containers

$3.5 million in transportation costs in1 year

HP won Wal-Marts 2008 home

entertainment design challenge byreducing packaging on HP Pavilionnotebooks by 97%.

The notebooks are now shipped three toa carton and each is packaged with

documentation materials andcord/accessories in a 100% recycledmaterial messenger bag


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Reductions in packaging helps companies greentheir supply chain by using fewer raw materials andreducing fuel usage.

By working together, manufacturers, suppliers, retailers

and transportation providers can maximize supply

chain efficiencies.

Green Supply Chain


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Supply Chain Sustainability Partners

By selling only concentrated detergent,Wal-Mart estimates the followingenvironmental impacts will be achieved in3 years:

Save over 95 million lbs of

plastic resin

Preserve more than 400 milliongallons of water

Conserve over 520,000 gallons

of diesel fuel

Reduce more than 125 millionpounds of cardboard

Subways supply chain redesign saved:

9 million truck miles

1.6 million gallons of diesel fuel

Saved more than 17,000 shipments/yr

Accomplished by:Its salad manufacturer moved afacility closer to its dryredistribution center.

Sysco eliminated shrink-wrapping on pallets

A protein supplier relocated arefrigerated warehouse to aprocessing center, eliminatingintermediate transport mileage.


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SmartWay Program is an Innovativecollaboration between the EPA and the freightindustry designed to increase the energyefficiency of the freight delivery system in order toreduce greenhouse gases and air pollution.

It was started by the EPA in Feb. 2004 and

today has over 1,900 members that travel morethan 51 billion miles a year.

SmartWay estimates it saves between 3.3 and6.6 gallons of diesel fuel annually (equivalent oftaking 12 million cars off the road)

Smartway Transport Partners include:

General Mills Georgia Pacific Goodyear IBM Target

Kimberly Clark Kohls Kraft Lowes Ocean Spray Wal-Mart P&G

PepsiCo Staples SC Johnson & Co. Walgreen NFI Many others


14/47Slide 14

Inventory Management

Flex Manufacturing

Allows manufacturers to produce multiple products

Serve demand from nearest, rather than specialized factory

Multi-client warehouse space

Balancing empty space with customer satisfaction

Offers ability to fill space with multiple clients

Non-corresponding peak seasons offset volume swings

Regional Distribution Centers (RDC)

More, smaller warehouses located closer to client

May affect inbound transportation (TLLTL) as well as outbound


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Regional Distribution Model

BEFOREA DC in North Carolina ships certain

products throughout the country

AFTERCertain products go directly from

supplier to DCs and then distributedto local markets for faster delivery


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Slide 16

Regional Distribution - Implications

Implications for inventory mgmt.

and transportation

Growth in 301 to 1,000 mile pkg.

Volume reflects regional distributionwith shippers locating closer to

customers

As carriers go farther in one and

two day, shippers can reduce

number and location of RDCs to

lower distribution cost without

change in service levels


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Slide 17

Modal Shifts

Shift from air to ocean & rail is evident in volume declines

In North America, YTD July 09 airfreight volumes

were down 21% while intermodal volumes were

up 17% thru August.

TL shift to intermodal facilitated by rail service improvements

Per EPA, for every ton-mile, a truck emits 3 times more nitrogen oxides and particulates

(vs. locomotive)

Union Pacific moves one ton 830 miles on one gallon of diesel fuel.

UPS partnered with the USPS for postal carriers to pick up returns from residences, saving fuel and

reducing cost


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Slide 18

Truck Modifications

Super-single tires replace traditional two-tire

arrangements in tractor trailers - for less rolling

resistance

Nitrogen tire inflation maintains proper tire

pressure

Global beverage distributor worked w/ NFI & uses

aerodynamic truck modifications & lightweight

trailers

Side skirts and cab extenders improve truck

aerodynamics, reduce drag & improve fuelefficiency


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Slide 19

Rapidly Changing TransportationEnvironment

Auxiliary Power Units 1st gen to 2nd gen

(diesel to battery)

No Idling laws limiting idling times

Voluntary reduction in speed of trucks from 65to 61/62.

On-site fueling located at DCs and

manufacturing centers.

Loads and trucks are lighting up less shipments need to go down

highway less fuel consumed

Larger trailer pools

drivers pick-up preloaded trailers less units traveling more efficiency

Time to reduce horsepower on trucks too many trucks on Americas highways

today have more HP than actuallyneeded


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Slide 20

Intermodal length of haul declining (TL to intermodal shift)

Improved East Coast intermodal facilities will reduce transit times, allow double stacking withfurther shift from TL to intermodal

Containers routed through the Panama Canal and Suez Canal will improve prospects for EastCoast intermodal & reduce West Coast port of entry.

Distribution Shifts


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Slide 21

A different kind of green bottom line impact

Per OOIDA, idling at dock and empty miles cost $5.7 billion annually

Government incentives

States offer rebates/deductions

The Recovery Act

Per recent EPA finding, Green House Gases contribute to air

pollution opening door for more govt regulation

Potential implications:

Higher fuel efficiency standards for autos

Require OEMs to produce hybrid/electric

Mandate use of clean energy (e.g. wind)

2010 Emission Standards for Diesel Engines ($6 $8,000)


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Slide 22

Distribution and Logistics Trends

CSCMP Annual Global ConferenceSeptember 21, 2009

Sid Brown, CEO

NFI


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Oct-09 23

Benefits to Green

An opportunity to take back control of daily operating costs

Lower energy bills

Lower maintenance costs

Lower carrying costs (green mortgages, property tax subsidies, insurancesavings)

Increases sustainability credibility

Government support and benefits; Now is the time

Do the right thing


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Oct-09 24

Building Envelope

75% of green building

Often the easiest fixes

Seal the doors and windows

Add insulation

Change employee behavior


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Oct-09 25

Energy Efficiency

Smart meters

Keeping the doors and windows sealed

Timers on lights

Change employee behavior


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Oct-09 26

Renewable Energy

Industry/Market Overview 7 Major Types of Renewable Energy Success Growth

Federal Incentives

30% ITC Accelerated Depreciation

State Incentives Varies State to State

Risks

Political Financial Operational Technological


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Oct-09 27

Renewable Energy

Wind

Tremendous MW generation, especially at large sizes; tremendously expensive Shrunken down, does it work on the roof?

Solar

Tough to do but ultimately an excellent long term investment Currently state dependent but very fluid situation Will incentives change?

Onsite Micro-Generation

Burning natural gas in an onsite generation plant and using the created heat to warmfacility is a good solution today

More realistic solution for urban settings


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Oct-09 28

The Future

Going forward, you MUST take into consideration sustainability

New construction should be green

Current portfolio should be systematically

overhauled to maximize its efficiency

To do otherwise would be foolhardy and short sighted

The rest of the world is catching up to us, we must use our

resources more efficiently


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Oct-09 29

Resources

Singapore Water Usage http://www.time.com/time/magazine/article/0,9171,1921608,00.html

Green Buildings have higher property value http://www.reuters.com/article/pressRelease/idUS70584+14-Sep-

2009+BW20090914

Commercial Buildings going green http://www.boston.com/realestate/news/blogs/renow/2009/09/since_the_discu.html
http://www.time.com/time/magazine/article/0,9171,1921608,00.htmlhttp://www.reuters.com/article/pressRelease/idUS70584+14-Sep-2009+BW20090914http://www.reuters.com/article/pressRelease/idUS70584+14-Sep-2009+BW20090914http://www.boston.com/realestate/news/blogs/renow/2009/09/since_the_discu.htmlhttp://www.boston.com/realestate/news/blogs/renow/2009/09/since_the_discu.htmlhttp://www.reuters.com/article/pressRelease/idUS70584+14-Sep-2009+BW20090914http://www.reuters.com/article/pressRelease/idUS70584+14-Sep-2009+BW20090914http://www.reuters.com/article/pressRelease/idUS70584+14-Sep-2009+BW20090914http://www.reuters.com/article/pressRelease/idUS70584+14-Sep-2009+BW20090914http://www.reuters.com/article/pressRelease/idUS70584+14-Sep-2009+BW20090914http://www.time.com/time/magazine/article/0,9171,1921608,00.html


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LEED & SustainableDesign


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Discussion Points

Sustainable vs. LEED

LEED Overview

Certification Green Development


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Sustainability drives LEED building

cannot be LEED rated without also being

sustainable.

Sustainable = Green

Buildings can be sustainable without being

LEED rated

Market Forces Value of LEED

Certification vs. Marketing

More later

Sustainable vs. LEED


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Who is the USGBC?

USGBC Creators of LEED

Non-profit Organization

70 Regional Chapters

Developers, Architects, GCs, Manufacturers

LEED Overview

Currently20,000+ members

of USGBC


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The LEED Green Building Rating System

Encourages and accelerates global adoption of sustainable

green building and development practices through

universally accepted tools and performance criteria.

LEED has become an accepted national

and international benchmark system forsustainable design and promotes a

whole building approach.

LEED = Leadership in Energy and

Environmental Design

Rating systems to determine feasibility of various

sustainable techniques as they relate to individual

project types.

LEED Overview


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Certification

Levels:

Platinum

Gold

Silver

Certified

Certification Categories:

NC New Construction and Major Renovation

EB Existing Buildings

CS CORE AND SHELL (most applicableto industrial)

CI Commercial Interiors (TI can be

certified by itself)

Multiple buildings or campus

Schools

Retail, Healthcare (pilot programs)

LEED Overview


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What does it

look like?

Sample

LEED-NC

checklist

LEED Overview


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* ALL prerequisites must be

obtained in order to obtain any

certification

Prerequisites for LEED CS

Code* Category

SS-1 Construction Activity Pollution Prevention (BMP practices in

place)

EA-1 Fundamental Commissioning (Must prove building operates as

designed)

EA-2 Minimum Energy Performance (Meet ASHRAE minimum efficiency)

EA-3 Fundamental Refrigerant Management (No CFCs to be used)

MR-1 Storage and Collection of Recyclables (Designated area on-

site)

IQ-1 Minimum IAQ Performance (Meet ASHRAE minimum ventilation)

IQ-2 Environmental Tobacco Smoke Control (Smoke areas designated

Corporate Express


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Code Category

SS-4.3 Alternative Transportation (Preferred parking for efficient

vehicles) 3 points

SS-4.4 Alternative Transportation (Parking provide per agency min.)

2 points

SS-6.1 Storm water Design (Detain storm water to reduce run-off)

1 point

SS-6.2 Storm water Design (Filter storm water via bio-swale or

fossil filters) 1 point

SS-7.2 Heat Island Effect, Roof (White roof covering)

1 point

Code Category

WE-1 Water Use Reduction (Water efficient landscaping)

2 points

WE-3 Water Use Reduction (Water efficient toilet fixtures)

2 points

Code Category

EA-1 Optimize Energy Performance (Exceed code min. for energy

Common Credits for Industrial

Buildings


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Code Category

MR-2 Construction Waste Management (Divert 50% to recycle center)

1 point

MR-4 Recycled Content (10% of materials used to construct

building) 1 point

MR-5 Regional Materials (10% extracted and manufactured within 500

miles) 1 point

Code Category

EQ-3.1 Construction IAQ Management (Protect materials during

construction) 1 point

EQ-4.1 Low-Emitting Materials (Interior sealants and adhesives)

1 point

EQ-4.2 Low-Emitting Materials (Interior paints and coatings)

1 point

EQ-4.3 Low-Emitting Materials (Flooring systems)

1 point

EQ-4.4 Low-Emitting Materials (Interior composite wood products)

1 point

Code Category


Buildings


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Total Points using only typical credits

23

Minimum Points total for LEED-CS certification 40

Deficit 17

Some typical low-impact strategies include (9

additional credits):Light Pollution Reduction (SS-8), Water Use Reduction

40% (WE-3), Green Power (EA-6), Construction Waste

Management Divert 75% (MR-2), Recycled Content 20%

(MR-4), Regional Materials 20% (MR-5), Certified Wood


Buildings


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Step One Registration

Submit application + $450 fee

Step Two Precertification = Unique process for

Core & Shell projects

Submit Checklists/Credit Templates/Narratives

+ $2,500 fee Preliminary Review Process (for design

intent only)

Step Three Certification (effective through

12.31.09)

Design Review, Construction Review or

combination

Design Review Fee = $.025 / sf up to12 500

What does it cost?

Certification


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Marketing Potential

No need for creative language

Inclusion on official, national database

(USGBC)

Placards are highly visible and can be placed

on building

Verification of Proposed Sustainable Solutions

Building Commissioning Process

Justification of costs for sale/lease

ADVANTAGES?

CertificationPetsmart


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Creating LEED checklists

Exploring pricing alternatives

Implementing basic strategies

Marketing as sustainable or green or LEED

ready

Emphasis on the following issues things tenants

can see/feel/smell:

Indoor Environmental Quality Low VOCs

Energy Efficiency (Energy Star ratings)

White Roofs very popular on warehouses

Green Roofs mostly office buildings (for viewing)

High-Efficiency Lighting quick payback

What is the industry doing?

Certification


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Typical additional Construction Cost is 1%-3% to meet LEED

Certified

Majority of cost is upgraded mechanical systems,

insulation, etc.

Green products have become commonplace and near comparablein price.

Hard Costs (office and Industrial)

Soft Costs

Applicator fees wide ranges ($10-100k; sometimes more)

Commissioning fees $50-100k typical, but competition drives

cost down

Energy Modeling varies widely depending on familiarity ($10-50k

+)

Architectural/Engineering varies depending on complexity and

size

Application fees relatively minimal in comparison

Costs


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Sears - ProLogis

780,862 SF industrial distribution center on 45 acre site

LEED NC Silver Certification | 36 points New

Construction Category

20% recycled content20% of materials manufactured |extracted | processed regionallyindoor air quality management systemlow-emitting paints | sealants | adhesives preferred parking for fuel efficient vehicles & carpools water efficient landscapingcool roof system

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