Wal-Mart Says It Is 60% of Way Toward Meeting Efficiency Goal

This story appears in the July 12 print edition of Transport Topics.

Wal-Mart Stores Inc. is 60% of the way to its broad goal of doubling its shipping efficiency by 2015 by streamlining every aspect of the freight movement process, according to its leading sustainability official.

“We are proving every day that sustainability makes business sense,” Elizabeth Fretheim, director of strategy and sustainability for Wal-Mart’s fleet operations, told Transport Topics. “The kind of efficiency we are talking about is more than just the truck and trailer. It involves our ability to drive less miles and fill the trucks better.”

Nearly five years ago, former CEO Lee Scott challenged the company to double fleet efficiency. That was interpreted at the time as a bold stroke to double truck fuel efficiency from the 2005 mark of 6.5 mpg to 13 mpg (10-31-05, p. 1).

“By being the leader, we will not only change our fleet, but eventually change trucks everywhere in the world,” Scott said at the time. “We will increase our fleet efficiency by 25% over the next three years.”

Now that fuel economy gains have become more elusive with tougher federal emissions standards, Wal-Mart is taking a broader four-step approach. Truck fuel consumption is one of those approaches, along with packaging, loading and routing.

Fretheim told TT that Wal-Mart reduced its transportation costs by $170 million last year, from sustainability-related steps such as lighter packaging, optimal loading and more effective routing, as well as fuel efficiencies.

Wal-Mart’s comprehensive standard — called fleet efficiency — measures cases of products shipped against gallons of fuel burned.

“Fleet efficiency also includes operational improvements (e.g. loading, routing) that actually take trucks off the road, thereby eliminating the fuel they would have used,” Fretheim said. “Miles per gallon only accounts for equipment and technology improvements, which is still very important.”

While truck technology is just one part of fleet efficiency, Fretheim said, the company has multiple initiatives under way to boost fuel economy.

Those include tractor and trailer aerodynamics improvements, alternative fuels, auxiliary power units that are standard on tractors with sleeper cabs and more fuel efficient tires.

“We are rolling out a program to do nitrogen filling of tires,” she said. “That will help with rolling resistance.”

In the engine, synthetic oils, engine calibration and speed governors are in use.

“There has been a lot of attention focused on getting engines that adhere to emissions requirements,” she said. “There has been so much focus on that versus fuel economy.”

To facilitate further fuel-efficiency advancements, Fretheim said both industry and the government will have to increase investment.

“When it comes to Class 8 hybrids, there is not a lot of equipment out there, and not a lot that is proven,” she said. “We are working with the [manufacturers] to move faster on this.”

Today, two types of hybrid engines are being evaluated in both long-haul and local delivery conditions on a total of five tractors. One is a prototype called a full propulsion hybrid that uses electric power up to 48 miles an hour.

The hybrids’ fuel efficiency improves in stop-and-go conditions, as expected, she said.

The tests are ongoing and Wal-Mart didn’t disclose a timetable for completing them.

Overall, Wal-Mart delivered 1.4% more cases of product, but drove 7.6% fewer miles in 2009 than 2008. In numerical terms, that was an increase of 77 million cases and a drop of 100 million miles traveled. The company’s private fleet of more than 6,700 tractors and 55,000 trailers has held miles per gallon steady as shipments rose.

Wal-Mart’s relentless drive for greater shipping efficiency is in the spotlight for another reason in 2010. It’s pushing to take more control of inbound freight from suppliers who arrange those moves now (7-5, p. 1; click here for previous story).

“It still is possible to reduce inventory and transportation costs,” said Jeff Kauffman, a transportation analyst at Sterne Agee. “One way to attack that is to try to control procurement because maybe I can do a better job determining which mode it goes by and control costs that way.”

Packaging concentrates on working with suppliers on product size and weight to increase payload, while the loading area includes techniques to best fill the trailer.

Fretheim noted that Wal-Mart’s grocery business has shown the greatest improvement, with the ability to load 30 pallets in a trailer when weight limits allow. That’s a 15% increase over the previous 26-pallet standard.

Routing assesses a combination of whether a backhaul is available and what the most efficient route is for the trailer whether it is loaded or empty.

“One of the keys to remember is that we have not found a silver bullet,” she said. “We are working across a broad spectrum of technologies.”