VICS Empty Miles Program Offers Real Opportunity to "Go Green" 

How can logistics carriers deal with the inevitable "empty miles" problem that robs them of fuel while polluting the environment? Joe Andraski, Art Smith, and Bob Carpenter, of the Voluntary Interindustry Commerce Solutions and GS1, have a possible solution to the problem.

Joe Andraski, Art Smith, and Bob Carpenter, Special Contributors -- Supply Chain Management Review, 1/27/2010

Every supply chain professional today has two huge challenges, with sometimes conflicting remedies. What if you could address both of these with one solution? 

Challenge 1: Improving profitability. All businesses are struggling with the effects of the sluggish economy-that is., meeting sales and profit objectives. Many companies are seeking the means to optimize efficiency while monitoring extraordinary amounts of tactical data via GPS or satellite tracking systems. Every penny per mile in productivity can add to shippers' bottom lines, and help to put carriers' operating ratios in the black.  

Challenge 2: The pressure to "go green." With cost optimization an important part of the equation, industries have begun to realize the significance of working toward the reduction of their environmental footprint. This issue has become a focal topic on the national and global levels. During the recent climate conference in Copenhagen, the Obama administration joined global leaders to initiate a major step in the federal stance on CO₂ emissions reductions. In December 2009, the U.S. Environmental Protection Agency (EPA) announced a CO₂ "endangerment finding" where carbon dioxide posed a danger to the environment and health of Americans. Sen. John Kerry (D-Mass.) stated, "The message to Congress is clear: Get moving." And the EPA is now drawing up new regulations to reduce emissions. 

These challenges bring with them some key questions: 

• What if there was a way to uncover and fix an age-old problem facing every transportation operation-a way that could lead to quantum-leap improvements in shared cost and emissions efficiencies?

• What would it take to fix the problem?

• What results can we expect?

The answers to all of these questions have been addressed by the increasingly popular Voluntary Interindustry Commerce Solutions (VICS) Empty Miles Program, the mission statement of which is "Driving Savings and Curbing Emissions." In 2007, VICS, GS1 Canada, and GS1 US collaborated to develop the Empty Miles solution, an online service that matches loads with empty trailers to tackle the challenge of empty transport truck miles. This service operates under the banner of VICS Empty Miles, Powered by GS1 North America. 

"Today's market is like a perfect transportation storm, and the perfect storm is getting everyone's attention," says Steve Matheys, Executive Vice President, and Chief Administration Officer of Schneider National. "The people at VICS engaged in the Empty Miles solution are really committed to having open dialogues with us and providing the needed information to help shippers and transportation providers drive costs out of the supply chain."

The Age-Old Problem

The challenge facing all transportation managers is indeed the empty miles that trucks run as some portion of their overall hub miles. Since the first truck carried cargo, every supply chain operation has faced some form of empty miles. Whether it is going from A to B and returning empty from B to A, or the myriad network movements that inevitably result in a truck getting home or deadheading to the next pickup, the problem of running empty has confounded even the best dispatchers. Private fleets often feel the most pain of incurring costs without generating revenue. For many years, the nature of dedicated fleets and for-hire carrier contracts have somewhat hidden the physically empty miles inside the shippers' P&Ls. Usually for good reason tied to dedicated service, these carriers receive some level of revenue for the unfilled trailer as it makes its way back to the shipper's next origin point. The hidden reference comes from the fact that if a carrier is getting revenue miles from a customer receiving high service to perform a shipper's non-core-competency, then why would either of them broadcast the fact that the bare capacity is underutilized?   

With today's economic challenges, every line of every P&L is scrutinized for the "what" and "why." As is often quoted, understanding the problem gets you halfway to the solution. Broad collaborative visibility to unused capacity (empty trailers) is an opportunity to reduce cost and CO₂ emissions.

The National Private Truck Council (NPTC) states that about 28 percent of miles run by their membership are empty. VICS also had numerous conversations with members and came up with a range of empty miles as wide as 6 to 50 percent, with the top of the bell curve averaging around 25 percent. A large retailer commented that its own network contained an astonishing 25 million empty miles annually. 

In March 2009, in its 2007 "Motor Carrier Efficiency Study" Annual Report to Congress, the U.S. Department of Transportation listed empty miles as an "identified inefficiency" with a "potential gain to carriers of $2.7 billion annually." In a 2007 transportation brainstorming session, VICS and GS1 North America members recognized the challenge, but also saw it as an opportunity to seize already available capacity through a tool for easily sharing the lanes between collaborative partners. VICS Empty Miles was born, introducing organizations to a new sustainability and cost saving opportunity.

What would it take to fix the problem?

VICS-a voluntary, member-run association established a quarter century ago to provide the retail industry with guidelines such as Quick Response, CPFR (Collaborative Planning, Forecasting and Replenishment), Floor Ready Merchandise, electronic data interchange (EDI) and other programs that have generated improvements across the supply chain-seemed a natural fit to create process guidelines, and to get shippers and carriers together to address the empty miles challenge. 

Based on years of research that VICS has gathered, collaboration between trading partners results in improved supply chain effectiveness and efficiency. VICS' core belief can be summed up as: "Don't wait to be great. Collaborate!" 

Getting to genuine transportation collaboration was discussed in a recent Council of Supply Chain Management Professionals (CSCMP) New Jersey Roundtable as one of the last major opportunities for real improvement in North America's logistics network. Many multibillion dollar companies have built their own massive networks. So tackling the empty miles opportunity would need an innovative tool to provide visibility across these massive networks as well as a process for the companies to truly partner by sharing their supply capacities and shipment demand across available lanes between their enterprises. 

The process has to address everything from the potentially sticky legal contract agreements to how to approach the detailed lane rate negotiations, and the calculation of resulting benefits in cost and emissions savings. 

The empty mile problem is not new. What is new is how VICS Empty Miles brings shippers and carriers together as motivated partners to get this done. Within the Empty Miles web portal, subscribing companies can post information that provides the opportunity to match trucks that are moving empty with transportation demands. The reduction of CO₂ emissions from eliminating these empty trailers has no parallel in practices that can both improve the environment and substantially reduce transportation costs. 

This unique approach is about improving the environment. Further, the subscription price is not a barrier as it is set at a level where every company can participate. 

VICS chief Joe Andraski states, "We're offering an opportunity for people to share transportation data in a way that they've never had visibility to do before-all with the support and guidance of GS1 North America." 

Bill Connell, Executive Vice President of Logistics at Macy's Inc. adds, "It is important for us to implement business practices that are sensitive to the environment. The Empty Miles Program greatly supports that premise while continuing to drive operational efficiency."

After over a year of proof of concept and prototype diligence, VICS launched the Empty Miles web portal (www.emptymiles.org) in the first quarter of 2009, adding to its stable of collaborative tools. As the end of 2009 approached, 41 shippers and carriers representing over $1 trillion in annual sales revenue had subscribed to the service, and were driving critical mass for the potential empty miles lane matches.

What results can we expect?

In mid-2009, Kevin Locascio, Macy's Director of Shuttle Operations, noted that achieving results is "just a matter of commitment. We are dedicated to this program and its ability to support operational efficiency." Ever since, the Macy's team has aggressively led the charge to get at empty miles transportation savings and incredible CO₂ reductions. Locascio added that "VICS Empty Miles creates an opportunity for us to limit the environmental impact of our day-to-day business operations."

Locascio and his Macy's colleagues have been tireless in contacting the other subscribers of the service to set the stage for continuous leading-edge process and system improvements. To date, Macy's and trading partner Schneider National have realized significant transportation savings; for each initial lane opened, Macy's reduced annualized transportation costs by an average of $25,000. 

"Any opportunity that allows a carrier or shipper to minimize transportation costs is an opportunity worth looking into," stated Locascio. He sees VICS Empty Miles as an integral part of how they deal with truckers going forward. "We will continue to strengthen our carrier relationships and leverage Empty Miles to eliminate inefficiencies and drive our commitment to sustainability," he said.

The Macy's and Schneider National case study is available on the www.vics.org website and shows how Schneider National improved sustainability by eliminating 62 tons of carbon dioxide, 147 tons of particulate matter and 1.5 tons of nitrous oxide while saving over 5,500 gallons of diesel fuel. 

Pennie Ayers, Macy's VP of Customer and Shuttle Operations, also presented the VICS Empty Miles opportunity in 2009 at the National Association of Chain Drug Stores (NACDS) Conference. As the Empty Miles Project Leader for Macy's, Ayers is responsible for leading the organization in reducing its carbon footprint on the environment and reducing the overall transportation spend at the same time. 

By logging on to the VICS secure site, Macy's and many other companies can identify matches across their networks to share the lane details and ensure that trucks are loaded to capacity to avoid empty miles. According to Joe Andraski, "VICS' intentions are for companies to collaborate with their trading partners and carriers to have a dramatic impact on the environment by reducing CO₂ emissions while at the same time reducing transportation expense. It's about supply chain professionals having sustainable strategies at top of mind." And giving participants a place to go green, he added.

VICS Empty Miles is also an Affiliate Member of the EPA/SmartWay Transport program, which promotes outfitting tractors and trailers at point of sale with equipment that significantly reduces fuel use and emissions. SmartWay is an innovative collaboration between the freight industry and the EPA, who are leading the way to greater fuel efficiency and lower emissions. Other associations, such as the National Retail Federation (NRF) and CSCMP also have joined in support of the cause. CSCMP, in fact, has posted a free webinar on their site to provide their member community and other supply chain leaders with an overview of Empty Miles and how it works. 

On the academic front, VICS has delivered presentations on the Empty Miles Program at the Penn State Transportation Benchmarking Consortium. VICS also has worked with Joel Sutherland of Lehigh's Centre for Value Chain Research (CVCR) at the recent CSCMP New Jersey Roundtable Executive Transportation Panel. The solution was also discussed with Dr. Lloyd Rinehart at the University of Tennessee who has written extensively about how "closer relationships achieve lower costs." 

Al Yasalonis, an advisor to VICS during the development of Empty Miles, has deemed the carriers as "the glue that holds this project together." The carriers, as well as EPA/SmartWay, are all concerned about fuel reduction, lane-matching opportunities, and reducing empty miles and CO₂ emissions. Top carriers like Schneider National, UPS, Ryder, J.B. Hunt, and Swift Transportation are on board, with more carriers signing up. Yasalonis commented that "we once thought that private fleets at 28 percent empty miles were the main issue. Now we've gone beyond that with our subscribers who have convinced us that there's an ocean of third-party carriers and dedicated operators who can share the value on countless possibilities to optimize empty miles. This will be a home run on both dollar and environmental savings for supply chain practitioners."

JC Penney is a retail pioneer in its support of initiatives that reduce environmental impact through energy savings and recycling. JC Penney has also become a leading participant in Empty Miles, using the online marketplace to offer their available empty mile truck lanes to other shippers. By working with their third-party carriers, the retailer's goal over time is to utilize at least 50 percent of their empty backhaul trailers returning from stores.

Sharing of Best Practices 

Empty Miles subscribers frequently and freely share best practices to keep the momentum going, as opportunity lanes across partners continue to be found. Program participants have broken down potential barriers to include tri-party legal agreements and freight payment technicalities that no longer stand in the way of tremendous success. 

The Empty Miles web portal also offers a toolkit to subscribers, consolidated from participants' own feedback. The toolkit also includes a benefits calculator that helps a retailer, manufacturer or supplier compute savings in transportation costs and emissions. Additionally, a process checklist is offered through the toolkit to help ensure negotiation topics are resolved between trading partners. These practices are being openly shared by early adopters, dramatically reducing the time it takes new entrants to arrive at collaborative arrangements.

The results produced by participation in Empty Miles positions this program as unique in solving the challenging empty miles problem. The following illustrate some points that differentiate the Empty Miles service from other like initiatives, illustrating its ability to drive savings and curb emissions: 

1.      Sustainability Focus 

• 30 percent of the subscribers are in the Newsweek's Top 500 Green Companies.\
• Companies such as JC Penney have referenced Empty Miles in their 2010 Sustainability programs.

2.      The Macy's/Schneider National case study

• The initial lanes set up by Macy's and Schneider National are averaging an annualized $25,000 savings per lane. The case study states they have replicated the economic and environmental model to an additional 44 lanes.
• Macy's has experienced an increase of 30 backhaul loads per week or a projected 1,500 loads per year.
• Schneider National has reportedly eliminated 61.5 tons of carbon dioxide, 147.24 tons of particulate matter and 1.47 tons of nitrous oxide while saving 5,554 gallons of diesel fuel. It has also increased dedicated backhaul revenue on specific accounts using the VICS Empty Miles Service by an astounding 25 percent.
• Savings in both transportation cost and emissions generate significant ROI but will vary by partnership depending on their base of rates, length of haul, miles per gallon efficiencies, number of collaborative lanes, frequency of loads, and so forth.

3.      Ties to the EPA/SmartWay Transport program  

• VICS Empty Miles was presented as the "spotlight speaker" on the EPA's South East Diesel Collaborative Partners call with eight Eastern U.S. states and 70 environmentalists.
• 55 percent of Empty Miles subscribers are SmartWay Transport certified, and VICS helps those that are not with the certification process.
• VICS works with member companies to support several points in the EPA Shipper Council 2010 Plans for load and cube optimization, routing improvements, and facilitating load matching and empty miles resolution. 

4.      Reduces effects on highway Infrastructure, deterioration, and congestion by minimizing the number of unnecessary trucks on the roads. 

• As the U.S. Department of Transportation states, "accumulated strains due to axle grouping weights directly affect the deterioration of both rigid and flexible pavements, increasing the chance of cracks and humped pavements, in turn increasing the probability of manipulated road related accidents."
• The DOT adds, "Congestion increases the cost of all trucking operations." There are three main aspects to this increased cost:

1.      Labor:  A driver is still paid for being "on-the-clock" whether they are traveling or sitting in traffic.

2.      Fuel: The wasted fuel of a truck sitting in traffic at reduced speeds, especially when diesel prices continue to be high, will increase cost.

3.      Maintenance: Maintenance on trucking fleets increases when the vehicle is being driven at reduced speeds.

The Federal Highway Association reports annual costs of $2.46 billion for the trucking industry because of congestion, which can be reduced using the VICS Empty Miles Program to take underutilized trucks off the road. 

5.      Helps mitigate effects of macro issues like pending government action. 

• For example, with American Clean Energy and Security Act (ACES)-Cap & Trade, reducing your empty miles and carbon emissions could lead to reduced potential taxes
• Fuel rate increases tied to rising oil trends could be mitigated by improving the productivity of rated miles

6.      Subscription fees are only $1,600 for VICS members and $1,850 for VICS affiliates sponsored by a VICS member.

• Because Empty Miles subscriptions are so reasonable, the ROI for subscribers can reach extraordinary levels.
• VICS provides its members and affiliates with what VICS refers to as the "win-win-win." Says Tony Galli, Empty Miles Project Manager: "The shipping company gets money back that would have just gone to waste on an empty trip, the second company saves money by shipping its freight at a discounted rate, and the carrier makes money off the deal, too."

In summary, the age-old problem of empty miles now has a viable fix and significant results from the VICS collaborative transportation solution support its effectiveness. "Filling empty miles with the VICS service is good for the economy, it's good for the environment, and it's healthy for those companies that know how to leverage it and leverage it effectively," summarized Steve Matheys of Schneider National. 

Visit www.emptymiles.org to join and begin saving!

Joe Andraski is President and CEO of VICS. Art Smith is President and CEO of GS1 Canada. Bob Carpenter is President and CEO of GS1 U.S.