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Reducing GHG’s in our Transportation Network to Create a More Sustainable Logistics Profile Sept. 9, 2009.

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Presentation on theme: "Reducing GHG’s in our Transportation Network to Create a More Sustainable Logistics Profile Sept. 9, 2009."— Presentation transcript:

1 Reducing GHG’s in our Transportation Network to Create a More Sustainable Logistics Profile Sept. 9, 2009

2 2 Today’s Agenda … ► Sustainability Vision in Our Supply Chain ► Types of Transportation GHG’s at JCI Freight Logistics Travel Service/Management Fleet Vehicles ► Opportunities for GHG Reductions −Freight Logistics −Travel −Fleet

3 3 Sustainability at Johnson Controls Sustainability Through our products, services, operations, and community involvement, we promote the efficient use of resources to benefit all people and the world. 2.Achieve competitive advantage (e.g., increase sales, profit, market share) from environmentally responsible products and services 3. Reduce our global environmental foot print (e.g., carbon, waste) 4. Work with our suppliers to improve the eco- efficiency of the supply chain 5. Increase minority business development and supplier diversity 6.Strive to attain a high performance work environment that is free of work place diseases and that is physically and emotionally safe. 7.Recognize and respect the human rights of our employees and community stakeholders 8.Promote fair selection, development, engagement and recognition of our people to ensure a diverse, inclusive and sustainable work force 9. Invest in the communities we serve through employee volunteerism and targeted philanthropic giving 1.Ensure the ongoing financial viability of the business through strategic investments and management of risk 10. Hold ourselves accountable to the highest standards of corporate and personal integrity and ethics Environmental Stewardship Social Responsibility Economic Prosperity (Planet) (People) (Profit) Key Strategies Value

4 GHG and Carbon Sources

5 Logistics, Travel, Fleet GHG Overview Logistics:Approximately $1 B spend => 19 M tons GHG Travel:Approximately $200M spend => 54 M tons GHG Fleet:Approximately 18,000 vehicles => X M tons GHG

6 Logistics Focus

7 7 Sustainability Goals Within Our Supply Chain Reduce our Global Environmental Footprint (e.g., carbon, waste) Work with our Suppliers to Improve the Eco-Efficiency of the Supply Chain Logistics focus: Increase Mileage Efficiency Decrease Total Miles Supplier Initiatives Find ways to deliver our goods and services to our constituents more efficiently.

8 Logistics Focus FY 2010 Global Plan Spend 8

9 Logistics GHG Reduction Activities Moving Forward Increase Mileage Efficiency  Convert LTL to TL (Milk-runs, Consolidation Centers – see ‘AE Hub & Spoke Consolidation Network’ slide)  Minimum carrier contract mileage clause – set minimum MPG requirement  MBBP Rate Cost Modeling - establishing BIC benchmarks for rate cost drivers (Equipment, Fuel, Labor, etc.)  Fuel surcharge minimum miles per gallon requirement  AE Intermodal (see ‘AE Matamoros, MX Intermodal Example’ slide)  Mode Selection (see ‘UTI Analysis 5.1: Mode shift air to ocean’ slide) Decrease Total Miles  Supplier Selection footprint (see ‘UTI Analysis 4: Supplier Localization’ slide)  Manufacturing Footprint  Provide Logistics data / support to Manufacturing Op.’s team to define total supply chain cost  Warehouse and Distribution Locations Consolidation  North America BE Regional Distribution Center Consolidation (See ‘North America Systems Branch Shipments Consolidation’ slide)  Europe BE Katoen Natie Duty Deferred Distribution Warehouse Consolidation (38 warehouses to 4)  Increase Pack Density  North America AE Trim in Bundles vs Coffin Boxes project increasing density 2.5x (see ‘AE Trim in Bundles’ slide)  North America AE Headrest Eco-pack to Coffin Box project  Inbound pack density reviews at plants  Truckload Utilization (TUMS – AE North America 95% FTL utilization) 9

10 Logistics GHG Reduction Activities Moving Forward Supplier / Misc. Initiatives  EPA SmartWay Partnership (see ‘Smartway Partnership’ slides)  Carrier SmartWay Participation - JCI Sourcing Expectation  Key Supplier Sustainability Programs  Maersk Super Slow Steaming  Green Logistics at Schenker  Fedex  Global Logistics Council (first meeting held 8/25 - GHG reduction will be a GLC focus) Find ways to deliver our goods and services to our constituents more efficiently  Remote Operations Center with re-set capability  Vehicle selection parameters (hybrids, smaller units)  Consolidation Centers  Balance between Inventory and Freight Expense (GHG’s)  Eliminate storage (lead-time efficiency—lean) 10

11 JCI AE Hub & Spoke Consolidation Network (LTL to FTL and Increased Ship Velocity / Lower Inventory) 11

12 CHR Example Origin Matamoros, MX Destination Warren, MI Total annual moves: 1008 Total miles/move: 2,342 OTR fuel (gallons): 378 Rail fuel (gallons): 98 Annual Fuel reduction (gallons) 281, OTR Miles 1766 Rail Miles AE Matamoros, MX Intermodal Example 12

13 Analysis 5.1: Mode shift air to ocean JCI agreed upon a feasible mode shift plan considering their current business environment as well as a few key assumptions 13 Shift in RB, Prover, & Greishaber using 75% tier Shift in two products from CTS* (Thailand) Total Total Savings Freight Change ICC Change (OH) Avg. Days Increase Avg. % Hit Minimum # Shifted Shipments $72,415 $92,565 $20, % 30 $17,552 (1) $ 17,552 $ 0 (2) 23 0% 26 $ 89,967 $ 110,117 $ 20, JCI mode shift plan = += Considerations for the Mode Shift Analysis: The overall increase in lead-time between air and ocean is feasible for the volume being shifted. There is enough space in Reynosa to accommodate the increase in safety stock when switching from air to ocean BCP was evaluated, but was not shifted to ocean because of the increase in lead time and increase in space for safety stock in Reynosa (1) Two items produced by CTS ( and ) coming from Ayutthya (TH) are being shifted from air to ocean. These products represent 28% of the total weight of CTS shipments. Remaining CTS product will ship via air. (2) Inventory carrying costs not considered for CTS due to consignment status

14 Analysis 4: Supplier Localization Sensitivity Analysis: Scenario 2 – All suppliers are moved to within a distance of 1000 miles from Pharr Avg. distance 1260 mi 1000 miles Freight SavingsICC SavingsInv. Reduction Air Freight81.8K-- Ground Freight290.2K6.3K 63.2K Sub Total372.1K6.3K63.2K Grand Total378.4K Supplier locations outside 1000 mi974 Total supplier spend$68.9M 14

15 Analysis 4: Supplier Localization Sensitivity Analysis: Scenario 3 – All suppliers are moved to within a distance of 500 miles from Pharr Avg. distance 1260 mi 500 miles Supplier locations outside 500 mi1,103 Total supplier spend$80.0M Freight SavingsICC SavingsInv. Reduction Air Freight210.4K-- Ground Freight572.5K10.0K 102.7K Sub Total782.9K10.0K102.7K Grand Total792.9K 15

16 North America Systems Branch Shipments Consolidation From 15 to 4 Regional Warehouses 16

17 Trim In Bundles Project Opportunity: Transition trim from coffin containers to loose loaded trim in bundles/bags. 2.5 pack density improvement 17

18 EPA SmartWay Transport Partnership: General Overview SmartWay is a voluntary, market based program that is creating a demand for cleaner, more fuel efficient transportation Major focus on sustainable goods movement Provide tools to help carriers improve their fuel efficiency Through SmartWay, carriers showcase their efficiency to shippers Challenges Shippers and Logistics companies to use SmartWay carriers to move their goods SmartWay directly addresses 3 significant National issues: Global Climate Change Energy Security Business Financial Bottom Line SmartWay works from the principle of you can’t improve something until you properly measure it 18

19 EPA SmartWay Transport Partnership: Goals Reduction Goals: Fuel consumption from trucks and rail delivering freight Operating costs associated with freight delivery Emissions of CO2 (30 million metric tons) Emissions of NOx (commonly known as smog) Particulate Matter (PM) serious health and environmental effects Environmental goals: Reduce spend on fuel (and dependence on oil imports) Better understand emissions and environmental footprint Contribute to corporate vision for environmental responsibility Demonstrate our commitment to the environment publicly Our commitment to Smartway includes: Define percentage of freight shipped (or received) by SmartWay Partnership carriers Measure greenhouse gas emissions Increase the percentage of freight shipped (or received) to score at least 50% in 3 years Develop action plans detailing how goal will be achieved Submit goals and action plans to the EPA within 6 months of signing (report annually) 19

20 EPA SmartWay Transport Partnership: JCI SmartWay Profile and Focus Areas Carrier Focus Areas: Engine Idling Top Speed Governing Tire Pressure Improved Aerodynamics Use of Bio-diesels / Alternative Fuels Route Planning 20

21 21 Sustainability Goals Within Our Supply Chain Reduce our Global Environmental Footprint (e.g., carbon, waste) Work with our Suppliers to Improve the Eco-Efficiency of the Supply Chain Travel focus: Decrease travel (video conference, other) Shift Modes => Air to Rail Downsize car rentals Shift to “Sustainable Hotels” Airline initiatives

22 Types of Travel GHG’s at JCI--air Car measurements: # of car rentals * 96 miles per rental day, assumes 23 mpg, assumes 2.2 days per rental Hotel nights: # of trips * 2.2 nights per trip, GHG estimated generically

23 Travel GHG Reduction Activities Moving Forward 23 ► Telepresence/Halo: Higher approval on impacted routes, currently in review by Bruce McDonald. Recommended Milwaukee/Detroit/Shanghai/Hong Kong/ Burscheid/ Hannover/Brussels/Bratislava/Monterrey/Aldershot ► Car rental: Reduce mpg rate through current Avis contract—reduced involuntary upgrades from 83% to 56%--upgrades now normally to full-size not SUV ► Car Rental policy: changed policy to smaller cars ► Airline: Have negotiated new rates with SNCF on Paris/Strasbourg (one of our top European routes) and shifted some traffic from air to rail. ► Last RFP has requested airlines to commit to CO2 reductions/mile of 1%/year—have buy-in from UA & DL ► Rail: Changed policy on use of rail for AE Europe (Rail = 1/8 of air on high-speed rail routes ► Hotels: Have requested hotel suppliers on RFPs to list sustainable devices, e.g. in- room energy card switch ► Requested hotel suppliers to supply energy data (low response) ► Working with industry group to set hotel sustainability measurement standards ► Meeting group is focusing on sustainable menus for meetings ► Demand management: Airweb is making this more visible—includes CO2 measurements on travel docs.

24 Vehicle Fleet GHG Reduction Update

25 25 Sustainability Goals Within Our Supply Chain Reduce our Global Environmental Footprint (e.g., carbon, waste) Work with our Suppliers to Improve the Eco-Efficiency of the Supply Chain JCI Vehicle Fleet Focus Opportunities: Increase Mileage Efficiency via vehicle selection (hybrids, engine size, diesel) Driver education Route planning

26 26 US Vehicle Fleet GHGs by Business Unit JCI has approximately 18,000 fleet vehicles globally.

27 Johnson Controls27 Uplander GHG Reduction Activity: Hybrid Vehicles 3.2 tons CO 2 e/vehicle/yr5.5 tons CO 2 e/vehicle/yr Approximate 42% decrease from non-hybrid vehicle use within JCI fleet Have 15 Ford Escape Hybrids, avoid approximately 30 tons CO 2 e/yr by FY2009 ► Plans for FY2010 Vs. Escape Hybrid

28 28 Add 100 Ford Escape Hybrids Estimated avoidance of 220 tons CO 2 e/yr If this trend continues: ► Plans for FY2010 FY2009FY2010FY2011FY2012FY Fleet Hybrids Annual Addition Total Hybrids ,160 Avoided tons CO 2 e % Reduction of Total Fleet Footprint* 0.3% 1.4% 0.6% 0.9% 1.1% GHG Reduction Activity: Hybrid Vehicles By 2012, considering BOTH GHG reduction opportunities, a potential 3% reduction & approximate $1 M in fuel savings Approximate $500,000 in fuel savings

29 29 Fleet GHG Reduction Activities Moving Forward Action items being pursued: ► Hybrid vehicle implementation in systems fleet ► Considering alternate vehicles for service fleet ► Driver educational/training program - (‘Driving Green Competition”) ► Shifting of vehicles within categories - Engine size reduction –6 cyl to 4 cyl -Gasoline to Diesel Further study required: ► Engine Idle Monitoring ► Route planning (GPS, ROC, no left turns)


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