Logistics

Ford's physical logistics operations provide the safe and efficient transport of parts from our supply base to our manufacturing plants and of finished vehicles from the end of our assembly lines to our dealerships. Though logistics account for a relatively small percentage of total vehicle life-cycle emissions, we are working hard to maximize the efficiency of these operations to reduce both costs and environmental impacts. This work is managed by Ford's Material Planning and Logistics organization (MP&L), which is responsible for the design and operation of our transportation networks and for engineering high-quality and efficient packaging to protect materials while in transit.

Ford operates two sets of freight networks: one handles the collection and delivery of inbound parts and materials, while the other handles the delivery of outbound finished vehicles. The inbound freight networks are highly integrated. We move a large majority of parts ourselves, rather than having them delivered by suppliers, in order to give us greater control of the process. Material for all of our plants is collected together and then redistributed from centrally located transfer facilities closer to final destinations. Collection routes are planned so that trucks can collect smaller quantities from suppliers close to each other in a single journey. The effect of these strategies is to minimize the number and length of journeys required. Shipping quantities and collection frequencies are regularly reviewed, with the aim of further optimizing the networks.

In 2008, we integrated transatlantic freight into the domestic networks operated by Ford of Europe and Ford North America. In addition, in mid-2009 we will begin to use a single freight forwarding approach for the Asia Pacific region. The synergies that result from both of these projects will mean greater sharing of trucks and warehousing for stock awaiting export, which will further improve the efficiency of our transportation logistics.

We are also working to maximize the use of rail, river and short sea transport for inbound parts and materials, to reduce fuel costs, emissions and road congestion. To increase overall transport efficiency, we have implemented contracts that encourage our freight carriers to carry third-party freight on return journeys, rather than returning home empty. We are also working with rail companies to find ways to combine road and rail freight. In Europe, for example, we have begun using a truck/rail system that allows us to drive truck trailers directly on to special railcars. The trucks are carried by rail across France and then driven the final distance to our plants in Northern Europe.

Air freight is only used in emergency situations because of its relatively high cost and environmental impacts. Close attention has been paid to reducing the use of air freight. Between 2007 and 2008, for example, Ford of Europe decreased its use of premium air freight by close to 9 percent.

Ford MP&L has established a global team to specifically address the climate change impacts of transportation logistics. During 2008, the team focused on reducing carbon dioxide emissions caused by inbound freight. The team has been working to develop a methodology for calculating CO2 emission levels and to identify and promote actions to reduce freight-related CO2 in the long term. As part of this effort, Ford has partnered with the delivery company DHL International to support Masters' students at the University of Cologne in developing a practical calculation method for road and rail freight emissions. This project builds upon the CO2 calculation methods used previously in our European operations. We are also working with UTi Worldwide, a global supply chain logistics company, to develop an approach for calculating CO2 emissions associated with ocean freight. These efforts will enable a full computation of Ford's freight-related CO2 emissions during 2009.

In North America, we have been working on practical applications for alternative fuel and engine technologies in our logistics activities, and have carried out a number of trials. These projects will help to both save fuel and reduce CO2 emissions. In North America, for example, we have been collaborating with Georgia Tech University to produce a best practices handbook for truck carriers, to be published in early 2009. We plan to distribute this handbook globally, along with other best practices identified by Ford of Europe during a 2008 environmental awareness survey of their European carriers.

We also carefully manage outbound vehicle shipments. We use rail- and sea-based transport wherever possible to reduce the need for long truck runs. By avoiding road-based transport, we help to reduce congestion, fuel consumption and exhaust emissions, including CO2. We locate our vehicle holding centers to optimize transportation efficiency by taking into account the proximity of ports, rail hubs and trunk roads.

Packaging is the other primary activity managed by our logistics operations. Packaging directly impacts a number of environmental aspects1, including materials usage, waste and freight. Ford MP&L's Packaging Engineering department focuses on designing, procuring and optimizing packaging. Over the years, this group has confirmed that the best general strategy to eliminate material waste and optimize freight efficiency is to use durable (returnable) packaging for all but the longest supply chains. In Europe, we have developed contracts with third-party packaging providers to manage returnable packaging. As part of this strategy, returnable packaging is pooled and used where required rather than always having to be returned directly to the parts suppliers.

Over the years, we have developed a standard range of packaging that not only protects parts and makes them easy to handle at the assembly line, but also allows maximum storage density during transportation, thereby minimizing transport requirements. We review the packaging of production trial parts to assess opportunities to increase packing density prior to the full-volume launch of a product.

We are now working globally to share best practices between regions and to drive consistency in packaging for future global vehicle programs. The latest packaging guidelines, published in April 2009, require that supplier-provided packaging supports corporate sustainability goals by seeking a neutral or positive environmental footprint through zero waste to landfill and use of 100 percent recycled, renewable or recyclable materials.