Logistics

Ford’s physical logistics operations provide the safe and efficient transport of parts from our supply base to our manufacturing plants (our “inbound” freight) and of finished vehicles from the end of our assembly lines to our dealerships (our “outbound” freight). Although logistics account for a relatively small percentage of total vehicle lifecycle emissions, we are working hard to maximize the efficiency of these operations to reduce their environmental impact. This work is managed by Ford’s Material Planning and Logistics organization (MP&L), which is the department responsible for the design and operation of our global transportation networks and for engineering high-quality and efficient packaging to protect parts in transit.

Green Logistics

Ford MP&L applies a global approach to addressing the environmental aspects of our logistics operations. In 2008 we established an international team to coordinate our reporting activities and to share best practices. We manage activity via subject matter experts in our four operating regions (Europe, North America, Asia Pacific and Africa, and South America) and in 2010 we created a central “green logistics” intranet site to assist in standardizing our procedures and in communicating latest information. During 2010 and 2011 our major focus has been on greenhouse gas emissions with two key work streams – carbon dioxide (CO₂) emissions reporting and CO₂ emissions reduction. The fact that freight emissions are so closely tied to fuel usage means that this focus on emissions reduction will in itself encourage actions that will help us achieve our other environmental goals.

Freight Emissions Reporting

Understanding and quantifying our freight CO₂ emissions is important to us for a number of reasons including:

Helping us to understand our overall environmental impacts
Enabling us to prioritize actions to reduce emissions
Allowing us to calculate the full carbon footprint of our supply chains
Providing data for the overall lifecycle carbon footprint of our vehicles
Providing data for our customers

In 2006, our European operations, with the support of our European lead logistics partner DHL International, first began producing basic CO₂ metrics for our inbound road and rail network. During 2008 and 2009, Ford and DHL supported a Masters Project at Cologne University to better understand reporting techniques and to tune our methods to the latest academic thinking.

Since that time we have greatly expanded our reporting. At the start of 2009 we began internally reporting CO₂ emissions for our North American land-based networks. In 2010, following work with our transatlantic lead logistics partner UTiWorldwide, we introduced CO₂ emissions reporting for ocean freight. In 2010 we also began collecting data for our Asia Pacific networks and are developing processes for reporting in South America.

For 2011, we have updated our emissions calculations to take account of other greenhouse gases including N₂O and methane.

Tracking transport emissions data allows us to study the impacts of different sourcing patterns. MP&L is working closely with Purchasing on value stream mapping projects to help us compare the transportation and manufacturing footprints in different source locations.

Throughout 2010 and 2011 Ford has played a major role in supporting the development of internationally recognized reporting standards. We have been assisting the World Resource Institute and the World Business Council for Sustainable Development with their new Greenhouse Gas Protocol Scope 3 reporting standards by carrying out “road testing” of those standards and providing active feedback. In Europe, we have been a member of the UK Department for Transport’s Low Carbon Transport Supply Chain Steering Group and helped formulate their Guidance on Measuring and Reporting Greenhouse Gas Emissions, published in December 2010.

We are actively involved in engaging others in the industry and in 2010 delivered lead presentations on freight emissions reporting to a wide range of conferences and industry association seminars, including the Association of Climate Change Officers, the Automotive Industry Action Group, the Verband der Automobilindustrie and the Society of Motor Manufacturers and Traders.

Freight Emissions Reduction

The efficient design and operation of our networks is key to improving the environmental footprint of our freight. There is a direct correlation between the use of greener modes (such as rail and water), reducing miles traveled, increasing vehicle utilization and reducing emissions.

In general, we choose to contract and manage our own freight networks rather than have freight contracted by our suppliers. For example, we collect parts from our suppliers’ factories rather than have the suppliers deliver parts to our assembly plants. This gives us better control and allows us to optimize collections and deliveries across all pick-up points and destinations and so minimize the total amount of transport required. Our inbound network is fully integrated with regional distribution centers, so that material for different plants can be collected together and then cross-loaded onto trailers routed to different final destinations. Our transatlantic freight is integrated into the domestic networks operated by Ford of Europe and Ford North America. This integration has resulted in a reduction in the number of vehicles collecting materials from shared suppliers.

We work closely with our Lead Logistics Providers (LLPs) to improve our network designs. We use a number of methods – for example “milk run” routes, where groups of collection points are identified that can be visited by a single truck. Our LLPs continuously review shipping quantities and collection frequencies, with the aim of ongoing improvement. The net effect of these kinds of strategies is to minimize the number and length of journeys required.

As a further step 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, which not only gives us a cost benefit but reduces overall traffic on the roads.

Part of our business plan is to maximize the use of “green routes” – rail, river and short sea transport – for the transport of inbound parts and outbound vehicles to reduce fuel costs, emissions and road congestion. The environmental impact of rail freight is significantly less than that of road freight. It has been estimated that switching from road to rail can reduce CO₂ emissions by 40 percent.

For some time we have made use, where possible, of traditional rail services. For example, we move material by rail between our Cologne logistics hub in Germany and our Transit plant at Kocaeli in Turkey, and we move engines by rail from our Bridgend plant in Wales to our Valencia plant in Spain.

It can be difficult to expand the use of rail freight because rail terminals are not always sited near the facilities from which and to which we need to make materials and parts deliveries. One solution we have adopted to overcome this difficulty is to use “SWAP bodies” – standard freight rail containers that can be lifted onto dedicated road trailers. This kind of approach combines the environmental friendliness of rail for long distances, with the flexibility of road transport at either end of the journey.

In 2010 and 2011 we expanded our use of these intermodal approaches. In particular we have increased the use of a system for lifting an entire road trailer onto a specially designed rail wagon for moving parts from our suppliers in Italy to our assembly plant in Genk, Belgium. We use a similar process to transport materials to Genk from suppliers in Scandinavia.

We continue to utilize a combined road/rail route process from northern Spain and southern France to our Saarlouis facility in Germany. In this system, standard truck trailers from suppliers in Spain are driven directly onto rail wagons at a special terminus at Perpignan, France, near the Spanish border, and then carried by train more than 1,000 km to Luxembourg, from where they are taken by road to Saarlouis. This approach is not only more environmentally friendly, it also reduces road congestion: the train-based freight from Perpignan to Luxembourg has the potential to keep 40 truck trailers a day off of French roads.

We also continue to develop water-based transport options in Europe for our outbound vehicle deliveries. Following this approach, inland road-based transport within Spain is greatly reduced by using six different ports of entry. Also, we use the Black Sea for imports into Russia. Where possible, we take advantage of inland waterways as well: we use barges from our Cologne facility to a number of ports to the north and south and another barge route operates between Romania and Bavaria.

Actions by Ford of Europe to reduce the carbon footprint of its vehicle transportation logistics operation were recognized by a prestigious Supply Chain Distinction Award in 2009. The judges honored the team for its performance in environmental supply chain planning and execution.

In North America, rail is used for efficient long-distance transport of commodities such as metal stampings and powertrains. A single 86-inch-high cube railcar can carry cargo equivalent to three to four 53-foot truck trailers. At the beginning of 2010, Ford’s rail and intermodal rail shipments in North America represented almost 40 percent of the network distance traveled, while accounting for less than 15 percent of the network carbon footprint.

Our Finished Vehicle logistics team in North America has focused its recent carbon footprint reduction efforts on reducing the number of miles traveled per vehicle transported within the network, thereby lowering the amount of fuel consumed to deliver them. In 2010, transportation miles were reduced by 42.5 million miles in total compared with 2009 despite an increase in auto sales, and the network is an efficient 70 percent rail miles/30 percent road miles. This mix provides an effective blend of cost, speed to market and carbon emissions management, given North American geography.

The modernization of the transportation fleet with a view toward fuel efficiency is an objective of shippers and carriers alike. Our North American logistics operations are also focused on improving load density, or the number of vehicles carried per conveyance, as a means to lower the number of conveyances employed, and thereby reduce the amount of fuel consumed.

North American inbound logistics and parts supply operations are also making substantial network efficiency improvements. Inbound production material and service parts transportation distances were reduced between 2009 and 2010 by 17.6 million and 2.7 million miles respectively.

A major reduction in emissions for transatlantic freight has been achieved by implementing direct ocean shipments between Mexico and Europe. Previously, material had been routed via a North American port, but now lengthy road transport is avoided and a 40 percent reduction in CO₂ emissions has been achieved.

In addition to looking at network design, other opportunities to reduce environmental Ford’s footprint exist within the design and operation of the transport equipment itself.

For example, we worked with the Georgia Institute of Technology to identify guidance on equipment modifications to reduce fuel usage. We shared this and other potential best practices along with the results of internal testing at regular communications meetings with our carriers. We also survey our carriers on their implementation of fuel-efficient practices.

We have also been working on practical applications for alternative fuel and engine technologies in our logistics activities, and have carried out a number of trials using our in-house transport fleets. Our Ford Rawsonville fleet has been certified by the U.S. Environmental Protection Agency’s SmartWay program and is monitoring improvements to its truck fleet’s fuel usage. Our North American operations also work to decrease the number of transport runs required by making improvements in packaging density and trailer cube utilization as well as mode changes where possible to reduce fuel consumption.

Ford of Europe’s in-house transport operations have been implementing a number of initiatives to reduce the emissions of their trucks. These initiatives include training in fuel-efficient driving and increasing the use of bio-fuels. Also, we use a fuel additive on major inbound routes to reduce harmful nitrous oxide emissions. We have implemented driving speed limiters to improve fuel economy and use deflectors on new trailers to improve the vehicles’ aerodynamics. These and other efforts have allowed us to comply with Euro V emission rulings and reduce our emissions-related road tax costs. Our UK Transport Operations are actively supporting the Freight Transport Association’s Logistics Carbon Reduction Scheme.

We are now beginning to investigate the possibilities of electric propulsion for freight transport. We are installing 10 solar-powered electric vehicle-charging stations at the Michigan Assembly Plant to demonstrate advanced battery-charging technologies for vehicles using renewable energy and other smart-grid advances. The stations will be used to recharge the electric switcher trucks that transport vehicle parts between adjacent buildings at the manufacturing site.

Packaging

Ford MP&L’s Packaging Engineering department focuses on designing, procuring and optimizing packaging on a part-by-part basis to best suit the components being moved and the transport required.

Packaging directly impacts a number of environmental elements throughout its lifecycle, including materials usage, freight and waste disposal. Over years of testing, tracking and performance improvement, we have confirmed that the best strategy to eliminate material waste and optimize freight efficiency is to use durable and returnable packaging for all but the longest supply chains.

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.

One of the benefits of standardizing packaging is that it makes packaging interchangeable between suppliers and programs. In Europe, we have contracts with third-party specialist packaging providers to control the issue, collection and pooling of standard packaging for our suppliers. This pooling greatly reduces transport requirements, as the packaging can be shipped to where it is next required rather than always having to return it to the supplier who last used it.

Currently, our European operations use 90 percent reusable containers, and we are seeking to increase that amount. For example, we are working to develop more direct routing for parts to our St. Petersburg, Russia, plant so that it is viable to use returnable packaging. We are also introducing returnable steel racks for much of our new transatlantic shipments that previously would have been shipped in disposable material.

We are working closely with packaging suppliers to take advantage of new developments. In Spain, we are introducing dedicated designs that include specially designed foldable internal packaging that avoids the need for disposable internals. It is also lighter and easier to handle than conventional standardized returnable packaging.

The European powertrain packaging team is introducing a novel approach to packaging returns. The empty packaging is broken down into small chips that are then returned in sacks to be remade in to new packaging close to the original supplier location. This dramatically reduces the volume of the return shipments, and thereby the transportation costs and emissions.

An example from our Asia Pacific and Africa region is their implementation of returnable packaging for hazardous material shipments such as of air bags from Europe to China. Previously this part had been handled by air shipment, but now it can be shipped by sea, giving a considerable saving in emissions.

We are now working globally to share best practices between regions and to drive consistency in packaging for future global vehicle programs. Ford’s latest packaging guidelines 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.

The Evolution of Green Logistics

For 2011, we have expanded our engagement with the Carbon Disclosure Project and others to include many of our key carriers and logistics service providers. Within Material Planning and Logistics, environmental considerations form a key part of our business plan. We are actively establishing strong dialogues with our major carriers and service providers to share ideas and methods with the aim of pushing our green logistics to new levels of collaborative best practice.