Logistics

Ford’s physical logistics operations provide the safe and efficient transport of parts from our suppliers 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 accounts for a relatively small percentage of our vehicles’ total 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 designing and operating our global transportation networks and for engineering high-quality and efficient packaging to protect parts in transit.

Green Logistics

We focus our green logistics efforts on three areas:

1. reducing our freight greenhouse gas (GHG) emissions,
2. reporting on those emissions and
3. improving the environmental footprint of packaging materials used to transport parts and vehicles.

Since freight emissions and fuel usage are so closely tied, our focus on emissions reduction also encourages actions that help us achieve other environmental goals as well, such as improving air quality and reducing traffic flows.

Ford MP&L has an international team to coordinate our green logistics activities. We have subject-matter experts in each of our four operating regions (Europe, North America, Asia Pacific and Africa, and South America), and we have a central green logistics intranet site to assist in standardizing our procedures and communicating best practices.

Freight GHG Emissions Reporting

Understanding and quantifying our freight carbon dioxide (CO₂) emissions is important 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 to respond to customer inquiries

We began to develop CO₂ tracking and reporting metrics in 2006 for our European operations in conjunction with our European lead logistics provider, DHL. Since then, we have expanded our reporting to include transportation networks in North America, South Africa, India and Australia. We have also expanded our reporting to include additional modes of transportation. For example, we now include CO₂ emissions reporting for ocean freight, using methods developed by our transatlantic lead logistics provider, UTi, as well as ground transportation.

We are also now collecting GHG emissions data and reporting internally for all our regions. This data is included in our global performance scorecard, which is regularly reviewed by senior management. In 2012, we began collecting freight emission data in China from our joint venture, Changan Ford, and its trucking providers. Early results from this effort, which includes both inbound and outbound logistics, suggest emissions are being reduced per vehicle shipped.

We continually review the latest international best practices to improve the quality of our reporting. Based on these best practices, we now track non-GHG emissions such as nitrous oxide (N₂0) and methane in our overall GHG emissions estimates. We also continually update our data sources. For example, in 2012 we began using newly published CO₂ data from the Clean Carrier Working Group to improve the accuracy of our ocean freight emission calculations.

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

Ford has taken an active leading role in supporting the development of reporting processes for automotive freight emissions. In 2011, we were a road-tester of the World Resource Institute and the World Business Council for Sustainable Development’s new Greenhouse Gas Protocol Scope 3 reporting standards, which cover freight CO₂ reporting. We have since worked with the Automotive Industry Action Group (AIAG) in North America to encourage others in the industry to adopt these processes and provide relevant training. In Europe, we are part of the UK Department for Transport’s Low Carbon Transport Supply Chain Steering Group, which published Guidance on Measuring and Reporting Greenhouse Gas Emissions. We also lead a project for Odette to publish common guidelines for freight CO₂ reporting for the European automotive industry. In Asia, we participated in the inaugural Green Freight China seminar in Beijing, run jointly by Clean Air Asia and the Chinese government.

We believe it is important for our logistics providers to have policies on CO₂ issues. Since 2011, we have involved our major North American and European logistics service providers in our annual Carbon Disclosure Project Supply Chain Survey as part of our effort to encourage them to have strategies to improve the sustainability of their operations.

For more information on our supply chain greenhouse gas initiatives, please see Supplier Greenhouse Gas Emissions.

Freight Emissions Reduction

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

In general, we contract and manage our own freight networks rather than have freight contracted by our suppliers. This gives us better control and allows us to optimize collections and deliveries across all pick-up points and destinations, minimizing the total amount of transport required.

Our freight emissions-reduction efforts generally focus on reducing the number of vehicle miles traveled to deliver our inbound parts and outbound vehicles, as well as improving route efficiencies and switching to lower-emission transport methods. Some of the specific strategies we use to reduce freight emissions include:

• Using regional distribution centers to coordinate deliveries and reduce the number of vehicles collecting materials from suppliers that are destined for multiple factories
• Using “milk run” routes, where groups of collection points can be visited by a single truck, to minimize the number and length of journeys required
• Developing contracts with our freight providers that encourage them 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
• Maximizing the use of lower-emission transport methods such as rail, river and short sea transport, to reduce fuel costs, emissions and road congestion. It has been estimated that switching from road to rail can reduce CO₂ emissions by 40 percent.
• Using “SWAP bodies” – standard freight rail containers that can be lifted onto dedicated road trailers to expand our ability to use rail freight where possible on a given journey and road transport as needed
• Improving load density, or the number of finished vehicles carried per conveyance, which lowers the number of conveyances employed and reduces the amount of fuel consumed
• Reducing the emissions of our transportation fleet through the use of alternative fuels and engine technologies, improving vehicle aerodynamics, and training drivers on more fuel-efficient driving practices
• Maximizing trailer loading efficiencies and minimizing packaging so we can carry more cargo with fewer trips

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 has environmental impacts throughout its lifecycle, including materials usage, transportation 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 many 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, for example, we are introducing dedicated designs that include foldable internal packaging that avoids the need for disposable material. 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 into 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 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 considerable savings in emissions.

We are now working globally to share best practices between regions and 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

Going forward, we will continue to expand our logistics-related CO₂ reporting and reduction initiatives. Within Ford MP&L, environmental considerations form a key part of our business plan, with metrics in place and with objectives to introduce more rail and short sea routes instead of road freight. We are actively establishing 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.