11. Reducing Pollution Through Green Logistics

Prepared By:
Tom McNamara
ESC Rennes School of Business

Erika Marsillac
Old Dominion University

Managing a cargo container facility can be a herculean task. Worrying about inbound and outbound logistics, cargo and ground transport coordination, health and safety concerns...whew! And those are just a few of the many challenges facing facility managers. There is a nearly constant demand for greater operational efficiencies, and combined with having to pay strict attention to the bottom line, operators must look for improvements in terminal planning and management wherever they can find them. Even slight increases in performance can go a long way toward improving the underlying competitiveness of a port or bulk terminal.

Compounding these complex problems is a soon-to-arrive expected increase in container traffic. Although many facilities might still be feeling some of the effects of 2008’s global economic recession, growth in international trade and container volume is expected to increase dramatically over the next several years, well above the growth trends in world GDP. In 2012, global trade in containerized cargo came in at about 530 million TEU (twenty-foot equivalent unit, a measurement of cargo capacity), versus 250 million TEU in 2000. Although container volumes did drop slightly in 2009 (by ~9% as a result of the recession), they rebounded by almost 15% in 2010, and are expected to increase by another 50% between 2009 and 2015. A 50% increase in six years?! How are we going to manage that growth?

The cargo industry, for the most part, is dealing with this expected boom by moving to bigger ships, so-called “megaships.” In 2006, the largest oceangoing cargo ship could carry 7,100 TEU. Compare that capacity with Maersk Lines today, which has ships that clock in at 15,000 TEU, and which hopes to start operating new Triple-E vessels sometime in 2013, with an expected effective capacity of 18,000 TEU. To make that differentiation clear, that’s one ship now carrying the cargo equivalent of literally almost three of the former ships.

This expected increase in total cargo and the accompanying megaships create both huge opportunities and challenges for bulk terminal facilities. Facility managers will need to do everything possible to improve their performance in order to keep up with this expected increase in demand. If not, they risk losing out to better run, and more efficient, terminals.

A recent study by the Organization for Economic Cooperation and Development (OECD) showed that the most efficient container ports were not necessarily the largest, so large facility managers can’t just assume that they have an advantage due to economies of scale. Smaller players can certainly get a leg up on the competition by developing specific competencies that larger facilities can’t or don’t have. The OECD found that most container ports operated at between 70% and 80% of maximum efficiency. Based on these findings, most ports could improve overall efficiency by at least 20% to 30%, which would translate into a huge potential for increased savings (and profits).

One of the biggest efficiency problems facing any cargo facility is truck waiting times. Long lines of trucks idling outside the entrance of a terminal are already a common sight at many facilities, and these lines are only going to get worse as volume and demand increase. And just one hang-up, bottleneck, or flat tire, in a key area, can bring an entire facility almost to a standstill, wreaking havoc with productivity, and adding to the already known environmental concerns raised by trucks idling for hours on end. The diesel fumes and dripping engine fluids generated by endless queues of trucks waiting to load or unload their cargo have a particularly detrimental effect on air and water quality. For example, the diesel engines most commonly used in big rigs emit more than 40 hazardous air pollutants, and the small drops of oil falling from their engines end up as industrial runoff, which eventually washes into the sea.

The U.S. Environmental Protection Agency says that ports (which includes both land and water operations) are one of the biggest and most poorly regulated sources of pollution in the country. No one has really quantified just how big a problem this is across all ports, but it’s been estimated that idling commercial diesel trucks across the U.S. results in 36.2 million tons of air pollution a year. Per the U.S. EPA, that amount includes somewhere around 11 million tons of carbon dioxide, 200,000 tons of nitrogen oxides, and 5,000 tons of particulate matter. Even slight improvements in the way terminals manage their operations could lead to drastic reductions in pollution. And in addition to the air and water pollution, every idling truck wastes about one gallon of diesel fuel per hour (worth about US$4 at press time).

One simple solution to the endless lines of trucks is to just add more entrance gates to the facility. This can be a quick and easy way to increase the effective capacity of a port to receive and ship containers, if the facility can indeed handle the increased number of simultaneous truck arrivals. Facility expansion is also a relatively simple solution. One expansion idea is to build a temporary drop-off/pickup terminal outside of the main terminal, similar to a cross-docking station. This design would allow trucks to arrive and depart during main peak hours, with the containers then being shuttled back and forth between the main facility and the external facility during off-peak hours. Unfortunately, neither gate nor facility expansions are always available options at older terminals or at terminals located in or near large metropolitan areas, where land space is at a premium.

Another efficiency solution that’s been applied is known as truck arrival management, or TAM. TAM assigns trucks a time window for when they can come to a port to drop off or pick up cargo associated with a particular vessel, with the ultimate goal of maintaining truck congestion at a manageable level. TAM suggests that the minimum time window given should be no less than 6 hours. The problem with TAM systems, however, is that there is no “one size fits all” best strategy, because different countries have different ways of handling cargo. In China, for example, cargo handling and terminal operations are generally a 24/7 activity, and nighttime drop-offs and pickups don’t pose a problem. Having access to a 24-hour work cycle allows facility managers to spread out the demand around the clock, reducing truck waiting times, idling times, and negative environmental impacts. But for ports in other countries or regions with restricted operating hours, balancing truck arrivals and departures to reduce waiting times and pollution can be an almost impossible challenge.

To try to address this issue, a modification to the TAM system uses what is called congestion pricing, which is essentially a surcharge paid to use road or port facilities during peak hours. If a town or community decides to implement congestion pricing, charges are imposed on the vehicles (trucks, cars, or other kinds of transportation, for that matter) that want to use its roads and terminal facilities. The actual tolls can vary (e.g., higher prices during the day, lower prices at night) to provide financial incentives for trucking and shipping companies to manage their own operations and shift cargo movement to off-peak hours. The primary benefit of this system is an overall decrease in wait times, traffic, and pollution, and a smoothing of the usual demand spikes and valleys.

A port already successfully using this type of system is the huge combined port of Los Angeles and Long Beach, California, the largest port complex in the United States. In 2005, port administrators created a nonprofit organization called PierPass to better manage truck and container movement at the port and bulk terminals there. They implemented the system by creating a financial incentive to use the facilities and roads, during nonpeak hours, by imposing a Traffic Mitigation Fee (TMF) on almost all cargo movement during peak hours, which they consider to be Monday through Friday, from 3:00 a.m. to 6:00 p.m. By all accounts, the initiative has been generally well received, with truckers reporting less congestion and substantial truck traffic being moved from peak times to nonpeak times.

But can these small changes really produce big efficiency and environmental results? Let’s consider some examples. One container terminal, located in a busy city in Northern China, used new technology and better management principles to implement a TAM system, and with what results? The maximum length of truck queues dropped from 336 to just 46, and truck waiting times went from an average of 106 minutes to 13 minutes! In the U.S., by just extending their operating hours, turn times at the port of New York/New Jersey went from an average of two to three hours to less than one hour, and at the Port of Savannah from 75 minutes to 42 minutes. So not only do you get less congestion, less fuel consumed, and fewer emissions, but you also get happier customers, happier neighbors, and substantially increased port capacity and efficiency. Sounds like a home run for green logistics!

Chen, G., K. Govindan, and Z. Z. Yang. 2013. “Managing Truck Arrivals with Time Windows to Alleviate Gate Congestion at Container Terminals.” International Journal of Production Economics 141 (1): 179-188.

Dekker, R., S. van der Heide, and E. van Asperen. “A Chassis Exchange Terminal to Reduce Truck Congestion at Container Terminals,” Proceedings of the First International Conference on Logistics and Maritime Systems, Busan, Korea (2010): 380–388.

Environmental Defense Fund (EDF). “Attention Drivers! Turn Off Your Idling Engines.” Last accessed January 17, 2013. www.edf.org/transportation/reports/idling.

Environmental Protection Agency (EPA). “SmartWay Technology Program.” Last accessed January 17, 2013. www.epa.gov/smartway/technology/idling.htm.

Environmental Protection Agency (EPA). “Sustainable Ports: Management.” Last accessed January 21, 2013. www.epa.gov/region1/eco/diesel/spmanagement.html.

Merk, O., and T. T. Dang. “Efficiency of World Ports in Container and Bulk Cargo (Oil, Coal, Ores and Grain).” The Organization for Economic Cooperation and Development, September 2012. Last accessed January 7, 2013. www.oecd-ilibrary.org/urban-rural-and-regional-development/efficiency-of-world-ports-in-container-and-bulk-cargo-oil-coal-ores-and-grain_5k92vgw39zs2-en/.

PierPass. Last accessed January 7, 2013. http://pierpass.org/about/.

Supply Chain Digest. “Global Logistics: Port Efficiency Must Keep Pace with Growth in Megaships, APM Executive Says.” Supply Chain Digest, May 2, 2012. Last accessed January 7, 2013. www.scdigest.com/ontarget/12-05-02-2.php?cid=5799&ctype=content.