With diesel fuel hovering near $5.00 per gallon, many trucking company executives and shippers find themselves in nothing short of a crisis. An emerging organization outside of the transportation and logistics industry called SmartWay, however, is working to provide carriers and shippers with a fighting chance to combat the costs of rising fuel.

Created and launched by the Environmental Protection Agency in 2004, and acutely aware that shippers and carriers would be resistant to doing business with a government agency focused on the environment, the EPA wisely marketed SmartWay as a voluntary organization that specialized in saving companies money through a new technique known as sustainable transportation. 

In order to ensure a successful launch, the EPA spent months consulting with some of the biggest names in big box retailing and trucking establishing goals of the program:

•            Carriers who agreed to utilize the technology and guidelines set forth by SmartWay could expect to reduce the cost of operating each truck in their fleet by up to $5,000.

•            SmartWay would work with shippers to quantify the benefits and savings that could be achieved by utilizing SmartWay certified carriers. SmartWay would also act as a champion to get shippers and carriers to embrace sustainable transportation and collaborate on business opportunities.

•            The environment would benefit as a result of reduced carbon, nitrogen (NOx) and particulate matter entering the atmosphere.

•            U.S. national energy security would be enhanced as a result of less fuel being required for import.

•            Membership into the program would require nothing more than carriers and shippers reporting their overall fuel usage and agreeing to submit a three-year plan to reduce their use of fuel and carbon emissions.

Many carriers remained skeptical of the technology SmartWay was recommending and the view at the time among most trucking executives and industry experts was that fuel prices were peaking. As one carrier executive noted, “SmartWay had their supporters within the carrier community, but my view at the time was that it didn’t make economic sense to invest money into fuel reduction technology for trucks.” 

The SmartWay Upgrade Kits being offered to carriers were not cheap. The kits consisted of highly fuel-efficient technologies bundled with emission control devices. 

When SmartWay first unveiled the pricing for the kits in 2004, many carrier executives felt the prices too high as the belief at the time was that fuel prices were in a bubble and would eventually decrease. 

To ensure that shippers got the message that SmartWay was in it for the long haul, SmartWay partnered with NGO’s who were pressuring companies in the U.S. to pay more attention to their carbon footprint. Shippers began to ask questions about the type of carbon reduction and environmental sustainability programs transporters had in place.

Today, SmartWay has over 870 members ranging from carriers, logistics providers, and shippers that are on track to save over $2 billion in fuel while eliminating over 5 million tons of carbon dioxide from the atmosphere on an annual basis. Carriers such as JB Hunt, Estes Express Lines, and charter carrier Schneider National, and shippers Dell, JC Penney, and Wal-Mart are all partners.

SmartWay, by all accounts, has been among the most successful programs ever launched by the EPA; it operates on a small budget, which is a double-edged sword. Rising fuel prices are driving carriers to invest in fuel saving technologies and devices.  Correspondingly, from 1 to 3 carriers per day are enrolling in the program, taxing administrative resources.

The organization continues to grow, doubling in size every year since its inception, according to Mitch Greenberg, manager of the EPA SmartWay program; and shippers continue to express a tremendous amount of interest in the program. Shippers are now asking SmartWay to expand their program to include all modes of transportation from ocean, rail, to air as well as to port services with heavy truck traffic transporting products from ports to distribution centers. 

Meanwhile, the EPA is proposing an ambitious project called the SmartWay Transport Supply Chain Protocol, which offers tools and methods to quantify and reduce their transportation supply chain carbon footprint. The project will enable industry stakeholders to better assess and reduce the emissions from multimodal goods movement.

The EPA is also responding to a growing list of inquiries from overseas where foreign governments, trade associations and NGOs are looking to implement SmartWay sister programs in their countries. Many are offering to harmonize data collection and reporting methods and are looking to improve the sustainability of global supply chains. 

Beyond SmartWay

Although partnerships with organizations such as SmartWay have taught carriers and shippers how to reduce their fuel costs, the price of diesel fuel continues to cause anxiety. According to the logistics research organization ARC Advisory Group, one of the best strategies that shippers can utilize to reduce their logistics related costs is to take advantage of available transportation management software (TMS) and strategic network analysis tools.

Adrian Gonzalez, director of ARC’s Logistics Executive Council, says that growth in TMS sales stems from the fact that transportation has become more difficult to manage, with smaller order sizes and shorter order-to-delivery cycles wreaking much of the havoc. Rising fuel costs and inventory-reduction initiatives are also pushing companies toward leaner, just-in-time operations. “As a result, transportation providers have no choice but to turn to technology as a way of reducing their costs. Carriers and shippers will also have to do a much better job of collaborating and working as strategic partners,” he observes.

The long and winding road

No one knows for sure what the future will hold in regards to the price of oil or corresponding diesel prices, but many industry analysts are predicting sustained price increases for the near future. Programs such as SmartWay are easing the pain for over 870 companies who have chosen to seek out real-world solutions to their rising logistics costs. TMS technology can continue to provide much needed analytic and optimization capability for better network management and reductions in cost. Professor Zach Zacharia, Ph.D., Management, of Texas Christian University, argues that “collaboration accelerates innovation among companies especially during times of high stress.” The term “high stress” certainly applies to the present. wt



Brittain Ladd is Director of Logistics and Project Management for a Dallas private equity firm.