Reducing GHG’s in our Transportation Network to Create a More Sustainable Logistics Profile
Sept. 9, 2009
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Today’s Agenda …
► Sustainability Vision in Our Supply Chain
► Types of Transportation GHG’s at JCI
Freight Logistics
Travel
Service/Management Fleet Vehicles
► Opportunities for GHG Reductions− Freight Logistics
− Travel
− Fleet
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Sustainability at Johnson Controls
SustainabilityThrough our products, services,
operations, and community involvement, we promote the efficient use of resources to benefit all people and the world.
2. Achieve competitive advantage (e.g., increase sales, profit, market share) from environmentally responsible products and services
3. Reduce our global environmental foot print (e.g., carbon, waste)
4. Work with our suppliers to improve the eco-efficiency of the supply chain
5. Increase minority business development and supplier diversity
6. Strive to attain a high performance work environment that is free of work place diseases and that is physically and emotionally safe.
7. Recognize and respect the human rights of our employees and community stakeholders
8. Promote fair selection, development, engagement and recognition of our people to ensure a diverse, inclusive and sustainable work force
9. Invest in the communities we serve through employee volunteerism and targeted philanthropic giving
1. Ensure the ongoing financial viability of the business through strategic investments and management of risk
10. Hold ourselves accountable to the highest standards of corporate and personal integrity and ethics
Environmental Stewardship Social Responsibility Economic Prosperity (Planet) (People) (Profit)
Key
Str
ateg
ies
Va
lue
GHG and Carbon Sources
Logistics, Travel, Fleet GHG Overview
Logistics: Approximately $1 B spend => 19 M tons GHG
Travel: Approximately $200M spend => 54 M tons GHG
Fleet: Approximately 18,000 vehicles => X M tons GHG
Logistics FocusLogistics Focus
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Sustainability Goals Within Our Supply Chain
SustainabilityThrough our products, services,
operations, and community involvement, we promotethe efficient use of resources to benefit all people and the world.
2. Achieve competitive advantage (e.g., increase sales, profit, market share) from environmentally responsible products and services
3. Reduce our global environmental foot print (e.g., carbon, waste)
4. Work with our suppliers to improve the eco-efficiency of the supply chain
5. Increase minority business development and supplier diversity
6. Strive to attain a high performance work environment that is free of work place diseases and that is physically and emotionally safe.
7. Recognize and respect the human rights of our employees and community stakeholders
8. Promote fair selection, development, engagement and recognition of our people to ensure a diverse, inclusive and sustainable work force
9. Invest in the communities we serve through employee volunteerism and targeted philanthropic giving
1. Ensure the ongoing financial viability of the business through strategic investments and management of risk
10. Hold ourselves accountable to the highest standards of corporate and personal integrity and ethics
Environmental Stewardship Social Responsibility Economic Prosperity(Planet) (People) (Profit)
Key
Str
ateg
ies
Va
lue
Reduce our Global Environmental Footprint (e.g., carbon, waste)
Work with our Suppliers to Improve the Eco-Efficiency of the Supply Chain
Logistics focus:Logistics focus:• Increase Mileage Efficiency• Decrease Total Miles• Supplier Initiatives• Find ways to deliver our goods and services
to our constituents more efficiently.
Logistics FocusFY 2010 Global Plan Spend
North Latin Middle Estimated CO2Global Spend (mil.'s) America EMEA Asia America East Total Emissions (Ton mil.'s)
Building Efficiency $120.0 $50.0 $18.8 $20.1 $8.6 $217.4 4.3
Automotive Experience 158.0 200.0 7.5 tbd - 365.5 7.3
Power Solutions 263.5 110.0 0.4 tbd - 373.9 7.4
Total $541.5 $360.0 $26.6 $20.1 $8.6 $956.8 19.0
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Logistics GHG Reduction Activities Moving Forward
Increase Mileage Efficiency Convert LTL to TL (Milk-runs, Consolidation Centers – see ‘AE Hub & Spoke Consolidation Network’ slide) Minimum carrier contract mileage clause – set minimum MPG requirement MBBP Rate Cost Modeling - establishing BIC benchmarks for rate cost drivers (Equipment, Fuel, Labor, etc.)
Fuel surcharge minimum miles per gallon requirement
AE Intermodal (see ‘AE Matamoros, MX Intermodal Example’ slide) Mode Selection (see ‘UTI Analysis 5.1: Mode shift air to ocean’ slide)
Decrease Total Miles Supplier Selection footprint (see ‘UTI Analysis 4: Supplier Localization’ slide) Manufacturing Footprint
Provide Logistics data / support to Manufacturing Op.’s team to define total supply chain cost
Warehouse and Distribution Locations Consolidation North America BE Regional Distribution Center Consolidation (See ‘North America Systems Branch Shipments Consolidation’ slide) Europe BE Katoen Natie Duty Deferred Distribution Warehouse Consolidation (38 warehouses to 4)
Increase Pack Density North America AE Trim in Bundles vs Coffin Boxes project increasing density 2.5x (see ‘AE Trim in Bundles’ slide) North America AE Headrest Eco-pack to Coffin Box project Inbound pack density reviews at plants
Truckload Utilization (TUMS – AE North America 95% FTL utilization)
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Logistics GHG Reduction Activities Moving Forward Supplier / Misc. Initiatives EPA SmartWay Partnership (see ‘Smartway Partnership’ slides)
Carrier SmartWay Participation - JCI Sourcing Expectation
Key Supplier Sustainability Programs Maersk Super Slow Steaming Green Logistics at Schenker Fedex
Global Logistics Council (first meeting held 8/25 - GHG reduction will be a GLC focus)
Find ways to deliver our goods and services to our constituents more efficiently Remote Operations Center with re-set capability Vehicle selection parameters (hybrids, smaller units) Consolidation Centers Balance between Inventory and Freight Expense (GHG’s) Eliminate storage (lead-time efficiency—lean)
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JCI AE Hub & Spoke Consolidation Network(LTL to FTL and Increased Ship Velocity / Lower Inventory)
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CHR Example
Origin Matamoros, MX
Destination Warren, MI
Total annual moves: 1008
Total miles/move: 2,342
OTR fuel (gallons): 378
Rail fuel (gallons): 98
Annual Fuel reduction (gallons) 281,868 576 OTR Miles
1766 Rail Miles
AE Matamoros, MX Intermodal Example
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Analysis 5.1: Mode shift air to ocean JCI agreed upon a feasible mode shift plan considering their current business environment as well as a few key assumptions
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Shift in RB, Prover, &
Greishaber using 75%
tier
Shift in two products
from CTS* (Thailand)
Total
Total Savings
Freight Change
ICC Change (OH)
Avg. Days Increase
Avg. % Hit Minimum
# Shifted Shipments
$72,415
$92,565
$20,150
14.7
40.6%
30
$17,552 (1)
$ 17,552
$ 0 (2)
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0%
26
$ 89,967
$ 110,117
$ 20,150
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JCI mode shift plan = + =
Considerations for the Mode Shift Analysis:•The overall increase in lead-time between air and ocean is feasible for the volume being shifted.
•There is enough space in Reynosa to accommodate the increase in safety stock when switching from air to ocean•BCP was evaluated, but was not shifted to ocean because of the increase in lead time and increase in space for safety
stock in Reynosa•(1) Two items produced by CTS (25-89244-10 and 25-89244-2) coming from Ayutthya (TH) are being shifted from air to ocean. These products represent 28% of the total weight of CTS shipments. Remaining CTS product will ship via air.
•(2) Inventory carrying costs not considered for CTS due to consignment status
Analysis 4: Supplier Localization Sensitivity Analysis: Scenario 2 – All suppliers are moved to within a distance of 1000 miles from Pharr
Avg. distance1260 mi
1000 miles
Freight Savings ICC Savings Inv. ReductionAir Freight 81.8K - -Ground Freight 290.2K 6.3K 63.2KSub Total 372.1K 6.3K 63.2KGrand Total 378.4K
Supplier locations outside 1000 mi 974
Total supplier spend $68.9M
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Analysis 4: Supplier Localization Sensitivity Analysis: Scenario 3 – All suppliers are moved to within a distance of 500 miles from Pharr
Avg. distance1260 mi
500 miles
Supplier locations outside 500 mi 1,103Total supplier spend $80.0M
Freight Savings ICC Savings Inv. ReductionAir Freight 210.4K - -Ground Freight 572.5K 10.0K 102.7KSub Total 782.9K 10.0K 102.7KGrand Total 792.9K
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North America Systems Branch Shipments ConsolidationFrom 15 to 4 Regional Warehouses
Reno HarrisburgCarol Stream
Coppell
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Trim In Bundles ProjectOpportunity: Transition trim from coffin
containers to loose loaded trim in bundles/bags.
2.5 pack density improvement
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EPA SmartWay Transport Partnership: General Overview
SmartWay is a voluntary, market based program that is creating a demand for cleaner, more fuel efficient transportation•Major focus on sustainable goods movement•Provide tools to help carriers improve their fuel efficiency•Through SmartWay, carriers showcase their efficiency to shippers•Challenges Shippers and Logistics companies to use SmartWay carriers to move their goods
SmartWay directly addresses 3 significant National issues: •Global Climate Change•Energy Security•Business Financial Bottom Line
SmartWay works from the principle of you can’t improve something until you properly measure it
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EPA SmartWay Transport Partnership: GoalsReduction Goals:• Fuel consumption from trucks and rail delivering freight• Operating costs associated with freight delivery• Emissions of CO2 (30 million metric tons)• Emissions of NOx (commonly known as smog)• Particulate Matter (PM) serious health and environmental effects
Environmental goals:• Reduce spend on fuel (and dependence on oil imports)• Better understand emissions and environmental footprint• Contribute to corporate vision for environmental responsibility• Demonstrate our commitment to the environment publicly
Our commitment to Smartway includes:•Define percentage of freight shipped (or received) by SmartWay Partnership carriers•Measure greenhouse gas emissions•Increase the percentage of freight shipped (or received) to score at least 50% in 3 years•Develop action plans detailing how goal will be achieved•Submit goals and action plans to the EPA within 6 months of signing (report annually)
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EPA SmartWay Transport Partnership: JCI SmartWay Profile and Focus Areas
Carrier Focus Areas:•Engine Idling•Top Speed Governing•Tire Pressure•Improved Aerodynamics•Use of Bio-diesels / Alternative Fuels•Route Planning
BE North AmericaCO2 Emissions (Tons) Smartway Carrier SIF Score Mileage
Mode (1000s) Smartway Non-Smartway Compliance Weighted by Mode (1000s)Truckload 68 78 139 36% 0.71 33,384 Less Than Truckload 253 63 190 25% 1.17 124,058 Expedited 4 7 117 6% 0.64 2,176 Parcel 1,302 17 5 77% 0.81 639,193 Air 755 34 56 38% 0.80 370,946 Total 2,382 199 507 28% 0.79 1,169,756
NotesCurrent estimated JCI Smartway shipper score is .79 out of possible 1.25Carrier base Smartway compliance is 28%CO2 Emissions (Tons) based on .00203656 Tons / mile
Carriers
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Sustainability Goals Within Our Supply Chain
SustainabilityThrough our products, services,
operations, and community involvement, we promotethe efficient use of resources to benefit all people and the world.
2. Achieve competitive advantage (e.g., increase sales, profit, market share) from environmentally responsible products and services
3. Reduce our global environmental foot print (e.g., carbon, waste)
4. Work with our suppliers to improve the eco-efficiency of the supply chain
5. Increase minority business development and supplier diversity
6. Strive to attain a high performance work environment that is free of work place diseases and that is physically and emotionally safe.
7. Recognize and respect the human rights of our employees and community stakeholders
8. Promote fair selection, development, engagement and recognition of our people to ensure a diverse, inclusive and sustainable work force
9. Invest in the communities we serve through employee volunteerism and targeted philanthropic giving
1. Ensure the ongoing financial viability of the business through strategic investments and management of risk
10. Hold ourselves accountable to the highest standards of corporate and personal integrity and ethics
Environmental Stewardship Social Responsibility Economic Prosperity(Planet) (People) (Profit)
Key
Str
ateg
ies
Va
lue
Reduce our Global Environmental Footprint (e.g., carbon, waste)
Work with our Suppliers to Improve the Eco-Efficiency of the Supply Chain
Travel focus:Travel focus:• Decrease travel (video conference, other)• Shift Modes => Air to Rail• Downsize car rentals• Shift to “Sustainable Hotels”• Airline initiatives
Types of Travel GHG’s at JCI--air
Mileage <940 940-1875 >1875 TOTAL TOTAL CO2US AE 6,206,820 4,211,631 14,425,729 24,844,180 5,962,603US BE 27,045,005 18,795,863 13,392,136 59,233,004 14,215,921US PS 5,393,239 2,520,941 3,495,847 11,410,027 2,738,406US COR 1,344,601 902,679 3,155,725 5,403,006 1,296,721US GOV 718,937 403,134 315,802 1,437,874 345,090EU AE 29,029,759 4,960,492 19,638,181 53,628,432 12,870,824EU BE 6,793,953 1,129,725 4,729,335 12,653,013 3,036,723EU COR 845,853 164,768 1,401,253 2,411,874 578,850EU PS 3,082,563 79,258 317,263 3,479,084 834,980MEX 0 0 0 11,035,715 11,035,715 2,648,571CANADA 555,176 531,550 494,496 0 1,581,222 379,493ASIA NON CONSOL 16,577,764 16,577,764 3,978,663LATIN AMERICA NON CONSOL 8,470,715 8,470,715 2,032,971MIDDLE EAST NON CONSOL 4,642,857 4,642,857 1,114,286EU NON CONSOL 11,189,520 11,189,520 2,685,485TOTAL 227,998,285 54,719,588
Car measurements: # of car rentals * 96 miles per rental day, assumes 23 mpg, assumes 2.2 days per rental
Hotel nights: # of trips * 2.2 nights per trip, GHG estimated generically
Travel GHG Reduction Activities Moving Forward
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► Telepresence/Halo: Higher approval on impacted routes, currently in review by Bruce McDonald. Recommended Milwaukee/Detroit/Shanghai/Hong Kong/ Burscheid/ Hannover/Brussels/Bratislava/Monterrey/Aldershot► Car rental: Reduce mpg rate through current Avis contract—reduced involuntary upgrades from 83% to 56%--upgrades now normally to full-size not SUV
► Car Rental policy: changed policy to smaller cars► Airline: Have negotiated new rates with SNCF on Paris/Strasbourg (one of our top European routes) and shifted some traffic from air to rail.
► Last RFP has requested airlines to commit to CO2 reductions/mile of 1%/year—have buy-in from UA & DL► Rail: Changed policy on use of rail for AE Europe (Rail = 1/8 of air on high-speed rail routes► Hotels: Have requested hotel suppliers on RFPs to list sustainable devices, e.g. in-room energy card switch
► Requested hotel suppliers to supply energy data (low response)► Working with industry group to set hotel sustainability measurement
standards► Meeting group is focusing on sustainable menus for meetings
► Demand management: Airweb is making this more visible—includes CO2 measurements on travel docs.
Vehicle Fleet GHG Reduction Update
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Sustainability Goals Within Our Supply Chain
SustainabilityThrough our products, services,
operations, and community involvement, we promotethe efficient use of resources to benefit all people and the world.
2. Achieve competitive advantage (e.g., increase sales, profit, market share) from environmentally responsible products and services
3. Reduce our global environmental foot print (e.g., carbon, waste)
4. Work with our suppliers to improve the eco-efficiency of the supply chain
5. Increase minority business development and supplier diversity
6. Strive to attain a high performance work environment that is free of work place diseases and that is physically and emotionally safe.
7. Recognize and respect the human rights of our employees and community stakeholders
8. Promote fair selection, development, engagement and recognition of our people to ensure a diverse, inclusive and sustainable work force
9. Invest in the communities we serve through employee volunteerism and targeted philanthropic giving
1. Ensure the ongoing financial viability of the business through strategic investments and management of risk
10. Hold ourselves accountable to the highest standards of corporate and personal integrity and ethics
Environmental Stewardship Social Responsibility Economic Prosperity(Planet) (People) (Profit)
Key
Str
ateg
ies
Va
lue
Reduce our Global Environmental Footprint (e.g., carbon, waste)
Work with our Suppliers to Improve the Eco-Efficiency of the Supply Chain
JCI Vehicle Fleet Focus Opportunities:JCI Vehicle Fleet Focus Opportunities:• Increase Mileage Efficiency via vehicle
selection (hybrids, engine size, diesel)• Driver education• Route planning
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US Vehicle Fleet GHGs by Business Unit
Management2%
Non-Management
98%
AE 1.5%
PS0.5%
BE 98%
JCI has approximately 18,000 fleet vehicles globally.
Johnson Controls27
Uplander
GHG Reduction Activity: Hybrid Vehicles
3.2 tons CO2e/vehicle/yr 5.5 tons CO2e/vehicle/yr
Approximate 42% decrease from non-hybrid vehicle use within JCI fleet
Have 15 Ford Escape Hybrids, avoid approximately 30 tons CO2e/yr by FY2009
► Plans for FY2010
Vs.
Escape Hybrid
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Add 100 Ford Escape Hybrids Estimated avoidance of 220 tons CO2e/yr
If this trend continues:
► Plans for FY2010
FY2009 FY2010 FY2011 FY2012 FY2013
+100 +100+100 +100 +100
-250
Fleet Hybrids
Annual Addition
15 415115 215 315
Total Hybrids 115 515215 315 415
-480 -700 -930 -1,160Avoided tons CO2e
% Reduction of TotalFleet Footprint*
0.3% 1.4%0.6% 0.9% 1.1%
GHG Reduction Activity: Hybrid Vehicles
By 2012, considering BOTH GHG reduction opportunities,a potential 3% reduction & approximate $1 M in fuel savings
Approximate $500,000in fuel savings
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Fleet GHG Reduction Activities Moving Forward
Action items being pursued:
► Hybrid vehicle implementation in systems fleet
► Considering alternate vehicles for service fleet
► Driver educational/training program
-(‘Driving Green Competition”)
► Shifting of vehicles within categories
-Engine size reduction –6 cyl to 4 cyl
-Gasoline to Diesel
Further study required:
► Engine Idle Monitoring
► Route planning (GPS, ROC, no left turns)