Sustainable Storage Lecturers Jorma J Imppola Summer School

Sustainable Storage Lecturers: Jorma J. Imppola Summer School 2015 Seinäjoki University of Applied Sciences Seinäjoki Finland 1

Lecture Content Background Motives of storage Sustainable distribution centres Reasons to invest in a sustainable warehouse 2

Background The material activities are aimed to perform so that right materials (rawmaterials, semi-products, supplies and final products) are at the right time at the right place at the right quality at the preferred service level so that the long-range financial result of the company is maximised. These general items lead to the material management's items for inventories: To ensure efficient operation => minimise the total costs To maximise the service level To minimise the capital bound in the inventories 3

Background With these objects a group of items can be formed: small unit costs big inventory turnover the steady quality of purchased products good relations to the suppliers and the continuity of the deliveries. These items partly conflict with each other. The problem of the material management is to find a suitable combination of objects in order to maximise the total benefit. The essential questions of inventories are which inventory level should be chosen and how big should the supply batches were. 4

Background The decision is a compromise between two conflicting objects: minimisation of the inventory capital and maximisation of the service level. The storage must not be dealt as a function separate from its environment. When changing the inventory system the effects on the logistic chain both sides of the inventory must be considered. We must remember that the sum of partial optimisations is not the result of the total optimisation. The alteration of the inventory system must be joined to alterations in distribution and production systems etc. 5

Motives of storage Transportation and process inventories These are materials bounded into transportation and process. These are substitutes for static inventories because: storage is expensive the requirements for delivery time get tighter market and supply areas widen because of specialisation the information traffic techniques develop Batch size inventories These are created because the economy of the magnitude. Because of different economical reasons it is profitable to accumulate sufficient amounts of materials before starting the production or transportation. Buffer inventories These are maintained because of uncertainty in demand or delivery amounts or timing. The costs of a buffer inventory are smaller than stock-out costs. 6

Motives of storage Seasonal inventories appear when products are produced before their demand. Regular predictable variation is typical for the demand. For example winter sport equipment, soft drinks, garments etc. Speculative inventories These appear when some products are bought before a predictable rise in prices or taxes etc. In this case the savings are bigger than the inventory costs. Security inventories are created for the case of accident, war etc. Security inventories are usually stored separately and cannot be used without special permission, which can be issued in special cases only. 7

Sustainable distribution centres Incorporating sustainability initiatives into a warehouse and distribution centre (DC) design is proving to be a win-win proposition. It mitigates harmful effects to the environment, encourages worker safety and comfort, while winning the respect of your customers and community. From a more critical business perspective, it also lowers operating costs, ultimately improving a company’s financial performance. Even older trends are being given a fresh look, incorporating newer technologies and innovative techniques. 8

Sustainable DC - Location The primary energy use in a DC is actually not the building itself but rather the transportation that services that building. With this in mind, distribution centres should be located where it makes sense primarily in terms of the logistics model. That is the greatest impact on sustainability. Companies are turning to network studies to investigate moving their distribution facilities closer to inbound ports or closer to customers to save local transportation energy consumption — and subsequently reduce environmental emissions. 9

Sustainable DC - Location The latest modelling tools literally calculate a company’s supply chain carbon footprint for its plants, its warehouses, and its different modes of transportation. This is then factored into the decision-making process for locating DCs in an optimised, more energy-efficient distribution network. To make an even bigger dent in costs and your carbon footprint, experts suggest optimizing truck capacity and developing more efficient transportation routes. 10

Sustainable DC - Lighting Sustainability in lighting has always been one of the most popular initiatives; that’s because the percentage of energy attributed to lighting a facility is quite high. It represents typically about 30 percent of the energy use in a DC. One of the more popular lighting strategies is ‘daylighting. ’ Just recently at Coca-Cola daylight tubes were integrated well as clear story glass to bring light into the distribution centre. 11

Sustainable DC - Lighting Light fixtures with daylighting sensors were installed in this facility so that the building can often operate without any artificial lighting. There was also an increase in employee productivity and attendance when working in an environment with natural light. Further improvement can be achieved by complementing artificial lighting with occupancy sensors. 12

Sustainable DC - Lighting A very functional solution is to use energy-efficient fluorescent fixtures like LED lamps with these occupancy sensors. Due to the instantaneous strike time of a LED lamps, they can be turned on and off providing lighting on demand. By contrast, a high pressure sodium lamp needs about 10 minutes to warm up to full illumination and must cool about 15 minutes before they will restrike, making it not suitable for intermittent operation. 13

Sustainable DC - Recycling Be it in the planning phase, construction phase or in day-to-day operations, the trends of “recycling, reusing, and repurposing” remain one of the most popular in sustainable design. Even before construction, professionals see opportunities for sustainability and significant costs savings in land use—or reuse. Instead of new facilities, vacant buildings that are currently in abundance as a result of the difficult economy should be redeveloped. Better yet, develop on land that has previously been developed and/or contaminated. If building a new DC, reduce construction costs by using precast concrete and steel with high-recycled content. 14

Sustainable DC - Recycling Once the DC is operational, recycling is now a fairly common practice for today’s DCs. Why not take it a step further? Use returnable plastic containers (RPCs) in internal captive pools designed specifically for a particular operation, or external shared pools with standardised designs that enable supply chain-wide efficiencies – like the Finnish Transbox pool system. RPC pools have minimised operating costs with greater than 90% waste reduction. 15

Sustainable DC - Going for net-zero A net-zero building is one that generates as much energy as it uses over a year, thus “net”-ting zero energy requirements to the local power grid. The design of a net-zero building as an iterative process where the building function and energy footprint are evaluated to optimise performance. Once optimal building energy performance is determined, a renewable energy strategy is formulated. Furthermore, the vast rooftops of some DCs make them excellent locations for solar panels. For example a net-zero facility deploying a roof-mounted, 1, 2 MW photovoltaic array that met the demands of the company’s entire corporate campus with a less than five year payback. 16

Sustainable DC - Smarter buildings Buildings are not only getting greener; they’re getting smarter. It’s now best practice for new construction to have some form of smart building or energy management systems that uses “submetering” to give building managers visibility into equipment energy use and performance. Submetering involves installing physical measuring devices onto machinery and equipment to monitor usage of electricity, gas, water, and other utilities. This data is then sent to web-based building management software for analysis and to identify opportunities for energy and cost savings. 17

Sustainable DC - Smarter buildings It involves understanding energy loads and where they’re being used. If something goes wrong with any piece of equipment anywhere in the building, these kinds of systems will immediately give an alarm. An outside air damper could be stuck open and you could be heating 20 degree air all winter long. With an intelligent building management system, you could quickly pinpoint the problem and deploy an engineer immediately to fix it. 18

Sustainable DC - HVLS fans Even during hot summers, a mega-DC hardly taps into its air-conditioning system. That’s because the company installed an integrated fan control system that uses 26 high-volume, low-speed (HVLS) networked warehouse fans with 72 cm diameters to cool indoor temperatures. Designed to move massive columns of air at low speeds, HVLS fans can help regulate a facility’s temperature year-round from floor to ceiling. It permits facilities to increase or decrease thermostat temperature settings between 3 degrees and 5 degrees without realising any negative temperature changes. By networking the fans, they can be easily controlled and monitored from a centralised location. Savings can range from 12% to 50% in cooling and heating costs, while providing employees with a more comfortable work environment. 19

Sustainable DC - Define goals first With so many initiatives to choose from, first define goals. Why sustainability is pursued? Is it to reduce energy costs or is it to make a statement that’s consistent the company goals? Never rule out an initiative because of a preconceived notion that it might cost too much money. Many times the incremental cost is not as much as people think it’s going to be. 20

Reasons to invest in a sustainable warehouse The incorporation of sustainable practices into warehouse and distribution centre design has proven to be a winning strategy for business. Warehouse designs incorporating sustainability alleviate harmful effects on our environment while encouraging worker security and comfort levels. Sustainable warehouses earn respect from customers and community members. Moreover, they lower a company’s operating costs and ultimately improve a company’s profit margins. 21

Reasons to invest in a sustainable warehouse Access to energy The energy sources that a company uses directly impacts the surrounding community’s quality of life. Approximately 20% of the world’s population is living without direct access to electricity. People forced to contend with this circumstance have limited access to conventional education. Consequently, citizens of these communities have few options for economic and social development. 22

Reasons to invest in a sustainable warehouse Access to energy Moreover, some communities that have access to electricity may lack the infrastructure needed to create a more stable energy grid. Energy interruptions at a company’s warehouse or distribution centre often negatively impact commercial operations and could possibly endanger lives. Sustainable warehouses provide more reliable electricity access since power is produced on the actual worksite — meaning products kept in these warehouses can be held in ideal conditions. Goods held in sustainable warehouses are also more secure since security systems are less likely to experience interruptions in electricity access. 23

Reasons to invest in a sustainable warehouse Price volatility Energy prices rise and fall according to consumer demand. Today, much of the world is in the process of developing its infrastructure. Additionally, war and unstable trading conditions can cause huge price increases and limit access to energy sources. For instance, unstable conditions in the Middle East directly affect the world’s energy markets. 24

Reasons to invest in a sustainable warehouse Price volatility Rising energy prices can slow growth in developing countries. In some cases, price increases can halt a country’s growth completely. By generating power from alternative energy sources, sustainable warehouses shield companies against the adverse effects of war and political uncertainty. Alternative energy sources provide a dependable energy supply in locations that previously lacked the resources needed to stabilise its energy supply through traditional means. 25

Reasons to invest in a sustainable warehouse Efficiency incentives Government mandates that regulate commercial buildings are becoming increasingly strict where pollution is concerned. Current trends clearly indicate that operating sustainable buildings will be the standard for commercial enterprise in the near future. One such example of government-regulated changes into green operations is the Energy and Performance of Buildings Directive issued in 2010 by the European Parliament and the Building Council of the European Union. 26

Reasons to invest in a sustainable warehouse Efficiency incentives Some of the requirements mentioned in this directive are: By 2020, all new buildings must be able to achieve “nearly zero energy” results and must gain most of its energy supply from renewable resources. By the end of 2018, each new building owned or occupied by the public must be nearly zero-energy buildings. By 2020, all buildings must get at least 20% of their energy supply from renewable sources. 27

Reasons to invest in a sustainable warehouse Improve ROI There are several economic reasons why a company should consider moving toward sustainable warehousing and distribution centres. Sustainable design provides efficiency improvements and reduces operation cost over the lifetime of a building. CDP’s annual report issued in 2011 stated the following: Operating costs decrease by approximately 13. 6% for new buildings and roughly 8. 5% for existing buildings. Occupancy of rates increase by 6. 4% in sustainable buildings and increase by 2. 5% in existing constructions. 28

Reasons to invest in a sustainable warehouse Inspire better overall performance Reports from Global 500 companies show a positive correlation between negative returns on equity and abandoning corporate social responsibility standards. Consequently, one can easily understand how owning sustainable warehouses and distribution centres can improve a company’s bottom line. 29

Thanks for your attention 30