How green warehouse practices reduce cost: The double benefit of environmental sustainability

By understanding how green warehouse practices reduce cost, modern companies reap the benefits of improved bottom lines while boosting their corporate image.

Going green proves to stakeholders that a company values sustainability and cares about the larger world outside the corporate conference room. Indeed, research shows that such initiatives are vital to global health now and in the future. And with the right green warehouse practices, the benefit becomes twofold by leading to cost savings as well.

This article covers the cost-effective, competitive advantages of a green warehouse. Discover which green warehouse practices will save you the most money and how to implement them.

Gaining a cost-effective competitive advantage through a green warehouse

Going green provides a competitive advantage, especially considering public interest in green initiatives. Suppose a prospective customer is choosing whether to buy from a company that implements sustainable practices or one that does not. A majority of studies show that all other factors being equal, consumers are more likely to choose the greener option.

Implementing green practices can also lead to cost savings because many green practices center on improving efficiency and reducing waste. Multiple supply chain leaders have achieved significant savings by adopting green practices. For example, Amazon’s data centers run entirely on renewable energy, which costs the company an estimated 10 percent less than using fossil fuel energy.

How supply chain leaders can incorporate green practices while maintaining profit margins

Now more than ever, supply chain leaders consider sustainability efforts to be critically important. In a 2017 survey by EcoVadis and the HEC Paris business school, 97 percent of procurement officers named sustainability as one of their top five priorities. In addition, 75 percent of companies in the survey reported that they took environmental sustainability and social responsibility into account when selecting new suppliers.

Agility has invested in Hyliion, which is developing an electrified powertrain system for Class 8 commercial trucks. The Hypertruck Electric Range Extender (ERX) is a long-haul, fully electric powertrain that will improve vehicle performance, reduce emissions and save on operational costs.

Supply chain leaders also implement supply chain assessments to identify inefficiencies and ways to reduce waste and expense. This leads to cost savings by improving visibility into the supply chain and identifying opportunities for more efficient logistics solutions. Assessments can also pinpoint opportunities for improving environmental impact, such as implementing green procurement systems.

The right technologies and modeling tools also enable higher efficiency and allow companies to optimize their warehouse practices to improve their profit margin. For example, Agility has a modeling tool that enables specialists to work with a nearly infinite number of variables and combinations. These include routes, schedules, inventory requirements, shipping modes, packing density, load configuration, and more. From this data, specialists can model various supply chain strategies and identify ways to optimize their shipping practices, as well as other steps in their supply chains.

How a green warehouse saves you money

Green practices often involve finding ways to improve efficiency through an optimized supply chain, which often benefits not only the environment but also a company’s bottom line. For example, when General Motors established a reusable container program with its suppliers, it reduced disposal costs by $12 million.

The following are some simple examples of how cost savings come about from green practices:

• Decrease fossil fuel use: Using less fossil fuel leads to cost savings, as long as you don’t accomplish this reduction by spending more on electric transportation or other methods. Practices such as consolidating orders into fewer shipments or optimizing shipping routes, for example, save fuel and fuel costs without requiring you to spend the savings elsewhere.
• Reduce hazardous materials use: Many chemicals and other materials may be hazardous to humans or the environment. By minimizing reliance on these materials, such as solvents and paint, you save on costs associated with their handling and disposal.
• Use recyclable or reusable packing materials: Although reusable packing materials may have a higher up-front cost, the ability to reuse them leads to savings in the long run. Recyclable packing materials or materials made from recycled products may be less expensive.
• Use technology to reduce waste: Technologies such as robotic process automation or warehouse management tools lead to fewer mistakes, conserve time and energy, increase process efficiency, and reduce waste overall.

Saving money on operations through green warehouse practices

Warehouse storage can be expensive. Many of the reasons for high costs have their origins in practices that aren’t green. High energy usage, inefficient storage practices, and warehouse processes that result in waste cost money and impact the environment.

Reducing these inefficiencies and sources of waste can make your warehouse practices greener and more cost effective.

Green warehouse practices

Companies can implement many practices within the warehouse environment that increase efficiency, save money, and promote sustainability. The following are some of the more common green warehouse practices:

• Storage optimization: Store products in a way that minimizes the total floor space you need for them. Also, consider stacking products on pallets that forklifts can easily handle and move to minimize any expenditures associated with moving these items.
• Inventory control: Make sure to properly package, label, and store inventory. This minimizes damage, which saves you money while decreasing how much you send to the landfill.
• Cross-docking: By transferring products directly from the supplier truck to the delivery vehicle bound for the customer, you use fewer resources in the warehouse.
• Recycling and reusing: Reusing pallets and storage materials when possible saves money and helps the environment. Recycling old materials keeps them out of the landfill and saves on disposal fees.
• Energy-saving practices: Increasing warehouse insulation, using energy-efficient or natural lighting, and automating lighting can reduce energy costs.
• Warehouse management: Warehouse management systems (WMS) automate and streamline many processe within the warehouse, reducing expense and waste. For example, it can record inventory locations, direct employees where to store items, and calculate the most efficient sequence for picking items. Warehouse management software also facilitates shipping to customers from the closest warehouse, minimizing transportation use.

Benefits of improved resource efficiency

Practices that take place in the warehouse often impact and reflect practices throughout the larger supply chain. Therefore, improvements in warehouse operation often lead to improvements in shipping, handling, order management, and more.

Many of these green warehouse practices fall under the category of improving resource efficiency. In other words, the goal is to obtain the maximum useful work with the minimum amount of resources. Those resources may be human workers, energy usage, storage space, time, transportation, packaging, and so on.

For example, suppose a company plans to warehouse one hundred cubic feet of product. The warehouse needs to receive the product from the manufacturer, store the product, and then ship it to customers when they place an order.

However, this total volume is slightly over the maximum for a single forty-eight-inch by forty-inch pallet. If the company decides instead to ship ninety cubic feet at once, it can stack the product on a single pallet and improve resource efficiency. The company can then wait until demand calls for another ninety cubic feet of the product before it ships more to the warehouse. This minimizes storage space, as well as shipping and handling resources.

Cost efficiency of flexible warehousing

With the fast pace of today’s economy, many companies find that flexible warehousing solutions better meet their needs. Flexible warehousing is a warehousing strategy that enables companies to scale their warehouse space up and down by storing inventory in shared warehouse spaces on an as-needed basis. This also includes changing warehousing locations to meet customer demand.

What makes flexible warehousing green is that it only uses the necessary resources rather than securing space that goes unused. It’s also extremely cost effective because companies only pay for the space they’re using instead of reserving the maximum space they may need at all times.

Some warehousing providers specialize in providing flexible warehousing space, not by owning any actual real estate themselves, but by providing companies with open space in warehouses. Third-party logistics (3PL) providers, like Agility, own multiple warehouse sites. These companies also provide a dedicated workforce capable of handling and managing products of all types in a flexible manner.

Often, 3PL providers bring the most efficient, cost-effective, and green solutions because they come with industry expertise, as well as optimal infrastructure. By handling the warehousing needs of multiple companies at once, they can strategically manage storage of all types, often with the help of industry-leading warehouse management software.

Determining the most cost-effective green warehouse practices

With so many different green techniques on the rise, how can companies determine the most cost-effective green warehouse practices? Fortunately, emerging technologies can provide data and models to predict the financial impact of adopting green practices. In addition, there are a wide variety of case studies that can help companies see what has worked well in similar industries.

Best practices for green warehousing

The first step in determining which practices will prove most cost effective requires using data technology. The right technology and tools allow companies to estimate the environmental impacts of new practices, as well as the associated increase or decrease to overall costs.

For example, Agility has a carbon measurement tool, which allows its customers to accurately offset estimated CO₂ emissions. Since 2009, Agility has been providing customers with free carbon footprint reports that enable them to track and reduce the amount of emissions created in their supply chains.

Reducing carbon emissions often goes hand in hand with decreasing costs. Green practices typically involve cost-efficient measures such as using renewable energy, reusing resources, and cutting down on packaging materials.

Tools like warehouse management software make it easier for companies to manage and optimize their warehouse processes. Companies can also take advantage of other technology tools that automate packaging, handle procedures that reduce waste, and increase efficiency in a host of other ways.

Best green ways to reduce warehouse costs

Cost-effective green warehouse techniques aren’t one-size-fits-all; the best methods can vary based on factors like a company’s product and the target market. To decide on the best green methods for reducing your warehouse costs, it can be helpful to study how similar companies have found success in implementing green practices.

The following are some examples of practices that have helped companies realize significant cost savings:A sports apparel brand in Indonesia and the Philippines realized $2.2 million in savings by collapsing and stacking unused boxes for future use.

A Chilean retail company saw cost savings by using tracking technology. Purchase order visibility and real-time reports enabled proactive vendor contact and tracking, as well as improvements to processing efficiency.

Working with Agility helped a major electronics company meet a tight timeline by selecting a strategically located 14,500-square-meter facility in Algeria. By working with industry experts, the company procured all the necessary equipment, tools, and systems efficiently, minimizing waste and sales losses.

A global telecommunications provider created a goods-in-transit center that reduces air cargo weight, transport costs, and carbon emissions on shipments from mainland China and Hong Kong to India.

In general, following green packaging practices and using green packaging materials can help companies reduce costs while remaining environmentally friendly and reducing waste.

Inexpensively implementing green warehouse practices

Some companies avoid implementing green warehouse practices because they fear the cost of doing so. Even though companies may realize cost savings once those practices are in place, the problem lies in the up-front expenses companies must pay to change current practices.

For example, if a company decides to use reusable shipping containers, the new containers’ up-front cost might far exceed the cost of disposable ones. Even though it saves money in the long term, the opportunity cost may dissuade some supply chain managers.

However, by starting with simple steps that reduce waste and increase efficiency, it’s possible to realize long-term cost savings even with a small initial investment. Afterward, you can apply those saved funds toward other green measures with higher opportunity costs.

Tips for transitioning to green warehouse practices

Adopting green warehouse practices doesn’t have to happen all at once and doesn’t need to be an overwhelming proposition. Below are some simple tips that you can implement over time to transition to more sustainable practices:

• Start small with recycling: Make it a practice to send used packaging materials to a recycling center instead of the landfill. Work with a battery recycler to safely dispose of worn forklift batteries or other similar materials.
• Upgrade warehouse equipment with sustainable alternatives: As older equipment wears out, replace it with new products that have lower energy requirements and maintenance needs. For example, choose electronic forklifts and pallet jacks, as well as eco-friendly conveyor systems.
• Make lighting modifications: Installing an energy management system for warehouse lighting allows you to only use lighting when needed. Replacing older bulbs and fixtures with newer energy-efficient LED fixtures can significantly reduce energy use and save money.
• Consider warehouse layout: A poorly laid out warehouse can reduce efficiency. Look at the process for unloading, storing, and processing products. Identify ways to make the transitions as smooth as possible, without the need for continually rearranging pallets or moving materials across the warehouse floor.
• Consider warehouse locations: A green warehouse is part of a larger green supply chain. Most of the total supply chain carbon footprint comes from moving items to and from warehouse locations and consumers. Strategically optimizing warehouse locations, storing products as close as possible to large customer centers, and optimizing shipping routes will cut emissions and costs.
• Consider other warehouse systems: This includes everything from your heating, ventilation, and air-conditioning (HVAC) system to your choices for insulation and roofing. Improving insulation reduces heat transfer and saves on expenses related to heating and air-conditioning. A more energy-efficient HVAC system reduces usage and costs. And when it’s time to replace the roof, choose one that is bright and reflective.
• Transition to eco-friendly packaging: Many options are available on the market, allowing companies to implement green packaging practices that meet their needs. This includes packaging made from recycled paper, mushrooms, cornstarch, organic fabric, and bamboo. These packaging materials are often inexpensive to produce and lightweight, which can reduce shipping emissions and expenses.

Inefficiencies to eliminate to make your warehouse green while on a budget

Making your warehouse green while on a budget requires careful planning. To begin, look over your entire supply chain management process to identify inefficiencies you can easily eliminate to the benefit of the environment, as well as your bottom line.

These inefficiencies may include things like the following:

• Workflow disorganization: Follow the path a product takes from manufacturer to warehouse/distribution center to consumer. Identify any hiccups along the way, such as delays in transfer, storage times that are longer than needed, or problems with order processing. Remedying the situation may only require simple process changes at no additional cost to you.
• Lack of carrier mode diversification: Seek to continually build relationships with different carriers, and get quotes for other carrier mode options. By sticking with what you’ve always used before, you might be missing out on less expensive (and more environmentally friendly) options.
• Lack of proper demand forecasting: By not having accurate estimates of consumer demands, it’s difficult to strategically and efficiently stock products in the right warehouse locations. This leads to using more space than needed, as well as extra transportation expenses. A small investment in quality forecasting software can lead to a significant payoff in the end.
• Excess packaging usage: Examine your packaging usage and practices. You need to use enough packing materials to keep products safe during storage and transport, but overuse is simply waste. Identify ways to refine and optimize the use of packaging materials.

Eliminating inefficiencies often costs little except the time it takes to identify them and implement new practices. As a result, you might begin realizing cost savings immediately, and the environment will thank you as well.

Reducing costs and improving sustainability with Agility

The two key ways that a green warehouse provides a competitive advantage are by improving company image and decreasing expenses. Anytime you can accomplish the same objectives at a lower cost without reducing quality or other metrics, it’s in your best interest to do so.

One of the most efficient ways to implement green warehouse practices while reducing costs is to partner with a third-party or second-party logistics provider like Agility. Not only does Agility offer scalable warehousing and distribution capabilities worldwide, but it is actively working to build a greener and more equitable supply chain.

Agility has implemented multiple ongoing efforts to reduce hidden environmental and social costs associated with supply chain logistics. Independent sustainability analyst EcoVadis ranks in the top 5 percent industry-wide for environmentally friendly practices.

By partnering with Agility for your warehouse or supply chain solutions, you are working with an industry leader that actively engages in sustainability efforts to support the environment. Contact Agility’s contract logistics team today to learn how it can help you save money while minimizing your impact on the environment.