4 ways to increase profitability in 2014
As the holiday dust clears and we settle into a new year, it’s only fitting that retailers take a moment to reflect on successes of 2013 and identify opportunities for 2014. How can we be more efficient this year? Can we waste less while producing more? Where can we make simple adjustments that add up to big bottom line savings?
At Environmental Defense Fund (EDF), my team and I have spent seven years working to answer these questions for major retailers like Walmart, Target, J. C. Penney and Staples. I asked my team of supply chain experts to put their heads together and come up with the four best ways for companies to optimize business operations, maximize efficiencies and ultimately increase profitability this year. Here’s what they said.
1. Look at your waste
A successful retail business is bound to produce a lot of waste — think about a company of Walmart’s size and the waste associated with its business. Now think about Walmart committing to a corporate goal of zero waste.
Waste streams cost retailers money — the company has already paid for everything that goes out the back door. You can manage it out the back door, or you can figure out why you have it going out the back door in the first place. A waste audit — looking at everything in your Dumpsters throughout a period of time to see what gets thrown away — is a great first step.
Everyone should be making some money on back of store “waste,” from recycled cardboard and plastic if nothing else. Look to third party resellers for those returned products you can’t sell in your store. Why would anyone pay people to haul off commodities that could be sold?
Smaller retailers can band together into “wastesheds” to reach cost-effective volumes. For items like organic waste where there’s not a lot of infrastructure, retailers of all sizes should reach out to their close neighbors and work with local municipalities to help create such infrastructure for themselves.
2. Look at how you are transporting goods and products
Retailers depend on the movement of goods. The freight system, though, has a hefty environmental footprint. Retailers can significantly reduce their freight footprint and transportation costs by employing EDF’s Five Principles for Greener Freight.
The Container Store demonstrated the power of choosing the most carbon-efficient transport mode possible. It saved $300,000 and reduced emissions 40%by utilizing rail for some of its outbound moves.
Ocean Spray Cranberries was able to cut 4.5 million road miles from its distribution system by redesigning its logistics network. This change cut outbound freight costs by 15% and lowered carbon emissions by 18%. The change also enabled Ocean Spray to collaborate with a competitor by matching backhauls, which resulted in a 40% cost savings for the lane.
3. Look to source and sell better products
Consumers are becoming increasingly interested in the health and environmental impacts of the products they buy, but most retailers don’t have access to tools that tell them whether their products are healthy and sustainable. That’s where The Sustainability Consortium (TSC) can help. TSC is a working group looking to leverage the combined power of retail firms, consumer product companies, academia and NGOs to create a comprehensive system to evaluate the sustainability of products in a rigorous, credible and transparent way across thousands of different categories. Already the information generated by TSC is being used in over a hundred product categories by Walmart's Sustainability Index, which links sustainability objectives to buyers' annual reviews. By the end of 2017, Walmart aims to buy 70% of the goods sold in U.S. stores and U.S. Sam’s Clubs from suppliers who use the Sustainability Index to evaluate their products.
Also, in recent months, retailers and manufacturers have begun taking important steps toward eliminating potentially hazardous chemicals from consumer products. Walmart is requiring suppliers to disclose all chemical ingredients, targeting about 10 toxic chemicals for elimination, and putting its private brands cleaning products through EPA’s rigorous Design for Environment program. Target launched an internal sustainability rating system aimed at assessing ingredients and shaping purchase decisions. Proctor & Gamble and Johnson & Johnson have both set goals for eliminating key suspect chemicals too.
Retailers who make a commitment to sourcing safer, sustainable products will stand out to consumers.
4. Look at your buildings
From lighting to heating, water cooling towers and warehouses, there are significant energy efficiencies and cost savings to be had. Working with some of the country’s leading brands to enhance energy management programs, EDF’s Climate Corps has uncovered nearly $1.3 billion in energy-saving opportunities.
EDF Climate Corps matches trained graduate students with companies looking to take their energy management efforts to the next level.
REI calls EDF Climate Corps a "secret weapon" for finding environmental opportunities in different business units. The most recent EDF Climate Corps fellow identified an opportunity for REI to save 10 to 16% of the energy used in each of its distribution centers through retro-commissioning at a very low cost thanks to utility rebates.
Similarly, an EDF Climate Corps fellow at Office Depot identified energy efficiency and generation projects that could save $6 million in energy costs.
EDF is currently accepting applications for EDF Climate Corps 2014. Interested companies can learn more on EDF’s website.
In the next few months, we’ll zoom in on each of the ideas listed above, sharing resources and best practices from our experts to yours right here on Retailing Today. EDF has more than 25 years of experience working with companies to find solutions that benefit the planet and the bottom line. We hope you can make use of our years of experience for a prosperous 2014 and beyond.
Elizabeth Sturcken is managing director of the Corporate Partnerships Program at Environmental Defense Fund (EDF). She directs the work of EDF’s Corporate Partnerships teams in California and Arkansas, developing and implementing joint projects with leading companies to create environmental change. In her role, Elizabeth leads the team working with Walmart to create broad environmental changes. She also led the FedEx project to develop environmentally advanced heavy-duty delivery vehicles and a project with UPS to create innovative change in their express delivery packaging.