Logistics processes

THE COMPANY’S MAIN IMPROVEMENT TARGETS FOCUS ON REDUCING CO2 EMISSIONS ASSOCIATED WITH THE HANDLING OF FINISHED COMPONENTS AND PRODUCTS, AND ON MINIMIZING THE USE OF NON-REUSABLE PACKAGING MATERIALS

When managing logistics processes, CNH Industrial is unrelenting in its search for sustainable solutions to combat climate change, preserve natural resources, and safeguard health.

The Company manages its improvement efforts related to logistics through the Green Logistics Principles, published by Fiat Industrial in 2011, and adopted by CNH Industrial in September 2013 by resolution of the Board of Directors. These principles, available on the Corporate website, are designed to coordinate all Company initiatives, and to support different corporate functions in performing effectively, in collaboration with suppliers, to ensure indicators are continuously monitored and that targets are met.

CNH Industrial’s approach focuses on four areas:

  • increasing low-emission transport 
  • minimizing non-reusable packaging and protective materials 
  • adopting intermodal solutions 
  • optimizing transport capacity.

Engaging suppliers is an integral aspect of this course of action, as their active involvement is key to achieving an effective, sustainable logistics system. This commitment became evident when a number of logistics suppliers participated in the Carbon Disclosure Project Supply Chain (see also page 153), aimed at monitoring the CO2 emissions of a few selected suppliers and at promoting initiatives to reduce them, including through joint ventures and partnerships. The Carbon Disclosure Project Supply Chain will continue in 2014, involving more suppliers.

This approach testifies the importance of sustainable logistics within CNH Industrial’s materiality matrix; the issue is of increasing interest for stakeholders too, owing to the economic, environmental, and social implications involved. In fact, sustainable logistics are considered important because of their impact on cost optimization, on the reduction of emissions, on the use of resources and management of packaging, and because of their indirect effect on employee health and traffic congestion.

The Company’s main improvement targets focus on reducing CO2 emissions associated with the handling of finished components and products, and on minimizing the use of non-reusable packaging materials. These targets are all set voluntarily and included in the Sustainability Plan (see also pages 119-120). Targets are evaluated twice a year to monitor progress toward their achievement and, if necessary, to adopt corrective measures. Results are shared annually through the Sustainability Report and the Corporate website.

The logistics system is managed according to World Class Logistics (WCL) standards that, based on the World Class Manufacturing (WCM) program, define the integrated logistics processes affecting plants and supplier network planning, while pursuing safety, ergonomics, eco-compatibility, and transport flow optimization. WCL standards allow for lean processes both inside and outside plants, involving all employees in the improvement processes. With the active participation of all parties, stock quantities are significantly reduced, production volumes and mix are evened out, and logistical know-how at plants is enhanced. Another significant aspect of WCL is the systematic reduction of both internal and external handling, deriving from the integration of the production and distribution networks. This approach ensures management effectiveness, and that projects are evaluated according to defined standards. Through World Class Logistics, CNH Industrial shares and spreads its best practices, tried and tested across all plants, to improve process management through up-to-date internal benchmarking.

All of the projects indicated in the 2013 Sustainability Plan were incorporated in the Performance and Leadership Management system, among the individual targets of the managers involved (see also page 46).

The Group Executive Council (GEC) has the highest responsibility for initiatives focusing on the reduction of the environmental impact of logistics systems at CNH Industrial.

For issues related to business travel see page 65.

MONITORING OF ENVIRONMENTAL PERFORMANCE

Operatively speaking, the inbound flow (i.e., the transport of production components and materials to Company plants) is handled either by external transport providers engaged by the Company or directly by material suppliers, while the outbound flow (i.e., the distribution of finished goods from plants to the sales network) is handled by external transport providers.

Spare parts are managed by CNH Industrial Parts & Services. Their inbound flow (to warehouses and distribution centers) is handled either by external providers engaged by CNH Industrial or directly by the suppliers. Their outbound distribution (including to dealerships) is handled by: specialized transport companies in the case of Agricultural and Construction Equipment; external companies coordinated by a logistics operator in the case of Trucks and Commercial Vehicles; and external providers engaged by the Company in the case of the Powertrain segment.

In 2013, some of the environmental aspects considered most significant * to logistics processes continued to be monitored in order to substantiate the targets included in the Sustainability Plan and the improvement projects that followed.

 inbound and outbound CO2 emissions

The significance of the environmental impact of CO2 emissions is affected by: the number of inbound/outbound transport flows generating the impact; CNH Industrial’s ability to promote mitigation activities among suppliers (e.g., the inclusion of contractual clauses); the initiatives implemented to reduce the impact (e.g., the adoption of intermodal solutions); and the impact’s potential effects on the community (e.g., traffic congestion related to plant location).

In 2013, the worldwide monitoring of CO2 emissions was completed for both the Agricultural and Construction Equipment and Powertrain segments, adding up to 327 thousand tons of CO2 in total (Europe excluded); monitoring activities for Trucks and Commercial Vehicles in Latin America and Australia will be completed in 2014.

In 2013, anticipating one of the goals envisaged by the Sustainability Plan, the Agricultural and Construction Equipment segment extended the monitoring of CO2 emissions associated with air transport to all of its plants worldwide, for a total of 47.3 thousand tons of CO2. In 2014, the same monitoring will be extended to two additional business segments. The inbound and outbound CO2 reduction achieved in Europe was 2,260 tons, i.e., more than the target set for 2013 (1,710 tons). This figure corresponds to the emissions savings associated with the improvement projects implemented in 2013. CNH Industrial has set an equally challenging target for 2014 of 1,580 tons.

CO2 EMISSIONS IN LOGISTICS PROCESSES

 201320122011
Inbound71.675.565.6
Outbound50.147.254.8
Spare parts12.87.95.2
Total134.5130.6125.6

(1) CO2 emissions have been quantified as per the Greenhouse Gas (GHG) Protocol, revised edition, for road transport and the IFEU Heidelberg methodology for environmental calculations for sea and rail transport.

The increase in CO2 emissions is due to the extended reporting scope (in line with the targets stated in the Sustainability Plan) and the moving of the production hub.

 

The management of the environmental aspects associated with logistics also aims at reducing non-reusable packaging and protective materials, according to corporate standards and quality requirements. Where this is not possible, CNH Industrial seeks the best solutions to ensure the recovery of materials. Although this aspect may be less significant than atmospheric emissions, a monitoring process was started to create a reliable database to develop future improvement plans.

Material recovery processes are the solution of choice within the Trucks and Commercial Vehicles segment, where activities aiming at optimizing packaging for shipments to Latin America continued in 2013.

This led to a decreased use of wood crates (-5% compared with 2012, from 10.8 to 10.3 kilos of wood packaging per m3 shipped) and to a reduction of approximately 147 tons in wood shipped.

The Powertrain segment, included in the scope of the World Material Flow (WMF) program in 2013, also began to pursue a progressive reduction of non-reusable packaging for shipments from Italy to plants in Latin America in favor of metal crates, setting a wooden crate reduction target of 35% for 2014. In 2013, the Agricultural and Construction Equipment segment continued to monitor the quantity of cardboard and wood used to consolidate the shipments of materials by sea to plants in North and South America within the scope of the WMF program.

CNH Industrial continued to monitor the disposal of cardboard packaging in European plants, reporting an average of 7.43 kilos of cardboard disposed of per unit produced. Furthermore, the Powertrain segment ended 2013 with an average of six kilos of wood disposed of per unit produced.

wood packaging

INCREASE IN LOW-EMISSION TRANSPORT

CNH Industrial continues to promote the use of low-emission vehicles to reduce CO2 emissions associated with the transportation of components and goods. During 2013, all segments gradually introduced specific environmental contractual clauses obliging external transport providers to utilize fleets in which at least 70% of vehicles comply with Euro IV standards or higher. Preempting its own objective, the Powertrain segment has begun to introduce clauses stipulating a fleet with at least 75% of vehicles compliant to Euro IV or higher, with the other two segments to follow suit in 2014.

In 2013, vehicle emission standards continued to be monitored for a sizable sample of material and component suppliers; this will enable extending to outsourced transportation the same emission standards applied to transport directly managed by CNH Industrial. In 2013, 93% of all vehicles used for inbound and outbound transport in the Agricultural and Construction Equipment and Trucks and Commercial Vehicles segments in Europe conformed to Euro III standards or higher.

In North America, the Agricultural and Construction Equipment segment continued to engage its logistics partners in the SmartWay Transport program, an Environmental Protection Agency (EPA) initiative; participation in the program is a factor in evaluating potential suppliers. In 2013, 91.6% of service providers (rail and road transport) participated in the Smart Way program.

 Euro III standards

USE OF INTERMODAL SOLUTIONS

Inbound and outbound transport can generate significant levels of road traffic, depending on geographical features, infrastructures and production volumes. CNH Industrial has always strived to promote alternative methods of transport (by rail and/or sea) using intermodal solutions, with the aim of reducing traffic congestion and lowering CO2 emissions. Intermodal solutions take a holistic view of transportation services, treating them as an integrated logistics chain and employing a variety of solutions for the movement of goods from source to destination.

Freccia GiallaThe Freccia Gialla, a combined inbound and outbound biweekly rail service launched in July 2012 at the Lecce plant (Italy), cut CO2 emissions in 2013 by 1,350 tons.

From July 2013, with the Trucks and Commercial Vehicles segment directly managing inbound transport, intermodal solutions were found by exploiting the existing shipping connections between Italy and Spain. This initiative reduced CO2 emissions by 1,151 tons.

In line with the 2013 Sustainability Plan, the Powertrain segment achieved its target of reducing CO2 emissions by launching its first regular inbound rail transport service to the Foggia plant (Italy). There are plans to extend railway use in 2014 by adding suppliers in Central Europe to the existing transportation network, and by launching the first intercontinental railway connection from China to the plant in Bourbon Lancy (France). This initiative is expected to reduce total CO2 emissions by 480 tons.

 

BREAKDOWN OF INBOUND TRANSPORT

CNH INDUSTRIAL EUROPE

BREAKDOWN OF INBOUND TRANSPORT

BREAKDOWN OF OUTBOUND TRANSPORT1

CNH INDUSTRIAL EUROPE

BREAKDOWN OF INBOUND TRANSPORT

(1) Percentages refer to Agricultural and Construction Equipment and Trucks and Commercial Vehicles segments, and are based on the principal mode of transportation used for each vehicle.

OPTIMIZING TRANSPORT CAPACITY

Optimizing transport capacity is one method CNH Industrial employs to reduce the costs and environmental impact of transportation. Streamlined Delivery is one of the projects launched to realize this objective, outsourcing the collection of materials destined for CNH Industrial plants to a pool of logistics providers, replacing delivery by individual suppliers through dedicated transportation services.

The estimated coverage was achieved in the Agricultural and Construction Equipment and Trucks and Commercial Vehicles segments. In 2011, the project was also launched within the Powertrain segment, reaching a coverage of 25% in 2012. Other plants will join the Streamlined Delivery project in 2014, and targets will be readjusted according to future volumes.

CNH INDUSTRIAL PARTS AND SERVICES RESEARCH ACTIVITIES 
In 2013, CNH Industrial Parts and Services Europe started a collaborative study with the Warehousing Center of Bologna University focusing on the analysis, optimization, and strategic planning of warehouse activities. This €36 thousand study, using IT tools supplied by Bologna University, offered a number of insights into possible improvements to machinery, equipment, procedures, staff management and energy savings. 
In 2014, a first strategic project will be launched aiming to save an estimated €180 thousand per year in warehouse handling costs. During this collaboration, the Company gave four students the opportunity to complete an internship, working side by side with three corporate tutors (namely the Quality, Outbound and Inbound Managers, responsible for a team of almost two hundred people), for a total of six hundred hours of training each. They were requested to write their dissertations on targeted operational aspects and issues, identifying improvement plans and innovative solutions sustainable over time. One of the students, for example, developed a stock picking improvement plan that will save around €40 thousand per year in operational costs. Internships have also proven useful in identifying talent pools of prospective highly qualified professionals who already possess an understanding of the values of CNH Industrial. 
The program, whose first phase will end in January 2014, will respond to a challenge: to establish a new spirit of collaboration between University and Company, potentially extending to all plants in the EMEA Region.

 

GRI-G4
DMA; EN30
Glossary
DMA, EMEA, EPA, Euro VI, GHG Protocol, Erognomics, Stakeholders, WCM