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U.S. Environmental Protection Agency +

Inventory Management as a Shipping Strategy
for Logistics and Shipper Companies

A Glance at Clean Freight Strategies

REDUCED SHIPMENTS

Pick up and delivery of a single less-
than-truckload (LTL) shipment accounts
for roughly 30% of the CO2 generated
by an LTL shipment. Good inventory
management can help reduce LTL
shipments and significantly reduce
carbon emissions.

Third-party logistics providers (3PLS) can work with customers to consolidate orders
into larger, less frequent shipments. This strategy is most applicable to 3PLS that
are involved in shippers' long-term transportation decision-mahing.

WHAT IS THE CHALLENGE?

Shippers generally determine load size and frequency according to customer
requests, but the frequency requested may not always be the most efficient. For
instance, a shoe store may request shipments three times per week, when a larger
load twice per week would be sufficient. Adjusting shipment schedules can create
time and cost savings for shippers, their customers, and 3PLS. 3PLS can work with
shippers to determine the optimal size and frequencies of loads.

WHAT IS THE SOLUTION?

Products that are best suited for this strategy are characterized by:

Predictable demand. If a product has predictable demand, it is easier to
schedule large shipments in advance.

Minimal storage requirements. Products with long shelf lives, minimal
security, and low storage costs are suited for this strategy.

Minimal change from year to year. This strategy is ideal for goods with a
history of stable production. For example, white undershirts and office
supplies might fit this strategy well.

A 3PL can work with a shipper to identify products that can be shipped less often
in larger quantity. One 3PL helped a customer reduce the number of truck trips
containing dynamite for its blasting operations from 10 shipments per year to one.

Even for industries with shorter shelf lives and higher costs of storage, such as
food and technology, this strategy can still be useful. Adjusting the frequency
of shipments of cereal or smartphones from daily to a few times per week, for
example, can yield large benefits in the long term.

Maintaining long-term relationships with customers also facilitates this strategy.
Working for a customer over time makes it possible for a 3PL to analyze past
trends to predict and plan future shipments.

EPA-420-F-21-040 | December 20211 SmartWay Transport Partnership | epa.gov/smartway

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Inventory Management as a Shipping Strategy (continued)

COSTS

The primary costs of this strategy are carrying costs, such
as the warehouse storage fees, security, insurance, utilities,
and other maintenance expenses. Because of this, products
that are easy and cheap to store work best for this strategy.
There may also be environmental costs from longer storage
time because orders that require larger storage facilities use
more land and energy and products in storage may require
refrigeration and other energy-intensive measures.

A potential impact of this strategy that may be more difficult
to quantify is a reduction in the ability to respond quickly to
change in demand.

$10,000

savings
per month

A dynamite supplier
cut the number of trips
by 90%.

A pork rind producer cut LTL
shipments by two-thirds and
saved $10,000 a month in
transportation costs.

SAVINGS AND BENEFITS





%

Shipping. Reduced frequency of orders can reduce
shipping costs.

Strategic pLanning. Coordinating orders further in
advance gives 3PLS the opportunity to engage in
longer-term planning. If 3PLS can choose which days
to ship orders, they can ship on off-peak days.

Longer lead time. By increasing delivery lead time,
this strategy can reduce time spent waiting and idling.
Pickup, staging, and loading can be planned more
precisely.

Processing costs. Fewer orders translates to fewer
forms to fill out, fewer invoices to print, and less time
spent processing orders. Both the customer and the
3PLcan reduce administrative costs through this
strategy.

Better reliability. The customer can gain more
certainty about order arrival time, and the 3PLcan
rely on a steadier stream of business. Larger
inventories can benefit customers by reducing the
risk that they will run out of stock.

Emissions reduction. Reducing frequent LTL
deliveries and converting to fulltruckload can be
faster, cheaper, more reliable and can also help
reduce CO2 emissions. LTL pick up and delivery
operations account for roughly 30% of the CO2
generated by an individual LTL shipment.

NEXT STEPS

1

2

3

Consult with customers to assess their priorities. Some customers may care more about reliability
than frequency.

Examine the costs of transportation and storage, the predictability of demand, and the lifespan of the
product to calculate the optimal order size.

Set up policies and design customer service agreements that incentivize larger orders at reduced
frequency. For instance, 3PLS can offer discounts for larger orders or charge a processing fee for
smaller orders.



Please visit the SmartWay website at www.epa.gov/smartway
to access more tech bulletins.

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U.S. Environmental Protection Agency^

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