Wall Street Journal
April 24, 2006
New York- Wal Mart Stores Inc.'s effort to increase the efficiency of its trucking fleet- a key part of the company's plans to cut costs and portray itself as more envirnomentally friendly- is running ahead of schedule.
In October, the Bentonville, Ark., retailer unveiled plans to make its trucking fleet 25% more fuel-efficient within three years. The 7,100 trucks are already on track to becoming 18% more efficient over the next year alone, said Johnnie Dobbs, Wal-Mart's executive vice president of logistics.
"We feel pretty comfortable we can make the 25% goal, " Mr. Dobbs said.
The progress is a boost to Wal-Mart's recent efforts to curb its operating expenses amid soaring prices for energy and health care. Last fall, Chief Financial Officer Tom Schoewe singled out the trucking fleet along with work-shift management as a top priority for reining in costs.
By increasing trucks' fuel-efficiency by one mile a gallon from their recent average of 6.5 miles a gallon- a 15% improvement- Wal-Mart could add $50 million a year to its income, Mr. Schoewe said. The effort comes amid high fuel prices.
Mr. Dobbs said the bulk of the savings for the trucking fleet so far have come from the installation of auxiliary units that power the air conditioning when a truck is parked, eliminating the need to run the engine. Wal-Mart's trucks also are benefiting from wider tires that can carry bigger payloads, aerodynamic skirts and cowlings that cut wind resistance, and new additives that give diesel more bang for the buck.
Wal-Mart executives said they are surprised to be exceeding their near-term goals early. The company also has set a longer-term goal to double the efficiency of its truck fleet in 10 years. Mr. Dobbs said meeting that target "will be the real stretch," as most of the energy savings are able to come from technology that is still being developed.
Improvements may come from lighter truck designs, more efficient engines and transmissions, and hybrid technologies that use electricity and hydrogen power, he said. Researchers also are testing "biodiesel" manufactured from animal and vegetable oils, but "the jury is still out on that," Mr Dobbs. said.
The plans are a pillar of an environmental initiative Wal-Mart announced in October. In addition to slashing transportation costs, the program seeks to reduce greenhouse gases from existing stores and distribution centers by 20% over the next seven years.
For new stores, Wal-Mart aims to introduce a design within four years that is at least 25% more energy-efficient. Those developments could also pay off, as the price of electricity and natural gas have soared along with the price of oil.
In addition to upgrading its truck fleet, Wal-Mart this year has purchased 100 hybrid cars for the company's market managers, who typically oversee eight to 15 stores each.
"They tend to do a lot of driving in between stores, so that could be a real savings," Mr Dobbs said.