Reference no: EM133388859

Case Study: Richard T. Murphy, Jr. is not your ordinary business executive. A landscape architect by training and an adjunct professor at the University of Minnesota College of Design, Mr. Murphy serves as the President and CEO of the Murphy Warehouse Company, a fourth-generation family business. Step into the company's corporate offices and you might think you've stepped into the Rock and Roll Hall of Fame, with platinum records and rock music memorabilia lining the walls.

Company Background

When it comes to running a warehouse business, Mr. Murphy's warehouses are also far from ordinary. Mr. Murphy claims that Murphy Warehouse is "not just another fricking' warehouse company." What makes the company different is its willingness to invest in sustainability initiatives that rivals view as too risky or overly speculative. In an industry that is ultrasensitive to cost, Murphy Warehouse makes sustainability a business priority. The company invests in projects and technologies that often require a longer view than most businesses are willing to tolerate.

A long-term perspective lies at the heart of the business that dates back more than 100 years. Founded in Minneapolis in 1904, Murphy Warehouse Company operates 14 facilities in Minnesota and Missouri, with total capacity of 2.8 million square feet. The facilities are equipped for bulk, rack, and food grade storage. The company lists well-known Fortune 500 companies as well as new start-ups among its 250 clients. Beyond basic storage services, the company offers pick and pack services, case-pick and full-pallet support, regional and national transportation services, and a variety of value-added tailored services.

Sustainability Initiatives

Conversion to LED lighting and the pursuit of LEED certification for facilities are becoming the norm among progressive warehousers. Murphy was leader-with 100% LED conversion and LEED certification for warehouses and offices. But, at Murphy LED and LEED were just the beginning. Mr. Murphy put his landscape management experience to work at one of the company's legacy facilities in Fridley, Minnesota. The building, like many "showplace" warehouses, was surrounded by a manicured grass lawn, which cost $21,651 to maintain each year. Mr. Murphy dreamed of converting the landscape to prairie grass, which is native to the region. The annual maintenance cost dropped to $4,350 and provided better stormwater runoff than green grass, because of its deeper roots. The company installed holding ponds for the runoff water and avoided wastewater fees that were totaling $58,000 per year.

The company also pursued aggressive energy conservation measures. In a region known for very hot summers and very cold winters, this can be a challenge. The company's five owned facilities achieved an average Energy Star score of 97 on a 100-point scale. This is well above the median score of 50 for energy performance of similar properties nationwide and the score of 70 required for LEED certification. Energy savings were achieved by converting heating, ventilation, and cooling (HVAC) systems in warehouses and offices to more efficient technologies and using dock blankets that prevent the escape of warm air at dock bays during a long, cold winter.

Murphy Warehouse didn't stop there, though. Decision makers pursued federal and state grants to install solar panels on the rooftops of some warehouses. The Fridley warehouse now derives 40% of its power from solar energy and has become the fifth-largest solar generator in Minnesota. The grants helped to reduce the technology conversion payback period from 20 years to about 4.5 years. Yet, that's still too long-and uncertain-a payback for some companies to accept. Murphy, himself, notes that many companies refuse to invest in a new technology if it takes more than three years to pay itself off.

The Murphy Warehouse Company has garnered several regional and national awards for its environmental stewardship and is recognized as one of the "greenest" logistics service providers. In 2013, the company issued its first Corporate Sustainability Report, in accordance with the standards of the Global Reporting Initiative (GRI). GRI standardizes the reporting of environmental sustainability performance in a similar manner that the Financial Accounting Standards Board (FASB) delineates proper financial reporting. Providing such open, detailed reporting of environmental performance is a rarity among small and medium-sized enterprises, and particularly so in the logistics industry, which has a reputation as a major consumer of energy and contributor to greenhouse gases. Murphy, by contrast, addresses the challenge head-on to make not only its accomplishments public but also its opportunities for improvement visible. The goal: "Become a leader and role model for sustainability within the logistics industry."

Questions:

In a business where maintaining product integrity and keeping costs down are priorities, does it make sense to invest in green technologies in the manner of Murphy Warehouse Company?

How do you make sustainability an important feature of warehouse services for a client?

What are the advantages and challenges associated with private enterprises, as opposed to publicly-traded/owned companies, when it comes to implementing initiatives like sustainability?

Do you expect sustainability to factor more significantly into strategic logistics decision-making in the future? Why or why not?