The industry at the center of this situation is the American Logistics industry.[ii] These businesses are sitting on enormous amounts of energy inefficient trucks, vans and trailers. It is financially impossible for them to abandon these existing fleets in favour of new, more energy efficient vehicles yet the social and corporate pressure for fleets to become environmentally “safe” is increasing by the day.[iii]
XL Hybrids has created technology that can be retrofitted onto existing trucks to greatly improve their fuel efficiency and reduce their emissions. More importantly, an investment in an XL Hybrids retrofit pays for itself in only two years, making it a very attractive financial decision.[v]
The increase in “on-demand services” has created a conundrum for many companies, especially in America. Consumers expect access to goods and services 24/7 and as a result many large companies, especially CPG and logistics, have started to expand their fleets to incorporate numerous smaller vehicles to accommodate for the continuous shipping needs of their customers and the urban location of many of the requests. A product of this has been a steep increase in the fuel costs for companies – especially in states such as California where petrol prices are much higher than the U.S. national average – as well as an increase in the rate of wear and tear of the vehicles, (urban driving damages vehicles more quickly than long-haul trips as there is heightened stopping and starting).[vi]
With transportation believed to be responsible for 28% of U.S. CO2 emissions, [vii] (making it the second largest source behind electricity), innovation in the transportation space is not only critical to combating climate change, but can also be very lucrative.
XL Hybrids (XL) was founded in 2009 by MIT grad, Tod Hynes. Based in Boston, Massachusetts, XL is the, “leader in fleet electrification solutions for commercial and municipal fleets”.[viii] XL has created an innovative technology solution using regenerative braking – a proprietary hybrid electric car process – that helps its customer to optimise fuel efficiency, (25% increase in miles per gallon), lower performance costs and measure performance to meet corporate responsibility goals put in place by the company or the government. [ix]
The XL system can be installed in a fleet truck within six hours, meaning that it can be done overnight so there is 99.9+% fleet uptime. The installation works seamlessly with the truck’s current functionalities so there is no training time or infrastructure needs required and no disruption to the fleet schedule.
I went to visit the factory in Newton, Massachusetts to see the team install one of their products into a Coca-Cola truck.
To install the system consistently in under six hours the team needs to have every stage of the process memorised and needs to be operating at 100% capacity, (there was no idle time and almost 0% time for product defects or personal error). In general, the installation process is designed as a job shop in which all of the required amendments to a truck are worked on in parallel. The sales cycle for the products is complicated and long and XL has not yet been able to build out a very sophisticated inventory management system. The current system is to ramp up inventory purchasing when XL thinks a deal is about to close meaning that the plant often has a high quantity of raw materials and some WIP, though almost never any finished goods as the truck is almost always picked up as soon as the six hours of work on it are complete.[xii]
XL’s innovative technology have allowed it to acquire a wealth of brand name customers, ranging from Coca-Cola to FedEx and ThyssenKrupp. With the likelihood of an increase in climate change bills being introduced in the coming years, XL needs to be prepared to educate their customers about the opportunities that they provide and to position themselves as the continued preferred partner for corporate America. Marketing to the consumer and credibility of the XL products will be paramount for XL’s continued success. As well, ensuring that XL’s products remain in keeping with changing regulation and guidelines will be essential for success.
With its mission statement of, “Our team is dedicated to beating big oil by giving fleets a cost-effective way to reduce fuel consumption and meet sustainability goals”,[xiii] XL is a strong example of a company created to combat the growing climate challenge in our world.
Want further proof? Let’s look at some case studies to see how effective XL is:
[i] Climate Change in 2016: Implications for Business (317032)
[iv] XL Hybrids – factory visit
[x] XL Hybrids – internal company documents
[xi] XL Hybrids – factory visit