Analyst Insight: Sustainability is no longer just about public-relations opportunities. As an integral part of supply-chain strategies, it’s also about the bottom line. Sustainability is also a major factor in winning shippers’ business. As such, logistics providers and transportation carriers will need to incorporate measurable sustainable practices within their business structure, or run the risk of being sidelined by the competition.
According to the World Economic Forum, sustainable supply-chain practices can result in cost reductions of between 9% and 16%. Indeed, thanks to the connectivity that the internet of things (IoT) offers, shippers can use data to quantify the benefits of a sustainable approach to supply-chain management. By tracking shipments from beginning to end, for example, shippers can uncover a treasure trove of data which can assist them determining the most sustainable transportation modes. Key measurements include the percentages of each transportation mode used, time in transit, total costs including fuel, mode of transport by lane, and carriers utilized.
At the same time, transportation providers are looking to reduce their impact on the environment. According to the U.S. Environmental Protection Agency, commercial freight is a significant contributor to total transport emissions. Experts predict that freight activity will nearly double by 2040, and that global freight-transport emissions will exceed those from passenger vehicles by 2050.
When it comes to individual transportation modes, trucking is the unfortunate leader in greenhouse gas (GHG) emissions, with light-duty vehicles accounting for 59% of the total, and medium and heavy-duty trucks 23%.
To help offset some of those emissions, the American Trucking Associations suggests better matching the size of a trailer with that of the load being carried. Smithfield Foods cut costs by $19 million in 2018 by utilizing more fuel-efficient, lightweight trucks.
Efficient route optimization is another tool that can help reduce environmental impacts while cutting down on empty miles. UPS reports savings of $400 million in recent years from the use of its routing system.
Perhaps the most interesting change in the trucking industry is that of a shift toward the use of electric and autonomous vehicles. Indeed, 2019 saw a flurry of announcements from truck manufacturers, thanks to a decline in battery costs and an increase in state incentives and mandates for zero-emission buses and trucks.
Another area of great interest is that of autonomous trucking, which can help to alleviate the driver shortage while also reducing operating costs. According to McKinsey, full autonomy will result in costs declining by about 45%, saving the U.S. for-hire trucking industry between $85 billion and $125 billion. Research from the Department of Energy reports that autonomous vehicles could bring fuel savings of almost 90%.
Sustainability is an important part of supply chains, as well as a criterion for selecting partners. By utilizing supply-chain data from the tracking of shipments, shippers can begin the process of establishing key performance indicators to select and measure partners such as motor carriers on the basis of sustainability. Truckers will also need to embrace sustainable practices, and demonstrate the consequent cost savings they can provide to shippers.