How technology improves sustainability in the supply chain

Global economic activity has grown at a phenomenal pace over the past several decades. The most recent data available shows that Gross World Product (GWP) in 2014 was estimated to be $78 trillion[1], 19 times the $4 trillion GWP in 1950[2]. However, the vast economic development of recent times has come at the expense of the environment as growth pulls raw material from forests, soils, seas and waterways and greenhouse gas emissions lead to rising global temperatures[3].

At the same time, increasingly savvy customers are seeking information about the quality of products, carbon miles and the company’s commitment to environmental and social responsibility. As the global economy and global ecology are becoming ever more interwoven[4], key decision makers are recognising sustainability as a business priority to deliver economic growth in the 21st century.

What is sustainability?

Sustainable development is defined as development that meets the needs of the present without compromising the ability of future generations to meet their own needs[5]. The goal for business is to improve profitability while reducing environmental and social impact for long-term performance.

A critical component of long-term success is social license to operate. That is, the ongoing acceptance of a company’s business practices by the public and other stakeholders. Today, consumers expect the companies they buy from to be committed to sustainability. Nielsen’s Global Consumer Confidence Survey[6] found that:

• Four in five global consumers feel strongly that companies should take action to improve the environment.
• These consumers span generations and genders and are using their spending power to effect the change they want to see.

An equally important consideration is that widespread failure to take action now can interfere with a business’ ability to deliver its core products in the future. Consider for example, global FMCG giant, Unilever, which estimates it loses €300 million per year due to natural disasters and climate change[7].

The supply chain solution

The logistics industry is a critical enabler of global economic growth. It is estimated that freight transport accounts for roughly 8 percent of energy-related CO2 emissions worldwide[8]. Therefore, we have an opportunity – and a responsibility - to promote sustainability in the supply chain. According to McKinsey and Company[9], consumer packaged goods supply chains account for:

• More than 80 percent of the company’s total greenhouse gas emissions; and
• More than 90 percent of the impact on air, land, water, biodiversity and geological resources.

By leveraging the right technology in their supply chain, product-based companies have the opportunity to reduce the environmental and social costs of their operations while also building goodwill with customers and positioning themselves for strong growth.

A few technological innovations that hold great potential for companies to meet their sustainability targets include:

A fourth party logistics provider (4PL)

Because a 4PL delivers complete and agile supply chain management, it’s powered by a sophisticated technology platform which presents a single view of all the partners in a customer’s supply chain. This end-to-end visibility enables the 4PL to identify unused capacity in the system.

The 4PL’s highly trained team uses these insights to optimise the carrier utilisation in a bespoke solution tailored specifically to meet the customer’s needs. The result is waste elimination which reduces cost, unlocks competitive advantage for the customer and reduces greenhouse gas emissions from fewer trucks on the road.

Autonomous Vehicles

No longer the realm of science fiction, the autonomous vehicle (AV) industry is expected to be worth $557 billion by 2026[10]. Removing the driver from the equation of transport holds great promise for improving sustainability. Appropriately programmed AV will be able to apply the principles of eco-driving, reducing fuel consumption by as much as 20% and reducing the greenhouse gas emissions to a similar extent[11].

Drones

Drones are increasingly being adopted by the logistics industry. The unmanned aerial vehicles are reportedly more cost effective and energy-efficient than other solutions in both ‘last mile’ and long-distance deliveries[12]. The increasing development and adoption of drone technology is putting downward pressure on prices, which further enhances their cost-effectiveness.

Green fleets

Various governments and companies around the world are using clean energy technologies to make their fleets greener. Traditionally, vehicles used in logistics run on combustion engines, which create mechanical energy by burning fuel, which releases greenhouse gas emissions. However, countries in America, Europe and Asia have begun to make transportation more efficient and sustainable by using electric vehicles and hybrid electric vehicles. One example is Norway’s postal service, which has substituted its diesel fleet with electric vehicles, bicycles and mopeds to make for an eco-friendly distribution system[13].

Digital twins

Characterised as the next evolution of Internet of Things, ‘digital twins’ capture a ‘virtual model’[14] of an organisation through the use of multiple sensors on various pieces of hardware. The output is a complete picture of operations that is easy to monitor and understand, allowing the user to understand the situation and identify better solutions.

For example, the right logistics partner could replicate its customer’s activities and machinery in a digital twin of a warehouse. This would allow them to analyse the movement of the packages and functionality of the machinery to improve productivity.

Toward supply chain sustainability

Business leaders the world over are seeking to strike the right balance between environmental, social and economic objectives. Accounting for more than 80 percent of a packaged goods company’s total greenhouse gas emissions, the supply chain is a key focus area for achieving sustainability targets. Fortunately, technological innovations across the industry provide the opportunity for businesses to not only reduce their environmental footprint and build consumer goodwill, but also to create efficiencies which will position them for strong, sustainable growth.

Interested in finding out how our technology can improve sustainability in your supply chain?