Cutting-edge technology is providing organisations with the means to create greener more sustainable supply chains. The reward is lower costs and higher profits.
Back in the 19th century, if you wanted to move goods “at speed” across ocean trading routes you probably booked space on a clipper – a streamlined class of sailing ship capable of travelling at 30 kilometres per hour. Today the same routes are navigated by massive container vessels, most of them running on heavy fuel oil.
And here’s the dilemma. The ability of businesses to move raw materials, components and finished goods around the world is one of the pillars of global prosperity but the fleets of ships, aircraft and trucks deployed by the logistics industry are responsible for significant carbon emissions. As the climate emergency becomes more pressing, it is vital that organisations take positive steps to create greener and more sustainable supply chains.
A return to the golden age of the ocean clipper, perhaps? Well, no one is suggesting that, but as the world moves towards net zero, wind-powered ships may yet have a role to play. In August of this year a container ship powered in part by new cutting-edge sails known as Windwings set off from China for Brazil. Operated by shipping company Cargill, the vessel provided an example of how cutting-edge design coupled with a source of energy that is as old as the world itself can reduce pollution while also providing an effective logistics solution.
It may be some time before wind-assisted vessels become commonplace on the world’s shipping lanes but on land, electric vehicles are already having an impact. Meanwhile, businesses in all sectors are using a range of tools and practices to create more sustainable supply chains and technology is the enabler.
A Wealth of Data
So what does that mean in practice? An obvious place to start is to fully utilise all the available data.
As the World Economic Forum highlighted recently, most modern businesses often have a wealth of data captured on their systems but often fail to use it effectively to drive supply chain efficiencies. For instance, 25 per cent of containers are shipped empty every year. Essentially this means that unnecessary journeys are being made, feeding through to higher carbon emissions.
The problem here is that companies tend to book container space without seeing the bigger picture. Orders are placed with no awareness of whether a container will be full or almost empty when shipped. This is incredibly inefficient but it’s a problem that can be solved by real time analysis of capacity and the optimisation of schedules and bookings.
More broadly, artificial intelligence combined with analytics can be used at just about every point along the supply chain to identify and rectify bottlenecks, re-route shipments and accurately predict demand.
There are challenges, of course. Modern supply chains are complex. For instance, components must be ordered, shipped to factories, held in distribution centres and shipped again to customers or warehouses. In today’s globalised business environment, the journey of that component may involve multiple border crossings and customs jurisdictions. Bottlenecks can occur at any point. It is, therefore, to collect data at every point. One trend, identified is an increasing use of automation and the Internet of Things to capture the necessary information.
Businesses and logistics firms are also using third-party data, such as weather reports, to optimise routes. For instance, as reported in Forbes, IBM analyses weather and location data to predict hurricanes and other weather events that might disrupt shipments. New routes are planned accordingly. The same principles enable the routing of fuel-efficient voyages.
The above examples underscore the close relationship between efficiency and environmental impact. Broadly speaking an efficiently managed supply chain will result in lower energy consumption and reduced carbon emissions.
Ethical Sourcing
But there are other strategies to consider. Ethical sourcing is becoming an increasingly important issue, not least for consumers. A survey carried out in 2021 found that 88 per cent of consumers were more likely to buy products that had been ethically sourced and many will pay a premium. There are, however, other reasons to pursue an ethical procurement policy, including regulatory compliance and (importantly in this context) maintaining a good and sustainable relationship with suppliers. Similarly, many companies have introduced circularity into their supply chains, with goods and products being recycled through the supply chain.
The narrative around supply chains is changing rapidly. Governments around the world have adopted net zero targets and businesses must find ways to comply, not only internally but also in terms of how they manage suppliers. Increasingly consumers are also seeking evidence of ethical, sustainable trading practices.
However, businesses should beware of attempting to be more environmentally friendly than they are. Claims about sustainability initiatives should be backed up with transparent and accurate data in ESG reports.
And while organisations are making progress around digitizing their supply chains, a recenet report shows that a majority of chief executives are not planning to use the technologies that would drive sustainable practices.
Perhaps that’s not surprising. These are troubled times economically and PWC found executives focusing on “near-term” priorities rather than spending on new tools and the necessary upskilling of their workers. Supply chain innovation requires upfront investment and businesses may struggle to see the ROI.
But ultimately, efficient supply chain management goes hand in hand with sustainability. The use of AI, analytics and innovative technologies reduces waste and pollution, brings down costs and boosts profits.
