The global pandemic has created a watershed moment for global supply chains. As we adjust and respond to this “new normal”, one important area is the effect of these shifts on the environment. From that perspective some changes have been clearly positive (e.g. fewer commuting miles driven), some largely neutral (e.g. alternate sourcing strategies), while others are potentially negative (e.g. the daily delivery of packages to our homes). Alongside all of this is the growth of automation and related technologies which also have environmental considerations. Combined with the heightened concerns regarding climate change and associated sustainability impacts, all businesses should consider and assess these changes using the lens of environmental sustainability.
Managing Disruption and Change with Emerging Technologies
Emerging technologies play a role in managing disruption and are driving change in the transportation and logistics industries. We are now seeing an increase in the use of automation, not just within a TMS or WMS, but the digital coordination across all phases of logistics, from shipper to broker to carrier to warehouse. AI and machine learning provides more accurate information during the transportation planning process; using IoT to monitor shipments, cargo conditions, and yard management have allowed companies to make quick adjustments when disruptions occur; and mobile digital assistants provide feedback and instant visibility into shipments and inventory.
Business logistics costs as a percentage of GDP is currently 7-8% in United States. In developing countries it can be more than double that. Economic development is both measured by and based on logistics. As supply chains continue to evolve to drive more efficiency, we will see changes in three main areas:
- Physical infrastructure – Electrification and low emissions transportation and IOT supported by high volume ubiquitous connectivity via 5G
- Systems infrastructure – Cloud and improved information sharing through social and business networks, often enabled by blockchain
- Applications techniques – Using AI/ML to drive real-time insights and decision making – plus improved optimization, resilience and responsiveness
All of these come together in some way with autonomous transportation options. These will most likely show up first in contained environments such as yard management – possibly augmented by some human oversight. Volvo’s POD in Sweden is a great example. The knowledge gained in these settings can be used for subsequent expansion to other, less structured, environments.
So when we talk a lot about Industry 4.0 or the 4th industrial revolution – the combination of smart technology, machine to machine communications and IOT – it’s good to remember that the logistics space is right in the middle of that, both in a business and consumer context.
The net result of all of these developments is to drive increased efficiency, both in terms of activity within a given logistics “leg”, but perhaps more importantly, between those legs. Combined this with a shift to clean energy to power those activities, and you get a very significant environmental benefit.
Information Driving the Transformation of Value Chains
Being able to collect, analyze and decide using that information, and to be able to do all this in real-time, will give companies competitive advantage. FedEx founder and chairman Fred Smith, famously said “Information about the package is as important as the package itself.”
The keys to success are security, opt-in, and transparency. There is value to sharing data, like receiving suggestions for a better route, more accurate ETAs, and complementary product choices. Your movement as determined from your smart phone is what helps generates those redlines on your car’s map. When value accrues to both the people who supply that data and the people who receive and use it – and everyone is aware of the exchange – then it’s a fair and even playing field. The choice of whether to participate needs to be up to the individual, and the penalties of breaking that trust need to be equally clear.
What applies to personal information, also applies to information sharing across business value chains. If there are greater mutual benefits to sharing data than to holding it private, then more data will be shared and this will tend to yield efficiency benefits and in turn, to environmental ones.
“Speed is the New Cheap”
Transparency and choice apply to both businesses and consumers. Knowing the impact – to people, to profits, and to the planet – of your decisions. I often say “speed in the new cheap” but there is a price to pay for that speed, and that price is often paid by the environment without us being aware. Residential deliveries that made up 25% of US parcel volume in 2000, grew to over 50% pre-pandemic, and has grown more since. That’s not just limited to the US. China increased its lead in global parcel volume in 2019, shipping more than 63 billion parcels last year, representing 26% YoY growth and making up substantially more than half of global parcel volume. Informing the consumer of the impact of their choices and then providing options to combine shipments or delay till a weekend delivery – each of these tagged by environmental implications (e.g. a “green leaf”) – can help drive choices that improves consolidation and reduces environmental impacts. As can smarter consolidation and routing algorithms at the shipper, as well as the shift towards electrification in local delivery fleets.
And in general, we must continue developing those cost-effective electric transportation options, whether it is transportation on-demand or public transportation and adopt these at scale. These will have a big impact on sustainability.
Jon Chorley is chief sustainability officer for Oracle, where he drives and coordinates all initiatives, both internally and externally, related to environmental sustainability. This responsibility covers all areas, from IT infrastructure and business operation to corporate reporting and risk management. Jon is also group vice president of product strategy for Oracle’s supply chain management (SCM) applications and leads the team responsible for driving the business requirements and product roadmaps for these applications. Chorley has more than 25 years of experience in the software industry in a broad set of roles including sales, implementation, and development.