Cargolux chief's big decision: how to replenish an ageing fleet
Cargolux is at a crossroads. It has a big decision to make, and fairly fast. ...
People in the logistics sector have their hands full these days trying to find capacity and keeping track of pricing, but there is also a mounting push for sustainability in their offerings.
The latest impetus has been the recently published United Nations (UN) report on climate change, which presents a dire warning.
“We need to focus on sustainable supply chains.,” said Abe Eshkenazi, CEO of the Association of Supply Chain Management, while Mete Bayyigit, VP global supply chain at semiconductor producer ASM, told a conference on sustainability organised by Reuters Events: “Sustainability is a wake-up call for all of us.”
For companies like Coca-Cola, sustainability is part of its role as a corporate citizen, according to global supply chain director Keith Woods. Consumer-facing firms, especially global brands, were increasingly under the microscope, he noted.
“As a consumer brand, the cost of not taking this seriously is really high. Consumers have high expectations of organisations and will hold them accountable,” agreed Stephen Jacob, COO of outdoor gear brand Cotopaxi, which has built its business model around sustainability.
A sustainability focus also worked inside the company: “It creates accountability that we can use not only with customers, but also with recruitment and retention of talent,” said Mr Jacob.
Sustainability can also have a positive effect on the bottom line, stressed Oren Zaslansky, founder and CEO of Flock Freight, a technology company that optimises truckloads through matching freight from different shippers, resulting in lower costs for them and better results for the truckers.
While truck optimisation by matching freight was one way to improve sustainability and bolster the bottom line, another was a shift in modes, Mr Woods pointed out. “We’re starting to explore multimodal strategies,” he said.
For instance, Coca-Cola used to rely on less-than-truckload carriers to move cargo from Monterrey, but now ships more freight from the Mexican city to the US by sea or through intermodal channels.
And Hewlett-Packard has historically relied on airfreight, but in recent years it has taken aggressive steps to shift as much as possible of this traffic to ocean carriers.
However, some of this traffic has reverted back to air recently because of disruption in the ocean cargo supply chain since the outbreak of the pandemic, reported Dean Fortino, in charge of the company’s sustainability drive in the supply chain.
For optimisation drives to work, it may be necessary to change processes, said Mr Zaslansky. He added that improved supply chain visibility was another key element.
“End-to-end visibility helps take out volatility,” he said, explaining that having a better demand signal allows companies to plan ahead, which gives them more options than a last-minute scramble for capacity on the spot market.
And a digitised supply chain was a critical component there, Mr Woods noted, “you definitely need to invest in digitising your supply chain,” he urged.
This will certainly help firms measure their own footprint, a vital early step in the journey for a company trying to develop a sustainability strategy, according to Mr Jacob. Companies should understand how high their emissions are and the biggest contributors to their carbon footprint, he said.
“Set up measurements and put them in a scorecard and hold people accountable,” advised Mr Woods.
At the cutting edge, companies look to steps like electric trucks to decimate their emissions, but for now, the cost and limited range of the technology were obstacles for most players, Mr Zaslansky said. He sees large global brands taking the lead in this, as they can leverage volumes and longer strategic planning cycles to invest in this area. For small and mid-sized players, e-vehicles will remain elusive for some time before they can justify the investment, he said.
For them he sees greater promise in things like truck and load optimisation, where companies like his are happy to help.
No matter why they embark on a sustainability journey, players should be clear about their motives, he said, adding: “This is not the kind of initiative you pay lip service to. If it’s rhetoric, it doesn’t work. You have to be honest with yourself why you want to do it.”