24.02.2022

Part-load Logistics In Times Of Climate Change

COP26 in Glasgow – the governments of the world gather to tackle the climate challenge. Despite the woolly language in the Glasgow Climate Pact and the general reluctance of governments to make firm commitments, it has become abundantly clear that decisive action is required to reduce greenhouse gas emissions.

According to the German Supply Chain Act, which will take effect for all companies employing more than 3000 staff in 2023, and for companies with 1000 or more employees in 2024, requires supply chains to be sustainable so as to avoid negative effects for people and the environment. While most multi-drop delivery businesses are smaller, their customers will insist on their compliance with these principles to prevent competitive disadvantages and reputational damage for themselves. So ultimately every company that is part of a supply chain will have to comply with the Act.

The Federal Government’s Climate Protection Programme 2030 calls for a 55 per cent reduction of greenhouse gas (GHG) emissions by the year 2030; at the same time, there is growing public pressure to address decarbonisation more vigorously. Extreme weather events have reinforced the impression among people that there is an urgent need for action. Quite apart from these new requirements, the steep rise of fuel costs, aggravated by the CO2 tax which will be increased in several steps, is eating into the slim profits of logistics companies. Similar to other industries, the part-load distribution logistics segment must come to terms with these challenges.

While agriculture, private households, energy and other sectors in Europe have been able to reduce their greenhouse gas emissions significantly compared to 1990 levels, the output from motorised traffic has increased by 30 per cent within the same period. Transport currently accounts for roughly one quarter of all GHG emissions in Germany and Europe. The EU aims to achieve a 20 per cent reduction of emissions by 2030 compared to 2008 levels. How can the logistics industry achieve this?

While lorries have become significantly more efficient over the past decades and emit much fewer noxious gases today, the enormous increase of the volume of transported goods has more than offset the positive effects of this development on overall GHG emissions. Research projects are looking into the potential of alternative fuels such as hydrogen, ammonia and bio “natural gas” produced using solar and wind energy as major energy companies are investing in offshore hydrolysis wind farms. New propulsion technologies using fuel cells, battery systems or overhead cables are being trialled, and some e-vehicles are in production. Government support programs help interested companies shoulder such investments. But no affordable, alternative-fuel full-sized lorries – the true workhorses of the part-load delivery business – are currently available in the market.

Contribution to climate neutrality represents key challenge for part-load logistics operators

In its study “Stückgutlogistik in Deutschland“ (Part-load Logistics in Germany; in German) of 24 August 2021, the German logistics association DSLV (Bundesverband Spedition und Logistik e.V.) points to the industry’s responsibility for the climate, seeing the “contribution of transport to climate neutrality as a significant future challenge for part-load logistics operators. Apart from personnel and process costs, it is particularly the direct and indirect environmental costs that are rising steadily.” DSLV General Manager Frank Huster points out that “legislators often fail to understand the multi-level, ecologically highly efficient part-load distribution system”. DSLV sees “a major discrepancy” between the economic importance and ecological potential of the part-load logistics segment “unlike any other logistics segment”.

Because of its very nature, dock-to-dock distribution cannot be shifted to the railway system, contrary to long-distance transport. Until a new generation of fit-for-purpose vehicles and an appropriate energy supply infrastructure are available, logistics operators must find other means to handle the rising fuel costs while meeting regulations and the public’s expectations regarding emission reduction.

Holistic strategy of implemented environmental goals and improved bottom line might be the solution

So what can they do? In its October 2021 report “Transport und Logistik für den Klimawandel fit machen“ (Getting The Transport and Logistics Industry Ready To Face Climate Change; in German), PricewaterhouseCoopers GmbH (PwC) recommends that logistics companies adopt a holistic strategy that strives to implement environmental goals in a manner which simultaneously improves the bottom line. To design a strategy for future profitability that accounts for all relevant factors, each logistics operator should determine and quantify its own contribution to climate change and plan for compensation measures which are financially feasible. On the other hand, the report says, companies should also try to understand the impact climate change has on their business and figure that into their future business models. Doing so requires flexibility. According to PwC, realistic measures to reduce GHG emissions include the optimisation of networks, route planning and vehicle utilisation. Driver training and investing in more efficient lorries are additional measures to contemplate. Emission calculations should also account for emissions by subcontractors as well as the electric and heating energy consumption of administrative buildings and warehouses, the PwC study says.

A combination of cost-reduction and efficiency-enhancing measures is consequently the most realistic option for the time being. Furthermore, optimising driving times to avoid costly overtime and mandatory breaks can help companies keep their operating costs in check; the same applies to measures to improve the efficiency of goods handling processes and energy usage at the depot. Logistics companies are doing what they can to seize these opportunities. Reducing CO2 emissions and cutting costs is difficult, of course, when you are constantly operating at the very limits of your capacity.

To maximise the saving potential of vehicle and depot operations it is necessary to perform a detailed analysis of the cost factors. This can only be done with the help of powerful software using high-quality planning data. Many operators are unsure how to obtain either; they lack clarity about the full range of cost-related factors and do not have access to reliable data. Investing in software that can help disclose saving potential while supporting the complex dispatch process is definitely a step in the right direction.

The dispatchers play a key role when it comes to reducing fuel consumption and carbon emissions – they are the ones who decide about route optimisation and vehicle utilisation. As a smart, AI-supported software solution, Smartlane Transport Intelligence can uncover hidden cost drivers and provide solid data as a basis for operations planning while optimising and accelerating the dispatch process. This solution creates the data transparency part-load distribution companies are struggling to obtain – business-critical transparency that will help them tackle the cost and emission challenge while building competitive muscle.

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