The Profitable Journey To Sustainable Logistics Operations

Image credit: iStockphoto/Ghing

At the 2021 United Nations (U.N.) Climate Change conference, U.N. Secretary-General Antonio Guterres stated, “It’s time to say: enough. Enough of brutalizing biodiversity. Enough of killing ourselves with carbon.” While many companies have long understood the effect of carbon emissions on global warming, the increasing frequency of natural disasters, rising sea levels, and biodiversity collapse are having a real impact on their businesses. Moreover, as end consumers demand sustainable products, a minimal carbon footprint has become an increasingly important factor in purchasing decisions.

Barriers to carbon neutrality and net-zero targets

Logistics professionals recognize the urgency for change but face enormous barriers to reaching carbon neutrality and net-zero targets. For companies that use carbon offsets to meet the targets, there is increasing scrutiny regarding the role of offsets and concerns over the quality and cost of those offsets. Other barriers include costly electric vehicles to replace diesel-powered engines, the inadequate infrastructure supporting electric vehicles and longer lead times, and higher costs associated with lower-emissions modes such as rail These challenges were exacerbated when COVID-19 drastically increased the demand for e-commerce because while customers want sustainable products, they also want them right away and at reasonable prices. To further complicate the problem, driver shortages in the U.S. continue to plague the industry with an annual driver turnover of more than 90%.

Our solution helps address the challenges

IBM believes that sustainable enterprises are purpose-led and should be anchored in the quadruple bottom line: people, planet, profit, and positive impact. As part of our sustainable supply chain transformation offering, we collaborate with Leaf Logistics, a company focused on transforming transportation logistics through digital solutions. According to Anshu Prasad, CEO of Leaf, “We connect all transportation market participants across the industry, giving them unprecedented network connectivity to create resilient transportation plans. We work with IBM to give retail companies a way to demonstrate positive sustainability initiatives that also reduce supply-chain costs.”

Prasad added that more than 30% of the trucks on the road drive empty due to a lack of network coordination. Leaf is dramatically reducing that number using transportation and client data to dynamically allocate transportation capacity and minimize empty miles. This provides retailers with more reliable planning that reduces overall costs, helps drivers to realize a better life, and dramatically reduces CO2 emissions.

According to Leaf:

— 30% of truck carbon emissions are not associated with material utility for value-added goods delivery 

— Independent drivers spend 30% of travel time without a paid load 

— Companies spend 30% of their logistics budgets on non-value-added services  

With support from solutions like Leaf, companies can steer toward more sustainable outcomes by reducing empty miles, reducing logistics spend for beneficial cargo owners (BCOs), and fostering a better life for drivers. For retail customers, this creates a world-changing impact. In partnership with IBM and Leaf, retail companies are able to demonstrate positive environmental and social impacts across the supply chain. This allows businesses to get their brands closer to realizing sustainable product delivery for end consumers, while also reducing supply chain costs.

Solution focus

1. Reducing emissions associated with logistics 

Many retailers rely upon third-party logistics providers for shipping. Emissions associated with such shipping activities are considered Scope 3 emissions of the retailer.”  Scope 3 emissions are defined as emissions as the result of activities from assets not owned or controlled by the reporting organization, but that the organization indirectly impacts in its value chain. They are often hard to capture and quantify.

The ability to collect Scope 3 emissions data is hindered by a lack of primary source data, cumbersome data collection, and challenges associated with estimating emissions. The Greenhouse Gas Protocol, an organization that provides standards, guidance, tools, and training for businesses and government to measure and manage climate-warming emissions, establishes 15 categories for Scope 3 emissions data. It also provides methods to estimate emissions for each category. Managing this process has been a challenge to emissions reporting for many retailers.

Our solution helps retailers quantify Scope 3 emissions through collected data related to transportation routes, types, and content. This is part of IBM Consulting’s larger offering for supply chain carbon footprint reporting. The Leaf Adapt optimization engine enables companies to select partnerships and routes that significantly reduce Scope 3 emissions. By reducing spend on empty miles and suboptimal loads, retailers can lower expenses and invest more in renewable fuel-powered transportation solutions.

2. Promoting driver wellness  

The safety and wellness of truckers are often overlooked in discussions regarding sustainable logistics. Empty miles mean no payment for their work. Driver well-being has been further strained by the pandemic, with limited freedom of movement. In 2021, the International Chamber of Shipping wrote an open letter to the UN stating that all transport sectors face a worker shortage and that more truck drivers are expected to quit because of the poor treatment faced during the pandemic. This puts the supply chain under greater threat,

Using the Leaf solution, filling empty miles will lead to better pay and a better quality of life for truckers. By facilitating network coordination that uncovers hidden capacity, BCOs can source drivers from the existing pool of carriers and these carriers can generate more revenue. IBM and Leaf are able to quantify and demonstrate the positive driver community impact for retailers that use this revolutionary solution.

3. Increasing transportation reliability and availability

Customer expectations for home-delivery timing and reliability have increased significantly since the beginning of 2020. At the same time, middle-mile delivery timing and reliability have not increased significantly. This supply chain gap requires the industry to abandon previous selling models to make e-commerce profitable.

Leaf provides shipment visibility and artificial intelligence-enabled analytics that accelerate the ability of retailers to predict and plan middle-mile deliveries. This results in higher reliability in last-mile delivery without significant fulfillment center inventory costs and strained working capital.

In addition, today’s cargo insurance is limited to delivery services — not the actual loads — mainly because of limited cargo content visibility between BCOs, carriers and insurance providers. Leaf data enables visibility into actual cargo and this visibility helps retailers price and insure cargo. This is especially important for high-end products.  

The journey to sustainable logistics and supply chain operations

IBM Consulting helps companies embed sustainability as a core competency and value in their supply chains. We believe that a shared sense of purpose, community prosperity and corporate success fosters sustainable supply chains to bridge the gap between identifying the need for sustainability and taking action for global change.

IBM Consulting can help build resilient, sustainable supply chains that prepare your business for the future of work, create greater transparency and improve employee and customer experiences.

Learn more

The original article by Sara Thuo, IBM’s chief operating officer at IBM Consulting Global Sustainability Practice is here.

The views and opinions expressed in this article are those of the author and do not necessarily reflect those of CDOTrends. Image credit: iStockphoto/Ghing