Sustainable Transport & Green Logistics

Decision Making in Sustainable Logistics

 

Traditionally, transport network decisions are made using three principles: cost, quality, and service level. Each decision must employ a balance of these three principles. For instance, increasing fleet size improves service levels but comes at an extra cost, while using un-liveried vehicles saves costs but impacts the quality of service, and so on. In this way, transport managers the world over have weighed up the pros and cons of changes to their transport network, all in the hope of reaching a cost-service-quality optimum. 

Add sustainability into the mix, and, all of a sudden, the transport managers have a fourth principle to contend with. Their calculations are quickly unbalanced and all those past decisions have to be revisited with a sustainable eye. They need to start from scratch.

Or so you might think.

Because to consider sustainability as acting in opposition to the three traditional transport principles is the boardroom mindset of yesteryear. Sustainability does not always come at extra cost, nor will it necessarily reduce quality or imperil service levels. When employed correctly, sustainability can enhance the three traditional dimensions, sometimes all at once.

Take cost as an example; typically, one of the most transparent levers to react to changes in the transport network. While at first, one might think a sustainable transport network means a more expensive efleet and investment in new infrastructure, that isn’t strictly the case. A truly sustainable transport network seeks to lower costs in a number of ways: by reducing transport miles through more efficient routes; by mandating more fuel-efficient driving; by increasing driver productivity. Sustainability goes up – and costs go down.

Service level, too, can be enhanced through employing sustainable logistics. Using bike or e-bike couriers for last-mile transport is not only cost-effective and environmentally friendly but also allows for quick and agile delivery routes, shortening SLAs.

Similarly, a sustainability-led maintenance programme, with the aim of prolonging vehicle life, enhancing fuel economy, and reducing vehicle downtime, typically leads to more presentable vehicles, improving service quality. Striving for a more sustainable, stable workforce through investing in driver happiness schemes not only avoids turnover costs, but is also witnessed – and often commented upon – by the end customer.

So sustainability is not a stick to beat transport operations into shape, it is an opportunity to enhance value and achieve growth, while making the organisation more future-oriented and responsible.

But how does a company go about integrating a truly effective sustainability ethos into their transport network?

 

Sustainable Transport Transformation

 

Integrating sustainability into the transport network won’t happen overnight. It requires a diligent and structured transformation programme across the logistics department – and beyond. Here, we describe a number of initiatives that will set an organisation on the road to green logistics and sustainable success.

 

Strategic orientation

In the first instance, sustainability should be approached on a strategic level, to ensure it is fundamentally ingrained within the transport department’s values and its future direction. Some practical steps to achieve this include:

• Building a sustainable transport business model:
  The business model is the foundation of the sustainable transport strategy. It defines the proposed value-add to the customer in simple, unequivocal terms: sustainable transport from A to B. Subsequently, all processes and operations are aligned towards this goal, ensuring the customer benefits from the new efficiencies and captured value.
  
  
• Sustainability cost model:
  It is vital to ensure that sustainability is properly accounted for on an economic basis. Without fully measuring the financial benefits of sustainability, it becomes yet another victim of jargon and hand-wavery. Creating a cost model that considers, for example, the actual cost of driver turnover, will help the transport department make reliable, fact-based decisions. It will also help sell sustainable transport to the rest of the business.
  
  
• Addressing the location and network strategy:
  The location and network strategy details how a network is set up and how it operates; in other words, it dictates which facilities go where, what purpose they serve, and how they interact. In all likelihood, the current transport network strategy has been formulated on different principles, or, in cases of rapid growth, on no definite principles at all. A review of the network from a sustainable viewpoint will doubtlessly unearth a number of improvements that will make the network more efficient. An example might be consolidating transport hubs, not only saving road miles but also overhead costs. Or it could be that your current network is over-centralised and too rigid. By breaking the network down into smaller, local hubs and cross-docking stations, the transport network acquires agility, operating more efficiently with improved service levels and service quality to the end customer.
  
  
• Strategic collaboration:
  Sustainability is wide-reaching – in other words, it’s inclusive. Only through collaborating both internally and externally can sustainability be truly effective. A collaboration strategy – detailing who the transport department will collaborate with, when, and how – will help make such initiatives genuinely impactful. This could include fleet-sharing initiatives between different networks within or without the company. Efleets are sustainable but the infrastructure is costly – how about sharing charging stations with e-mobility providers? Last-mile delivery is notoriously costly too, not to mention difficult... sharing the burden with other companies will reduce costs and make the last-mile operation more streamlined and sustainable.

 

Supplier selection and management

More often than not, logistics networks are comprised of a number of partners and suppliers, so it’s not enough to get only your own house in order – your partners’ houses have to be in order too. This can be achieved through the following:

• Transport partner strategy:
  Do your current partners have a similar sustainable mindset? Do they want to work with you to not only ensure their operation is sustainable – but yours is too? If not, it might be time to introduce new ways of working or even seek new partners. A transport partner strategy will help you decide upon and structure your partner relationships.
  
  
• Partner professionalisation:
  Sometimes partners need a little encouragement to see the benefits of sustainability. Professionalising the incumbents through sustainability training schemes or investment is a great way to improve their sustainability metrics. It might be the case that the partners are too numerous and small to achieve the appropriate levels of professionalisation – seeking new partners capable of meeting a higher standard is always an option.
  
  
• Transport and freight tenders:
  Whether it’s to sharpen up the incumbent or find new, like-minded partners, tenders are the best way to draw out sustainable innovation from the market. Make sure any talk of sustainability is more than just sales patter by including measurable sustainability commitments in the initial tender requirements and the final supplier agreement.
  
  
• Transport partner management:
  Contracts don’t manage themselves, especially without the relevant KPIs. To ensure sustainability is continually applied in the transport partner’s decision-making processes, it should be included within the transport partner management effort and measured quantitatively in partner reviews. By continually monitoring the partner’s performance, the transport managers can react, adjust, and, in extreme circumstances, impose penalties to ensure the standards don’t slip.

 

Digitalisation

Only with the appropriate data and digital processes can a sustainable ethos be truly effective. The three pillars of any digital strategy include:

• Transport digitalisation:
  One of the reasons why sustainable transport has become an achievable goal is technological innovation. Efficient, algorithmic route planning; GPS enabled vehicle tracking and ETA management; automated consignment tracking through handheld devices; driver monitoring systems. For every requirement, there is a solution – it's an exciting time to be a transport manager. But that doesn’t mean all the solutions should be bought and installed all at once. To get the best out of what the market has to offer, all technologies should be properly vetted and included in a structured digitalisation roadmap.
  
  
• Partner platform / driver academy:
  A partner platform allows real-time interaction with the drivers on the ground, increasing their sense of accountability for the job. Similarly, a driver academy can be used to improve driver training and disseminate benefits and praise. This improves the quality of the drivers and enhances job satisfaction, reducing turnover and making the workforce more sustainable.
  
  
• Digital logistics management / reporting:
  Digital logistics management systems can be used to quickly and effectively enact live logistics changes, while detailed and regular logistics reporting – containing KPIs, performance dashboards, risks, and decision-supporting metrics – can be used to assess sustainable performance and inform future strategy.

 

Processes & specifications

• Fleet optimisation:
  Sustainability hates waste. That means vehicles stood down in depots or waiting for instructions at the side of the road. Fleet optimisation, through accurate fleet-sizing, digital solutions, and process change, will reduce downtime and make your fleet operate more sustainably. Additionally, equal to the progress in the digital space is the improvement in vehicular technologies. Old diesel trucks belching fumes are a thing of the past, particularly when they are liveried in company colours... New vehicles offer lower emissions, improved fuel economy, and the possibility for the integration of efficient driving technologies.
  
  
• Route optimisation:
  Unnecessary journeys and poorly planned routes eat into budget and produce avoidable emissions. Data-driven route optimisation reduces day-to-day waste through the analysis of contemporary data. They can also reveal the need for greater change, such as adjusting service times so a more efficient route becomes available, or collaborating with other carriers on poorly visited routes.
  
  
• Digital/sustainable customer integration:
  End customers lead busy lives and are not always in the right place at the right time to receive deliveries. By empowering the consumer with delivery information, costly missed drops and return visits will be reduced. Not only that: the customer experience will be improved.
  
  
• SCM load optimisation:
  Half-empty lorries lead to double the road-miles and perhaps even double the fleet size. From digital solutions to simply adjusting packaging so more fits on the back of the lorry, SCM load optimisation will put half-consignments in the rearview mirror and bring you one step closer to sustainable logistics.
  

 

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Sustainable Transport & Green Logistics: Final Thoughts

 

A move towards sustainable transport is inevitable. In one form or another, it’s probably happening already within your organisation. But it doesn’t have to be difficult or costly: in fact, quite the opposite.

By employing a truly sustainable mindset across the transport network, sustainability can make your organisation more future-oriented and responsible, while harnessing value and increasing competitiveness – essential in a market that has never been more crowded. Moreover, it can actually improve the bottom line.

Whether it be digital, process, or fleet-related, the solutions promising sustainable transport are numerous. What’s more, every transport network is different so there is no ‘one size fits all’. As a result, the path to sustainable logistics is not always clear. That’s where OCM can help.

From strategy to implementation, OCM offers comprehensive support with regards to sustainable transport. If you would like to receive some initial guidance or have questions about our approach to sustainable transport and green logistics, please do not hesitate to get in touch.