The secret to achieving sustainability in the supply chain

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As a company, doing business as sustainably as possible has never been more important. There is enormous pressure on companies to be as green as possible while remaining cost-effective and efficient. These demands come from all sides: from customers, staff, government and, in many cases, shareholders.

For many companies, sustainability without rising costs seems impossible, but the good news is that this is not the case.

In recent years – and especially after last year’s COP26 conference – sustainability has been at the top of business leaders’ agendas, and it shows. In a survey by technology company ABB of 765 industrial business leaders, 71% said they are prioritizing sustainability goals as a result of the pandemic.

One industry that has boomed during the COVID-19 era but still has a way to go before it can claim to be truly sustainable is logistics.

Interestingly, 72% of ABB respondents said they are slightly or significantly increasing their spending on industrial IoT in an effort to improve their sustainability and I think they are right to do so.

It is becoming clear that digitization is going to play an important role in how we live and work, and we have moved away from using IoT just for efficiency; it has also become a factor for sustainability goals, including supply chain sustainability. According to a report by Vodafone and WPI Economics, emerging technologies such as the IoT and 5G could help the UK reduce 17.4 million tons of CO2 per year.

For several years now, I have been advocating IoT as a way to help make logistics more sustainable. Like a puzzle, there are important elements to solve and IoT technologies can help.

Supply chain sustainability and spoiled goods

No one wants spoiled goods. They cause headaches for both suppliers and customers and can increase carbon emissions for companies as they try to solve the problem. I think the root of the problem is actually a lack of data.

With little to no data, spoiled goods are not reported until they reach their destination and it is much more difficult for logistics companies to know the exact details of why the goods arrive in that condition.

They don’t necessarily know where or when the goods got damaged, nor – crucially – whether there had been any means of rescuing them. This increases the chance that goods will spoil regularly, costing companies and the environment.

IoT trackers can collect real-time information about important shipping data, including location, shock, temperature, humidity and light, so that problems with goods can be identified and corrected before irreparable damage is done. Real-time tracking allows businesses to receive data when it deviates from normal performance. Humidity and temperature indicators are very important when transporting foodstuffs or medicines, for example. If the recommended indicators are exceeded, the goods begin to deteriorate. Using real-time sensors, a notification would be sent to the carrier as soon as a problem started, so they could fix the problem as soon as it started, not the moment damage to the goods was discovered.

Labor costs for quality control and risk transfer

One of the main benefits of the digital revolution is that it simplifies processes and removes the need for people to perform everyday tasks.

Using people in places where machines are more efficient and accurate contributes to an increase in CO2 emissions. However, this is still a common practice in logistics, where opportunities for digitization are ripe.

In many cases, people still have to check goods multiple times for conditions and quality during a single shipment. This happens between one of the two carriers – warehouse to truck, truck to port, port to ship, and so on. But this method relies on people getting it right every time – which is unlikely because mistakes happen.

Even if there were no human errors, goods can also deteriorate in transit between checkpoints. But sensors are never wrong and can alert when potentially harmful conditions arise, rather than at the next checkpoint when goods are already spoiled.

But having uninterrupted end-to-end data on shipping terms and location would help reduce costs in several ways.

1. Expenses for personnel manually checking the security of goods.

2. The cost of paying insurance in case of damage to the goods.

3. The cost of identifying what the problem was and why it happened.

I believe this should be a standard interface not only for the shipment owner and recipient, but also for the logistics companies in the supply chain. Why? Currently, logistics companies are responsible for the cargo during transport. They are liable for everything that happens to the cargo during this time. With real-time condition tracking, any change in the storage conditions of the goods can be corrected before the product deteriorates.

Co2 emissions

Every company has a job to reduce its carbon footprint, but some don’t even have goals or dates to work towards.

In addition, there is no consistent way to monitor the amount of CO2 emissions from specific shipments – something that is important and is becoming mandatory in more and more jurisdictions.

That said, location and condition data can help estimate carbon footprints with very high precision; our calculations show that end-to-end condition monitoring is carbon positive, reducing spoilage and labor costs throughout the supply chain.

For example, by implementing technology to track shipments and monitor conditions, the number of spoiled goods can be reduced and CO2 emissions reduced.

While multiple solutions are available to monitor the exact location and condition of shipments, they rely on reusable and expensive IoT sensors and are not suitable for all businesses.

Such solutions are usually limited to one logistics operator, such as the trucking company or container operator, while 95% of shipments are one-way traffic and end customers are barely able to return anything. In the event that the end receiver is willing to return a reusable sensor to the sender, this will add 10 to 30 minutes of additional labor, shipping and associated carbon footprint.

A sustainable future

Our research led us to believe that the digitization of the supply chain would not only improve efficiency and be good for the bottom line, but also for the environment.

We are all on track to address these sustainability issues in the supply chain and I am convinced that disposable IoT trackers are the answer.

It may seem counterintuitive to get rid of trackers, but the CO2 impact of manufacturing them is less than the CO2 impact of the human labour, shipping and return logistics associated with reusable sensors in cases where end-to-end monitoring is possible.

It also helps that they provide insight into the entire journey of the goods; By having no blanks in the condition data, the labor costs associated with quality control on the receiver side can be reduced. Any lack of data, for example only monitoring goods to the distribution center, leads to the need for full Q&A acceptance on the part of the recipients.

The reduction in CO2 emissions for logistics shipments is greater in combination with location and condition data than the CO2 emissions associated with SaaS platforms and disposable IoT sensor operations.

It is for the same reasons that a significant proportion of packaging is disposable – it is driven by sustainability and economic factors. Granted, when you decide to make a cardboard box thicker to avoid damage, you’ll have to spend a little more, but you’ll save a lot in the long run because you won’t lose as many goods as you would without.

Companies should consider applying the same logic to their tracking solutions if they want to achieve sustainability in the supply chain.

Alexa Syniacheva is co-founder and CEO of Moeco.

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