Efficient, sustainable supply chains go hand in hand.
Data, Optimization Key to Eco-friendly Supply Chain
Apr 29, 2022
Data and optimization can improve efficiencies in supply chains, save shippers money and reduce greenhouse gas emissions, according to logistics experts who shared insights last Friday in honor of National Supply Chain Day.
“In transportation, it’s one of those rare industries where going green and being more sustainable is a one-for-one in cost reduction,” said Caleb Nelson, co-founder and chief growth officer at Sifted. “I don’t think most shippers understand that because the access to that data isn’t totally available to them.”
Sifted is a logistics data science platform that allows companies to experiment with different scenarios using computer modeling.
As sustainability becomes top of mind for consumers, investors and retailers, shippers are starting to look to data to find how they can streamline operations to boost profits and benefit the environment.
Data gives shippers insights
Step one to understanding where companies have the largest opportunities to optimize their supply chain efficiencies is getting access to data.
“I think most people are just operating in the dark, and they might not fully understand if their company is sustainable or not and ways that they can help improve that sustainability,” Nelson said.
Transportation and logistics data is incredibly complex, especially for companies that use multiple carriers and multiple modes of transportation.
“The good news is that there is a lot of inefficiency to solve for in supply chains. The challenge is aggregating emissions data and sharing with stakeholders so everyone involved can identify these inefficiencies and invest in high-impact emission reduction activities and technologies,” said Danny Gomez, managing director of financial and emerging markets at FreightWaves.
Before cloud services became available, companies in the technology sector were doing redundant work with their own servers, which was less efficient and more carbon-intensive, said Azad Ratzki, CTO at BlueGrace Logistics.
“3PLs are kind of the cloud platform as a service of logistics and supply chains,” Ratzki said.
BlueGrace Logistics is a 3PL that uses technology and data to help companies find inefficiencies in supply chains and provide solutions.
Data can help companies minimize waste throughout supply chains, whether that is packaging materials, extra time truckers spend waiting to load or unload, space left in half-full trucks, or extra miles traveled.
Using data is “one of the most significant things you can do” to find the most efficient and sustainable way to get goods from point A to point B, said Mike Meier, chief strategy officer at BlueGrace. Once you have the data, the key is to “understand the data and utilize the data to make positive change.”
Opportunities for optimization
Step two is where companies put their new knowledge into action.
Supply chains can become more environmentally and economically sustainable by optimizing:
- Shipping routes.
- Packaging and box sizes.
- Space in trucks.
- Modes of transportation.
It takes more fuel, time and labor to ship goods across the country.
“It just comes down to more efficiently designing supply chains from end to end. The more visibility you have from an inventory standpoint, it kind of comes down to where you’re shipping goods from,” Meier said.
Nelson said companies could avoid some of the emissions and costs from cross-country shipping by using data to assess where their customers are and shipping more locally.
Working with 3PLs and fulfillment locations closer to consumers reduces miles traveled, days in transit and fuel consumption, he said. It’s a win-win-win.
Meier said, “That’s the exciting thing for us is you’re solving problems, you’re saving money, and you’re reducing waste, and that’s important.”
But Nelson said figuring out shipping patterns, where consumers are and where it would make sense to move fulfillment locations is a “very hard math problem.” He said if shippers had access to that data, he thinks many more would make changes to improve efficiency.
In addition to shipping more locally, relying more on rail for longer distances and reducing empty miles can cut costs and emissions.
Packing trucks more efficiently can sometimes allow companies to consolidate loads, saving on fuel and labor costs. Cubing out trucks and optimizing box sizes to reduce wasted space and excess packaging can also reduce shipping costs. Companies can avoid high dimensionalization fees and extra handling costs by using smaller boxes.
Smaller boxes also require less packaging to fill excess space. This can help avoid “excess packaging and materials that immediately go into landfills,” Nelson said.
What is preventing widespread optimization?
The pandemic added stress to supply chains and put shippers in a reactive position, Nelson said. They have just been focused on getting shipments out the door. However, Nelson said he believes shippers will get back in the driver’s seat and look for ways to become more efficient and sustainable in the next year or two.
The logistics experts said many shippers don’t know where to start or how to use data available to them.
“We are all learning as we understand how our business can be more sustainable. Tools that help companies make those assessments are exactly what’s needed right now,” Gomez said.
As data tools develop and expand in the industry, more and more shippers are realizing the value those tools and the data they provide have for their businesses.
“I don’t think data is being utilized to the extent it could be, but that’s also a lot of opportunity to optimize and improve in a lot of different ways. There’s a lot of low-hanging fruit there,” Ratzki said.