The secret to achieving sustainability in the supply chain

As a business, operating as sustainably as you can has never been more important. There is huge pressure on companies to be as green as possible, while also remaining cost-effective and efficient. These demands are coming from all directions — from customers, staff, government and, in many instances, shareholders.

For many businesses, increasing sustainability without increasing costs seems impossible, but the good news is this is not the case.

In recent years — and particularly following last year’s COP26 conference — sustainability is being forced to the top of business leaders’ agendas, and it’s showing. In a survey by technology company ABB of 765 industrial business leaders, 71% said they are giving greater priority to sustainability objectives as a result of the pandemic.

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

Interestingly, 72% of ABB’s respondents said they are increasing their spending on industrial IoT either somewhat or significantly in a bid to improve their sustainability and I believe they are right to be doing so. 

It’s becoming clear that digitalization will play a major part in how we live and work, and we’ve moved away from using IoT solely for efficiency; it has also become an enabler for sustainability goals, including supply chain sustainability. According to a report from Vodafone and WPI Economics, emerging technologies like the IoT and 5G could help the UK cut 17.4 million tonnes of CO2 per year.

For several years now I have been championing IoT as a way to help make logistics more sustainable. Like a puzzle, there are key 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 bid to rectify the issue. I believe the root of the problem is basically a lack of data.

With little to no data, spoiled goods are only reported at their destination and it is much harder for logistics companies to know the exact details of why the goods arrive in that state. 

They don’t necessarily know where or when the goods became damaged, nor — crucially — whether there could have been any opportunities to save them. This increases the likelihood of goods becoming spoiled on a regular basis, which costs companies and impacts the environment.

IoT trackers can collect real-time information about key shipment metrics including location, shocks, temperature, humidity and light, so problems with goods can be identified and rectified before irreparable damage is done. Through real-time tracking, companies can receive data when it deviates from normal performance. For example, when transporting food products or medicines, humidity and temperature indicators are very important. If the recommended indicators are exceeded, the goods will start to deteriorate. Using real-time sensors, a notification would be sent to the carrier as soon as a problem started, enabling them to solve the problem as soon as it started, and not at the moment when the damage to the goods was discovered.

Labor expenses for quality control and risk transfer

One of the main benefits of the digital revolution is that it is simplifying processes and removing the need for humans to do mundane tasks. 

Using humans in places where machines are more efficient and accurate contributes to increases in carbon emissions. However, this is still a common practice in logistics, where opportunities for digitalization are ripe. 

In a lot of cases, humans are still having to check goods for conditions and quality multiple times during a single shipment. This happens between any of the two carriers — warehouse to truck, truck to port, port to ship, and so on. But this method relies on humans getting it right every time — which is unlikely as mistakes do happen. 

Even if there were no human errors, goods can also deteriorate during transportation between checkpoints. But sensors are never wrong and can raise the alert when potentially damaging conditions arise, instead of at the next checkpoint when goods are already spoiled.

But having non-interrupted end-to-end data about shipment conditions and location would help to reduce costs in different ways.

1. Expenses for personnel manually checking the safety 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 while it is in transit. Anything that happens to the cargo during this time, they are liable for. However, with real-time condition tracking, any change in the conditions in which the goods are being kept can be corrected before the product deteriorates.

CO2 emissions

Every company is being tasked with reducing its CO2 emissions, yet some don’t even have targets or dates to work to.

Furthermore, there is no consistent way to check the amount of CO2 emissions associated with specific shipments — something that is important and becoming mandatory in more and more jurisdictions. 

That said, location and condition data could help to estimate CO2 footprints with very high precision; our calculations show that end-to-end condition monitoring is CO2 positive — reducing spoiled goods and labor costs across the supply chain.

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

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

Such solutions are typically limited to one logistics operator, such as the truck company or container operator, while 95% of the shipments are one-way and end customers are barely capable of sending something back. In the case that the end recipient is willing to send a reusable sensor back to the shipper, this adds 10 to 30 minutes of extra labor costs, shipping costs and associated CO2 impact.

A sustainable future

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

We are all on a journey to address these sustainability issues in the supply chain and I strongly believe that disposable IoT trackers are the answer. 

It may seem counterintuitive to dispose of trackers but the CO2 impact of producing them is less than the CO2 impact of the human labor, shipping costs and reverse logistics associated with reusable sensors in cases where end-to-end monitoring is possible.

It also helps that they provide insights into the whole journey of the goods; by having no blanks in the condition data, labor costs associated with quality control on the recipients’ side can be reduced. Any lack of data, e.g., only monitoring goods to the distribution center, leads to the need for complete Q&A acceptance on the recipients’ side.

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

It’s for the same reasons that a significant part of packaging is disposable — it’s driven by sustainability and economical factors. Admittedly, when you decide to make a cardboard box thicker to avoid damage, you do have to spend a little more, but you save a lot in the long run as you don’t lose as many goods as you would without them.

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

Alexa Syniacheva is cofounder and CEO at Moeco.