The logistics and mobility sector makes a significant contribution to most countries development and economic growth. I believe that this is not only true for developed economies. As the World Bank states:
Improving the performance of logistics helps developing economies engage more deeply in international trade, a powerful driver of economic growth and poverty reduction.
However, the importance of logistics and mobility in our global economy also brings challenges. According to data of the MIT Climate Portal, billions of tons of freight are transported around the world each year by trucks, planes, ships and trains, accounting for 8% of global greenhouse gas emissions, and as much as 11% when warehouses and ports are included. Growing economies in Asia, Africa and Latin America are expected to triple global freight demand by 2050, doubling greenhouse gas emissions from freight transportation.
When breaking down the freight emission data, surprisingly the most emission are caused by road vehicles. Although almost three quarters of the world’s freight is transported by ships, road vehicles such as trucks and vans account for the largest share of freight transport emissions at 65%.
The challenges of the logistics and mobility sector have many facets. While road transport is not the most environmentally friendly, it is a fast-growing sector due to e-commerce and home delivery growth (MIT Climate Portal). The road freight industry also urgently needs improvements in efficiency. In the European Union for instance, trucks are empty for around 20% of the distance they travel each year. If the use of digital marketplaces can reduce this by 10-20%, it is estimated that the industry could save €1-2bn and cut CO₂ emissions by 1-2 megatons (PwC).
Source: Suzanne Greene (MIT Climate Portal)
In addition to the urgent need for efficiency, the logistics and mobility sector in general must solve the following challenges:
Congestion: Traffic congestion in urban areas leads to delays, increased fuel consumption, and higher emissions, affecting both logistics and personal mobility.
Infrastructure Limitations: Inadequate infrastructure, such as poorly maintained roads, ports, and airports, can hinder the efficient movement of goods, leading to delays and increased costs.
Last-Mile Delivery: Delivering goods to the final destination, especially in urban areas, poses challenges due to congestion, limited parking, and the need for efficient routing, limited delivery windows, and high costs.
Environmental Impact: The transportation sector contributes to air and noise pollution, as well as greenhouse gas emissions, impacting both local air quality and global climate change. Growing concerns about environmental sustainability are prompting the logistics industry to seek greener alternatives and adopt more eco-friendly practices, which can increase costs and require significant investments in technology and infrastructure.
Safety: Safety concerns related to accidents, especially in the case of road transportation, remain a significant challenge for logistics and mobility.
Cost: High operating costs, including fuel prices, labor, maintenance, and insurance, can impact the profitability of logistics operations and the affordability of transportation and services for individuals.
Supply Chain Disruptions: Supply chain disruptions due to natural disasters, geopolitical tensions, or pandemics can disrupt the flow of goods and lead to delays in delivery.
Rising Fuel Costs: Fluctuating fuel prices can significantly impact logistics costs, especially for transportation modes heavily reliant on fossil fuels, such as trucks and ships.
Regulatory Compliance: Compliance with regulations related to customs, trade, and transportation can be complex and time-consuming, requiring logistics companies to stay updated with changing requirements across different regions.
Labor Shortages: Shortages of skilled labor, particularly truck drivers and warehouse workers, can pose challenges for logistics companies, leading to delays in operations and increased costs.
Technological Disruption: Rapid technological advancements, such as automation, artificial intelligence, and blockchain, are reshaping the logistics industry, requiring companies to invest in new technologies to remain competitive.
Security Risks: Cargo theft, cyberattacks, and other security threats pose risks to the logistics sector, requiring companies to implement robust security measures to protect their assets and data.
Digitalization of the logistics and mobility sector: the only solution?
The logistics and transport sector is responsible for over a third of global CO₂ emissions, making it the largest-emitting sector in numerous developed countries. This share continues to increase. In 2021, the transport sector accounted for 7.7 gigatons (Gt) of CO₂. Today, the world’s total annual CO₂ emissions amount to around 35 Gt (ISO).
A sector that makes such a significant contribution to global emissions can play a crucial role in the transition to a decarbonized economy and in adapting to the effects of climate change. The next question that needs to be answered is then:
How can we address the challenges within the mobility and logistics sector to ensure customers receive goods and services affordably while significantly reducing carbon footprint?
The first answer is to promote digitalization. Beyond that, the industry needs to consider several factors, from investing in sustainable transportation to creating regulations that incentivize the shift to carbon neutrality. Below you will find more detailed suggestions:
Invest in Sustainable Transportation: Encourage the adoption of eco-friendly transportation modes such as electric vehicles (EVs), bicycles, and public transit for urban deliveries. Governments and businesses can offer incentives for the purchase of EVs and develop charging infrastructure to support their widespread use.
Optimize Route Planning: Utilize advanced route planning and optimization software to minimize the distance travelled and reduce fuel consumption. By optimizing delivery routes, logistics companies can improve efficiency and reduce carbon emissions.
Promote Multimodal Transportation: Implement a multimodal transportation approach that combines different modes of transportation (e.g., road, rail, sea, air) to leverage the strengths of each mode and reduce overall emissions. Encourage the use of rail and sea freight for long-distance transportation where feasible.
Encourage Collaboration: Foster collaboration among logistics companies, shippers, and retailers to consolidate shipments and reduce empty miles. By fostering collaboration, businesses can share data, insights, and resources to optimize processes, reduce lead times, and mitigate risks. Collaborative platforms and networks enable real-time communication, coordination, and decision-making among partners, facilitating agile and responsive supply chains as well as improving efficiency and reduce the environmental impact of transportation.
Embrace Last-Mile Innovations: Invest in innovative last-mile delivery solutions such as micro-fulfillment centers, autonomous delivery vehicles, and drone delivery to optimize urban deliveries and reduce congestion and emissions associated with traditional delivery methods.
Implement Green Packaging Practices: Encourage the use of sustainable packaging materials and design practices to minimize waste and reduce the environmental impact of packaging. Promote the use of reusable packaging and packaging materials made from recycled or biodegradable materials.
Raise Awareness and Education: Educate consumers and businesses about the environmental impact of transportation and the importance of choosing sustainable delivery options. Raise awareness about the benefits of eco-friendly transportation and encourage behavior change through incentives and awareness campaigns.
Embrace Data Analytics: Leveraging advanced analytics and big data techniques, businesses can gain insights into supply chain operations, customer behavior, and market trends. By analyzing data from various sources, including sensors, IoT devices, and transactional records, companies can optimize inventory management, forecast demand more accurately, and identify areas for cost reduction and efficiency improvement.
Adopt IoT and Automation: Internet of Things (IoT) technologies enable real-time tracking and monitoring of assets, inventory, and equipment throughout the supply chain. By deploying IoT sensors and connected devices, businesses can improve visibility, enhance asset utilization, and automate routine tasks such as inventory counting and equipment maintenance. Automation technologies, such as robotics and autonomous vehicles, further streamline operations and reduce manual intervention.
Implement Blockchain: Blockchain technology offers transparent, secure, and tamper-proof record-keeping capabilities, making it well-suited for supply chain management. By creating decentralized, immutable ledgers of transactions and events, blockchain enables greater transparency, traceability, and trust across the supply chain. Businesses can use blockchain to track products from source to destination, verify authenticity, and ensure compliance with regulations and standards.
Invest in Talent and Skills: Building a workforce with the right digital skills and competencies is crucial for capitalizing on digital supply chain opportunities. Businesses should invest in training and upskilling employees in areas such as data analytics, IoT technology, blockchain, and supply chain management. By developing a digitally fluent workforce, companies can drive innovation, adapt to technological advancements, and stay competitive in the digital era.
Regulatory Measures: Enact policies and regulations that incentivize sustainable transportation practices and penalize carbon-intensive transportation methods. Implement carbon pricing mechanisms, emissions standards, and other regulatory measures to encourage the adoption of green transportation technologies and practices.
Conclusion
The scale of the digital supply chain transformation is enormous and offers numerous opportunities for participation and innovation. To take advantage, logistics and mobility companies can get involved in a number of ways, starting with recognizing where the problems lie.
The logistics and mobility industry faces major challenges, including inefficiency, environmental impact and infrastructure constraints. However, some of these challenges can be solved by digitalization. By leveraging digital technologies such as IoT, AI, blockchain and data analytics, the industry can streamline its operations, improve transparency, increase sustainability and offer better services to its customers. In addition, digitalization opens the doors to new business models, collaboration and market expansion as well as in alignment with carbon neutral endeavors. To take full advantage of these, players must invest in digital infrastructure, talent development and legal frameworks that promote innovation.
