A recent ARC survey looked at reasons to address sustainability. This survey included over 400 respondents across a number of industries. There are three responses in this question that address supply chain sustainability: align with our goals, mission, and values; meet consumers expectations; and increase profitability.
The second reason to address sustainability topics, from a supply chain perspective, is to meet consumer expectations. Consumer expectations are constantly shifting and challenging the industry. For example, most people expect free next-day delivery for online purchases as a result of Amazon Prime. And more consumers are looking at sustainability as a key motivator for purchasing. More and more retailers are giving consumers choices for how they want an order delivered, and part of this is to show the environmental impact of the option that they choose. On top of that, some retailers are developing sustainability scorecards for items, allowing consumers to see hoe sustainably sourced and delivered their order is.
The third reason to address sustainability is to increase profitability. The fun thing about supply chains and sustainability is that they have a symbiotic relationship. Supply chain sustainability increases profitability. This is especially true when looking at route optimization, asset utilization, real-time visibility, energy savings, waste reduction, and efficiency. Looking at the example of route optimization, as a company takes more trucks off the road, or reduces the number of miles driven, it is better for carbon emissions, but also for profitability.
When looking at energy transition in the supply chain, there are two big opportunities to look at: warehousing and transportation. Modern warehouses play a big role in energy transition within the supply chain. Energy transition can be broken down into a few categories: energy efficient warehouse design; renewable energy usage; smarter warehousing solutions; and waste reduction.
Modern warehouses take design into account for sustainability. This includes the use of enhanced insulation for better temperature control, which results in less power usage. Additionally, modern warehouses use energy efficient lighting to reduce power consumption. Warehouses are also harnessing alternative energy solutions, including solar and wind power. Many warehouses now have solar panels lining the roof to generate electricity to be used in the warehouse.
Modern warehouses are also utilizing smarter warehouse solutions for sustainability. This includes automation within the warehouse such electric autonomous mobile robots as well as hybrid or electric forklifts. Finally, warehouses are placing an increased emphasis on waste reduction. This comes in the form of eliminating unnecessary packaging materials and doing a better job of recycling. Too often, warehouses use boxes to ship items that require a lot of additional packaging. Now, companies are turning to the use of machinery to create made-to-fit boxes for more efficient fulfillment shipping.
On the transportation side of things, energy transition applies to all modes, with the most interest in over the road trucking. The trucking industry has been making the shift to electric vehicles for first, middle, and last mile deliveries. The use case has been most evident in last mile, as more and more companies are investing in electric delivery vehicles and e-bikes. Amazon, for example, has purchased over 100,000 Rivian electric vehicles for deliveries. But long-haul trucking is also developing electric trucks. And while Tesla has received the most attention for its electric semi-trucks, Daimler, Freightliner, and Volvo, to name a few, have also produced all electric trucks.
Clearly, renewable energy from alternative fuels can play an important role as organizations seek to reduce greenhouse gas emissions. However, according to an APQC survey, as a percentage of the total fuel consumed in transportation and warehousing, respondents report that currently only 7 percent comes from renewable sources (at the median).
Another challenge facing the transportation sector is infrastructure. Currently, electric semi-trucks have a range of 500 miles at most. As of now, the infrastructure on American highways cannot support fleets to go all electric. The advancement of technology plays a role in the problem. While it could take 5 years to build out the infrastructure, by then, the range of trucks will likely be significantly longer. It becomes a challenge to build for the future with the trucks of today.