“Of course, I want to transform my logistics process to being carbon neutral. Because of my own values and because of a much more economic-driven reason: my customers are asking for it! But I have no idea where to start. The complexity and interdependencies are too high.”
This is a statement we hear more and more. So, let’s clarify the picture and take a look at the possibilities, that LogTech startups are offering.
When speaking or designing sustainability strategies, the three prioritization levels “reduce, reuse, recycle” are often used as a framework for defining ecological measures. When transferring this to logistics, the latter two: Reusing and recycling apply to equipment and packaging but not to business processes. This leaves us with the first one: The reduction of carbon emissions.
To make this as easy to understand as possible, the solutions are structured according to the use cases they are addressing:
1. Route Optimization
2.Restructuring of supply and distribution networks
• Using decentralized hub structures in last-mile delivery
• Using on-demand, shared warehousing services
3.Optimized hand-over of goods to the customer
• Using locker systems
• Using hand-over management apps
• Using post-purchase services
4.Emissions-oriented order management
Our first sustainability strategy regarding transportation is a no-brainer: Route optimization has been around for decades. Nonetheless, it has experienced a boom since processing power is getting cheaper and cheaper, and optimization has evolved from algorithmic and heuristic to AI-based solutions. Depending on the specific use case, fleet size, staff, drop-off dates, and many more restraints can be set and considered during optimization runs of suitable milk runs.
The implementation of these solutions is done within a few days. The typical reductions lay between 5% and 30% of driven kilometers and carbon emissions in comparison to manual route planning. Costs for fuel, staff, and fleet are positively affected as well. There is no need to change the supply or distribution network. European startups offering route optimization tools are Adiutabyte, Omniopti, Optiyol, and Greenlane – to give a few examples.
Restructuring of supply and distribution networks
The second strategy when it comes to reducing transportation and therefore emissions is to restructure supply and distribution networks to minimize distances e.g., between suppliers and OEMs, production sites and retailers, or logistics centers and drop-off points.
One possibility to implement this is by using decentralized hub structures in last-mile delivery. Instead of one big distribution hub outside of a big city, logistics providers offering these decentralized services use smaller storage spaces directly in the urban area. By doing so, delivery distances and speed can be optimized at the same time. Therefore, these structures are especially interesting for B2C businesses that sell a relatively high volume of products of a small portfolio (fast-moving consumer goods). To implement such new distribution structures, changes regarding organizational structures, processes, IT systems, and employees might be necessary. Therefore, these efforts in implementation need to be specifically calculated beforehand and compared to the potential benefits in cost and emission reductions. Startups offering decentralized distribution services are for example Ohi and Liefergrün.
A second possibility to optimize your logistics network, this time regarding long-distance transportation, is to use on-demand, shared warehousing services. What exactly is that? The startups offer their customers the possibility to commission the storage and preparation for shipment of their goods at a 3rd party logistics provider (3PL) in a highly flexible way. Using a network of multiple 3PLs with multi-user (shared) warehouses they can shorten tender process durations and offer contracts without minimum running times, turnover, or volumes. The customers pay for the services they use (on-demand) instead of calculating and commissioning their needs in advance. To use shared on-demand warehousing services no special implementation efforts are necessary but higher per-unit prices in storage and handling need to be compared with the gained flexibility in storage location and volume. Among others, Speiz, Spacefill, Everstox and Warehousing1 are startups offering shared and on-demand warehousing services.
Optimized hand-over of goods to the customer
The third strategy to minimize transportation efforts currently tackled by startups addresses the optimized hand-over of goods to the customer at their office or home. When it comes to D2C deliveries in German cities, the carbon footprint can vary between 58 g CO2 per parcel and 838 g CO2 per parcel depending on the point of hand-over – even with the assumption that a first delivery attempt is successful.
This can be tackled by using locker systems. While lockers have been used for many years now by DHL & Co, their locker stations are not available to other delivery companies. Therefore, independent solutions were developed. To make use of them, e-commerce shops need to integrate the locker option in the post-purchase process for their customers to choose it. The fulfillment provider will deliver the goods to the desired address and deposit them in a locker. As soon as the goods are deposited, the customer will receive a message with the PIN for pickup. Independent locker systems are currently developed and offered by World of Lockers, Packadoo, and Shipngrab.
Another option to optimize the hand-over of goods lies within the use of hand-over management apps. In the case of DropFriends, to pick one example, shipments are delivered to the closest registered and available neighbor if the recipient is not at home at the time of delivery. Afterward, the shipment can be picked up at this neighbor, the “DropPoint” who will receive a small compensation fee in exchange. In comparison to locker systems, no new infrastructure is needed but a minimum of “DropPoints” are needed per city for the App to offer the convenience it promises. The requirements to integrate them in the e-commerce fulfillment process are similar to those of locker systems: E-commerce shops need to integrate the new option in the post-purchase process for their customers to choose it. On the side of the 3PLs for e-commerce fulfillment, no implementation efforts are needed.
The third option to optimize goods hand-over is to use post-purchase services that connect e-commerce shop customers with 3PL data to facilitate communication regarding delivery times and therefore, increase a successful hand-over rate at the first delivery attempt. As in the two previously presented hand-over management options, the implementation depends on the e-commerce shop to integrate the services. Startups offering this service are Parcellab, Parcelperform, and Shipup.
Emissions-oriented order management
The fourth and last green logistics strategy is emissions-oriented order management. This concept includes the optimum use of resources while fulfillment processes are planned and steered. Here, service level agreements can be re-written by e-commerce customers as a part of their post-purchase process. If this is the case, the customers’ orders will now be scheduled as efficiently as possible instead of as fast as possible. The implementation of the software needs to be connected to the e-commerce shop as well as the distribution center in charge of order fulfillment. This plug-in solution, for example, is currently developed and piloted by Ecomize.
Transform your design with Supply Chain technologies:
The four strategies demonstrate the broad possibilities startups are developing to reduce carbon emission along any supply chain or logistics process. Their innovative solutions are enabling carbon reductions not only by looking at single companies but through connecting multiple companies and their data or resources.
In many cases, the carbon reduction can only be achieved, when changes are made simultaneously within all three stakeholder groups: the shippers, the 3PLs, and the customers. Startups are using their independent “outside view” of the big picture to identify potentials single companies might not have on their radar.
About the author
Katharina Zipse is a self-employed management consultant specialized in the digital transformation of the logistics and supply chain management sector. She supports cross functional customer teams by generating transparency in new and complex environments, optimizing processes, designing IT systems, and enabling rollouts. Her aim is to accelerate operational excellence and performance of her client’s businesses by creating more flexible and leaner scm and logistics processes.
After working for different consultancies and a broad spectrum of customers, the mechanical engineer founded connected-logistics.io – a warehousing on-demand startup – and established the A2X LogTech Community.