Sustainability in Project Logistics

By Sven Hermann

While in Glasgow, for the 26^th meeting of the Conference of the Parties, or COP26, global climate policies will be discussed, which are likely to determine the future of our planet, this article will cover the progress of sustainability in the project logistics and breakbulk industry to date. Based on discussions I had prior to my interviews with some well-known players in the market, raising awareness of the need for an extensive transformation. On the other hand, there seems to be plenty of room for improvement in what companies are already doing.

Findings from the BHV Project Logistics Monitor, an online-survey we did in September this year, show that only one-third of the asked companies were currently on the way to developing their own long-term strategy for sustainability. Regarding the ways and activities to make supply chains more sustainable from design to operation, their actual focus mostly lies on measuring CO₂ footprints, developing decarbonized transport solutions, emissions compensation, and developing the environmental consciousness of their employees. However, when it comes to the willingness of freight owners and final customers to pay higher prices for transportation and packaging for these activities, two-thirds are certain that there would not be the appetite. Finally, when it comes to who is responsible to lead the business to greater sustainability, 40 percent of the asked participants are confident it should be the freight owners, while nearly 30 percent see the logistics services providers in the driving seat. So, I recently asked both groups several questions about their targets, ongoing activities and future strategies. Have a read to see what they said.
 

Andreas Ulrich, SMS Group

Q: Why are many companies in the world of breakbulk and project cargo still too defensive or reactive when it comes to sustainability?

Unfortunately, companies are defensive and reactive because they are protecting their bottom lines. When we’re all operating with margins that are only several percentage points, and then a proposal to “go green” means increasing logistics costs by, say, 20 percent, well, it’s just not realistic. I’m not saying it can’t be done; I only mean that saying it will “only” cost whatever percentage is problematic. It is extremely important that we create additional value for our customers to compensate higher logistics costs that can result from “green” logistics.

Q: What are your current plans to realize more sustainable logistics solutions?

At the moment, since we use logistics providers to ship all our goods, we’re investigating shared metrics to evaluate environmental impacts from various companies. It’s important that we find partners to help forward our own green goals for the company.

Q: Where do you see further opportunities to implement more sustainable solutions for transportation and logistics in our industry?

I think the future is in the hands of the industry itself. The goal is to reduce the ecological footprint through sustainable solutions for transport and logistics. How can we achieve it? The logistics industry must focus in the future on reducing fuel consumption and scaling back or eliminating emissions by developing alternative drive technologies. Further opportunities are using environmentally friendly packaging materials and accelerating digitalization. So, what is the future for green logistics? We have to decide for ourselves, which we can only do when we are prepared to acknowledge the problem and the need for change.
 

Olli-Petteri Salo and Mario Schulz, Metso:Outotec

Q: Sustainability is a top priority for Metso:Outotec – what does that means for supply chain management?

Metso:Outotec is targeting a net positive impact on the planet with a commitment to the 1.5 degrees Celsius journey. Logistics actions can have a big impact on company’s CO₂ emissions; therefore, we have set a target to reduce the CO₂ emissions of our logistics 15 percent by 2023 and 20 percent by 2025 (versus 2019). We strive for environmental efficiency in all areas. Well-planned processes and an optimized logistics network are the keys to both lean and more sustainable logistics. The biggest challenge is to create a model that is simple, but simultaneously works for different demands and provides necessary flexibility to avoid unnecessary transportation.

Q: How can logistics providers contribute to your ambitious goals?

Logistics Service Providers (LSP) are playing a significant role to achieve our target to reduce the CO₂ emissions. The LSP have most of the responsibility for the carbon footprint. Commitment to sustainability and the willingness to align with our targets and actions are important aspects in our selection of LSP. It is essential that the LSP supports to avoid any unnecessary stops, to optimize transportation lanes and identifies most sustainable routings/transportation mode for our cargo.

Q: In which segment of your transport chain do you see the biggest potential to reduce your carbon footprint?

Typically internal movements (e.g. warehouse-to-warehouse), which is why we have initiated a warehouse optimization project and are looking into the transportation set-up with our LSP.
 

Christian Schulz und Kerstin Schauwecker, Siemens Energy

Q: Why is sustainability in project logistics becoming more and more important for Siemens Energy?

Supporting sustainability is one of the biggest trends in industry and logistics. It is important to note that all dimensions of sustainability have to be included: economic, environmental and social. In the context of digitalization, new methods have also emerged here which enable progress to be quantified and thus increase transparency. Together with our logistics partners, we at Siemens Energy want to help promote sustainability in all directions. One very important aspect of ecological sustainability is decarbonization which is driven throughout Siemens Energy. We not only want to offer environmentally friendly products and solutions, but also support decarbonization through our internal business processes in logistics.

Q: What is your current approach?

We are already active in all areas of sustainability in logistics. With the Code of Conduct, for example, we are aligning ourselves with the Sustainable Development Goals of the United Nations and ensuring that our partners meet certain standards with regard to social and environmental sustainability. In particular, we are currently driving decarbonization forward and have derived decarbonization measures. By increasing transparency, data availability and data quality regarding CO₂ emissions, we connect decarbonization and digitalization. Using that as backbone, we will optimize transport scheduling and routing as well as transport mode selection to reduce the carbon footprint of logistics.

Q: Particularly regarding cooperation between forwarders and packaging companies, where do you see further potential for handling project cargo more sustainably?

Decarbonization, as part of ecological sustainability in logistics, can be driven forward most efficiently if we work together with all partners along the supply chain and take advantage of innovative opportunities. We have found out that transparency, data availability and quality are particularly important for this. Accordingly, we want to promote these aspects in cooperative ventures and joint decarbonization projects, for example by consolidating transports, supporting environmentally friendly fleets of our forwarders and implementing “green lanes.” Additionally, we are improving our selection processes to integrate ecological factors to reflect sustainability in our collaboration with logistics partners and suppliers.
 

Andreas Mense, Beumer Group

Q: Sustainability in supply chains is becoming increasingly important in project logistics. Which starting points do you see for Beumer to develop more sustainable supply chain management?

In 2020 Beumer Group started an initiative to optimize the packaging of our equipment. The initiative included reducing the numbers of containers needed for each individual project, the use of more sustainable packaging materials and the relocation of our packaging company to the outskirts of Hamburg. We analyzed the utilization levels of our containers and changed the packaging for equipment so that more space within the container can be used. We introduced re-useable packaging units for the transport between our factory and the packaging company. We minimized the numbers of internal truck transports and reduced the distance of the container rotation between port and packaging location.

Q: What kind of efforts do you expect from your logistics service providers?

Our logistics service providers should highlight different options for us in order to be more sustainable. This would include mode of transport alternatives (e.g. train instead of sea) or options to consolidate cargo in order to reduce the required number of transports.

Q: In the long term, where do you see the biggest potential to reduce your logistics carbon footprint?

We see the biggest potential to reduce the logistics carbon footprint in the reduction of unplanned airfreight shipments within our projects. Airfreight starts to be an option as soon as delays occur, and as a result the overall project schedule has to act under duress. We are trying to identify potential delays early and utilize other countermeasures than airfreight. We also clearly communicate to our project teams the negative effect of airfreight shipments to the environment and the cost level. In case an airfreight shipment is unavoidable, we initiate a re-packaging so that only the urgently required parts are flown to the project site.
 

Andreas Sedlatschek, Voith Group

Q: Where do you see the most potential in your logistics processes to become more sustainable?

We intend to create measurable added value for the sustainable development of our company, society and the environment. We want to be a pioneer in producing as environmentally friendly as possible by using the available resources with highest possible efficiency while minimizing our footprint. It all starts with transparency in our logistics processes.

Q: How is the digital transformation in logistics, especially for Voith, contributing to efforts to achieve more sustainability in your supply chains?

To achieve climate neutrality, we focus on the four different levers: increasing energy efficiency, CO₂-neutral electricity contracts, technology change towards low emitting energy sources, and investments in renewable energy sources. Those principles also apply for our supply chain.

Q: What sustainable measures and initiatives do you expect from your logistics service providers

Measurable activities, projects and initiatives that ensure a constant reduction of our global CO₂ footprint as well as options to compensate our current CO₂ footprint with the clear trend to reduce the amount of compensation towards being real climate neutral within the coming years.
 

Dr. Joerg Breker, thyssenkrupp Industrial Solutions

Q: Based on your long industry experience in the breakbulk business, where do you see the highest potential for more sustainability in the project logistics chain?

Resilient and sustainable project logistics chains with high quality, optimal costs and times can only be achieved through transparent, trusting and parallel planning and controlling of all processes between suppliers, production, delivery and construction at customer’s site. Coordinated processes within the supply chain also plan and control the flow of goods in such a way as to significantly reduce CO₂ emissions during transport, through targeted bundling and optimized use of modes of transport. Resources are sustainably conserved, through strategic storage of components as well through targeted packaging avoidance or packaging optimization.

Q: In the longer term, which technological developments under way could support some movement toward more sustainability from your perspective?

The digitization of supply chains, and in particular the provision of information and data from different sources, will be a major challenge, both technologically and emotionally between the relevant partners in the supply chain. New concepts and systems are required to select and process up-to-date data and information from the information systems, at the interfaces of customers and suppliers as well as partners in the supply chain, and simulate and evaluate new scenarios for processing and making them available to partners in the supply chain. Technologies such as data mining, blockchains, narrow band IOT and others will have a big role in terms of sustainability, transparency and trust.

Q: What would you advise logistics services providers to do in the immediate future?

Don’t be too defensive or reactive when it comes to digitization and sustainability. Both comes hand in hand and can be a ticking time bomb for your business. A main factor for success is the development of experts and partnerships along the supply chain in a global context with a clear distribution of tasks, but with the same mindset of collaborative cooperation in the management of global sustainable supply chains.

 

Monika Beckfeld and Henrique Wohltmann, Hansa Meyer Global

Q: How can logistics service providers contribute to decarbonizing supply chains in the breakbulk business?

By calculating and showing the impact of purchasing and logistics decisions on CO₂ emissions, offering more sustainable transport and packaging solutions, and providing training formats especially for customers to improve management expertise about the possibilities to decarbonize their supply chains.

Q: What are your plans to develop corporate environmental responsibility?

We want to enable our employees, customers and stakeholders to leverage supply chains as a beneficial force to reach the sustainable development goals. This aim was also one of the reasons why we just founded our Hansa Meyer Academy platform.

Q: Which level of CO₂ footprint visibility we will see within the project logistics chain in the near future

Definitely a detailed level, combined with the given possibilities of real-time transportation visibility and prediction we will have the chance to really provoke something in our business in the foreseeable future.

 

Patrick Rehberg, PTS Logistics Group

Q: How important is the topic of sustainability in project logistics for the freight owners at the moment

We definitely recognize growing interest from our customer side in measures that help logistics going green. The scope reaches from questions and discussions about reducing, reusing and recycling packaging.

Q: Are there any promising ideas for shared sustainable approaches between freight owners and logistics services providers from your point of view?

Yes, there are and from my point of view the only promising way is to solve this important issue together, integrating all supply chain partners with the essential aim to reduce CO₂ emissions and enable more circular logistics in our business. With one of our customers, for example, we are currently redesigning a reusable packaging alternative.

Q: And what else is on your green agenda to develop PTS Logistics?

We are constantly working on our carbon footprint, trying to support our employees and facilitate a sustainable mindset within the company, and plan to develop our consulting services, that support our customers on their way becoming CO₂ neutral.

 

Mark Agatz, Axxum

Q: What are your key objectives to achieve CO₂ reduction in packaging and logistics?

Sustainability and environmental management are key part of the Axxum Group’s strategic and responsible actions. Our most important goals are the continuous improvement of our energy and environmental performance by reduction of emissions, avoiding energy waste, increasing energy efficiency, resource conservation, and raising awareness of CO₂ consumption among our customers and business partners through our my_axxum web customer portal.

Q: How will your platform my_axxum allow CO₂ footprint visibility for your customers in the future

my_axxum is the perfect digital complement to our sustainability and environmental management goals. With the my_axxum web customer portal, processes along the entire supply chain are available transparently and at any time. Customers can already follow our sparing use of resources today, with regard to the optimal deployment of employees, materials, production and storage areas, and transports. In the future it will be also possible to track the CO₂ consumption of whole projects.

Q: What kind of initiatives between freight owners and logistics service providers to jointly promote CO₂ reduction in the breakbulk business could really help?

The interaction between freight owners and logistics service providers plays a significant role in achieving sustainability goals. Leading companies in the plant and mechanical engineering industry have already set themselves the goal of climate neutrality and are ready to implement this consistently. In addition to our know-how and our many years of expertise in the field of packaging and logistics solutions, we see concrete opportunities in our sphere of activities to jointly contribute to CO₂ reduction through already existing tools like my_axxum. And as a new member of the Digital Hub Logistics Hamburg, which unites companies, startups and education, we will further develop sustainable innovation approaches together with our customers and existing network.

 

Dr. Patric Drewes, Logistics Plus Projects and BHV – Bremische Hafen- und Logistikvertretung

Q: Based on the updated BHV Project Logistics Monitor, only one-third of the companies are highly motivated to develop a long-term strategy for sustainability. Why is that? Why is the breakbulk business seeming here a bit behind?

The majority of contract award processes do not consider a sustainability strategy. Today it is important that you execute an excellent job within budget constraints.

Q: From your position as board member of the BHV organization, what sustainable activities are on your agenda?

We have initiated a task force, “Green Logistics.” Within this task force BHV members are currently developing a BHV sustainability strategy.

Q: And as managing director of Logistics Plus Projects, what are your goals for more sustainable supply chains in the near future?

Logistics Plus has a number of sustainability initiatives in place as we strive for a cleaner world for future generations. We joined the SmartWay Transport Initiative in 2010 and last year partnered with Restoring Integrity to the Oceans – an organization dedicated to making the oceans safe for all life above and below the water for generations to come.
 

About the Author

Professor Dr. Sven Hermann is founder and managing director of ProLog Innovation GmbH, professor for logistics and supply chain management at NBS Northern Business School Hamburg and chairman of the association LogistikLotsen für die Metropolregion Nordwest e.V. He worked several years in the logistics and purchasing business for industry and logistics companies.

ProLog Innovation is a consulting company for organizational development and innovation management in logistics. Focused on digital challenges and the chances of new work, ProLog Innovation works with industry and logistics service provider customers especially in the segment of project and breakbulk logistics.