Sustaining Supply Chains

Supply chain infrastructure by Lars Plougmann via Flickr CC

Have supply chains ever really been sustainable? Are they more or less sustainable now in the post-pandemic, political and economic climate? Probably less.

Perhaps the problem is with the word itself: what happens when supplies are disrupted by war, weather, politics, economic turbulence and/or pandemics? Are the chains tough and flexible enough to withstand those punches?

Supply Chain Digest reviewed the Top Supply Chain Stories by Month 2022, which presented  pictures of oddities, failures, and “chaos.”

In January, for example, SCD reported that thieves are “opening intermodal containers as freight trains slow down or stop as they approach depots in downtown LA. That also leaves a trash mess around the rails from items the thieves don’t want.” Also, the queue of ships waiting to unload at the ports of Los Angeles and Long Beach reached a record high of 105, even as peak season ended weeks before.

And that was just January. In February Russia invaded Ukraine leading to chaos that is still happening.

In June, CSCMP and Kearney released the 2022 State of Logistics report. One of its metrics, US Business Logistics Costs (USBLC) rose sharply on an absolute basis in 2021 to $1.85 trillion. “That was an increase of 22.4% from an economically weak 2020. With a smaller increase in US nominal GDP (10%) than logistics cost rose last year (22.4%), that took the relative cost of logistics as a share of GDP to 8.0%, up significantly from 7.44% in 2020.”

Members of the International Longshore and Warehouse Union (ILWU), which represents West Coast dock workers, begin working without a contract in July after the current one expired at the end of June. Negotiations with the Pacific Maritime Association (PMA), which represents ports and terminals, began in May and a settlement seems well off.  Port automation is said to be a key issue, raising fears that a stalemate will lead to a dock worker strike and … supply chain chaos.

In December, the battery-powered Tesla Semi was launched as a commercially available product, with news that PepsiCo received the first vehicle. “It’s been a long haul for the electric truck,” according to SCD. “The company’s CEO Elon Musk first announced the cargo truck plans in 2017, with stated expectation for a commercial launch in 2019. At the announcement, Musk also said that on a November 25 test drive, a fully-loaded Tesla Semi (81,000 pounds) traveled 500 miles on a single charge.

Maybe we will all have to slow down in the EV age.

So what about this year? Thomas Insights offered these “top trends” in the supply chain for 2023:

  • An increase in Reshoring and Near-Sourcing initiatives: “Factors ranging from high freight costs, labor shortages, and factory shutdowns to component shortages, transportation delays, and geopolitical conflicts, have compelled many organizations to rethink their approach to supply chain management.” 
  • The Rise of crowdsourced delivery: A global research study found that around 90% of retailers expect to use crowdsourced delivery to handle specific orders by 2028. 
  • Better conditions for truckers: As of October 2022, the U.S. was short almost 78,000 truck drivers. “If current trends continue, the driver shortage could exceed 160,000 by 2031, contributing to significant supply chain delays.”
  • High supply chain costs: “In 2022, increases in fuel prices and ongoing global supply chain disruptions have severely impacted retailers’ margins. Between January and June, for example, the price of regular motor gasoline rose by 49% and the price of diesel fuel rose by 55%. Meanwhile, the ongoing war in Ukraine has seen a decline in food supplies and transportation bottlenecks. Because it’s more expensive, and takes a good deal longer, for retailers to acquire, transport, and store their goods, the prices of commodities are also soaring.”
  • Smaller warehouses: “Because smaller warehouses are both in-demand and hard to come by, recently, the rental rates for units less than 120,000 square feet had risen twice as much compared to bigger warehouses. Another option for retailers is to transform existing retail spaces into fulfillment centers. This is the tactic taken by Walmart, which is in the process of converting many of its 4,700 stores to mini-warehouses.”
  • Major skills gaps remain: “For supply chain leaders, a focus on attracting, recruiting, and retaining top talent will be a key focus in 2023, as will reskilling and upskilling the existing workforce.”
  • Technology investments: “The top supply chain technology trends of 2022 included digital twins, autonomous things, sustainability tools, and analytics everywhere. As companies become more comfortable utilizing these technologies, we will see them grow in 2023.”

Sustainable supply chains? It seems those are three words that don’t work very well together at the moment.

Dueling for compliant fuel

Bunkering by Cycling Man via Flickr

Container shipping operators are scrambling to come into compliance with United Nations decarbonization rules, according to IHS Markit.

In 1973, the International Convention for the Prevention of Pollution from Ships (MARPOL) expanded the powers of the International Maritime Organization (IMO) to regulate the environmental impacts of shipping. A MARPOL update in 2008 called for a reduction of the maximum sulfur content in marine bunker fuel from 3.50% to 0.50% in 2020, unless a supply study would conclude insufficient availability of compliance fuels and a delay to 2025 deemed necessary. But, in October 2016, the IMO came to a broad agreement to implement the global reduction in the sulfur content of marine bunker fuel from January 1, 2020.

IHS Markit estimates that about 55,000 ships of a total fleet of about 110,000 vessels burn heavy fuel oil bunkers and that roughly 30,000 ships account for about 80% of global fuel oil bunker use.

Compliant fuel means seven and eight-tenths (7.8) pounds per square inch (psi) low Reid Vapor Pressure (RVP) gasoline, federal reformulated gasoline, or ethanol-blended low RVP gasoline as described in section 5 of the IMO rule.

Operators must therefore compete to secure shore-side production of eco fuels such as hydrogen, ammonia, and methanol with other energy-hungry industries. The current global supply of hydrogen, ammonia and methanol would barely cover the needs of the shipping industry, even without competition from other critical sectors such as manufacturing, oil refining, and the production of fertilizers, said the Shipping Gazette.

The shipping industry uses more than 300 million tons of fossil fuels every year, about five percent of global oil production, and there is still no clear pathway toward replacing that volume with renewable fuels.

The Paris-based International Energy Agency (IEA), predicts ammonia will be the dominant alternative fuel for shipping by 2050.

Jonah Sweeney, a European marine fuels analyst at oil price reporting agency Argus, told the IMO that alternative fuels such as ammonia and methanol produced less energy than very low sulfur fuel oil (VLSFO). One ton of VLSFO produces 2.2 times more heat content than one ton of ammonia and 2.1 times more than methanol.

“It is important when looking at alternative fuel options to compare like for like in terms of energy output, otherwise if you take the outright price of methanol, for example, you will have a substantial discount to VLSFO, but you will need about twice as much,” Sweeney said, quoted in the Shipping Gazette.

This is a big problem, because about 93 percent of the global companies that have set net-zero goals are on course to fall short of their carbon emissions targets, according to Triplepundit.

Green Corridors on the deep blue sea

On the shipping lane by Kari Nousianien via Flickr CC

The ports of Gothenburg and Rotterdam pledged to establish a Green Corridor between the two cities, which will put a framework in place for collaboration on alternative fuels and reducing carbon emissions.

The Memorandum of Understanding (MoU) was signed in the presence of the Swedish and Dutch royal families. It is intended that the corridor will become part of the European Green Corridors Network, set up in March 2022 by the Maersk McKinney Moller Centre for Zero-Carbon Shipping.

According to a recent report from McKinsey, zero-emission fuels and vessels will need to be deployed over the next decade to achieve full decarbonization of the shipping sector by 2050. “This ambitious goal could be catalyzed by green corridors.”

The zero-emission goal was established by the International Maritime Organization (IMO), which has mandated emission reductions of 50 percent for all vessels by 2050. (Annex 11 Resolution MEPC.304(72) adopted April 13, 2018, Initial IMO strategy on reduction of GHG emissions from ships, International Maritime Organization, imo.org.) A number of countries—including Japan, the United Kingdom, and the United States—have declared a target for net-zero shipping emissions in the same time frame.

The U.S. Department of State released a “Green Shipping Corridors Framework” fact sheet in April that states: “Green shipping corridors can spur early and rapid adoption of fuels and technologies that, on a lifecycle basis, deliver low- and zero-emissions across the maritime sector, placing the sector on a pathway to full decarbonization. The United States envisions green shipping corridors as maritime routes that showcase low- and zero-emission lifecycle fuels and technologies with the ambition to achieve zero greenhouse gas emissions across all aspects of the corridor in support of sector-wide decarbonization no later than 2050. There are multiple pathways through which a fully decarbonized corridor can be achieved; this green shipping corridors framework therefore provides maritime stakeholders the flexibility to choose the path that best suits their needs.”

It seems that we are in the early stages of actually establishing green corridors in the maritime/port sector, which is why the Rotterdam-Gothenburg agreement is significant. Allard Castelein, Chief Executive of the Port of Rotterdam said: “This Green Corridor initiative is part of our ongoing efforts to bring together parties across the supply chain to help realize more sustainable shipping in support of the Paris Agreement.” And Elvir Dzanic, Chief Executive of the Gothenburg Port Authority added: “We can now present a more distinct path towards the decarbonization of shipping.”

The McKinsey report asserted: “Finding industry-wide solutions is challenging, given the varied and complex nature of the sector. One way to accelerate decarbonization is to implement ‘green corridors’: specific trade routes between major port hubs where zero-emission solutions are supported. A new report, The next wave: Green corridors, produced by the Getting to Zero Coalition in collaboration with the Global Maritime Forum, Mission Possible Partnership, and Energy Transitions Commission, with analytical support from McKinsey, probes the feasibility of two such selected corridors,” the Australia-Japan iron-ore route and the Asia-Europe container route.

The results of this analysis are “encouraging” but there is still a long navigation ahead.

Preserve biodiversity through sustainable forest management

deforested by naqi via Flickr CC

Deforestation is the greatest threat to valuable biodiversity, with around 10 million hectares lost to deforestation each year, mainly for agricultural expansion, according to a new report from the Food and Agriculture Organization of the United Nations (FAO).

The key to thwarting deforestation is sustainable forest management, the report says. “Protecting the animals, plants, fungi, and microorganisms that thrive in forests must become a fundamental goal of sustainable forest management worldwide.”

The world’s forests provide habitats for about 80 percent of amphibian species, 75 percent of bird species and 68 percent of mammal species. In addition, about 60 percent of all vascular plants occur in tropical forests. The importance of sustainable forest management has long been recognized, but more action in a concerted manner is needed.

“The conservation of the world’s biodiversity is utterly dependent on the way in which we interact with and use the world’s forests,” said Tiina Vähänen, Deputy Director of FAO’s Forestry Division, of the report, Mainstreaming Biodiversity in Forestry.  The report was released at the 8th World Forest Week on the sidelines of the 26th Session of FAO’s Committee on Forestry.

The report assesses tools and methods of ensuring the conservation and sustainable use of biodiversity is integrated into forest policy, strategy and management. Through a series of case studies from the Democratic Republic of the Congo, Ethiopia, Finland, Japan, Malaysia, Mexico, Peru, and the United Kingdom it explores lessons learned and identifies good practices.

It recommends actions that governments and development partners can take “to facilitate the mainstreaming of biodiversity in forest management”:

  • Halting and reversing deforestation
  • Combating illegal and unregulated forest activities
  • Recognizing the forest tenure of Indigenous Peoples and local communities
  • Preventing the conversion of natural forests into monospecific forest plantations
  • Ensuring the sustainable management of harvested species
  • Managing and controlling invasive and overabundant species
  • Leveraging global momentum on restoration to enhance biodiversity conservation
  • Adopting a multisectoral perspective
  • Providing economic incentives
  • Facilitating market-based instruments
  • Investing in knowledge and capacity development

“We hope that the wealth of information and recommendations made in this study will inspire action from those involved in forest management and conservation,” said FAO Forestry Officer Kenichi Shono.

The role of forests in maintaining biodiversity is explicitly recognized by the United Nations Strategic Plan for Forests 2017–2030 and in 2019, FAO adopted the Strategy on Mainstreaming Biodiversity across Agricultural Sectors.

Lots of hope, lots of studies: time for action.

All-electric cargo plane flies for DHL

The first fully electric commuter/cargo plane ‘Alice’ by Eviation Aircraft successfully completed its maiden flight at Moses Lake, Washington, USA. Credit: DHL

Alice in Cloudland? DHL successfully launched the first all-electric cargo plane, Alice, late last month.

The maiden flight was completed at Moses Lake, WA’s Grant County International Airport (MWH), It flew for eight minutes and reached an altitude of 3,500 feet. The Seattle-based manufacturer, Eviation, is the builder.

“Completing its maiden flight confirms our belief that the era of sustainable aviation is here. With our order of 12 Alice e-cargo planes, we are investing towards our overall goal of net-zero emissions logistics,” said John Pearson, CEO DHL Express, who was quoted in the article.

https://www.dpdhl.com/en/media-relations/media-center/tv-footage/first-ever-fully-electric-plane-alice.html

A single pilot can fly the plane and it will carry 1,200 kilograms (2,600 lbs.). It will require 30 minutes or less to charge per flight hour and have a maximum range of up to 815 kilometers (440 nautical miles).

DHL says Alice will operate in all environments currently serviced by piston and turbine aircraft. Alice’s advanced electric motors have fewer moving parts to increase reliability and reduce maintenance costs. Its operating software constantly monitors flight performance to ensure optimal efficiency.

The aircraft is ideal for feeder routes and requires less investment in station infrastructure, DHL says. The Alice can be charged while loading and unloading operations occur, ensuring quick turnaround times that maintain DHL Express’ tight schedules. Eviation says Alice  can be configured for cargo or passenger use.

Pearson noted that Alice’s range and capacity “makes it a unique sustainable solution for our global aviation network.” It supports DHL’s goal to make a “substantial contribution” in reducing its carbon footprint and ultimately, achieving net-zero emissions by 2050.

FAO on food loss and waste

Fresh mangoes, like many other fruits, spoil rapidly because of their high moisture content and delicate nature. © FAO/Miguel Schincariol.

The Food and Agriculture Organization of the United Nations asserts that minimizing food loss “is easier than you think” by adopting simple solutions that can help “break the vicious cycle of food loss and climate change.”

The FAO article, released in connection with the International Day of Awareness of Food Loss and Waste 2022, notes that each year, approximately 14 percent of the food we produce is lost between when it is harvested and before it reaches the shops. A further 17 percent of our food ends up being wasted by retailers and consumers.”

FAO continues: “Food loss and waste is also a major contributor to the climate crisis, accounting for up to 10 percent of global greenhouse gas (GHGs) emissions. In some countries, the food supply chain is already on course to overtake farming and land use as the largest contributor to GHGs emissions, adding to an unstable climate and extreme weather events such as droughts and flooding.”

Alarming numbers, to be sure, but simple solutions? It seems that nothing is ever simple anymore.  

The UN organization has implemented several projects designed to reduce food loss and make agriculture systems more efficient. The Asia region is showing some promising results. Consider the mango.

Like other fruits, fresh mangoes spoil rapidly because of their high moisture content and delicate nature. If not harvested at the correct stage of maturity, and if not handled properly throughout the distribution chain, mangoes suffer both in terms of quality and quantity, resulting in losses and reduced income for all involved in their production and post-harvest handling. Furthermore, improper handling and infestations shorten their shelf-life, which in turn limits their sales, resulting in economic losses.

In southern Asia, for example, FAO experts found that local farmers often have scarce knowledge of how to handle fruit and vegetables after the harvest and also lack the resources to address quality issues in the supply chain. This can result in more than half of vegetable harvests being lost due to diseases, pest infestations, improper harvesting techniques, careless handling, poor packaging, and transport conditions.

That does not sound very simple, but apparently, training is a key factor. “When FAO trained the farmers to apply good post-harvest management practices and use reusable plastic crates instead of single-use mesh sacks to transport their produce, the switch produced dramatic improvements.”

Using plastic crates for bulk packaging reduced losses to a minimum during transportation. Also, “shelf lives in shops and markets improved significantly for the mangoes that underwent a hot-water treatment that controls post-harvest diseases. New harvesting tools and techniques, such as improved picking poles or trimming the fruit stem with scissors and gloves rather than pulling them off by hand, reduced mechanical injury to the fruit, while the trimming of the stems reduced latex staining of the fruit when packed in the crates, making them more attractive in shops and markets.” 

Improvements in the post-harvest handling practices, together with the hot water treatment, resulted in better quality mangoes having a longer shelf life in retail, with a 70 – 80 percent reduction in the number of mangoes wasted due to decay over a period of five days.

FAO is promoting its findings and practices around the world. About 5 000 smallholders across Asia have been trained in fresh fruit and vegetable production and marketing.

 The FAO conclusion? “With the rise of food prices, the growing impact of climate change, and the persistence of global hunger, there is no excuse for food loss and waste at any level.”

It does sound simple, but simple is often complicated.

The story and photos can be found here:  https://www.fao.org/fao-stories/article/en/c/1605721/

Eco-Friendly sourcing and risks

Forest Farming by Sustainability via Flickr CC

An article in Information Today talks about “reigning in” the risks of sustainable sourcing. Written by contributing reporter Samuel Greengard, the report says that building more eco-friendly and sustainable supply chains “is rapidly becoming a top priority for businesses. A clear strategy and the right technology that delivers visibility can reduce risks and improve results.”

That’s great but what has taken so long for businesses to realize this? The climate crisis is well upon us — it should have been a top priority many years ago. One of the great lessons, and confluences, of the pandemic and the climate crisis, is that supply chains of all types must change their thinking dramatically about how they do business.

Back to the article. Greengard writes:

“Product shortages and supply chain disruptions have emerged as a frustrating reality for organizations across a wide swath of industries. Due to a convergence of factors — including the pandemic, the war in Ukraine, and a shortage of raw materials — procuring essential materials and components is increasingly difficult.

“Yet, things suddenly get a whole lot more complicated as soon as sustainable sourcing enters the picture. As businesses strive to meet aggressive climate goals and display results on Environmental, Social and Governance (ESG) reports, the headaches and risks multiply. An inability to obtain materials, products and services can threaten basic operations.”

Supply chains and procurement are risky enterprises and adding green principles and sustainable sourcing to the mix adds even more risk. It’s the cost of doing business, so “reigning in risk” seems like the wrong approach. Actually, it can’t be done in a significant way because risk in the modern era is a pandora’s box.

“The end goal is to establish strategies, policies and processes that fully support sustainable sourcing.”

A nice and obvious thought but extremely difficult to implement as the climate crisis becomes more, well, critical. Better to do the right things, risks or no.

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Note: Things are changing job-wise for yours truly so watch this space for developments with this blog and other endeavors.