Introduction:
There are several key challenges that logistics managers are struggling with. Most of them are directly related to the industry, like reduction of costs, workforce management, processing of large amounts of information, and compliance with regulations. All these problems steal the spotlight as they are related to the survival and growth of the logistics industry. However, there is one problem that skips the logistics managers and key decision makers' notice. It might be because the problem is not directly responsible for the survival or growth of the industry, at least in the near future.
The challenge is none other than the impact of logistics on the environment and, in turn, the environment's impact on logistics. Somehow, the alarming effects of global warming evade our notice. Climate change is a major concern for the modern world, as much as any global wars, natural disasters, or geopolitical events. It is and will be a critical challenge for the survival of the logistics industry in the future.
History
Logistics is a critical industry as it directly affects society's military, healthcare, and food chains. Before the dawn of industrialization, logistics was simply an overlooked industry spread across different monarchies and nations. The only possible means of logistics was through manual labourers and animals known as the beasts of burden. Camels, donkeys, and elephants were some of the more popular animals used for logistics. They had limitations - someone even phrased a saying that is known as "The feather that broke the camel's back". The carts that were pulled by men or animals and the cargo ships powered by manual labourers, sea currents, and/or trade winds were the only possible methods of moving goods. The logistics industry was eco-friendly until that point, even though it was the least productive.
Everything changed when Carl Benz invented the car! Even though steam engines were making an impact on the environment with the burning of coal as fuel, the automobile revolution exponentially increased the emission of greenhouse gases. With the newfound demand for petroleum products, oil suppliers became wealthy. The oil-rich Middle Eastern countries became wealthier with the export of fossil fuels.
The logistics industry was not immune to the automobile revolution. The world became smaller with the manufacturing of large cargo ships and the advent of commercial aviation. Thus, logistics became a global industry, interconnected with virtually every country in the world. Soon after the commercialisation of automobiles and the widespread supply of fossil fuels, the logistics industry quickly abandoned carts, animals, and manual workers and embraced large trucks, ships, trains, and aeroplanes.
Problems
The logistics industry is a 7,641.2 billion dollar industry as of 2017. It is expected to grow to 12,975.64 billion dollars by 2027 (Source: Allied Market Research). In the USA, the transportation industry was responsible for 28.5% of CO2 and greenhouse gas emissions in 2016 (Source: Open Access Government). This emissions input is only behind the agriculture industry.
The primary reason for the logistics industry's need to take immediate measures is that climate change is making the planet fiercer and more inhabitable in many parts of the world. The disastrous effects of global warming are directly hitting the survival of the logistics industry and its productivity.
Impacts of climate change on land-based logistics
Climate change already poses a serious threat to the environment. There are many instances of flash floods, uncontrollable wildfires, thunderstorms, and hurricanes that last longer than usual. The Indian monsoon is becoming more violent every year, causing widespread destruction of lives, property, and infrastructure. Even harsh snowfalls, heat waves, and high humidity will cause the movement of goods to be considerably slower. During natural calamities, the logistics industry comes to a halt, with landslides and floods threatening or closing bridges and roads. Reduced visibility and the slippery snow also pose life-threatening conditions for the land transportation workers. Railway tracks get submerged during heavy rainfall and harsh snowfalls. This disrupts the logistics services, which might take a few days to months to recover. In the modern age, where it is common for companies to source raw materials from distant countries, this becomes a critical hindrance. For example, McKinsey has predicted that by 2040, large hurricanes could disrupt the supply of silicon chips from Western Pacific countries for up to a few months.
Impact of climate change on sea route logistics
Shipping accounts for 80% of the world's total trade volume (Source: World Bank). Climate change can worsen sea trade in several ways. Hurricanes and heavy rainfall can disrupt major sea routes. As global warming causes more polar ice caps to melt, the sea levels are expected to rise, changing well-known sea currents and trade routes. Heat waves, along with other harsh environmental conditions, can degrade large cargo ships at a faster pace. The decrease in the lifespan of these vessels will result in extra spending on repairs, loss of time, and productivity.
Impact of climate change on air logistics
According to Statista, there are about 25,900 aircraft that were in operation in 2019. The number is expected to grow to 49,405 within 20 years. A considerable part of these aircraft is logistics aircraft like C-17 Globemasters or Boeing 747s.
Air logistics operations are nearly impossible during harsh weather conditions like hurricanes or harsh snowfalls. During heavy rainfall, runways get submerged, causing airports to close down. Heat waves make landing a risky endeavour as the aeroplanes' tyres are prone to bursting with heat. Heat also restricts the loading capacity and operational standards of the aeroplanes, thereby increasing costs and productivity loss.
Impact of climate change on ports
Ports and port cities are the major gateways of a country's economic development. Many countries depend exclusively on sea trade through their ports. Hurricanes and floods are causing the erosion of coastal regions. The melting of polar ice caps and the rising sea levels are major concerns for established ports and port cities. Sea trade is a major logistics medium through which several essentials like oil, rare earths, and raw materials are exported or imported. Most ports, harbours, bridges, and docks will undergo structural changes when the sea levels rise, and beaches erode. These will be major concerns in the future.
Challenges
The wave toward eco-sustainability
As more icecaps crack, as the world becomes more barren, the supply chains are at the risk of extermination. The complex system is more likely to collapse with the decrease in the supply of raw materials and a drop in agricultural yield. As most raw materials are agriculturally based, a large part of the logistics industry is dependent on the well-being of the agricultural systems. Harsh weather conditions are increasingly making agriculture a financially risky endeavour.
More countries and governments are recognising the increasing threat of climate change and are slowly reacting with emission laws. If the effects of climate change shift dramatically, governments will be forced to enact stricter laws in a short time, like scrapping vehicles, ships, and aeroplanes that do not meet environmental regulations. Many countries, like the USA, already have such scraping laws (Source: Wikipedia). In that case, it is better to think into the future and drive your company towards eco-friendly logistics. As International laws are a major concern for the logistics industry, it is fitting to expect stricter sustainability laws shortly.
Climate change will also play a major role in geopolitics as critical resources like drinking water get scarcer. Developed countries like Israel are already planning to manufacture and export drinking water in the future. When such critical resources become scarce, political structures crumble, and the resulting political unrest can become a major problem for the logistics industry.
The dependence on fossil fuels
Scientists have been predicting for at least a century that petroleum will soon run out. Even after decades of predictions, petroleum is still going strong. Saudi Arabia oil minister, Sheikh Ahmed Zahi Yamani, said, "The stone age came to an end, not for lack of stones, and the oil age will end, but not for lack of oil." This means that the oil reserves of the Middle East are less likely to run out within this century.
According to a 2016 study, there are 1.65 trillion barrels of oil underground. Based on these numbers and the current demand and supply of oil, there are some claims that oil will run out within 50 years, natural gas in 53 years, and coal within 114 years (Source: MET). However, the study only focuses on known oil reserves. Nobody still knows how much oil is under the earth left to discover. Also, the pandemic has significantly halted the oil extraction process, supply, and demand for a couple of years. Based on these observations, we can say that oil will last longer than this century.
As most of the logistics vessels are petroleum-based, it is very unlikely that the industry will be able to make a quick shift towards other energy resources. Also, the process is very complex because of the widespread dependence on fossil fuel-based technology.
The Challenge of Electrical Vehicles
The only promising energy source for the Fossil fuel dependency problem is electricity. Companies like Tesla are already innovating in the electric vehicle industry. EVs are steadily growing in popularity. However, the only problem with electric vehicles is their batteries. The energy density of EVs is inferior to that of petroleum products. The weight to charge ratio of the batteries requires more space in the EVs, which makes them bulky and less energy-efficient than petroleum-based vehicles. This is the reason why there are no commercial aircraft that fly on electrical power (Source: Science Direct).
The lack of alternative solutions
Apart from oil and electricity, there are no other energy sources suitable for large-scale commercial logistics systems. Solar and wind energy systems are either expensive or bulky and thus impractical for logistics vehicles. This gives humanity a stalemate, as we are stuck in the current situation. We are unable to give up our present system and are under the threat of a dystopian future if we don't change it immediately. Finding a middle ground is only possible with scientific advances in clean energy sources or the invention of a new energy source.
The solution then lies in refining the current logistics industry. If it is hard to stop CO2 emissions, we should strive to cut off the emissions considerably.
Thankfully, several major logistics companies are taking this initiative. DHL has set several targets for 2025 and also has announced that it would achieve zero percent emissions by 2050. The targets include increasing carbon efficiency by 50% and using fossil-free delivery solutions like Electric Vehicles and bicycles for first and last-mile delivery. (Source: OpenAccessGovernment)
Sea logistics, however, is harder to adapt to the immediate needs of change. Cargo ships, oil tankers, and ocean liners are significantly large investments and take years, if not decades, to manufacture. So, the ships that were commissioned a decade ago make it hard to implement environmental laws that have been enacted only recently. Making the vessel eco-friendly with advanced technology will be the sole option in such cases. However, the International Maritime Organisation is planning to cut CO2 emissions by 50% by 2050. Also, it has said that it will improve its ship efficiency by 40% by 2030 and 50-70% by 2050.
Solutions
Use of AI
Modern technology can play a major role in making the logistics industry sustainable, productive, and effective. Currently, many large logistics companies and e-commerce giants are using AI to manage their logistics networks. Advanced GPS tracking, real-time weather prediction systems, advanced toll-clearance systems like FASTag, and seamless integration of all parts of the network can significantly increase the productivity of the logistics systems.
Route optimisation
Choosing the shortest and most cost-effective routes in logistics will cut transit time and increase productivity. Moreover, using advanced technologies like GPS and weather forecasts helps reduce unnecessary halts and fuel consumption. Logistics software plays a critical role throughout the goods delivery process with real-time locations and automation of route optimisation.
Keep track of demand and supply
Tracking the demand and supply chain will help to avoid overproduction and waste generation. Incorporating artificial intelligence and machine learning algorithms for tracking large databases will help logistics companies avoid financial losses.
Track empty miles
Often, transport vehicles return empty after the shipment is delivered. These empty miles add to CO2 emissions and fuel costs. Using internet-based tracking systems and alternative return shipments can reduce productivity loss.
Maximise product loads per shipment
Though increasing the load of the shipment decreases the mileage of trucks or vessels, logistics companies gain overall benefits per shipment per transportation leg.
As a decision-maker, it is the responsibility of every logistics and supply chain manager to put effort into the research and development of eco-friendly logistics. The efforts are both beneficial for the planet as well as your own company in the long run as well as in the short run. The sooner the efforts on your part start, the better output humanity will have in reducing CO2 emissions and greenhouse effects. Sweden is an amazing example of the best logistics system in the world. The country is experimenting with self-driving trucks, last-mile delivery, as well as fossil-free delivery vehicles. With enough determination and initiative, you can avoid a harsh future and its negative effects on your logistics company.
Conclusion
Climate change is a major concern for all humanity. It is becoming ever more concerning for the logistics industry's managers. The logistics industry is one of the major industry sectors that is primarily affected by climate change. Reducing CO2 and greenhouse gas emissions should be a major priority in the R & D departments of the logistics industry. Apart from that, refining the current infrastructures and vehicles, using advanced technology solutions like artificial intelligence and smart management practices, will ensure a better future for your company and the planet.
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