Utilizing Green Supply Chains

Just as the beauty industry must be committed to environmentally responsible and sustainable products, so too must the industry’s logistics infrastructure be fully integrated with a "green" strategy and outlook. Such green concerns as fuel consumption and carbon emissions have a direct impact on costs and competitiveness, and global supply chains face a large and growing number of local, national and multinational regulations related to these issues. Sustainability for the logistics process also involves a variety of other elements, from packaging to processing time.

However, achieving a truly green supply chain requires dealing with a fundamental catch-22. In logistics, time is money. The fastest modes of distribution, particularly air transport and expedited ground freight delivery, are often required as customer-responsive, competitive solutions, but they are also the most energy-intensive. The significant reliance on air freight and trucking reflects the demands of rapidly changing market conditions that must be met by just-in-time modes of production—both of which are essential elements of the competitive landscape for brand owners and retailers.

Fortunately, a green supply chain can respond to intense competitive pressures by using initiatives that combine environmental sustainability with best business practices. More efficiency in shipment tracking can serve as a perfect example. For companies that source globally, inefficient supply chain documentation means information snags, missing or ill-prepared shipping documents, and inappropriate cargo routing that can create huge and unnecessary waste in fuel and require expedited, energy-inefficient delivery to overcome delays. The fundamental problem is lack of information, which can involve incomplete or missing data about the status of shipments, an inability to retrieve data when needed, or an inability to adequately document shipment status. It wastes substantial time and energy spent chasing information which ought to be readily available, and creates energy-wasting delays at ports, air cargo terminals, customs inspection points—anyplace that shipments should freely pass. Comprehensive electronic tracking eliminates this inefficiency by bringing optimal efficiency to aggregating and optimizing loads and routes, for transportation planning that reduces both the fuel consumption and carbon footprint of shippers.

The Electronic Solution

In its basic form electronic tracking means the creation of comprehensive databases that take the extreme complexity of supply chain data and simplify it in order to define patterns that allow producers to understand their supply-chain function. Electronic tracking information for cargo is a relatively new phenomenon, but it is absolutely vital for a green supply chain. There is simply no other way to ensure that freight gets where it needs to go on time, without wasting of fuel, shipping resources and processing time.

As the ally of green shipping, electronic tracking shows what is happening at every step in the supply chain, enabling producer, shipper and forwarder to cross-check and validate progress and timings of shipments. The result is delivery on time and with proper quality thanks to online and real time updates on shipment location, quantity and composition. This improves both fuel efficiency and cost effectiveness, because it eliminates the guesswork and backtracking to find misplaced shipments. It also facilitates up-to-the-minute route and load scheduling to take account of everything from weather conditions to last minute, just-in-time shipment adjustments. Maximum flexibility in energy consumption, and the resulting reduction in excess greenhouse gas emissions, is inseparable from the kind of precise shipment control that electronic tracking provides.

Electronic tracking also eliminates inefficiency from physical keying or writing of routing numbers and freight identification. Not only is manual documentation slow and inefficient, but it also leads to high levels of human error. Every time a person has to manually key in a product code, there is the chance that they will make a mistake, and then the products will cease to exist along the rest of the supply chain, forcing a company to stop everything and search—typically wasting fuel in the process.

The E-freight Initiative

There is another subtle sustainability advantage from electronic tracking. The availability of information online and in real time can largely eliminate the need to print out reams of reports and forms that waste paper and all the other resources that go into making it. This is the major concern behind the e-freight initiative facilitated by the International Air Transport Association (IATA). An industry-wide initiative involving carriers, freight forwarders, ground handlers, shippers and customs authorities, the IATA e-freight project aims to take the paper out of air cargo. Each air cargo shipment carries with it as many as 30 paper documents—equivalent to 7,800 tons of paper a year, enough to fill 80 Boeing 747 freighters. As of 2010 IATA e-freight replaces 20 of these documents with electronic documentation.

The IATA estimates that the e-freight initiative can save up to almost $5 billion a year for the logistics industry, depending on the level of adoption. It will also result in faster supply chain transit times, given that the ability to send shipment documentation electronically before the cargo itself arrives can reduce the industry cycle time by an average of 24 hours. Add the greater accuracy of electronic documentation, and the sustainability advantages are substantial.

IATA e-freight meets all international regulations relating to the provision of electronic documents and data required by customs, civil aviation and other regulatory authorities. To participate in IATA e-freight, a location (country or territory) must pass high-level and detailed-level assessments to be certified as ready. Implementation requires local stakeholders (ground handlers, airlines, freight forwarders, shippers and customs officials) to define an e-freight operational procedure (E-FOP) for that location. Once an E-FOP is in place, the location is ready to go live. Freight forwarders who use electronic tracking as integral to their logistics operations will be best prepared to secure the efficiencies of e-freight in any jurisdiction.

The Rotterdam Rules

Customs and border protection officials are increasingly going to electronic processing systems for clearing import shipments. The direct interface provided by electronic tracking on the shipper and forwarder end is energy efficient, resource efficient and process efficient when dealing with such customs regimes. It also is fundamental to addressing the latest regulatory innovations involving one of the most paper-intensive parts of the logistics process. No globally sourced material can be shipped without a bill of lading, which shows where and from whom the goods were received, describes the shipment, and defines the liability of the carrier. It is not unusual for carrier bill of lading agreements to have voluminous terms and conditions, in particularly relating to insurance clauses—all of which typically have been documented and printed in great detail.

Now, however, the Rotterdam Rules, developed under the auspices of the United Nations and already endorsed by at least 21 major countries, allow liability terms to be included in individual, confidential contracts that address door-to-door multimodal shipping. The new rules more clearly and simply document responsibility and liability during the whole transport process. Global freight forwarders that have the electronic tracking systems and standardized operations to take greatest advantage of this significant change have yet another edge in both sustainability and competitiveness.

The Sustainable Advantage

Information control is king when it comes to creating an efficient global supply chain. It is clear that accurate and instantaneous information is essential to energy-efficient, sustainable global logistics, and that electronic tracking is the key to making the whole process work. Electronic tracking can eliminate calling backwards and forwards, chasing suppliers, forwarders, shipping lines and truckers, and generally spending tremendous time resolving delays or problems throughout the supply chain. A sustainable supply chain will use cutting-edge electronic systems for sourcing that improves both fuel efficiency and cost effectiveness, because it eliminates the guesswork and backtracking to find misplaced shipments and affords maximum flexibility in route and load planning so that delivery problems and energy consumption are minimized. It saves fuel, energy, resources and time. And that is the ultimate goal of a green supply chain.

Simon Kaye is founder and CEO of Jaguar Freight Services, with operations and fully integrated door-to-door freight solution networks in Europe, North America, South America, Australasia, Asia, the Middle East and Africa. E-mail: [email protected]; www.jaguarfreight.com; 1-516-239-1900

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