As responsible for your organization's logistics and supply chain, you're usually tasked with two objectives: Reduce costs, and reduce the climate footprint. Unfortunately, many see this as two separate operations. On the one hand, they negotiate tenders to reduce costs. On the other, however, they transition their fleet to electricity-fueled vehicles to reduce their climate footprint.
While these measures can be effective, they look at profitability and sustainability separately. The real potential lies in a holistic mindset and efficiency as the driver for both. The key to solid return on investment lies in efficiency: Not your initial project setup versus sustainable alternatives.
Green Transition has a Price – How to Compensate?
Even before the worldwide inflation we see today, transport industries warned about higher prices on the horizon. Energy is in higher demand than ever before, including clean energy.
Higher demand means that procurement and consumption of clean energy will significantly impact your total operating cost more than before. Hence, many are weighing the costs against the benefit of green investments. Are they worth it?
If approached through the scope of efficiency, the answer is definitely yes. Efficiency the lowest-hanging measure you can take to ensure sustainable operations, while also increasing customer preference. Higher sales, more orders and repeat business is compensation in itself for investments in sustainability, and should be a no-brainer for organizations looking to grow.
By calibrating your financial analysis of projects and measures of continuous improvement to revolve around efficiency gains, you give yourself the luxury of not having to lower your priority of either profitability or sustainability.
Four Tips for More Profitable and Sustainable Logistics
The type of fuel you use and where it comes from is secondary if you don't stay critical to your organization's efficiency. The most extensive margins to explore lie in the overall efficiency itself, and it's here that you can save the most on both cost and emissions.
Here are our four best and simplest tips for behavioral changes for more profitable and sustainable logistics:
1. Consolidate your Shipments and Adjust the Frequency
There's a vast and untapped potential in consolidating your shipments. Can you plan your deliveries better? Or load smarter? Improve cooperation with carriers and recipients? The greener choice than driving electric is, after all, not driving at all.
Consolidation of consignments gives immediate results in cost reduction, lower climate footprint, and less operational stress. Being proactive as you go about your business enables you to stay ahead of the curve and figure out best practices for your business.
The next step lies in adjusting the frequency and, in the best-case scenario, systemizing it. This approach requires solid cooperation with your customers and suppliers but is achievable. You can achieve cheaper shipping, higher margins, and lower environmental impact.
2. Take Responsibility for Redundant Packaging
As a supply chain and logistics operator, you are also responsible for your shipments when it comes to packaging and product composition. One thing is origin and material use, where many have much to gain from choosing more sustainable solutions, but also when it comes to (excess) quantity. If the products are packed with an unnecessary amount of packaging or air, this could affect the profitability of the shipment.
You influence how goods are packaged. If, worst case scenario, you'll need an extra shipment due to poor packaging, directly impacting your bottom line and emissions reporting. Act accordingly.
3. Explore Alternative Means and Methods of Transportation
Do we need an 18-wheeler for all deliveries? A varied fleet of vehicles makes you better equipped to make good and sustainable choices for each delivery. But asphalt should not be a requirement on the road from A to B.
For some deliveries, rails or waves can save expenses and emissions, given good planning and interaction with your partners. Explore the transport network where you operate – perhaps someone is going the same way and has room for a little more?
4. Make Your Sustainability Officer an Ally and Keep Emission Accounts
If you want to maximize your impact's potential with a sustainability strategy, you need to measure your progress. You already have a finance manager with whom you can spar so that the fiscal numbers add up without unnecessary red figures. Do you have the same for your climate reporting?
Several specialized benchmarking and reporting platforms can help you and your sustainability officer digitize and automate this process for you. If you invest in the right one, the probability of gaining support for your project rises significantly – along with your chances of succeeding.
The Key to Sustainable and Profitable Logistics is Efficiency
The best measure you can take to reduce your costs and climate footprint is to focus on digitisation and efficiency. Streamlining logistics has a direct effect on the bottom line because it minimizes costs, and at the same time reduces emissions. The sum of the measures ultimately makes the most significant impact.
A single, united view of financial cost drivers and Co2 emissions allows you to work more efficiently and align your overall strategy. Luckily, tools exist for this exact purpose, enabling you to balance your approach to coved both aspects. Only when you have a clear vision of how sustainability efforts impact your financials, and vice-versa, can you be sure to pull in the same direction.
Along with the digital tools to succeed, you need to get the people on board. Technology alone isn’t enough if employees don’t invest in it. To get there, you need a business culture where everyone knows the economic and emission-related consequences of their actions – and takes responsibility thereafter. How would you describe your culture?
Want to learn more about transitioning to sustainable logistics?
Read about Ahlsell's journey to net zero here
