Author: Oleksandr Trofimov, CTO at Artelogic
The traditional supply chain and logistics practices have significantly impacted our environment due to the high carbon dioxide (CO2) emissions produced.
According to statistics from the International Air Transport Association (IATA), air freight accounts for over 7% of global CO2 emissions. In addition, the transportation sector is responsible for 28% of all energy-related CO2 emissions globally. These numbers demonstrate how traditional practices generate a large negative environmental impact. The question on the table is about measurements that could reduce the negative footprints of the logistics industry and, on the other hand, are affordable for businesses.
At first glance, governmental regulations may force companies to shift to green standards, but they also can affect business competitiveness. However, in the long-term perspective, the smooth implementation of digital solutions looks more effective than only regulative factors.
Does IT change the game?
IT technologies have played an increasingly important role in transforming supply chains and logistics in recent years. Companies can streamline their supply chain activities and warehouse management through AI, IoT, Big Data, and other emerging technologies to reduce their environmental footprint.
Fortunately, companies can now leverage advanced technologies such as AI, IoT, and big data to dramatically reduce the amount of pollution generated by their supply chains and logistics operations.
For instance, AI solutions can help identify solutions that optimize fuel consumption during transportation routes and thereby drastically reduce CO2 emissions without sacrificing delivery times or service quality. Similarly, IoT devices allow companies to track their fleets in real-time to be more efficient in fuel consumption. Big Data analytics also enable organizations to uncover hidden correlations that can help them make informed decisions about designing their supply chains to maximize efficiency while minimizing environmental damage.
Global investment in AI in logistics and supply chain applications will grow exponentially in the coming years. The market size for AI in logistics will reach around $6.5 billion by 2023. By investing in technologies that reduce their environmental impact, companies can take an essential step toward creating a more sustainable future.
The United States and China were considered the two largest markets for AI technology in logistics, with both countries investing heavily in developing and deploying AI-powered logistics solutions. Other countries such as Japan, Germany, and the United Kingdom also invest in AI in logistics and are expected to continue doing so in the coming years.
Are the innovations affordable for SMEs?
After the pandemic, 45% of small-business leaders increased their software budgets. In 2022, the average SMEs’ IT budget for software, hardware, services, and talent bloomed to $2.4 million, according to Capterra’s Annual SMB Software Buying Survey. This research shows a +12% year-to-year growth of SMEs’ business intelligence & data analytics software adoption in 2022, which is the necessary foundation for smart logistics systems.
As commodity consumption rapidly grows, transportation providers meet the gaps in the supply chains. For example, the shortage of experienced drivers and increasing costs for delivery services force small local businesses to quit the far-distance supply. The promising way out could be the sharing economy remedies, like the shared supply between many local players. But the sharing logistics requires better planning and execution.
Therefore, better-connected operators, warehouses, and vehicles could be enabled to exchange information about needs and available capacity quickly and save both costs for SMEs and reduce the environmental impact.
This will help SMEs to become more competitive, efficient, and sustainable. Furthermore, digitalization opens the possibilities of new data-driven business models with higher value-added services, such as monitoring and controlling transport conditions that guarantee the quality of the products in transit. Moreover, advanced analytics tools can enable predictive vehicle maintenance and prevent delays due to breakdowns.
Entering the green fuel epoche
Another direction of making the logistics industry greener is researching and developing new fuel and parts materials. For example, substituting internal combustion engines for electric vehicles can significantly reduce CO2 emission levels.
Additionally, more efficient and lighter materials can reduce fuel consumption and help make transportation companies more cost-effective. For example, to the delight of the sustainable transport industry, Volta Trucks, a commercial vehicle manufacturer and services provider, has announced a dynamic kick-off to their 2023 operations by securing production orders for 300 full-electric trucks from customers across Europe.
Fuel substitution technology and distributive renewable energy grids are driving the revolution toward green ecosystems. These technologies form a powerful force for positive environmental change by working in tandem.
In conclusion, IT tools are increasingly crucial in transforming supply chains and logistics by helping organizations reduce their environmental footprint. IT technologies present an excellent opportunity for companies wishing to transition towards greener operations and significantly reduce the negative environmental impacts of their current supply chain and logistics practices. By leveraging these innovative tools, organizations can improve their cost savings while simultaneously reducing their environmental footprint at the same time.