BASF’s aim in logistics is to ensure a reliable supply to its customers, while maintaining a high level of efficiency. In the future, BASF’s product portfolio will shift to more downstream products, so in addition to bulk logistics, smaller lot sizes will be required. This requires higher flexibility and closer cooperation with its logistics partners and increases the need tofurther integrate its processes. For example, BASF already has Electronic Data Interchange (EDI) connections with several of its logistics providers, meaning  allowing for the  regular exchange of planning and transportation data.

In the next 10 to 15 years, overall freight volume in Europe is estimated to increase by 60% to 70%. Yet, the existing public logistics infrastructure is not suited to cope with this increase. The question remains whether future public investment will suffice to avoid bottlenecks. As a consequence, BASF may have to move stocks closer to its customers in order to ensure good service. This means using more warehouses and increasing inventory levels. In addition BASF strives to shift more transportation from road to rail, which reduces its exposure to road congestion. Furthermore, BASF is testing rail transportation as an alternative transport mode for selected products from Europe to Asia and vice versa, in order to reduce lead times.

Sustainable logistics and emissions reduction specifically, are getting more and more attention. BASF’s approach initially was very much focused on creating transparency in the supply chain. The company gathered data from all over the world on volume, distance and transportation mode and derived the amount of CO₂ emissions from that via a certified calculation model. Emissions are not the only relevant factor to take into account. In 2012, BASF will have its first set of workable key performance indicators considering environmental, economic and societal aspects.

Shifting from road to rail transport at its production sites in Ludwigshafen, Schwarzheide and Antwerp has already reduced emissions considerably. With the completion of the expanded Ludwigshafen intermodal terminal, BASF has enabled even more freight to be switched from road to rail, which will increase annual CO₂ savings in logistics by 25% to some 100,000 metric tons.

Next to the points outlined above, BASF is also faced with other challenges. The financial crisis has caused unprecedented volatility in freight volume in the last three years, especially at sea. Shipping companies try to optimise operations, while routes are cut and lead times are changed at short notice. This can be difficult for a company such as BASF, but it also demonstrates the need for close partnerships between the different actors in the supply chain. That is what BASF is working towards, alongside new operating models.

The AEL agrees that close cooperation between suppliers, customers and facilitators is crucial, not just for operational efficiency, but also in order to further promote the integrated nature of the logistics sector. This, in turn, will help policymakers to treat the sector as a whole instead of on a fragmented basis (for example by transport mode).

Nevertheless, putting the sensitivities of ETS and its potential impact on trade aside, implementation of the system and in general, the need for airlines as well as other companies to provide accurate sustainability and carbon reporting, has prompted a wide range of innovative IT solutions to facilitate the process. AEL member SAP embraces sustainability and is leading the way with a two-fold approach: leading by example, by utilising best practices to reduce its own carbon footprint, from supply chain efforts to its internal operations, and as an enabler, by building energy and sustainable operations software for customers from 24 industries worldwide, enabling them to reduce their carbon footprint, and overall, improving their sustainability initiatives across the organization. Specifically, SAP has developed Carbon Impact, an on-demand (hosted) solution that helps the aviation and other industries to accurately measure, mitigate, and monitor their carbon and other GHG emissions, and their impacts on the environment.

Carbon Impact also helps in managing effects from sources of pollution such as solid waste and water, as well as managing sustainability projects across internal operations and the supply chain. As a result, a company is able to cost-effectively assess its total carbon emissions inventory across the board, prioritize and manage a portfolio of abatement projects, as well as provide transparency into its sustainability initiatives.

SAP® has been recognised for its overall approach to sustainability by FTSE4Good, DJSI Oekem 50 and G100, and is closely cooperating with industry thought leaders, regulators and practitioners such as EPA’s Climate Leaders, Global Reporting Initiative, Energy Star, The Carbon Disclosure Project, and the World Resources Institute. Most recently, SAP® was named a winner of the inaugural 2012 Climate Leadership Awards, for which the US Environmental Protection Agency (EPA) recognizes corporate, organizational and individual leadership in addressing climate change and reducing carbon pollution. Furthermore, the company discloses its sustainability reports, using its own software as well as two sustainability indexes such the DJSI: The Dow Jones Sustainability Index and the FTSE4GOOD, and is amongst the leaders in its category. To learn more visit the 2011 Sustainability Report.

With the battle against climate change continuing, and as new strategies to reduce GHG emissions emerge, innovation can bring new and unexpected solutions, thus enabling industry and governments to tackle these challenges in a more effective manner.

For more information, visit the SAP Newsroom. Follow SAP on Twitter at @sapnews and @sustainablesap.

Light commercial vehicles (vans – for those unfamiliar with EU jargon) are essential for delivering goods in urban centres and, due to rapidly advancing technology, are becoming more fuel efficient and clean by the minute. AEL member Iveco just released the latest version of its famous Daily Delivery Van. Check out this picture on the 1978 Daily below, and compare it to the 2012 version.

1978 Iveco Daily - Credit: Wikipedia

2012 Iveco Daily - Credit: Iveco

Not only have LCVs such as the Daily had a massive make over in terms of looks, the new version is fully in line with Euro 5 emissions standards. Additionally, drivers have plenty of options to save fuel and money, including a Start&Stop function where the engine stops running when stationary, and a GSI (Gear Shift Indicator) system which indicates the exact ‘sweet spot’ for switching gears. Combining the new 2.3 litre engine edition of the Daily with the new 6-speed gearbox and the Start&Stop function over a mixed route, the van can achieve up to a 10% reduction in fuel consumption and CO2 emissions compared to the previous model. This fuel saving is even higher on city routes, where the Start&Stop and Gear Shift Indicator functions offer greater benefits. The Daily is just one example of innovative LCV engineering, and one of many options for transporting freight around town.

There is another topic which we haven’t touched on thus far – and that is cycle logistics. It is quite a niche market, the EU funded project Cycle Logistics notes that nearly 100% of goods transport within cities is currently done by motorised vehicles, ranging from personal cars to HGVs. However, there is great potential. Given that 25% of trips under 5km involve goods transport and 25% of those trips could be switched from motorised solutions to cycle-related ones – that means one in eight trips under 5km could be done by bike! It is up to policymakers and logistics operators to figure out how the marketshare of cycle logistics could grow.

Lastly, freight could be transported via public transport which is again not a very widely used option. Amsterdam ran a trial with cargo trams delivering goods to local businesses, but the project was brought to an end due to a lack of appropriate funding. In Dresden nevertheless, car manufacturer Volkswagen successfully uses a tram to transport automotive parts from its distribution center to its manufacturing facility. If such a project were to work on a wider scale, significant investment and strong public-private cooperation would have to take place.

The good news about city logistics is that we all know what doesn’t work. Large trucks and HGVs are not very well suited for use in cities – they are inefficient as they often carry a small load, contribute to congestion, and can be dangerous for other road users, especially vulnerable ones such as cyclists and pedestrians. Less use of HGVs would lead to cheaper road maintenance, reduced noise, less traffic, more available parking, cleaner air, and more flexible and affordable delivery options for small businesses. Routing trucks to consolidation centers rather than through the city will also make work less stressful for truck drivers, routes more efficient and more predictable for their dispatchers as they will be stuck less in traffic.

And so it seems that the most promising options are to further develop new technologies such as hydrogen and electric vehicles, as well as alternative fuels – and to focus on making LCVs even more efficient. Meanwhile, R&D needs to continue and should be incentivised by policymakers. Horizon 2020 already proposes to fund research in the area of smart, green and integrated transport, which is a welcome first step. Finally, we also look forward to hearing what the Commission plans to say about urban mobility in its expected Communication before this summer.

One thing we have noticed in these first weeks is that inland waterways (IWW) have been (unintentionally?) taking the spotlight. In the Netherlands, a major disruption was caused on January 3^rd when a 90 ton lock gate fell down in the Eastern part of the country hence blocking the channel. The cause of the accident is still unknown, but the obstructed lock is still having a major impact on maritime transport through the Twentekanaal. The canal connects the Port of Rotterdam to the German hinterland, passing through some of Twente’s important industrial areas (local businesses include the Grolsch beer brewery, Vredestein tyres, Stork Fokker aerospace, Akzo-Nobel and Thales radar systems). One of the area’s most active sectors is transport, several large road transportation businesses are based there.

Numerous businesses use the channel for transporting bulk goods and its main operator, CombiTerminal Twente, estimates losing 100.000 euro per week due to goods being transported by trucks instead of by water. To replace the capacity these ships offer, around 100 extra trucks per day are necessary which not only leads to higher costs but also to congested roads. In order to cope with the events, one user of the channel, chemicals company AkzoNobel, temporarily reduced the production rate of their salt facility to 25%. The impact is significant, not least because the Netherlands is the biggest user of inland waterways in the EU (approximately 35% of all freight transported by IWW).

The incident illustrates the vulnerability of the transport system, and identifies the lack of suitable alternatives – as well as a systematic lack of capacity in the system. Many actors had previously called for additional infrastructure to be put in place, which would have diminished the impact of just one broken lock. The fact that transport minister Schultz van Hagen is currently investigating the opportunities for building a second lock provides little consolation for the 40 ships that are still stuck in the channel even now. Repairing the lock will likely take another eight weeks. As a tempory measure, local authorities announced a new freight train service between Twente and Rotterdam on 24 January. A minimum of one train per day would be able to take 60-70 trucks off the road. Still, other modes of transport are only partially capable of compensating for the unavailability of inland shipping.

Meanwhile in Strasbourg, Dutch MEP Corien Wortmann, a substitute member of the Transport Committee, hosted a parliamentary roundtable on inland waterways as it is an important priority in terms of trans-European infrastructure. At the same time, Transport Commissioner Siim Kallas spoke at an event hosted by the European Barge Union on the potential of inland waterways to assist in attaining the EU’s modal shift goals as set out in the Transport White Paper. In his speech, Kallas praised Europe’s waterways for their success in the past and present, but mentioned that they are far from reaching their full potential. A mere 15% of total capacity for inland navigation is being used in the Danube for example. In order to make the use of IWW more attractive, Kallas suggested a focus on infrastructure improvement (good hinterland connections, to link IWW to seaports where possible, and to integrate them with other transport modes such as road and rail, for the onward transportation of cargo). In that regard Kallas also discussed what is somewhat of an East-West divide, stating that significant investments are needed for transhipment and storage facilities at many river ports in the eastern part of the EU to bring infrastructure up to par.

Inland waterways are an important part of the transport mix, but the key lies in an overall robust transport network with good connections notwithstanding the mode. When the network is more robust and different transport options are equally viable, one missing link will not manage to upset the entire system. In that regard, Kallas’ focus on infrastructure improvement is a welcome first step.

It makes for a very interesting read, particularly for those of us who are engaged in a dialogue on the future of European transport on a regular basis. We’re used to hearing repetitive political jargon here in Brussels on why policies are formulated. But what do the actual numbers say?

We wanted to highlight a particular example – the modal split debate. In the White Paper on the Future of Transport, the European Commission proposes to shift 30% of road freight, transported over a distance more than 300 km, to other modes such as rail or waterborne transport by 2030, and more than 50% by 2050, facilitated by efficient and green freight corridors. What is the current split between transport modes for intra-EU freight movements like, and how has that number developed in the last decade?

The table below shows that between 2000 and 2009, the percentage of freight transported by road has risen from 74% to 78%, whereas freight transport by rail and inland waterways (IWW) has declined from 20% and 7% to 17% and 6% respectively.

This graph illustrates the particular differences that exist between Member States.

Why has there been a decline in rail freight transport? For hauliers and logistics operators, it is the customers who drive demand. Unsurprisingly, time and costs are the major factors that drive customers towards using a certain mode of transport – and despite long-standing efforts, rail freight is still a less efficient way of getting goods from A to B. This is due to physical barriers, such as the interoperability of equipment and technical standards, and administrative barriers such as security and safety legislation, linguistic and cultural differences and variation in European drivers’ education – to name a few. Opening up Europe’s rail freight market requires significant investments in rolling stock, infrastructure development and the development of new standards, money that is not readily available at the moment. There also needs to be increased public acceptance of freight trains, meaning the so-called ‘not in my backyard’ problem needs to be addressed.

Why is imposing a modal shift through legislation not a viable option? This policy goal is in opposition to market realities. Certain business models, such as next-day delivery, will be hindered by modal shift regulation and restrict markets from developing the right solution for customers and consumers. Setting a one-size fits all goal fails to address the complexity of this situation by assuming all types of transportation are the same. Freight transport is very distinct, with varying types of journeys and shipments depending on different services and customer needs. For some types of journeys, it is feasible to use train and waterborne connections below or above 300km – but market realities dictate that this should be assessed on a case by case basis.

What could be an alternative solution? 2012 will be a key year for rail transport as the EU struggles to make the European single railway a reality (keep your eye out for the 4^th Railway Package). To make rail transport a real alternative to road transport, full liberalisation and fair competition of the rail freight market should be implemented and enforced without delay to trigger the necessary investments in infrastructure and renewal of rolling stock. The EU, and in particular, Member States and MEPs need to address the issue of public acceptance of increased rail transport before restricting other modes. But most essentially, Europe’s transport policy should be based on co-modality. Multimodal transport and the flexibility it offers is what underpins the EU’s economy, not to mention global supply chain routes. The underlying principle is efficiency: to stay competitive with respect to cost, all modes have to improve their efficiency. Transport modes should remain complementary in order for European transport to remain competitive.

For more interesting facts and figures on EU transport, do check out Eurostat!

In a recent post on Forbes, Richard lamented the fact that the world’s greatest supply chain goes unnoticed – even by rankings such as the Gartner Supply Chain Top 25. Which one is that, you may wonder? Santa of course!

Some highlights:

• 100% perfect order rating, on-time delivery and fill rates
• Direct Door to Chimney Delivery Model
• Leverages S2B (Santa to Business) process to collaborate
• In order to deliver everything on time, Santa travels at approximately 3,000 times the speed of sound!

To read the full article, click here. We always enjoy ways in which to represent logistics and supply chain management in an imaginative fashion and you will be hearing more on that subject from the AEL in 2012.

Image from Wikipedia

SAP Headquarters in Germany

As one of the largest global business software providers, SAP also caters to the transport and logistics industry. Their solutions can help a company to plan and forecast all the resources they need in order to provide transportation services. Tools such as transportation and warehouse management are capable of increasing the industry’s efficiency and lowering its operating costs. IT solutions can also provide a boost to a Small- or Medium- Sized Enterprise (SME) that is looking to expand either in size or in reach. This was the case for Italian transport and logistics company Artoni, where SAP solutions helped the company to transform from a regional transportation business into an international logistics service provider.

At the beginning of the 20th century, men of the Artoni family hauled goods, building materials, and stones from railcars to customers over the cobbled streets of Reggio Emilia. Established in 1933, the company is still owned by the Artoni family and specialises in transporting Italian luxury brands. Artoni now processes more than 700,000 shipments per month and is an international transportation and logistics provider, moving freight by road, rail, and sea to clients throughout Europe. One key to the company’s continued growth and success is the deployment of powerful transportation and warehouse management software from SAP, which they started using in 2009.

To support its transformation from a regional shipping company to an international transportation and logistics enterprise, Artoni needed to reengineer and optimise its business processes. The firm also wanted to streamline its transportation and warehouse management methods to maximise efficiencies and enhance customer service levels, while making their operations more transparent. In effect, IT solutions are an excellent tool to enhance supply chain / operational transparency.

With a newly rationalised and simplified application landscape, Artoni realised dramatic business benefits. Optimised transportation routes helped reduce CO2 emissions and closer integration between the logistics and transportation processes is improving operational efficiencies and reducing costs. For example, the volume of goods moved per hour rose by 30%, and the cost of transporting goods was cut by 10%. Storage space for goods to be transported has been reduced by 20%.

Recommendations

A comprehensive approach to a European technology roadmap for logistics is needed, which requires additional concentration on areas such as future mobility concepts, manufacturing, integrated safety (safe transport with cooperative systems) as well as continued focus on conventional technologies to maintain Europe’s existing global technology leadership.

The uptake of ICT platforms in logistics operations is needed to ensure seamless T&L along the whole supply chain and ensure competitiveness.

However, the core issue remains that if less transport emissions is what we need to reduce carbon emissions, how can a business such as Michelin improve its turnover while selling fewer tires? The answer is by replacing sales of tires and services and invoicing the kilometres travelled, in other words by proposing the full outsourcing of the tires of a specific fleet. Michelin was the first to propose this model in 2001 and is the European leader for outsourcing truck tires. Michelin’s interest is then to limit the consumption of tires and this has significant environmental and economical impacts, such as:

o Reducing the consumption of raw materials and the number of used tires by optimising the tires’ life; by working on the product (inflate, permutations, repairs); regrooving (90%); REMIX retreading (90%); and a traceability and valorisation of definitely used tires.

o Reducing the fuel consumption by product innovation: Energy and X-One tires reduce fuel consumption of 5 to 6%, services performance; systematically regrooving and better follow up of inflation pressures; and increasing safety through better tire care (pressure, tread depth).

o Simplification for the fleet owner who gets a fixed price per kilometer whatever the reality.

The logistics industry is experiencing a major change, and one of the trends is for increasing consolidation and professionalism of the industry characterised by the emergence of large fleets in Europe and North America, with some players experiencing faster growth than the rest of the market.

One of the consequences of this increasing professionalism is the increasing focus of players on their core business, which is logistics, and a tendency to outsource the rest, such as tire-related issues. Another consequence of the trend is increasing standardisation of processes with greater emphasis on total cost of ownership and operating costs than on purchase cost.

That is why, to meet these new expectations from fleet owners, Michelin is now positioning itself as a service provider as opposed to a tire vendor, and develops a complete solution-based offering including comprehensive tire management services for Michelin tires only.

Providers of transport and logistics capabilities are positioned between manufacturers, suppliers and the retailer. First, as globalisation increases and the time and distance between the point of manufacturing and the point of consumption increases, so does the need for these companies to improve the efficiency of their operations, reduce costs and ultimately provide better customer service. Second, with rising demand for the delivery of goods, transport companies are looking for faster and cheaper means of delivery, and increased and more accurate tracking capabilities. Third, with fuel prices and labor costs on the rise in an increasingly competitive environment, many logistics providers are running on less than optimal fleet sizes and are struggling to get more from their transport networks.

RFID solutions for the transport and logistics industry (including air, rail, water, truck, parcel/post delivery, transit, and pipeline) can help companies access more accurate and timely data to manage their assets, including the transport vehicle. RFID solutions for asset maintenance, yard management (cross-docking applications), dispatch, pickup and delivery, sales force automation and more secure freight and container solutions are available to help companies improve efficiencies or enhance services to their customers.

In short, the benefits that RFID solutions can provide are numerous and include:

• Enhanced customer service by increasing the accuracy and number of on-time deliveries;

• Reduced labour and inventory carrying costs and improved efficiency for the loading, tracking and delivery of cargo;

• A reduced loss of cargo through theft, mishandling or expiration with improved tracking and status information;

• Reduced fleet maintenance costs and increased fleet availability (asset uptime) by parts availability to support scheduled and preventive maintenance;

• Provision of safe and secure freight transport with container management solutions and electronic container manifests.

Increased adoption of smart solutions such as RFID in logistics operations can truly create sustainable freight flows that reduce logistics costs and improve the carbon footprint for all EU companies. However, the biggest obstacle to the adoption of available smart solutions is cost.

Therefore, European policymakers should increase and coordinate funding of pilot projects to leverage the available technology and to deploy innovative technology solutions (including standardisation initiatives) across the supply chain. From a logistics perspective this can lead to the concept of the “intelligent package”, in which the package would be given the “knowledge” of where it is going by storing this target information in a transponder attached to it. This is key in ensuring Europe’s position at the forefront of global logistics.

A solid and integrated industrial policy is needed to help industry seize these opportunities, and should incorporate the following elements:

First, competitiveness and implementation of smart regulation. Increased and more systematic efforts need to be made by Member States to reduce administrative burden, to pursue better regulation and e-government policies, to apply the “think small first” principle and to simplify support schemes.

Second, the development of business-related services such as logistics, facility management, design, marketing and advertising are becoming ever more essential to modern manufacturing. They are both essential inputs and enhance the value of products. In some Member States, road transport and energy infrastructures need attention.

Third, standards should not create an additional burden. Instead, they should lead to efficiency gains and act as an incentive for innovation. The ultimate aim should be convergence of standards at world level.

A new industrial innovation policy is needed to encourage the much faster development and commercialisation of goods and services and to ensure that EU firms are first onto the market. Improved use of ICT for industrial competitiveness, logistics, resource optimisation and innovation will be essential for future competitiveness.

Industry is increasingly dependent on inputs of raw material and intermediate goods, and is also crucially dependent on the business services industries and efficiency of logistics that add value and help to design and market new goods and services. This new perspective requires a different approach to industrial policy that takes increased account of the interlinkages.

Europe needs new governance for industrial policy. Whilst the economic and financial crisis shifted the focus of industrial competitiveness policies towards short-term rescue and recovery actions, in the future the attention of policymakers has to focus on long-term structural challenges, in particular maintaining global competitiveness, climate change, energy, population ageing, skills and knowledge.