Even C-level executives are coming over to the environmental side. And their message is clear: The business world is getting serious about getting green.
Art van Bodegraven was, among other roles, chief design officer for the DES Leadership Academy. He passed away on June 18, 2017. He will be greatly missed.
To those of a certain age, the subjects of conservation and the environment will probably always conjure up images of tree-huggers, flower children, and protest demonstrations. But we've all come a long way since those days. It's not just politicians and consumers who have responded to the eco-imperative. Even C-level executives are coming over to the environmental side. And their message is clear: The business world is getting serious about getting green.
The Saudis made us do it
As for what's behind the drive to go green, some would say the cost of energy is forcing us to pay more attention to energy efficiency than we otherwise would. Maybe so. The price of oil and the cost of fuel—and excitement about future availability—can indeed change the economic equation of some critical supply chain elements.
To see how fuel changes the calculus, you need look no further than just-in-time or offshore-production strategies. Both are premised on low-cost, freely available oil. In the case of just-in-time manufacturing and distribution, the trade-off has traditionally been somewhat higher transportation costs in exchange for significant savings in inventory costs, a huge net gain when done well. With offshoring manufacture to Asia (or anywhere, actually), the trade-off has been higher transportation costs vs. enormous savings in labor costs, another gigantic net gain when the conditions are right.
In recent years, rising wages and growing affluence in the producing countries have eroded some of the savings from offshoring production to Asia. But the real game-changer may be fuel and freight costs. The offshoring model relies heavily on long-distance transport. As fuel costs rise and stay relatively high, the total landed cost piece of the offshoring equation changes decision points. And contemplating energy costs of, say, twice current levels could change the outcome altogether.
Adding uncertainty of supply to the equation, which adds more potential variability to supply chain performance, only makes the idea shakier.
So, here's where we seem to be. Inventories must necessarily increase to reflect realities in product delivery variability as well as the length (in time, as well as in miles) of supply chains. Production of higher levels of inventory will also, by the way, consume more energy. Meanwhile, transportation costs are at permanently higher levels.
Not only is there more inventory—in transit, as well as in storage—but maintaining customer service performance may be driving the need for more distribution facilities, to deploy inventories further forward in the chain. And more resources are being consumed to build and run those facilities.
Watching and waiting
Admittedly, not everyone is making wholesale changes to their supply chains—at least not yet. But more and more companies are watching developments carefully and looking at alternatives. It is conceivable that the day may come—and it may not be far off—when offshoring to China no longer makes economic sense.
In fact, it looked for a time that oil at $150 a barrel might be the tipping point. Oil prices have tumbled since their July peak, of course, but we cannot take comfort in the recent reductions. For one, prices can shoot up again—for no particular reason—and might not stop at $150 this time. For another, uncertainty and variability in fuel and transport costs is a more difficult planning and management problem than permanently high, but stable, costs.
It is no wonder that tactical forces alone are driving hard looks at energy conservation of many kinds. But there are also organizations that are looking beyond knee-jerk reactions and beginning to think in strategic terms about supply chain construct and operation.
We may look to Europe for a preview of coming attractions; sooner or later, the core concepts will make their way here. For multinational companies, European regulation is already influencing how green their behavior must become. Such initiatives as the WEEE (Waste Electrical and Electronic Equipment) and RoHS (Restriction of Hazardous Substances) directives are forcing manufacturers to take environmental and health considerations into account in both product design and material selection. All this, plus mandated recyclable content in products of all degrees of size and complexity.
What are people doing?
As for the paths businesses are taking to green up their operations, the first step most always involves energy efficiency. Maybe it's restructuring transportation to reduce fuel consumption. Maybe it's electricity usage management, through more efficient lighting, more efficient HVAC systems, and/or flexible management of heating and cooling. Maybe it's a reduction in materials that are major energy consumers in their own production.
Maybe it's a return to the days of fewer, larger orders to optimize transportation usage and cost. In all cases, long-lasting improvement begins with a clear and complete understanding of processes and decision points, and gets legs through the attention of consistent and continuing measurement.
We think the term "environmental sustainability" really indicates a direction, more than an in-hand accomplishment, but some major players are getting into the act with far-reaching commitments. Wal- Mart has announced objectives of complete use of renewable energy, zero waste, and merchandise that sustains resources and the environment. Clearly, this initiative will require a long series of incremental improvements in facilities, fleets, operations, packaging, and sourcing.
UPS, a truly global services provider, has undertaken a number of programs designed to reduce its fleet's greenhouse gas emissions—worldwide. Dell is pioneering a recycling program to improve and enlarge asset recovery. FedEx is rolling out hybrid trucks, with an ambitious goal for particulate emission reduction.
Hewlett-Packard, with immense global sourcing and global sales, has developed a Supply Chain Social and Environmental Responsibility Policy, along with a supplier code that includes environmental considerations. SC Johnson has for years worked to reduce toxic substances in its products and encourage recycling.
Sun Microsystems is revamping product design, recycling, and end-of-life disposal processes. Timberland has developed a sustainability agenda that covers the use of energy, materials, chemicals, and systems. It has introduced water-based adhesives into shoe production and is recycling PVC as it moves toward zero PVC waste.
And DHL—and Deutsche Post—are looking at biofuels and natural gas alternatives, as well as working on reducing greenhouse gas emissions and offering low-carbon (or carbon-neutral) shipping products. Even port authorities (notably Long Beach) are involved, with programs to persuade tenants to adopt greener technologies and help reduce diesel pollution.
Start of a journey
Is it easy being green? Of course not. But it's not as hard as it used to be. And the economic equation is definitely tilting toward the green side.
Look, this is no longer about the "thou shalt nots" of the regulators: Thou shalt not build a facility on wetlands. Thou shalt not leak nasty substances into the groundwater. Thou shalt not emit particulates into the air. It is about redefining and reconstructing the supply chains of the future.
The keys are to plan ahead of the wave, all the while realizing that this green thing is a journey, not a destination. And being realistic about how long it might take to get where we need to go.
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The U.S. manufacturing sector has become an engine of new job creation over the past four years, thanks to a combination of federal incentives and mega-trends like nearshoring and the clean energy boom, according to the industrial real estate firm Savills.
While those manufacturing announcements have softened slightly from their 2022 high point, they remain historically elevated. And the sector’s growth outlook remains strong, regardless of the results of the November U.S. presidential election, the company said in its September “Savills Manufacturing Report.”
From 2021 to 2024, over 995,000 new U.S. manufacturing jobs were announced, with two thirds in advanced sectors like electric vehicles (EVs) and batteries, semiconductors, clean energy, and biomanufacturing. After peaking at 350,000 news jobs in 2022, the growth pace has slowed, with 2024 expected to see just over half that number.
But the ingredients are in place to sustain the hot temperature of American manufacturing expansion in 2025 and beyond, the company said. According to Savills, that’s because the U.S. manufacturing revival is fueled by $910 billion in federal incentives—including the Inflation Reduction Act, CHIPS and Science Act, and Infrastructure Investment and Jobs Act—much of which has not yet been spent. Domestic production is also expected to be boosted by new tariffs, including a planned rise in semiconductor tariffs to 50% in 2025 and an increase in tariffs on Chinese EVs from 25% to 100%.
Certain geographical regions will see greater manufacturing growth than others, since just eight states account for 47% of new manufacturing jobs and over 6.3 billion square feet of industrial space, with 197 million more square feet under development. They are: Arizona, Georgia, Michigan, Ohio, North Carolina, South Carolina, Texas, and Tennessee.
Across the border, Mexico’s manufacturing sector has also seen “revolutionary” growth driven by nearshoring strategies targeting U.S. markets and offering lower-cost labor, with a workforce that is now even cheaper than in China. Over the past four years, that country has launched 27 new plants, each creating over 500 jobs. Unlike the U.S. focus on tech manufacturing, Mexico focuses on traditional sectors such as automative parts, appliances, and consumer goods.
Looking at the future, the U.S. manufacturing sector’s growth outlook remains strong, regardless of the results of November’s presidential election, Savills said. That’s because both candidates favor protectionist trade policies, and since significant change to federal incentives would require a single party to control both the legislative and executive branches. Rather than relying on changes in political leadership, future growth of U.S. manufacturing now hinges on finding affordable, reliable power amid increasing competition between manufacturing sites and data centers, Savills said.
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.