How to Make Cargo Movement More Sustainable and Efficient
Nearly two years on, the pandemic and its effects on the supply chain are still going strong. The ability to move cargo has never been this severely impacted on such an ongoing basis. Several hub ports and gateway terminals are facing COVID-19 peaks due to high yard density, creating bottlenecks that back up arriving shipments on one side while wrecking delivery and distribution on the other.
As the queue of stranded vessels crosses 100 ships in Southern California ports, many export, logistic, and supply chain leaders are left wondering: Is this an indicator of things to come in the so-called new normal?
Thankfully, the short answer is no. Although port congestion — and supply chain disruptions in general — cause concern across governments worldwide, the good news is that they can be managed and even averted. All it takes is smart management, timely intelligence, and informed planning.
True Causes and Effects of Port Bottlenecks
Today’s rampant logistics disruptions in ports were exasperated by the pandemic, but the underlying supply chain issues aren’t new. One of the biggest mistakes businesses still make is the failure to plan for demand. When waiting times for container ships stretch to several days, the worst thing to do is send out another few thousand orders.
Despite decades of exacerbated logistics expenses due to unoptimized demand planning, however, businesses still haven’t prioritized effort and resources. Many continue to operate indiscriminately, receiving and fulfilling orders on an as-is, when-is basis with little thought given to optimizing effort and spend.
This results in larger unsold inventory piles, greater operational costs, and higher CO2 emissions. In fact, pollutant emissions in the four largest shipping ports in the world have increased 79% since the pandemic began. By 2050, scientists estimate maritime shipping will account for 17% of global annual CO2 emissions.
Obstacles in the Way of Sustainability
Although prioritizing a lower carbon footprint in maritime transportation and logistics isn’t difficult, it’s only possible with full, real-time visibility into supply chain operations. But modern supply chains are under immense pressure from start to finish.
On one hand, there is the perpetual challenge of rising costs and slimmer profit margins. On the other is the challenge of growing demand for more everything in less time. As if those issues aren’t enough, supply chains are becoming increasingly complex over time, as consumers now have multiple routes to market. Businesses throughout the supply chain must cater to each of these channels.
Finally, there is the constant pressure of growing environmental and sustainability regulations. As consumers become more ethically aware and resources become more scarce, regulatory bodies across the globe are cracking down on businesses to adopt less wasteful, more sustainable approaches to operations.
Regardless of these forces, however, one truth remains unchanged: As customer demand evolves, the need for speed, quality, and a superlative experience grows. The only way to address these issues in maritime shipping is to maximize value across the supply chain. When material flow is lean and streamlined, it allows for highly optimized operations at an end-to-end level.
Steps to Fix Unsustainable, Inefficient Shipping and Supply Chain Chaos
By producing just enough to cater to demand, companies can minimize environmental impact. In doing so, they can cut down emissions and excess inventory across the entire supply chain. Additionally, companies should make the most of limited inventory availability with minimal changeovers while prioritizing the minimization of their carbon footprint.
Imagine a pullback car that’s zipping ahead. Before it goes five seconds, another car is sent hurtling right after the first. This goes on until there’s a pileup that looks shockingly like rush-hour traffic on a Monday morning. Now, think of the same thing happening with order shipping and maritime transportation.
The pileup can be averted by increasing the window between two consecutive orders and collating more orders into a single shipment. To make the shipping process more sustainable and efficient, export, logistics, and supply chain businesses can follow these steps:
1. Accurately predict demand.
When historical sales data is viewed with a host of related factors, such as order volume, purchase trends, product mix, and revenue, it reveals a clear pattern of demand. This makes it possible to predict demand accurately for the near term and different horizons. When you can predict demand proactively, you can efficiently plan resources to minimize waste and accelerate a smooth, continuous flow of goods and cash. Businesses should use AI to monitor and predict demand changes so they can focus on what will sell, thereby eliminating early production and over-ordering down to the exact location, increasing availability, and maximizing on-time, in-full orders.
2. Segment and prioritize feedback.
Once businesses know the demand they’re catering to, the next step is deciding on the order of priority when fulfilling that demand. This is where demand and customer segmentation play a key role. Prioritized grouping of orders ensures fewer shipments, lower logistics costs, and minimized disruptions in the supply chain.
3. Combine all data.
Traditionally, businesses have adopted a siloed approach to analytics and AI projects and enterprise-wide rollouts. This is a flawed approach, however, because business operations are continuous by nature. Therefore, compartmentalizing data only leads to a myopic view of a large planet. When operational data is viewed in continuity, it affords a big-picture look at optimization without impairing overall operational goals. Even better, it will likely improve those goals.
The maritime transportation and logistics industry struggles with a multitude of sustainability and supply chain challenges. Disruptions in planning and a lack of clear insight into customer demand result in over-ordering, over-stocking, and over-producing materials. This “over-everything” results in higher CO2 emissions, stock-outs, and millions of dollars in lost sales.
Port congestions and supply chain bottlenecks affect the local, regional, and global markets, so much so that the crunch on container capacity could last until Q4 2022 with container prices surging. Companies should look at reducing waste, transport, and CO2 to increase their material movements, free cash flows, gain competitive market advantages, and ultimately run more sustainable businesses.
Anita Raj is a seasoned technology thought leader and product marketing expert for building impactful go-to-market strategies for targeted markets such as Europe, the U.K., and the U.S. She is the vice president of product marketing at ThroughPut Inc., responsible for the vision, strategy, and execution of go-to-market and product marketing initiatives, including value proposition, product launches, customer marketing, and product life cycle marketing.
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