Redefining the heart of logistics

The global economy rests on our ability to move things around. Our ability to create things based on inputs sourced from all across the world and then supply finished products to consumers within the right amount of time. This massive ecosystem of moving goods and materials is enabled by the logistics sector which consists of trucking, railways, shipping and everything else in-between. Steeped in old world technologies and practices the sector has largely been seen as part of support services and backend infrastructure. Though things are beginning to change. These changes are driven in equal part by climate change, increased protectionism by countries to global trade and the transformational impacts of technology and digitisation.

A.P. Moller – Maersk is a transport and logistics business that employs over 85,000 people across operations in over 120 countries. Maersk is taking steps to adapt the company to this changing world. Its vision is to become a global integrator of container logistics through digital innovation, connecting and simplifying the global supply chain.

The company has 4 top priorities: decarbonising logistics, multiplying the benefits of trade, halving food loss in the supply chain, and leading change in the ship recycling industry. Significant efforts are being made to reduce carbon emissions from operations as the transport sector is responsible for 23% of global energy-related emissions. Shipping alone accounts for 3-4% of global emissions. Maersk, a significant global player in this space, has internal targets to reduce CO2 emissions by 60% relative CO2 by 2020. The company is working with the industry towards de-carbonising logistics and is exploring how renewables may be used to power vessel operations. Substantial improvements will be seen through the roll-out of a Connected Vessels project, which focuses on upgrading data collection and reporting systems on its shipping vessels. Real-time, coordinated data for the routes sailed and the amount of time spent in ports will lead to lower fuel consumption, less time wasted and fewer delays  In total, Maersk expects these initiatives to reduce fuel consumption by 0.5% every year over five years, corresponding to a reduction of approximately 847,000 tonnes of CO2 eq.

In addition, to global projects, the company has country-specific interventions too. Julian Bevis, Senior Director, South Asia – Maersk Group is part of the core committee that leads Sustainability and CSR initiatives at Maersk India. He believes that the transport and logistics sector in India is in need of a paradigm shift. “The transportation system needs to change. The people in the system… the grass root level workers need a better quality of life. Drivers, fishermen, ship breakers have tough lives. Truckers are the lifeline of the Indian road transport system and on whose shoulder the Indian logistics sector thrives, yet, grossly ignored, underserved and unattended. Fishermen brave the rough waves of the ocean every single day and yet, earn so less. Their safety and basic needs are seldom addressed. “Similarly, ship breakers do really hard work and yet their health is often at risk” says Julian. Maersk India’s CSR programs are focused on providing health services and addressing basic issues faced by these communities. Close to 78,000 truckers and 21000 fishermen and 2500 ship breakers over the past few years have participated in these programs.

In 2016, Maersk began working to change the ship recycling industry to raise standards and create safe working conditions and environmentally sound practices at ship breaking facilities in Alang, a port in Gujarat. Working in partnership with participating yards, the on-the-ground achievements have the potential to break the gridlock in the ship recycling industry. The company is now working to accelerate change through a push for increased transparency on shipowners’ policies and practices. Maersk has also started a health project in partnership with Red Cross in Alang, after a survey highlighted that access to health care – in general and in emergencies – was confirmed as the most urgent unmet need.

“Are we making long-term impact?” is the question that Julian constantly asks himself and his team. “We need to make our projects self-sustaining and impactful. Long-term change and impact need commitment – not just financial, but genuine intent. No matter what we do, it’s just a drop in the ocean” says Julian. “We must collaborate to change the eco-system. Indian transport workers, work insanely long hours, are away from their families and have no support systems. This is completely different from what we see in Europe. Can we develop a platform of like-minded people who can work together to make the much-needed changes?”

While, these programs are specific to India, but they are also part of the company’s global alignment with the sustainable development goals(SDG’s). The SDG’s express what is increasingly expected of businesses: To work in partnerships to create solutions that contribute to developing a more sustainable and inclusive world. “We’re very aware that companies can no longer stay on the sidelines when it comes to global issues…” says Søren Skou, the global CEO[1]. He further says, “It is about businesses and other partners working together to solve a complex problem.”

The future will bring many challenges. The biggest one, other than climate change will be the one of digitisation. IDC predicts that by the end of 2020, one-third of all manufacturing supply chains will be using analytics-driven cognitive capabilities, thus increasing cost efficiency by 10% and service performance by 5%[2].

While this will bring many new opportunities at the same time it will have many fundamental impacts on the way logistics businesses are run and what they define as part of their responsibilities in creating a better world. Digitisation will lead to data sharing, reducing operational costs and better efficiencies, but it could also adverse impacts and unintended consequences as technological advances are changing how we live, work, produce and trade. For instance, with the use of robotics, the number of people that need to be employed may significantly reduce in the future. While repetitive tasks will be performed by machines, people would possibly focus on more complex activities, implying that workers would need to be re-skilled. [3]Julian has a philosophical perspective on this. He says, “Ideas won’t work without having the people to implement them. No matter how clever the idea.”

A.P. Moller – Maersk is expanding the scope of its efforts to drive real change at a systemic level. This is why the company is slowly moving from managing internal CO2 emissions to the entire logistics system. Similar strategies are being followed, in other initiatives such as reducing food loss in supply chains and working with other companies to improve ocean health.

Based on a conversation with Julian Bevis, Senior Director, South Asia – Maersk Group

(Original Post)

  1. WEF Impact of the Fourth Industrial Revolution on Supply Chains
  2. Maersk Sustainability Report 2017
  3. IndustryWeek