The Impact of Visibility on Supply Chain Sustainability

In early November, European Transportation Management Systems (TMS) provider Transporeon launched its Carbon Visibility module, the aim of which is to aid shippers and third-party logistics (3PLs) to measure accurately their environmental transportation footprint. The module piggybacks off the current trend for greater sustainability within supply chains, which has become a growing talking point at least among enterprise customers responding to customer and regulatory drivers, in particular after the Glasgow COP26 conference. Suppliers of real-time transportation visibility, such as FourKites with their Supply Chain Sustainability Dashboard in April 2020, are among some of the software vendors offering dashboards to bring visibility into this aspect of the supply chain—little exposed or optimized despite the heavy emissions from the freight transportation sector. Similarly in the case of Transporeon, it is Sixfold, the real-time transportation visibility platform with which Transporeon merged in 2020, that is allowing the launch of the Carbon Visibility module, providing as it does a more accurate data source on which to build the necessary insights.

Off the back of this, Transporeon will also be launching a new service in the final month of 2021 to facilitate collaboration between suppliers and carriers: the goal will be to reduce ‘empty miles’ by automatically suggesting loads suitably matched to their vehicle type, location, and trajectory to carriers. The impact of this product has the potential to be significant: Transporeon works with over 1300 shippers and 120,000 carriers, densely clustered across Europe, and is the only TMS vendor in the region to be fully-enabled by real-time transportation visibility, which it is planning to offer as a mandatory feature for all shippers on the Transporeon platform. This large customer base enabled with real-time transportation visibility and with the wide number of additional execution capabilities inherent in a TMS will make this collaborative feature more convincing than many competitors.

Real-time visibility data is a key tool in providing insight on the environmental footprint of a supply chain. With this, companies can gain insight into a number of metrics, such as the actual carbon footprint of a product at the stock-keeping unit (SKU) level based on the distance it has travelled and modes of transport employed to move it, as well as the number of empty miles driven, the distance travelled by trucks or vans on delivery routes, the fill level and utilization of vehicular or non-vehicular transportation assets, and many others. Real-time transportation visibility software vendors play an important role here in supplying an accurate stream of data aggregated from a large number of proprietary shipper fleets and third-party carriers. The impact of this is twofold: firstly, to increase the information on a product’s journey end-to-end, where many products move through different transportation modes and carriers; and secondly, to facilitate benchmarking of carrier performance based on standardized metrics. While providing this data stream is a critical first step, it is in the execution of the gathered data that the value primarily lies. To this end, real-time transportation visibility vendors have been building out these aforementioned dashboards or building collaborative features into their platforms to help shippers and logistics providers take advantage of the data. However, many of these are limited because of their still-small customer bases and by the fact that their product is a platform whose data is primarily valuable only when paired up with existing enterprise systems—such as a TMS—which are used on a daily basis by supply chain departments and which offer vastly more features, such as tendering, carrier management, freight execution, auditing, and data analytics. The acquisitions and partnerships in the past couple of years between TMS and real-time transportation visibility providers (Transporeon-Sixfold; Descartes-Macropoint; E2open-BluJay; Wakeo-DDS Logistics; etc.) show the mutual dependence of these systems. When it comes to collaboration on environmental footprint reduction, the same principle applies; value is created in how the data is actioned and interacts with an existing enterprise (TMS) system.

Lack of exposure of optimization of supply chains in line with sustainability and environmental goals has a number of causes. One challenge has been the lack of availability of data and data sharing between different organizations, limiting how much companies understand the environmental footprint of their own products, as well as limiting how they can collaborate with other companies. As real-time tracking technologies catch on and become a standard part of supply chain operations, there will be an emerging critical mass of shippers and Logistics Service Providers (LSPs) that will facilitate large-scale partnerships and collaboration to meet circular economy principles, as opposed to existing small-scale trials through narrow data sharing practices. Transporeon’s activities in this space are an important step in the right direction to bring about these partnerships and collaboration.

A second challenge is more cynical: while companies are willing to talk about environmental principles, it remains only a minor driving force behind supply chain changes. A November 2021 survey by FourKites in partnership with Reuters showed that sustainability was only a driver for supply chain visibility for 28% of respondents, while other forms of optimization such as customer service or on-time delivery were far more important. This reflects the fact that sustainability on its own is rarely enough to change company approaches, and that major changes will only be brought about if they have a financial impact or Return on Investment (ROI) as well. While some Key Performance Indicators (KPIs) publicized by enterprises might focus on sustainability (e.g., reduced CO2 emissions), the driver for adoption is almost always economic and linked to productivity (e.g., reduced number of empty miles, expenditure on fuel, expenditure on air freight versus lower-cost transport modalities, or number of trucks required to deliver the same quantity of product). Being able to demonstrate a financial return is therefore key to drive sustainability initiatives in the supply chain, and the greater maturity of technologies that enable this return can have a collateral impact on environmental footprint. The environmental footprint reduction, however, is increasingly tied to economic return, in particular with the growing number of regulations and higher cost of transport (e.g., higher price of EU carbon under the mandatory emissions trading scheme—rising to €74, or US$85, per ton, a 265% increase over end of November 2020). This will make targeting supply chain environmental footprint an increasingly key requirement in the very short-term future, particularly in Europe. Again, Transporeon’s combination of available real-time data, execution capabilities, and European-centric customer base will put it in a very strong position to address this growing use-case.

Customer interest and regulatory changes are increasingly forcing companies to re-examine their supply chain environmental footprint. Real-time transportation visibility providers are well-positioned to function as one of the primary data streams that will facilitate these changes, with the focus on optimizing the use of transportation vehicles and modes. However, real-time transportation visibility vendors should consider how they can offer differentiated value to shipper and LSP customers. This may involve a number of approaches:

• Explore partnerships with TMS vendors to leverage their execution capabilities and customer base and build the required critical mass that will enable meaningful and financially advantageous synergies.
• Build out full end-to-end visibility by expanding capabilities across different transportation modes (e.g., truck, ocean, air, rail; across first-mile, middle-mile, and last-mile) to reduce gaps in visibility for customers.
• Aggregate different types of data streams; while carrier information is useful, customers are increasingly interested in SKU-level visibility. This may require receiving data from Internet of Things (IoT) specialists (e.g., Arviem, Sony Visilion) who can provide more data on a product’s precise journey, as well as information at the item-level (Arviem’s recent partnership with serialization specialist Kezzler is worth watching to this end), or using Purchase Order (PO) data from a company’s Enterprise Resource Planning (ERP) system to provide more accurate item-level traceability.
• Expand vehicular transportation visibility with non-vehicular transportation visibility, as non-vehicular transportation assets such as pallets or packaging are starting to attract more attention as companies look to limit waste and disposal, facilitate return and re-use, and simultaneously reduce costs. Optimizing the flow of these assets, facilitating re-use, and limiting how much companies are spending on disposable pallets, crates, or other forms of packaging can add significant differentiation.

Sustainability initiatives from enterprises are rarely altruistic. Luckily, significant cost savings and internal process optimizations can also lead to the same end-result of a lower supply chain environmental footprint. The opportunity on the table is large for software providers and enterprises alike to kill the twin birds of operational efficiency and sustainability with one stone.