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A-List Insights: Adrian Gonzalez (Part 2)

Welcome to A-List Insights!

A-List Insights is an interview series where we talk with industry thought leaders and experts about different topics surrounding logistics and supply chain – gathering their insights and experience firsthand.

Thought Leader: Adrian Gonzalez

Part 2 of 5

We continue our Insight Series featuring Adrian Gonzalez, a trusted advisor and leading industry analyst with more than 20 years of research experience in transportation management, logistics outsourcing, global trade management, social media, and other supply chain and logistics topics. He is the founder of the popular industry blog Talking Logistics; founder and president of Adelante SCM, a peer-to-peer learning and networking community for supply chain and logistics executives and young professionals; and founder of Indago, a market research service that brings together a community of supply chain and logistics practitioners who share practical knowledge and advice with each other while giving back to charitable causes.

Adrian is a frequent speaker at industry events and conferences, is regularly quoted in industry publications, and is a recognized LinkedIn Influencer with over 250,000 followers.

This is the second of a five-part series interview with Adrian. To provide context to the current climate, the entire interview was conducted in late March 2020, in the midst of the worldwide COVID-19 pandemic. You can find Part 1 here.

Part 2: Transport Sustainability

Let’s move on to sustainability. We know sustainability is a key trend within logistics and supply chains. What do you think are the main considerations and opportunities for shippers, and how quickly are they to develop/adopt best practices?

Sustainability has been a discussion topic for many years. In fact, it was Walmart and its former CEO Lee Scott that arguably put the topic in the spotlight back in 2005, and it’s been gaining momentum ever since. The scope of sustainability has expanded over the years. A lot of the discussion early on was about global warming and greenhouse gas emissions, which is certainly still a focus today, but people are now also talking about things like the sustainability of water and other natural resources, along with social responsibility in terms of labor and labor practices. I believe it’s a good thing that the scope of sustainability has been broadened because, as we continue to see today, the whole aspect of global warming and climate change is a very divisive issue.

And when you talk about sustainability from this broader perspective, you’re able to bring more people under the tent because they recognize that things like clean water and treating people and workers humanely in all parts of the world, and protecting scarce natural resources are all important today.

If you look at the opportunities, they are still the same ones that existed 20 years ago. There’s still a lot of opportunity, for example, in transportation, which is one of the biggest contributors of greenhouse gas emissions.

In the previous question [Part 1] we talked about what’s changed over the past 20 years. Well, what hasn’t changed over the past 20 years is there is still a lot of waste and inefficiency in transportation (e.g., a lot of empty miles, a lot of underutilized capacity).

New technologies and business models like digital freight and lane matching solutions are attacking those inefficiencies, but a byproduct of these efforts are sustainability benefits. You can talk about electric vehicles and electric trucks and that’s all part of the overall effort to reduce greenhouse emissions, but if you can improve the utilization of existing capacity, even with the existing trucks, and reduce empty miles, you can have a huge impact from a greenhouse gas emission standpoint.

Related to that is packaging. If you’re able to make changes or design packaging with transportation in mind for example…

…are you talking about reusable transport packaging? Pallets and racks and things like that?

Well, that’s one aspect of it, but the other aspect of it is the recognition that if you’re able to fit more products per box and more boxes per pallet, you can ship more product with fewer trucks. Over the years I’ve come across several case studies, such as IKEA that was featured in The Wall Street Journal a few years back. IKEA designed one of its lamps to fold much more compactly into a box; and because of that, they were able to fit more of those boxes per pallet and so forth.

The best example, which is kind of a unique one, is bubble wrap. The company that makes bubble wrap introduced a new product a few years ago that is bubble wrap but without the air in it. The air is put in at warehouses and shipping facilities using special equipment when the time comes to use the wrap. So the makers of bubble wrap now are able to ship in one truckload the same amount of product that used to take 40 truckloads just by taking the air out.

Obviously, that’s a very unique example, but it’s symbolic of an ongoing problem: we continue to ship a lot of air! We see that, for example, with ecommerce and retailers using boxes that are too big for the product.

The bottom line is there is a lot of opportunity within transportation to have a big impact on sustainability by using optimization to create more efficient routes, by maximizing the utilization and loading of trailers, and by redesigning packaging to fit more products per box, more boxes per pallet, and more pallets per truck.

And finally, you really have to start thinking about sustainability at the product design stage.

Historically, when you design products, you never really think about designing them from a reverse logistics or material recovery standpoint. So what you typically see with many products is that they’re very difficult, if not impossible, to take apart or to extract materials from them for reuse. Why? Because they weren’t designed to be taken apart or to easily extract materials from them at the end of their life.

…in terms of product life cycle management?

Right. So if you’re a product designer, it’s about asking ‘What if we had to take these products back after the consumer was done with them? How would we design them differently if we had to take them apart and reuse most if not all the materials? Could we use screws instead of glue so that we could quickly unscrew things and replace pieces with newer ones and then put it all back together again like new?’ In short, I believe there’s a big opportunity from a design aspect.

So, how do you think shippers will weigh environmental benefit of sustainability efforts against the impact to their bottom line? Because it really does start with freight procurement.

There used to be this saying that ‘green is good for business.’ And I agree with that and believe it’s still fairly true. But the reason green is good for business is that most if not virtually all of the green things that are done are good for business. In other words, if something is not good for business – that is, not good for the bottom line too – then most companies are not going to do it.

That’s still a reality today. You have to find that balance where it is a win-win value proposition — a win for the environment and a win from a profitability or a financial perspective as well.

And we as consumers have a responsibility too. If we’re all waving the sustainability banner but we’re not willing to pay more for something, then that’s going to delay the adoption of sustainability efforts because companies are not going to put themselves out of business being 100% green if it’s going to cost them out of the market.

That’s the challenge. How do you do this in a way that is a win-win for the environment and from a financial perspective, and then how do you get more and more consumers to “walk the talk” in terms of making this a priority.

For example, a few years ago when oil was over $100 a barrel and gasoline was $4 dollars + getting up to $5 dollars a gallon, there was a huge movement towards buying Prius’ and smaller cars. Now gas is cheap again and guess what? What are best selling cars in the country? They’re not cars, they’re the pickups and SUVs again. That’s the reality. Consumers went to the smaller cars and moved away from SUVs and Hummers and went to more cost-efficient vehicles because gas impacted their wallet, gas was expensive. Now gas is cheap again and they’ve gone right back to driving pickups and SUVs. That’s the challenge.

Collectively, everyone has a responsibility, if they really feel that this is important, to walk the talk.

Look for Part 3 of our “A-List Insights” Series interview with Adrian Gonzalez where we discuss future challenges for logistics and supply chain software technology providers.

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