Defining Logistics 4.0 Era
By: William Xiong, Chief Strategy Officer and SVP of Europe and SEA regions at Cainiao Network
Last year was a momentum driver as consumer confidence heightened. The eCommerce sector has continued to flourish as consumers indulge in revenge spending across retail, travel, and leisure. However, the movement of cargo around the world is a carbon-intensive endeavor where the logistics and transport sector contributes more than a third of global carbon dioxide emissions — the largest emitting sector.
The environmental challenge is a real cause for concern. Globally, the eCommerce industry used almost 1.36 million kilograms of plastic packaging in 2022, and this is expected to increase to 2 million kilograms by 2025. With plastics emitting 3.4 percent of global greenhouse gas emissions, significant shifts in production and consumption are required. At this year’s World Economic Forum, new guidance to support the sector’s long-term global shift to a net-zero future is a clear signal of the criticality of the industry’s global carbon reduction efforts.
Clearly, organizations that seek to reduce their carbon footprint need to evaluate their current practices in order to mitigate their environmental impact. To build a resilient and green supply chain ecosystem, technology applications like automation, smart distribution and packaging, and other smart logistics measures are poised to scale to even greater heights from this year onwards. Not only do these sustain the ongoing momentum in supporting technological innovations propelling the sector towards Industry 4.0, they also enable efficient logistics operations to phase out environmentally unsustainable practices.
Investing in long-term sustainable business practices
Modern consumers are more eco-conscious than ever before. They demand accountability and transparency and purchase from brands that resonate with their personal values. Coupled with pressures by local regulations and international organizations, the time is now for supply chain leaders and logistics providers to invest in tools and resources that are carbon-neutral or carbon-negative.
Logistics providers can also enhance their sustainability efforts by utilizing energy-efficient equipment and augmenting internal operations. One example of this is the use of renewable energy power sources, such as photovoltaic power generation systems (solar panels), which Cainiao has installed on the roofs of its warehouses at Zhejiang Province in mainland China, that span more than 100,000 square meters. They power the entire logistics park, and the additional output gets routed to the State Grid, China’s electric utility corporation, for consumer usage.
Other ways of reducing the carbon footprint of the logistics industry include the use of alternative fuels, such as hydrogen and electricity, in cargo aircraft and logistics transportation. Over the next few years, research and development and public-private partnerships will play a significant role in catalyzing these solutions to power the industry and reduce its overall environmental impact.
While it may seem trivial and costly in the short term, sustainability initiatives improve brand value perception and forge consumer affinity and loyalty over time. A huge motivator for organizations to implement these technologies is the long-term business and operational impact that they will bring, including cost and energy efficiencies in warehouses.
Technology continues to be the bedrock of green growth
Most consignment and eCommerce parcels that are delivered today are still packed in boxes with sticker labels on them. But what if logistics providers can optimize packaging materials without incurring additional time and cost?
With radio-frequency identification (RFID) technology, logistics providers can automate the parcel sorting processes, digitize each parcel and track each of them through a central system in real time. Across all nodes of the supply chain, implanted RFID chips or RFID sticker labels in the packaging can streamline every aspect of tracking, delivery, and security of logistics. This helps to provide accurate inventory recognition, and real-time updates of the parcels’ whereabouts.
The use of RFID labels and packaging supplies revolutionizes the flow of goods and parcels in the entire value chain. When there are disputes about a misplaced parcel, logistics providers will be able to quickly locate its location and address the issue. This reduces customer frustration, eases delivery partners’ struggles, and most importantly, boosts efficiency and flexibility of the supply chain with end-to-end information flow.
The digital future of supply chains
Just a few years ago, the idea of digital twin seemed highfalutin and unachievable in reality. Today, countries like Singapore have successfully created a digital twin of the entire country, achieved by combining millions of images and more than 100 terabytes of data. This is helpful in simulating virtual ‘what-if’ scenarios pertaining to climate change, and aiding government agencies in collaborating and testing new technologies.
The concept is similar for the logistics industry. The global nature of delivery networks means that local factors that affect route planning and traffic management, natural disaster prevention, and carbon emissions governance are difficult to predict or pinpoint. Digital twins can test autonomous deliveries (vehicles, drones, or robots), predict bottlenecks and inefficiencies, and pinpoint potential risks in the supply chain. This helps logistics providers better plan and allocate suitable resources to get ahead of the issues, improving merchant and customer experiences in the process.
Moreover, logistics operators can utilize digital twins to optimize power and energy consumption in their facilities and operations. This can help to reduce real life impact on cities by modeling only successful, green outcomes of tested solutions.
With the increase in demand for better logistics services, digital twin technologies are likely to mature at a faster rate in coming years to improve decision-making and resource allocation across the industry. More accurate predictions and recommendations can be expected as digital twins leverage AI and machine learning (ML) to generate actionable insights.
Sustainability will become a fundamental part of business strategies moving forward, and technologies have the potential to positively define the future of logistics. The question is, how big do we dare to dream?