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Wholesale Banking

A new playbook: evolving transport and logistics through digitalisation and sustainability

Shifts in supply-chain management and increased use of automation and data are interlinked trends shaping the transport and logistics sector. They are being driven by advances in technology and an increasing awareness of the importance of sustainability – not just as a social responsibility, but as an essential part of business management that also brings long-term economic benefits. These are becoming ever more apparent as the world adjusts to the impact of Covid-19.

Rethinking supply chains

Just-in-time has become a widely accepted model for the current generation of logistics professionals, bringing considerable benefits, including reduced wastage and lower costs for inventory management. But the pandemic, as well as other serious threats such as climate change and trade sanctions, have highlighted the risks to system.

Brian Reed, VP at GEODIS Supply Chain Optimisation, expects to see a reassessment of just-in-time supply chains and sourcing strategies. “I would say that years of inventory savings were wiped away by not being resilient and flexible for Covid,” says Reed. “People should be moving to different inventory strategies.” These could include diversifying suppliers and moving supply chains closer.

Shortening supply chains brings benefits, both in reducing transport costs and lowering the impact on the environment – key goals for most businesses.

“This crisis now provides the whole sector with a price tag for [the lack of] prevention. It's quite similar to the aspect of sustainability where we are starting to get a sense of the harm that climate change will cause if we don't internalise such costs,” says Jens Brokate, VP for the automotive sector at ING.

Transparency perks

Better visibility in the supply chain is one of the factors that underpins resilience and more efficient planning in the transport and logistics sector. The increased integration of the Internet of Things (IoT), artificial intelligence (AI) and real-time data management are driving this progress.

“Transparency in the supply chain is a major factor and all innovations and process improvements relating to AI, data and blockchain that improve this will experience a major lift,” says Jens Brokate.

The example of intelligent containers, equipped with sensors and IoT-connectivity, which can be monitored in real time, offers a variety of hidden benefits beyond geolocation access.

The data provided can be used to tailor other operations and services; for example, smarter insurance premiums that are calculated automatically, depending on the container’s location – higher in a war zone, for example, but dropping when the container is on an idle ship or as it moves towards a secure warehouse in a safe country.

Arno Storm, COO of APM Terminals Rotterdam in the Netherlands, says that real-time information and data interchange have become a “must-have” in the sector. APM Terminals, part of the Maersk group, aims to simplify the transport and logistics business for their customers through digital platforms. “The simplification of the trade and the digital solutions that provide that are really picking up pace now. That’s a huge achievement, given the varying standards of all the different parties in the supply chain and their local specifications. This will bring the global trade to the next level,” Storm says.

Building blocks

What will it take to support this evolution? Firstly and most urgently, new or rolled-over financing to businesses to see them through the current crisis. Secondly, funding of the transformation that companies are undertaking over the medium to long term. As Jens Brokate points out, transport and logistics companies need to invest now to ensure that they keep pace with the rapid technology development in the sector and to make their business models more sustainable, factoring in their impact on the environment. Emissions reduction and energy efficiency in the transport sector through electrification and digitalisation will become more important considerations as the energy transition accelerates to meet climate targets.

Financial institutions clearly have a central role to play here and ING has been active in lending to support clients’ development of green projects and products, and to support sustainability. It has also pioneered sustainability improvement loans, in which the interest rate is specifically tied to the clients’ sustainability performance (1).

“It is really essential that companies acknowledge that there is somewhat of a new reality,” says Jens Brokate.