Company’s built-to-suit warehouses selected as national winner
KUWAIT – April 18, 2019 – Agility, a leading global logistics provider, has been selected as the Kuwait national winner in the Industrial Project of the Year category at the 2019 MEED Projects Awards, presented in association with Mashreq.
Agility Logistics Parks received the award for its ‘4 BTS Warehouse’ project for one of the largest retail companies in Kuwait. The built-to-suit warehouses covered over 70,000 sqm of warehouse floor space and were completed in a 12-month timeframe, including design and construction.
Michel Saab, CEO of Agility Logistics Parks, said: “Agility has significant experience designing and building logistics parks and warehouses around the world. Our experience means we were well-placed to deliver this large scale project to our customer. Winning this award further solidifies our strong market position as a leader in building and managing world-class facilities and infrastructure that help companies operate in the world’s fastest-growing markets.”
During the design phase of the project, Agility took into consideration measures to minimize water and electricity usage to the minimum. The warehouse was outfitted with LED lighting and water sensors, and excess water from air conditioning units was reused for irrigation. In addition, the design and execution of warehouse’s slab flooring used steel fibers and jointless slabs to minimize maintenance costs and possible operation disruptions for the customer.
Richard Thompson, Editorial Director, MEED, said: “This year the judging panel reviewed a record number of entries from across the GCC, which affirms yet again the robust projects market in the region, amidst the challenging business landscape. Competition has been tough, and it’s great to see a strong commitment not just in completing projects, but also in meeting very stringent quality standards. Congratulations to all our national winners.”
Agility’s 4 BTS Warehouses project will now be reviewed against its Gulf rivals for the GCC honors to determine the final winners of the 2019 MEED Projects Awards.
Figures in the table above have been rounded
KUWAIT – February 22, 2020 —Agility, a leading global logistics provider, today reported 2019 net profit of KD 86.8 million, or 52.14 fils per share, an increase of 7% from 2018. Revenue for the year reached KD 1,578.6 million and EBITDA was KD 193.1 million, increases of 1.8% and 24.7%, respectively.
For the fourth quarter 2019, Agility reported a net profit of KD 23.2 million, or 13.93 fils per share, an increase of 4.4% over Q4 2018. EBITDA for Q4 2019 was KD 50.7 million, an increase of 24.3%, revenue remained flat.
Board of Directors Recommendation
Agility’s Board of Directors has recommended a cash dividend distribution of 20% (20 fils per share), along with 10% bonus shares (10 shares for every 100 shares), subject to approval of the General Assembly.
Agility Consolidated Results
Agility continues to deliver growth despite regional and economic challenges. In 2019, EBITDA grew by 5.6% (pre-IFRS16), following three consecutive years of double-digit growth.
“Global trade tensions, regional economic uncertainty, and financial market pressure in emerging markets all contributed to a challenging year for our logistics business. Internally, the costs associated with our investment in digitization also had an impact; one that we believe will continue in 2020,” said Tarek Sultan, Agility Vice Chairman and CEO. “Driving operational efficiency and better customer service through digitization continue to be a priority. It is an investment in our future.”
Beyond digital, emerging markets also remain a key investment focus. This includes building logistics parks across the Middle East and Africa, the Reem mega-mall project in Abu Dhabi, bringing on new ocean vessels and fuel farms through our fuel logistics subsidiary, and growing rapidly in Africa through our airport services subsidiary.
“We move into 2020 cognizant that we are likely to see volatility in the global economy that may impact our logistics business, as well as slower market activities in certain markets in the Middle East and Africa that may affect certain portfolio companies. That said, we are confident that despite these challenges, we are well-positioned to navigate through them,” Sultan said.
Agility Global Integrated Logistics (GIL)
(All numbers in this section are pre-IFRS 16)
For the full year 2019, GIL EBITDA was KD 35.4 million, a 1.4% decline from 2018. This decline was mainly driven by the costs associated to the acceleration of the digital transformation.
Year-to-date net revenue improved 2.9%. Net revenue growth was driven by strong Freight Forwarding yields; higher warehouse utilization and new facilities in Contract Logistics; and greater contributions from specialty products (Project Logistics and Fairs & Events). GIL consistently executed well on its commercial strategy, showing growth with selected industry verticals that are strategic priorities such as Life Sciences.
Full year 2019 revenue fell 2.5% and remained flat on a constant currency basis. 2019 was a challenging year for the freight forwarding industry as a whole. According to IATA, 2019 witnessed the lowest air freight volumes since 2009. Full Year Air and Ocean Freight volumes decreased by 6.8% and 0.6% vs. 2018 driven by declining market demand, but were offset by higher yields.
GIL fourth quarter EBITDA was KD 10.9 million, a 3.8% decline from same period in 2018. The decrease was due to higher operating expenses related to new Contract Logistics facilities, as well as investments in digital transformation.
GIL’s Q4 net revenue was KD 70 million, a 3.3% increase vs. Q4 2018. The net revenue increase was driven mainly by growth in Project Logistics, Contract Logistics and Fairs & Events. The overall net revenue margin improved to 24.8% in Q4 2019 vs. 23.1% in Q4 2018. GIL gross revenue was KD 282.7 million, a 3.7% decline (or 2.6% decline on a constant currency basis) from same period in 2018.
Q4 Air Freight volume decreased by 7% (in tonnage) as a result of falling trade volumes and lower demand from customers across industries and geographies. This decline in volume was partially offset by higher yields – expressed as net revenue/ton – which increased 1.1% from same quarter last year.
Ocean Freight TEUs grew 1.9%, but Q4 yields declined 2.2% vs. the same period in 2018. GIL Ocean Freight yields were strongest in the Americas and Europe.
Contract Logistics achieved healthy growth, mainly in the MEA Region (Kuwait, Saudi Arabia) but also in the US, Australasia and Singapore. Project Logistics also showed solid growth in multiple countries.
To strengthen performance and its market differentiation, GIL is implementing its digital strategy. By accelerating its digital transformation, GIL intends to enhance customer and supplier connectivity, create innovative customer solutions, increase the efficiency of its business processes, and enable comprehensive business insight.
Agility’s Infrastructure Companies
(All numbers in this section are pre-IFRS 16)
For full year 2019, Infrastructure group’s EBITDA grew 7.7% and revenue increased 14% and for the last quarter of 2019, EBITDA grew 6.1% and revenue increased 12.8%. Agility is investing in these companies to drive its future growth.
Agility Logistics Parks (ALP) reported 14.9% revenue growth for the year, despite challenging market conditions. In Kuwait, ALP’s focus is driving the efficiency and optimizing the use of existing assets. In Riyadh, Saudi Arabia, ALP completed another 120K sqm of warehousing space in 2019. In Africa, developments in ALP Ghana Phase III and Phase I in both Mozambique and Ivory Coast are approaching completion.
Tristar, a fully integrated liquid logistics company, posted 10.9% revenue growth in 2019, mainly from Fuel and Maritime improvements. Fuel sales increased mainly in Africa and Yemen. Additionally, improvements were realized in the Road Transport and Warehousing (RTW) segment coming from new contracts. Tristar is focusing on a growth strategy across all business segments. New vessels in the Maritime segment are expected in second half of 2020. RTW will continue to ramp-up existing contracts with mining companies and oil majors. In addition, Tristar is investing in new fuel farms in Africa.
National Aviation Services (NAS), the fastest growing aviation services provider in emerging markets, grew revenue by 7.8% in 2019. Favourable market conditions in some markets where NAS operates, coupled with successful turnaround efforts, contributed to this growth. As part of its strategy to expand within the African Continent, NAS is in the process of launching new operations in several new markets.
United Projects for Aviation Services Company (UPAC), a leading real estate and facilities management company operating in Kuwait, posted 2.2% revenue decline in 2019 compared with same period in 2018. UPAC operations are still being affected by the shift in passenger traffic to dedicated airline terminals at Kuwait International Airport. UPAC has been able to partially offset the impact by generating new revenue from car park management operations in (T4) and through the strong performance of its real estate management operations in Kuwait. In Abu Dhabi, construction continues to progress on Reem Mall, a $1.2 billion project.
GCS, Agility’s customs modernization company, posted 8.8% growth in revenue in 2019. This was driven by new brokerage business and other services to support its core business. GCS is implementing initiatives to drive efficiency and improve profitability.
Since 2011, Agility’s EBITDA reported a 14% compounded annual growth rate and generated a 25% IRR to its shareholders.
“We are proud that in addition to our financial performance, we are focused on driving innovation in our industry and enhancing our digital logistics offering. We also continue to make strides in our sustainability goals,” Sultan said.
“We will continue to invest in the business to drive efficiency and seed future growth, even as we confront concerns about downward pressure on global trade volumes, uncertain growth prospects, and ongoing trade frictions between large economies. As always, we thank our employees, our customers, our shareholders and our partners for their engagement and support.”
Financial Performance for the full year 2019
Agility’s net profit stands at KD 86.8 million, a 7% increase from KD 81.1 million in 2018. EPS was 52.1 fils, compared with 48.7 fils a year earlier.
EBITDA was KD 193.1 million, a 24.7% increase from 2018.
Agility’s revenue for 2019 was KD 1,578.6 million, an increase of 1.8% from KD 1,550.2 million in 2018. Net revenue increased by 6.7%.
GIL’s revenue was KD 1,124.6 million, a 2.5% decline from 2018. However on a constant currency basis it remained flat compared to last year.
Infrastructure group revenue was KD 469.7 million, compared with KD 412 million in 2018, a 14% increase from last year.
Agility enjoys a healthy balance sheet with KD 2,082.1 million in assets. Its net debt position was KD 308.2 million as of Dec. 31, 2019. Operating cash flow was KD 151.5 million for full year 2019.
Fears of a global recession and concern over a US – China trade war have not diminished the resilience of the emerging markets in this broad-based logistics survey.
Supply chain executives brace for global slowdown, see threat to emerging markets
BAAR, Switzerland – February 10, 2020 – Supply chain industry executives anticipate a recession in 2020 amid concerns about downward pressure on global trade volumes, uncertain growth prospects, and ongoing friction between the U.S. and China.
Sixty-four percent of industry professionals surveyed for the 2020 Agility Emerging Markets Logistics Index say a recession is likely in the next 12 months. Only 12% of the 780 respondents say a recession is unlikely.
At the same time, most logistics executives say their companies will ride out any turbulence in trade relations between the world’s two largest economies. Seventy-percent of those with operations and investments in China say they will stay put and that their plans are unchanged despite the U.S.-China trade battle.
If they were to move production or sourcing from China, Vietnam and India were respondents’ top choices of places to relocate. They identified rising trade barriers as the factor most likely to hurt emerging markets growth.
The survey is part of the 2020 Agility Emerging Markets Logistics Index, the company’s 11th annual snapshot of industry sentiment and ranking of the world’s 50 leading emerging markets. The Index is a broad gauge of countries’ competitiveness based on their international and domestic logistics strengths and business fundamentals.
“The fears of a recession are not to be taken lightly, especially because of uncertainty about the impact of the coronavirus outbreak,” says Essa Al-Saleh, CEO of Agility Global Logistics. “A positive sign, however, is that a large number of emerging markets economies were able to weather an array of issues — political and social unrest, structural problems, even international sanctions for some — without losing much ground in the past year.”
The Index ranks 50 countries by factors that make them attractive to logistics providers, freight forwarders, shipping lines, air cargo carriers and distributors. In 2020, the top 10 emerging markets are: China, India, United Arab Emirates, Indonesia, Malaysia, Saudi Arabia, Qatar, Mexico, Thailand and Turkey.
China, India and Indonesia rank highest for domestic logistics; China, India and Mexico are top for international logistics; and UAE, Malaysia and Saudi Arabia have the best business fundamentals.
China and India, atop the 2020 rankings based on their size and strength as international and domestic logistics markets, lag behind smaller rivals in business fundamentals, a category that ranks countries based on regulatory environment, credit and debt dynamics, contract enforcement, anti-corruption safeguards, price stability and market access. In that area, China ranks No. 8 and India is No. 18.
The strongest clusters of emerging markets are in the Arabian Gulf and Southeast Asia, thanks to business-friendly conditions and core strengths – the Gulf’s energy wealth and Southeast Asian manufacturing power – that draw logistics activity. In the Gulf, UAE (No. 3), Saudi Arabia (6), Qatar (7), Oman (14), Bahrain (15) and Kuwait (19) rank among the most business-friendly emerging markets. Among ASEAN countries, Indonesia (4), Malaysia (5), Thailand (9), and Vietnam (11) are strong.
Survey respondents see India as the market with greatest potential over China, their second choice. In rankings of best business conditions, several countries are making big moves: Egypt climbs 10 spots to #17; Ukraine jumps 10 spots to #27; Ghana drops 13 spots to #32; and Iran tumbles 12 spots to #38.
Forty-two percent of those surveyed say a prolonged trade standoff between the U.S. and China could benefit Southeast Asian countries, which offer manufacturing and sourcing alternatives to China. This is less, however, than 56% who said last year that Southeast Asia would benefit.
Egypt, despite a brief period of social unrest in 2019, showed significant gains across all indices. On the overall index, Egypt rose six spots to No. 20, while leaping 10 spots on the business fundamentals chart (17), six spots on the domestic opportunities index (13) and jumping five spots on the international opportunities index (23).
The top three factors that keep small businesses out of global trade are trade bureaucracy (17%), government/border instability (14%) and inability to compete with larger rivals (14%), supply chain professionals say in the survey.
Despite the belief a recession is likely, emerging markets still grew an estimated 7% in 2019 and are projected by the IMF to grow 4.4% in 2020. As for what is driving emerging markets growth, 23% say modernization of customs systems and processes, 18% cite increased internet penetration, 16% say modernization of logistics provider systems (WMS, TMS, etc.) and 15% mention increased adoption and modernization of online payment systems.
The top five “megacity” emerging markets logistics hubs are Shanghai, New Delhi, Sao Paulo, Jakarta and Mexico City. Megacities – urban centers with populations of 10 million or more – require vast logistics support to meet domestic needs and engage in trade.
E-commerce fulfillment is the top choice among logistics services expected to maintain or improve growth, well ahead of other services such as domestic last-mile delivery and international express parcel delivery.
The countries with the least potential as logistics markets in 2020 are Syria, Iran, Venezuela, Iraq and Libya, according to the survey.
The rise of digital technology has spurred the growth of ever more complex business ecosystems. As companies partner with competitors and become “frenemies”, traditional boundaries are dissolving and co-opertition is now the new normal.
At an event hosted by Agility alongside the 2020 World Economic Forum Annual Meeting in Davos, Switzerland, global business leaders from diverse industries and roles discussed the ways they are using collaborative and interdependent ecosystems to drive growth at their companies.
Watch the video highlights to discover how Unilever has shifted its mindset from looking to drive savings from its suppliers, to a relationship where they partner for mutual growth. Toshiba’s Chief Digital Officer introduces “ifLink”, a new IoT platform and shares his 3 ‘A’s approach to building a successful platform: affordability, agility and availability. Siemens Nigeria CEO describes how she uses partnerships to expand to local markets and also to drive collective action towards solving issues such as cybercrime and corruption. And PayPal’s SVP core markets explains why whether you build, buy or partner, platform integration is key.
Logistics company donation will support 12,000 refugees, mainly from Myanmar
DAVOS, Switzerland – Jan. 25, 2020 – Agility, a leading global logistics provider, and UNHCR, the UN Refugee Agency, announced a partnership that will strengthen the delivery of essential services to refugees in Malaysia, in particular for vulnerable communities living outside of the country’s capital.
The partnership, announced at the World Economic Forum’s annual meeting at Davos, will establish pilot programs in Johor and Penang, Malaysia. The programs will bring critically needed services to more than 12,000 refugees, including refugee card renewal, access to essential information related to protection, and to receive counseling on available services.
There are some 178,000 refugees registered with UNHCR in Malaysia. The new partnership with Agility will allow UNHCR to further extend support to more than 12,000 refugees, most of them Rohingyas from Myanmar. With local engagement and support, Agility and UNHCR will eliminate the need for vulnerable refugees to travel 300+ kilometers from their homes to Kuala Lumpur to have access to vital services, including refugee card renewal.
Agility CEO Tarek Sultan said: “UNHCR’s services are critical to giving refugees and families a safe place in times of turmoil. These services will help support a stronger sense of community for refugees who have been forced to flee their homes and villages. Agility has long supported UNHCR in the Middle East. We see a need to expand our partnership to help meet the needs of refugees in Malaysia.”
H.R.H. Prince Jaime de Bourbon de Parme, Senior Advisor for Private Sector Partnerships, UNHCR, said, “Agility’s contribution is an important demonstration of solidarity from the Kuwait private sector and one that will improve the safety and well-being of thousands of refugees in Malaysia, a country that has a long history of hosting displaced populations. The global size and scale of displacement requires us to go beyond the business as usual approach and I am confident that Agility’s gesture will inspire the private sector to upscale its support to refugees.”
Globally, Agility helps those affected by natural disasters and other crises by providing supply chain expertise and resources in collaboration with commercial partners, relief groups and international institutions. In the past, Agility has supported UNHCR’s work in the Middle East, by assisting more than 490 Syrian refugee families (close to 2,500 individuals) through fundraising and donations. To find out more about Agility’s sustainability activities, visit http://sustainability.agility.com.
Logistics industry survey finds executives worried despite new trade deal
DAVOS, Switzerland – Jan. 22, 2020 – Just days after the United States and China signed a deal that de-escalates months of back-and-forth trade retaliation, a survey of logistics executives shows that the supply chain industry continues to see a U.S.-China trade war as the top threat to global growth.
In a poll conducted this month by Agility and Transport Intelligence, logistics professionals were surveyed for their thoughts on the global economy and the leading threats to growth in 2020*. The results are part of the annual Agility Emerging Markets Logistics Index, a look at industry sentiment and a ranking of the world’s 50 leading emerging markets.
Twenty-eight percent of respondents see a US-China trade war as the biggest threat to global growth in 2020. US-Iranian tensions were next (19%), followed by a slowdown in the Chinese economy (17%).
What is the biggest threat to global economic growth in 2020?
Three of the leading threats involve China, which highlights its growing importance to the global economy and its ability to affect the fortunes of other countries.
The findings come just a week after Washington and Beijing signed a “phase one” trade deal in which they agreed to halt imposition of new tariffs and restore the flow of many goods and commodities that had been cut off by months of friction.
Only 8% of those surveyed see Brexit as the largest threat in 2020.
*The survey of 330 logistics and supply chain professionals was conducted by global research group Transport Intelligence as part of the 2020 Agility Emerging Markets Logistics Index, which will be released Feb. 10, 2020.
As emergencies around the world displaces populations, the work of international organizations like UNHCR are even more critical. In Malaysia, over 70,000 of the 163,000+ refugees in the country are Rohingya, fleeing persecution. Public-private partnerships are an essential part of improving global governance, and this partnership between UNHCR and Agility creates opportunities for both organizations to collaborate and help solve many difficult challenges faced by refugees in Malaysia.
Small businesses have global potential thanks to e-commerce.
SMEs active on the internet export more than traditional businesses.
Heightened economic activity can especially benefit women.
Globalization got a bad rap in part because, by sweeping aside barriers to the movement of capital, labour and goods, it was perceived to have favoured large corporate interests over all others.
With the unfolding e-commerce revolution, however, a fairer and more inclusive balance is reshaping the global business environment to provide more room and opportunity for small businesses, especially those headed by women.
E-commerce: small business accelerator
Today, small businesses – even one-person “social sellers” – can run as global entities thanks to the growing availability of inexpensive digital tools that allow them to source, ship, deliver, pay, collect and virtualize other key aspects of their operations. The fast-developing e-commerce ecosystem, which includes marketplaces, payment gateways and online logistics, is helping to reduce barriers to trade across borders.
Export participation rates for traditional small businesses (those that typically do not sell online) range between 2-28% in most countries. In contrast, 97% of internet-enabled small businesses export, according to the World Trade Organization.
Why is this a big deal? Because firms participating in global value chains see the strongest gains in productivity, income and quality of employment. A report by the World Bank points out that in developing countries like Ethiopia, firms that are part of global value chains are twice as productive as other firms. And in a broad number of emerging markets, companies that take part in global trade are also more likely to employ more women than others with more traditional, male-dominated business models. Female participation in the labour market, in turn, correlates strongly to societal gains in health, education and overall prosperity.
Put simply, e-commerce is creating economic employment opportunities for new sets of players. Amazon claims that the 1 million small businesses selling on its platform have created 900,000 jobs in the process. Alibaba’s Taobao, one of the largest e-commerce platforms in China, has 3,200 “Taobao villages” in rural areas where a significant percentage of the village is engaged in e-commerce transactions. No wonder then, that some non-governmental organizations and think tanks are touting e-commerce as a model for developing rural Africa.
E-commerce: gender accelerator
When it comes to the gender effect of e-commerce, the research is still emerging and much of the data is localized, but early signs are promising.
The International Trade Centre (ITC) has found that despite having less access to technology, women use digital platforms to their advantage. The head of the ITC says four out of five small businesses engaged in cross-border e-commerce are women-owned, while just one in five firms engaged in offline trade is headed by women.
Meanwhile, there is more and more evidence to show how e-commerce and digital technology are bringing women to the fore of global trade:
A McKinsey study on Indonesia’s e-commerce sector found that women involved in online commerce generate more revenue than that contributed by those in traditional commerce.
Taobao says 50% of its online shops were started by women, whereas only 3.7% of businesses across 67 other industries in China are headed by females, according to the South China Morning Post.
The World Economic Forum says one in three Middle East start-ups is female-founded. And Cairo-based ExpandCart, one of the region’s most successful e-commerce enablement platforms, says that one-third of small businesses on its platform are owned by women.
Cross-border e-commerce is the fastest-growing segment of international trade, so all of this should come as welcome news for globalization’s critics and fans alike. More importantly, it can help change the two-decade narrative about opportunity, inclusion, fairness and balance in the global economy.
Technology and e-commerce are finally democratizing access to the benefits of global trade, helping globalization live up to its original promise of shared prosperity and growth.
Sustainable trade will require the participation of emerging economies.
Finding the right balance between sustainability and economics is crucial.
The technology exists; the real barrier is changing existing mindsets.
Eliminating avoidable emissions is a good starting point.
Getting to zero emissions in logistics is a daunting prospect. Developing zero-emissions fuels and vessels is a critical pathway forward, but this approach has its limitations. In a cost-driven industry, a high-cost, high-risk focus on zero-emissions technology may position many players in emerging markets as part of the dirty past – not the clean future. We need a pragmatic approach that balances high-tech practices with practical ones that offer a role for everyone. We can reduce avoidable emissions through more efficient supply chains, but we need to shift mindsets. That’s where we should take immediate steps while continuing the longer journey.
Without the willing participation of emerging market players, a sustainable future for global trade is at risk.
Trade is growing most and fastest in emerging markets, with the growth of import volumes into Asia’s emerging markets as an example. In 2018, developing economies accounted for 64% of seaborne trade. Engaging this majority of actors is essential for the success of the zero-emissions project.
At the same time, we need to balance the environmental with the social and economic aspects of sustainability. If we require investment in new vessels and bunkering infrastructure to participate in global value chains, some actors will simply not comply, and will be left out – and if a port or a country is left out, so are its small and medium-sized firms (SMEs). For SMEs in these markets, accessing global value chains is critical to achieving stable growth and creating jobs. Keep in mind that SMEs contribute over 50% to GDP and account for two-thirds of formal employment in many countries.
Even in mature markets, the largest industry players can’t agree on who should cover the cost of transitioning to a zero-emissions logistics industry.
Logistics is a highly cost-sensitive industry. Just consider that second-generation biofuels are commercially viable, but not available, because no one is yet willing to consistently pay higher costs to ship goods. When given a chance, only a handful of shippers choose the environment over cost. The industry consensus is that a global fuel levy will be necessary to incorporate the social cost of carbon into fuel costs – but action on this has stalled, because oil companies don’t think it’s fair that they shoulder most of the cost burden, even if that cost is ultimately passed on.
Will emerging markets be able to afford the transition to cleaner fuels?
Transitioning to new fuels will be expensive in the short term. Recent research by the Global Maritime Agency – due to be published in late January – estimates that out of up to $1.9 trillion in investments needed to fully decarbonize maritime shipping by 2050, only 13% is for ships. The remaining 87% would be for land-based infrastructure and production facilities for alternative fuels. The International Renewable Energy Agency says “any shift toward a cleaner sector will require important changes to port terminal infrastructure and operational equipment [see chart below], as well as daily operational practices”.
Consider coastal African countries, or Viet Nam, where newly-discovered offshore oil resources have the potential to drive considerable growth. How should these countries consider these potential assets in a zero-emissions future? Should they not plan to benefit from their natural resources? Should they, instead, invest in port infrastructure for zero-emissions fuels that they will likely need to import? Is that fair?
The industry should mobilize around practical, system-level approaches to address avoidable emissions across supply chains.
No matter what the fuels of the future will be, it will be useful to reduce the total amount of fuel needed to power global trade. More fuel-efficient transport modes, supply-chain optimization and operational efficiency should be prioritized for their emissions-reducing potential. These solutions are not, and cannot be mode-specific, but must address global logistics as a system.
To address avoidable emissions, data-informed optimization across modes and supply chains deserves more industry attention.
Avoidable emissions are embedded into inefficiencies at every step along the supply chain. It’s tough to measure their contribution to overall transport emissions, but the share could be substantial. Consider that in many markets, sometimes more than 40% of trucks on the road at any given time are moving empty, and a much greater percentage are underutilized.
Beyond individual shippers or supply chains, optimization across the logistics system makes better use of transport assets across a country’s distribution network, or back and forth along a trade lane. On a global scale, the containerization of US agricultural exports addressed the asymmetry of cargo flows between the US and China. Digital freight booking platforms, like Cargo X in Brazil, can drastically improve asset utilization, reducing trips, kilometres, costs and emissions. In the US, when Ocean Spray and Tropicana, two fruit juice competitors, collaborated to enable sharing of empty refrigerated rail boxcars, both parties reduced transport costs, and Ocean Spray’s emissions were reduced by one-third.
The barrier isn’t tech. It’s mindset. How do we shift it?
Logistics is full of myriad actors with high levels of interdependence and competing interests, and this drives down costs. Fierce competition leads to such low prices in road freight that often it is cheaper to send a dedicated truck less than half full than it is to use a small freight carrier. From this baseline, how can industry players work together – in ways that preserve competition – for incremental environmental gains?
First, emissions should be a measured key performance indicator against which supply chain performance is evaluated. For example, some shippers have instituted an internal carbon price. Other sustainability performance rankings can help, both internally and for third-party service providers, but we must be careful to avoid the proliferation of varying questionnaires, and include incentives to improve environmental performance. Immediate exclusion of carriers that can’t meet high environmental standards won’t shift behaviour, and may bankrupt smaller players.
Second, we need to amplify the message about the business case. Logistics services providers can use their visibility across supply chains to identify collaboration opportunities and estimate cost and emissions savings, so shippers can visualize lost value. We all must be retrained and our data systems redesigned to actively look for these opportunities. When collaboration is successful, we need to transparently communicate these stories to clarify what’s possible and set higher environmental aspirations.
Reducing avoidable emissions alone won’t get us to zero. But this approach is open to everyone everywhere, starting now, and it can save fossil fuels in the present, and open the door to zero-carbon fuels in the future.
[contact-form-7 id="3938" title="01 - Main inquiry form"]