A Clearer Path to LTL Carbon Footprints

Companies have devoted a lot of effort to reducing the carbon footprint of freight transportation as part of their sustainability programs. But one element of logistics operations, less-than-truckload (LTL), has proved challenging because it is difficult to quantify the carbon emissions from LTL transportation. A new white paper based on research carried out by MIT CTL graduate students, describes a model that helps companies to find this missing piece of the puzzle.

The research was sponsored by C. H. Robinson, the multimodal logistics services company that is an MIT CTL corporate partner. The white paper, “A New Model for Estimating Carbon Emissions for LTL Shipments” is published by the company. Two graduates in the Supply Chain Master’s program at MIT CTL carried out the research, which used actual shipment- and route-level data from TMC, a division of C. H. Robinson.

LTL trucks pick up and deliver a wide mix of freight from many shippers, making it difficult to associate the carbon emissions generated by each component shipment in the vehicle. The research also found that traditional methods for calculating LTL emissions are highly inaccurate, and based on flawed assumptions about this type of freight transportation. One of the main reasons why traditional approaches can be way off the mark, is that they do not take account of the pick-up and delivery elements of this mode. The research showed that this segment accounts for roughly 30% of total carbon emissions.

Yet LTL is a $35 billion business in the United States, and is expected to grow in line with the growth of ecommerce and the increasing demand for last-mile delivery services.

The researchers developed a detailed emissions evaluation model for the participating carrier’s existing network, and a simplified model where the characteristics of the LTL network are unknown. The simplified model was effective for estimating total emissions across a portfolio of shipments, but detailed route and carrier information proved to be important when estimating emissions of shipments individually. An easy-to-apply formula that is derived from the simplified model is included in the white paper.

In addition to providing a much improved method for evaluating the carbon footprint of LTL operations, the models also revealed much about the dynamics of this form of transportation.

The models are freely available to every logistics player, and it is hoped that the research provides a platform for further work in this area. At the very least, this important research helps the logistics industry to create a more precise account of LTL carbon emissions. And since a green supply chain tends to be a more efficient supply chain, applying the methodologies can also yield operational benefits.

 

 

 

 

Speed Bumps on the Road to Vehicle Automation

Unmanned cockpits a long way off?

Unmanned cockpits a long way off?

The tragic loss of Germanwings Flight 9525 in the French Alps has galvanized discussions about pilotless aircraft, and whether we have the technology to safely replace humans with computers in the cockpit.

In broad terms the answer is yes, we do have the technology, but of course the route to full automation in passenger planes – and for that matter in cars and trucks too – is far from straight. To find answers we need to look at the journey rather than the destination.

Passenger aircraft are already heavily automated; computers handle even the trickiest segments of a flight when the plane is taking off and landing. In fact, in today’s modern jetliners, a pilot action – such as turning the yoke – simply activates the computerized controls of ailerons, stabilizers, spoilers, slats, rudder, elevators, flaps and thrust, such that the desired maneuver can be executed optimally. Thus, today’s airliners are already drones with an operator on-board rather than on the ground. This computerized environment can be controlled from the ground, or operated in fully automatic mode.

Yet we are a long way from filling the pilot’s seat with an electronic brain for several reasons. First, it seems that it will take a long time for people to trust their life to a pilotless plane. Note that many metro transit systems are basically operating automatically with a driver sitting in the front cabin only to address public concerns. These include Line 2 in Barcelona, the Victoria line in London, San Francisco’s BART system, and many others. Second, people are unpredictable, and in many situations require human supervision from an authority figure who is “in control.” The third issue is the threat of cyber security; what if hackers take control of the big flying drone and crash it, killing everybody on board and people on the ground?

Pilotless cargo jets that do not carry passengers might be more acceptable and could well be a precursor to automated passenger flights – assuming the cyber security issue is solved. The incentive for cargo carriers is the potential for reaping huge cost savings if they can take human pilots out of the cockpit. There are precedents too. The US military successfully tested fully automated, remote controlled helicopters that hauled goods in Afghanistan, for example.

Will road transportation follow a similar trajectory? The situation on terra firma is somewhat different, in that extensive trials of both driverless trucks and cars have already taken place and are ongoing.

One can envision a distant future when all road conveyances are fully automated. The problem is the decades leading up to that scenario, when both manned and unmanned vehicles ply the highways. Automated vehicles will have to allow for the presence of other drivers around them. Conventional vehicles will need to be modified so they can safely share the roads with automated equivalents.

How will both types of vehicles communicate with each other? If a human-operated vehicle is about to change lanes or make an exit, will it be required to transmit these intentions electronically to automated cars and trucks? Also, will a computer be able to read informal road user signals such as flashing headlights or hand waving?

People do dumb things on the roads, to what extent will driverless vehicles be able to detect erratic human behavior and take precautionary action? Consider, for example, behavior at traffic signals. First, we can assume that automated vehicles will not be able to go through a red light since they will be programed to respond to some digital communication at the intersection. However, manually driven cars routinely run red lights, as can be seen in busy cities such as Boston. How will an automated vehicle detect that a driver is about to act irresponsibly?

It seems that in the first phase of implementation when unmanned and manned vehicles share the road, automated conveyances will have to sense the intentions of human drivers. This will delay the arrival of a system-wide automated fleet until manned vehicles are equipped with appropriate communications systems.

Given these demands, it is reasonable to assume that in order to make way for automation, manned cars will require new capabilities and equipment, leading again to the cyber security challenge. The idea of an automated truck being hijacked by hackers does not bear thinking about.

Even if we navigate through the transition period and automated cars and trucks become commonplace, these issues will still have to be addressed. For some individuals driving is an enjoyable pastime, so in all likelihood there still will be vehicles on the road with a human behind the wheel even when these conveyances are seen as eccentric. Also, “smaller” issues like insurance and liability will still have to resolved.

Photo: Wikimedia

This post was published on LinkedIn Influencer

4 Reasons Why 3D Printing is Still a Niche Application

3D printingAlthough 3D printing, often referred to as additive manufacturing (AM), continues to evolve at a rapid pace, the technology’s reach still falls short of the hype that surrounds it. Companies are finding more ways to print components, but mass production applications remain elusive.

In a presentation at MIT CTL’s recent Crossroads 2015 conference, John Hart, Associate Professor of Mechanical Engineering, MIT, explained why 3D printing is still confined to specialized applications.

1. Speed

Machines are becoming more sophisticated, but the 3D printing process is still a laggard in the mass production arena. A basic printer fed by thermoplastics “takes a couple of hours to make something the size of your hand,” says Hart. Even with advanced machines that use technologies such as high-powered lasers “the (production) rate is extremely slow relative to what we get out of conventional technologies.”

2. Materials

The range of materials that AM can use is increasing, but is still relatively limited. Another issue is standards. Sub-par materials tend to fashion sub-par products, and better certification processes are needed to assure quality. There are also a cost and economies of scale implications. “Materials producers want to make large quantities of feedstock and standards maintain quality,” says Hart.

3. Complexity

The process is not as straightforward as is sometimes assumed. “To achieve predictive quality you need to consider lots of things,” Hart says. The type of machine is an obvious factor, but there are less obvious considerations such as the integrity of the material. In a process that uses molten metal powder, for example, companies need to be cautious about using leftover material because the property of the powder changes after being subject to heating. Moreover, changes in the crystalline structure of the metal after it has been melted give the finished object certain important properties. So the material has to be pristine.

In addition, printed objects often require a significant amount of post-production work to remove excess material and improve the finish.

There is a widespread misconception AM offers “complexity for free because you can make any geometry,” says Hart. This is not the case, he argues, because more complex objects require more development work.

4. Qualifying printed parts

“How do you measure the tolerances of complex shapes?” asks Hart. This is particularly important for parts that are used in rigorous applications for long periods, such as aircraft components. Hart points out that 3D printed parts are not used in applications where the items are rotated at high speed, in turbo machinery for instance.

Still, the future looks bright for AM. Work is going on to extract greater productivity from the process. “In the coming years we are going to see the adoption of robotics in AM technology, continuous manufacturing lines and more advanced components, and we will be able to personalize certain products,” says Hart.

 

 

A Disruptive Innovation in the Energy Supply Chain

Professor Don Sadoway at Crossroads 2015

Professor Don Sadoway at Crossroads 2015

What supply chain must meet rare periods of peak demand with no inventory, and operates in an environment where demand equals supply? The answer is the electricity grid, and a new design for an old concept, the battery, could change the way this supply chain operates.

Don Sadoway, John F. Elliot Professor of Materials Chemistry, MIT, described the battery at MIT CTL’s Crossroads 2015 conference, March 24, 2015. Sadoway and his team invented the new battery, which is due to start field trials in Cape Cod, MA, next year.

The reason why a device that is usually perceived as 19th century technology could revolutionize the way electricity is generated and delivered can be summed up in a single word: storage. It’s the missing piece of the energy puzzle, according to Sadoway.

The grid is designed to meet peak loads, which is typically about 40% greater than the average load and occurs around 1% of the time. As Sadoway points out, an airline based on that business model would have 40% of its planes sitting on the ground except for perhaps five days of the year when the whole fleet would fly to handle peak passenger numbers on special holidays.

Renewable energy sources are not viable as a major contributor to the grid because much of their output varies according to the availability of wind, sun, and tidal power. There is no storage to buffer these fluctuations. “Imagine if every time you took a shower it had to be raining because there is no such thing as a water tank,” says Sadoway. “Without storage they don’t contribute to base load, and if they don’t contribute to base load they are not a solution, they are a headache,” he says.

But even the long established grid powered by traditional energy sources is in desperate need of storage solutions, maintains Sadoway. For example in Manhattan energy demand keeps rising. There is enough generating capacity in the New York region, but transmission lines are needed to bring the electricity to Manhattan. Sadoway estimates that Manhattan’s transmission line capacity will be exhausted in 2016/17, and since they cost billions of dollars apiece and permits to build them are very difficult to obtain, it’s unlikely that a new line will be available any time soon. “That means rolling brownouts and blackouts,” he says.

One solution is the liquid metal battery that Sadoway’s new company, Ambri, has pioneered. It consists of three liquid layers: a light metal on the top, molten salt in the middle that acts as the electrolyte, and a dense metal on the bottom. The substances have different densities so do not mix.

The battery goes against convention. Instead of running cold it runs hot, and the units are large not small; a block of 10 is about the size of a shipping container. It is safe because if the shell is punctured the contents immediately become solid. The device has no moving parts, and retains charge much longer than conventional batteries. Sadoway says that a lithium-ion battery retains about 80% of its charge for some two years, whereas the liquid metal battery can maintain this performance for around 305 years!

Moreover, the battery is constructed of abundant materials, which means that production can be scaled up economically, and the device can be built locally with local materials.

When operated in conjunction with renewable energy generators or conventional power plants, the battery provides the storage capacity that both sources of electricity need. Despite much skepticism in the wider energy community, Sadoway believes that his invention is a game changer. “With enough ingenuity the impossible becomes inevitable,” he says.

 

Speed Bumps on the Road to Growth for China’s 3PLs

Logistics in China

Good transportation links a logistics strength in China

China’s logistics industry is gaining in importance and developing rapidly to support the nation’s manufacturing sector. This growth is strongly encouraged by the Chinese government, which aims to develop the country into a premium integrated transportation and logistics hub with supply chain management competence to strengthen China’s position in international trade.

In 2014, researchers from China’s Shanghai Jiao Tong University and Lappeenranta University of Technology in Finland conducted a study to identify global trends in the logistics industry, relevant opportunities and challenges, and how logistics companies can better position themselves in China. Currently, there is very limited knowledge about the Chinese 3PL industry, and the study provides unique insights for foreign companies planning to expand their logistics operations in the country. The study was conducted through focus group interviews with senior executives of leading third party logistics (3PL) companies in China, followed by a telephone survey of 70 3PL companies administered by Shanghai Jiao Tong University researchers.

The key strengths of the logistics industry in China that emerged from the study include good transportation connectivity and new infrastructure. One of the industry’s main weaknesses is a shortage of qualified staff and slow adoption of technologies. The research raises a number of concerns and issues, such as oversupply of warehousing space in China, competition from the influx of foreign 3PL companies into the country, and the impact of regulations on free trade zones, seaports and airports. These findings have important policy implications.

While China has gained a reputation as a cost effective place for manufacturing, logistical costs (about 18% of the cost of sales) in the country are still very high compared to other developed countries. For example, intercity toll charges amount to a high percentage of overall transportation costs.

Information technology (IT) expertise, employing the right people, and developing efficient processes, are ranked highly by the respondents as critical success factors for 3PLs operating in China. Most of the IT used in 3PL operations is quite basic transactional software, and there is little opportunity to integrate with supply chain partners. In order for local 3PLs to compete with their foreign counterparts, they will have to upgrade their existing IT systems and infrastructures to support e-commerce and ERP systems. Furthermore, 3PL processes today are silo-centric owing to current regulative constraints. However, as deregulation continues in the industry, 3PLs will need to open up their processes and integrate them with those of their customers’ and suppliers’.

The shortage of talent will take some time to resolve. According to the China Federation of Logistics and Purchasing, 3PLs suffer acute skill shortages in every operational and functional area. In their survey findings, there was a fundamental mismatch between the demands of employers and what the Chinese education system is turning out, with many more vocational jobs available at the bottom and relatively few jobs for managers.

Despite these problems, the Federation pointed out that every year around 400 universities in China will produce 100,000 graduates studying logistics as a major part of their degree, leading to an abundance of prospective candidates looking to enter the sector at the managerial level. In contrast, only 90,000 graduates with relevant qualifications left 800 secondary vocational colleges to fill the far more numerous lower-level roles. This problem gets worse as more and more parents are looking for their only child to go to university and not college.

Supply chain outsourcing is one of the trends identified during the focus group interview. The objectives are to identify the key improvements that 3PL customers are looking for in this area, and to look at the challenges and problems 3PLs face in implementing supply chain outsourcing.    The pace of outsourcing is increasing according to the respondents, as demand for faster delivery services rises, product life cycles become shorter, and there is increased awareness of supply chain management issues.

Customer service, cost reduction, productivity and efficiency emerged as key features that warrant improvement during the interviews. Cost reduction was ranked as the most important factor and considered critical to gaining competitive advantage. China is perceived to offer the lowest costs in production and thus it is logical for companies to control their inbound and outbound logistics costs. When asked which supply chain activities are essential to achieving greater cost reduction, the most common replies pointed out to inventory management.

When queried about 3PL international network, all the respondents unanimously pointed to the need to expand their network to provide greater and better coverage for their clients. An important observation is that most local 3PL companies in China have adopted different expansion plans. In contrast, none of the local 3PL companies was observed to actively consider mergers and acquisitions as a path for expansion. Their preferred choices are to expand organically initially or to form strategic alliances with local or foreign firms.

This article was written by Dr. Albert Tan, Director of Education, Malaysia Institute for Supply Chain Innovation (MISI). For more information on the research described in this article contact the author who was involved in the study.

 The article is published in the winter 2015 issue of Supply Chain Frontiers. See this issue of the newsletter and subscribe for free here.

Will Reverse Factoring Cause the Next Financial Bubble?

Companies in Europe that are still struggling with the high cost of short-term capital and limited access to bank credit are turning to an unlikely financial ally: their customers.

A financial arrangement called reverse factoring (RF) uses the favorable credit rating of large, solid buyers to secure relatively cheap capital for cash-starved suppliers. The method is seen as a win-win for all the parties involved and is being encouraged by national governments, including the US Administration via President Obama’s SupplierPay initiative that encourages companies to use instruments such as RF to free up capital for suppliers.

However, RF can raise the risk profile of supply chains to dangerous levels, and could even cause a systematic financial failure. Research carried out by the MIT-Zaragoza International Logistics Program, Zaragoza, Spain, analyzes the rationale behind RF and the risks involved.

The suppliers involved in Europe are often small to medium sized companies (SMEs) that continue to suffer from the credit squeeze caused by the 2008 financial crisis. Large corporations with double- or triple-A credit ratings generally have no problem borrowing money. But SMEs in Europe with, say, a BBB rating that need to finance their operations and build working capital still find it difficult to borrow at competitive rates.

The common form of RF, initiated by the buyer, involves a return-oriented approach for a large pool of suppliers. The seller or supplier in need of liquidity sells some of its buyer’s receivables to a financial institution, such as a bank, proposed by the buyer. Since the buyer has an excellent credit rating, the bank offers the supplier competitive priced loans based on the sale of the receivables. In return, the supplier agrees to extend the buyer’s payment terms.

Suppliers win because they have access to affordable capital, and buyers win because they secure extended payment terms (although supplies are paid later, the savings on their borrowings more than compensate for this). The bank wins because the transaction brings new business; banks often on-sell other products to participating suppliers.

Some European governments see RF as a way to overcome the liquidity problems that have plagued their economies, and actively encourage the growth of these programs. Earlier this year President Obama introduced the SupplierPay initiative in the US that gives buyers the option to pay suppliers earlier or use some sort of financial mechanism to ease vendors’ financial issues.

As RF matures it is evolving away from traditional buyer-owned or bank-owned platforms and towards an internet-based service model in the cloud. This new iteration is easily accessible, and reduces the need for software development and lengthy implementations that add cost and time to the process. The introduction of industry standards, and challenging economic conditions, are also driving the growth of RF. Mature programs attract a wider pool of lenders, making them even more attractive.

But the strategy also brings some serious risks that are easily overlooked as a growing number of companies embrace RF. First, the mechanism works well as long as buyers pay on time. It is assumed that large firms with impressive credit ratings are highly unlikely to delay payment or default. However, as the Lehman Brothers debacle in September 2008 underlined, even enterprises that are rated highly by credit agencies can collapse. If a buyer did fail to meet its payment obligations, the financial institution involved would be forced to opt out, and the relatively weak supplier could go under. If RF programs were sufficiently widespread, such a default could trigger a market crisis. As RF vehicles become more established, they could be extended to sub-investment grade buyers, compounding the risk of defaults.

The chances of this happening are increased when banks’ due diligence is not rigorous enough. There is always a temptation to cut corners when a large portfolio of suppliers – each one representing new opportunities for selling financial services – is part of the deal. Moreover, assessing supply chain risk is not a core competency in the banking industry.

Another threat is the level of indebtedness that RF encourages, and the degree of risk this represents for individual companies and economies. Also, using a buyer’s credit rating to secure capital could weaken a supplier’s hand in contract negotiations.

Some of these risks are mitigated by the emergence of networked supply chain financing solutions that connect a wider range of trading partners, increase the efficiency of programs, and improve visibility into transactions. In addition, RF fosters more collaboration between suppliers and buyers, which in turn bolsters competitiveness.

However, as the RF bandwagon continues to gain momentum, companies and governments need to be aware of the downside risks that could ultimately cause another financial meltdown

This article was written by Professor Alejandro Serrano, Professor of Supply Chain Management, MIT-Zaragoza International Logistics Program, and Spyros Lekkakos, PhD candidate, MIT-Zaragoza International Logistics Program. The article is published in the winter 2015 issue of Supply Chain Frontiers. See this issue of the newsletter and subscribe for free here. For more information on the article contact Alejandro Serrano at: aserrano@zlc.edu.es

Lessons to Glean From the West Coast Port Dispute

It is now possible for cybercriminals to take control of a vessel's GPS system

Limited options on the West Coast without new thinking?

It appears that ports on the US West Coast are back in full swing after a protracted labor dispute delayed cargo worth billions of dollars and caused untold reputational damage to the companies caught in the crossfire.

But the implications of this standoff between the International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association go beyond idle ships and stranded freight containers.

On the company side of the divide, the dispute underlines how short termism hobbles the ability of companies to deal with crisis situations.

In 2002, a 10-day lockout on the West Coast cost the US economy an estimated $ 1 billion per day in the first week growing to $2 billion per day in the second week, and required a presidential intervention. Yet with a few notable exceptions, companies forgot or ignored the lessons learned some 13 years ago and were caught flat-footed by the re-run of the contract dispute in 2014/15.

Many enterprises argued that their options were limited given that West Coast ports dominate the container trades in the US. There is some truth to this claim at this time, however, too many companies failed to take precautionary measures and response strategies well ahead of the stoppages. It’s not as if the disruptions were unexpected.

The general lack of preparedness is testament to short-term thinking. Managers move on and take their experiences with them; companies are forced to march to Wall Street’s quarterly drumbeat.

There is a lack of far-sightedness on the labor side too, but here the problem has more to do with tunnel vision than short-term memory.

Today, global supply chains have to be incredibly agile to stay competitive, which means that companies have become adept at reconfiguring their supply and distribution networks in response to changing market conditions. The uncertainty and high costs caused by the labor unpredictability on the Pacific Coast will (admittedly slowly) cause companies to adapt in two major ways.

First, over the next several years, new shipping options will become available to US companies. These include a wider Panama Canal and possibly the construction of a Nicaragua Canal; Mexican port capacity expansions; port capacity expansions on the US East Coast that will reduce the costs of using the Suez Canal; and even the opening up of Arctic sea routes.

The second way in which shippers could adjust to problematic operations on the Pacific Coast is by moving production to the US (re-shoring) or Mexico and other Latin American countries. This strategy enables shippers to bypass the Pacific ports altogether. California farmers might also reduce their export volumes through ports on the West Coast in response to the loss of market share as competition around the world heats up.

To make matters worse, US ports have fallen behind technologically-advanced cargo handling hubs such as Singapore and Rotterdam in the Netherlands, mainly due to union opposition. And no industry has ever been able to win the struggle against technological development and corporate flexibility. The UAW, for example, is now a shadow of its former self owing to the trade union’s over-reaching tactics. The UAW’s actions were based on the belief that production assets are not moveable and thus employers have to succumb to their demands. The result was the creation of multiple manufacturing plants in the US South, dwindling union clout, and bankruptcies at General Motors and Chrysler.

The lesson for Pacific ports is that they can either modernize or continue to fall behind and suffer the same, predictable outcome.

But that vision seems to be lost on the ILWU.

The union clings to outmoded practices and negotiating tactics, while the rest of the industry moves on. To some extent this is a symptom of an aging leadership that is far more concerned with the needs of the current generation of dock workers than future generations.

Some argue that robots will not buy the goods and services that underpin the US economy and create jobs, and this point of view does have merit. As robotics and advanced information technology replace more and more workers, the percentage of the US workforce that is fully employed will continue to shrink. Add to this the fact that the US educational system is falling further behind other systems in the world, and one can see the need to re-think social policies and the distribution of wealth. Companies – shippers in this case – cannot be expected to remedy this situation. This is Government’s job; but that is a much bigger subject that could fill numerous blog posts.

Meanwhile, the longer the ILWU’s myopic view persists, the more isolated it will become. Ultimately, shippers will find other routes and cargo handling options for their goods, eroding the West Coast’s dominant position in the US.

Let’s hope that both sides use this latest episode in their long-running contractual disputes as an opportunity to take the longer view. For example, strong investments in port modernization will make cargo operations more efficient in the short term and could deter alternatives from developing over the long haul.

One thing is for sure, the next time these issues come to a head the world will be a different place.

This post was originally published on the LinkedIn Influencer site.

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