Challenges and solutions: The future of logistics

An apt choice to host the 2010 World Expo, Shanghai's hi-tech but overcrowded cityscape offers competing visions of what is to come. By 2030, about 60 percent of urban dwellers will live in "megacities" like Shanghai with 10-million-plus people, with all the environmental and logistical implications.

"Road of solutions"

At the Expo, the Deutsche Post DHL-sponsored Urban Planet pavilion drove home the stark message that urban sprawl and global warming are realities that must be faced up to in the present rather than handed down to our children. But through sound, light, and vision someone who took a tour around the exhibit found himself walking not only the "road of crisis" but the "road of solutions" too. We can save the future, said the Expo, but we must start the struggle now.

On October 14, 2010, logistics leaders and experts from various other professions convened from around the globe to discuss the challenges of megacity development and climate change during the Deutsche Post DHL Delphi Dialog. The debate coincided with the publication of Deutsche Post DHL's latest report: "Delivering Tomorrow: Towards Sustainable Logistics."

Emissions efficiency: "A win-win situation"

During the two-part debate at the Hyatt Hotel on Shanghai's historic riverfront "the Bund", the world's top experts presented their ideas on how to keep life going in the future's megacities and offered some blue-sky thinking on green logistics.

As a former advisor to the Obama administration and now a Visiting Fellow at the Peterson Institute for International Economics in Washington, USA, Delphi speaker Trevor Houser knows the difficulties of brokering political agreement on climate change at first hand. Currently Director of Energy and Climate Practice at research consultancy the Rhodium Group, during his keynote address Houser recalled the wrangling at Copenhagen in 2009 and examined alternative strategies where the private sector was at the heart of "practical solutions."

None of those solutions were easy, agreed panelists drawn from Deutsche Post DHL and academia during the ensuing dialog on "The Environmental Responsibility of Global Players." Carbon taxes or oil price hikes are not only unfair but could stall economic development for those who needed it most. Informing people about the true "carbon price" of their products is a deceptively complex undertaking, but could put consumers back in control where governments had failed.

Sustainability is already an integral part of DPDHL's strategy

"Logistics companies themselves have a particular responsibility to the environment," asserted Deutsche Post DHL Chief Executive Officer Frank Appel, the man in charge of the greenest logistics company in the world, according to a recently published study by the Carbon Disclosure Project. And Deutsche Post DHL has long since reacted to the challenge of climate change: Sustainability is already an integral part of DPDHL's strategy. 

On the other hand environmental awareness is stimulating a new business paradigm, Appel said: "The fastest growing product we have is our carbon-neutral GoGreen product, which is shipping five times more than the year before. That is encouraging, and customers are willing to pay for it." "Our initiative to put our own targets out and put products into the market like GoGreen is pushing our competitors to follow," he added. "It's a huge benefit for us as well. If we are smarter in using our fuel, it saves a lot of cost. It's a win-win situation."

Who is responsible for the carbon that is emitted for a specific product?

Appel expounded a vision of the world's major companies united to beat climate change, engaging their workforces of millions to "make a change in their private lives", too. Robert de Souza, Executive Director of The Logistics Institute in Singapore, added that not only competitors need to share their ideas to improve the overall impact of business on climate change. Thinking forward, he envisioned a greater coalition of industry, government, and academia to reach really sustainable solutions.

But one question remains to be answered in advance, Kelvin Leung, CEO of DHL Global Forwarding North Asia Pacific, mentioned: "The manufacturer, the shipping company or the consumer: Who is responsible for the carbon that is emitted for a specific product? And who has to pay for it?" For Kelvin Leung this shows that carbon accounting and carbon allocation still needs to be professionalized. 

For Frank Appel this does not mean that mitigating climate change has to be a negative experience for investors. "I see global warming not only as a threat but as a business challenge," Appel stated. "We can turn it around to a business advantage - let's make green products, reduce our footprint and become more competitive - and an even more attractive investment."

A breath of fresh air for choking cities

"The carbon footprint of the city of Tokyo alone is 1.5 times as high as that of the rest of Japan", Johannes Dell, urban planner and partner of Albert Speer & Partner, the renowned architect's office in Frankfurt, Germany, stated in his speech during the panel discussion on "Challenges for City Logistics in Megacities". One of the main reasons for that is the overwhelming congestion which is choking modern megacities. The fact that average London traffic had recently been slower than horse-drawn carts indicated "just how strangled our cities have become" explained Paul Graham, CEO of DHL Supply Chain Asia Pacific.

During his speech he highlighted some real-life solutions, such as DHL's consolidation sites at Heathrow airport and the city of Bristol in the UK.  Both reduced the need for constant ad-hoc deliveries, preventing overload on existing infrastructure and reducing carbon emissions too.

Meeting ever-rising customer expectations of logistics companies in the ever-more congested megacities would require similarly innovative new thinking, and could change the complexion of a highly competitive industry. But beside being a great challenge, this also has a great upside potential. Or, as Petra Kiwitt, Executive Vice President of DHL Solutions & Innovations at Deutsche Post DHL noted: "As a logistics company we see a lot of opportunities in megacities."

Making use of public transport for smaller deliveries

Technology would play a critical role, Paul Graham and Petra Kiwitt told the guests. Night deliveries with electric trucks could cut down on daytime traffic, while reducing emissions too. Smart trucks with intelligent systems to plan their way around the jams were another. Making use of public transport for smaller deliveries could alleviate the pressure on road networks. And "Bring Buddies," ordinary people coordinated by social media and mobile communications to play a part in the logistics chain, could change logistics in the same way that "citizen journalists" are revolutionizing the media.

One of the main reasons for today's enormous challenges in megacities lies in the fact that they mainly work with a historically grown infrastructure, Johannes Dell explained. This focuses on the challenge of individual traffic. While most megacities do not have a clear concept of how to cope with the fact of growing individual traffic, Prof. Dr. Yeung Yue-Man, Emeritus Professor of Geography, Chinese University of Hong Kong and an expert on urban development showed that Hong Kong is a positive example on how to deal with the situation: "No other megacity in the world has a public transportation system that is so well planned, efficient, and affordable."

And it is not only used for commuters but also for logistics as well: DHL couriers in Hong Kong use the subway as a fast alternative for delivering on schedule. And that is also a clever one, because: "People have very little patience with us. We are Express - and so we need to deliver everything in express mode", Jerry Hsu, President DHL Express Greater China, put it bluntly.