Benoit Montreuil

on .

INTERVIEW WITH Benoit Montreuil 
(Director of the Physical Internet Center at the Georgia Institute of Technologyhttps://www.scl.gatech.edu/research/physical-internet, http://physicalinternetinitiative.org/index.php)

Premise

The growing human ecological footprint and the no longer undeniable Climate Change are pushing humankind to rethink its activities on Earth. With the increasing globalization, logistics is becoming an ever more important factor in the economic and social development of every country. However, logistics activities are also environmentally impacting and are characterized by some inefficiencies. Moving from a point-to-point transportation model to a more segmented one, and from a closed supply system to an open supply network are key factors to make logistics more sustainable (environmentally, economically and socially). Can Logistics become greener? How can we achieve smart logistics thanks to the help of new technologies? Can the Physical Internet make logistics more sustainable? Prof. Benoit Montreuil, founder and director of Georgia Tech’s Physical Internet Center and expert on sustainable logistics, answered to these and other questions.

Benoit Montreuil: He is Professor and Coca-Cola Material Handling & Distribution Chair in the Stewart School of Industrial & Systems Engineering at Georgia Tech where he is Director of the Physical Internet Center and a leader of the Supply Chain & Logistics Institute. He leads the International Physical Internet Initiative, engaging academic, industry and government leaders worldwide into research and innovation projects on smart, hyperconnected and sustainable logistics, supply chains, transportation, businesses and regions. His main research interests generically lie in developing concepts, methodologies and technologies for creating, optimizing, transforming and enabling businesses, supply chains and value creation networks to thrive in a fast evolving hyperconnected world. Dr. Montreuil is a world-renowned scientist who has introduced in collaboration with students and colleagues an imposing set of paradigm-challenging leading edge contributions through nearly four decades of research, shared through 250 scientific publications, 250 scientific communications and numerous keynote speeches at international scientific and professional conferences. He has extensive advisory, entrepreneurial and collaborative research experience with industry and government. Through his career, he has received numerous awards, recently including DC Velocity’s Rainmaker of the Year, THE Physical Internet Pioneer Award for his outstanding and inspiring vision, and the Pythagore Award for the excellence of his science & engineering career from his alma mater U.Q.T.R.

 


INTERVIEW - (September 2015)
The interview was made in September 2015 and published in February 2016 
Subject
: Sustainable Logistics and the Phisical Internet


 
 

Highlights 

  • The way logistics contributes to pollution varies from country to country, depending on too many factors: the kind of industry, the kind of trains, lorries, ships used to transport things, the entire country’s specific logistics system.
  • In absolute terms, maritime transport contributes more to global greenhouse emissions….However, to be true, cargo shipping is the cleanest mode of transportation: per every ton of goods shipped one mile, in comparison to cargo ships, freight trains produce 1.6 times as much emission; trucks 10 times and international air freight 47 times as much emission..
  • Sustainable logistics means above all fighting “inefficiencies”…
  • Inefficiencies are not just confined to logistics companies; they hit the whole supply chain system. Now each actor involved in the supply chain (being it a supplier, a manufacturer, a shipping company, a distribution center) mostly works in isolation, with its own rules, standards and logic. That causes a lot of inefficiencies….
  • Most of us think that the term ‘Green Logistics’ and ‘Sustainable Logistics’ have the same meaning. That is not necessary true! logistics is sustainable when it is environmentally, social and economically sustainable.
  • The Big Change I’m calling for is just moving from a ‘closed supply system’ to an ‘open supply network’ and the Physical Internet will enable such a change…
  • Green vehicles are surely an important factor in reducing greenhouse emissions, but, at least for the moment, the priority in logistics activities is the organization of the system that exploits on a massive scale the physical, digital, operational, business and legal interconnectivity to increase efficiencies in the supply chain..
 
 

Question 1: Welcome Benoit Montreuil and thank you very much for being with us. You’re an expert on sustainable logistics. Before talking about it, let’s make clear some basics about Logistics. In laymen terms, what is logistics about?

Answer

We all know that the places where goods are produced (places of production) and those where they are used or consumed (places of consumption) are not the same. So there’s the need to transport and deploy these goods (and with the emergence of globalization such a need has become ever more impelling). That said, logistics is what satisfy this need! The term logistics includes all the infrastructures (roads, railways, ports, dry ports and so on) and the operations (transportation and storage of goods) that allow materials and finished products to get to their destination (being it factories or end-consumers).

How much does logistics contribute to pollution?

Now it is clear that logistics includes a series of activities (including storage and transportation) that contribute very much to the consumption of energy and to the emission of greenhouse gases: it is estimated that logistics makes up for 5.5% of total manmade global greenhouse emissions (Source: World Economic Forum, 2009).  At any rate the way logistics contributes to pollution varies from country to country, depending on too many factors: the kind of industry, the kind of trains, lorries, ships used to transport things, the entire country’s specific logistics system.

 

Question 2: So most logistics activities are related to the transportation of products and materials, on the roads, by the railways, through the air and over the seas. Which of these four modes of transport covers the biggest share of logistics?

Answer

Trucking is the mode of transport people are most familiar with, being the most used land-based mode. However, the majority of products are transported by ‘ships,’ in containers. To give you an idea of what we are talking about, more than 80% of world trade is carried by sea. So, what we call Maritime industry makes up a significant part of the logistics activities. In fact, it is vessels that represent by far the most efficient way of transporting large amounts of goods over long distances.

Which of these modes of transports contribute much to pollution?

It is clear that, due to its capacity and its major share of logistics activities, in absolute terms, maritime transport contributes more to global greenhouse emissions, followed by trucks and finally by trains. However, to be true, cargo shipping is the cleanest mode of transportation: per every ton of goods shipped one mile, in comparison to cargo ships, freight trains produce 1.6 times as much emission; trucks 10 times as much emission; and international air freight 47 times as much emission. http://news.mit.edu/2010/corporate-greenhouse-gas-1108

 

Question 3: Let’s move on to the topic of our discussion: ‘sustainable logistics.’ Firstly let’s talk about inefficiencies: what are the main inefficiencies in the global logistics system?

Answer

Well, let me say that I carried out a deep study on this issue, published in Logistics Research in 2011.What did emerge from it? First: inefficiencies are found in almost all the activities of the logistics system; no mode of transport (neither ocean freight, nor road freight nor rail freight) escapes from them. Second: inefficiencies are not just confined to logistics companies; they hit the whole supply chain system. Now each actor involved in the supply chain (being it a supplier, a manufacturer, a shipping company, a distribution center) mostly works in isolation, with its own rules, standards and logic. Improving the flow of information and standards connecting all such operators can be a big step towards sustainable logistics. So a “big change” is required to make logistics sustainable, and now we have all the tools to make it a reality.

 

Question 4: Before explaining in what consists such a ‘big change,’ let’s make clearer the concept of ‘sustainable logistics.’ What does sustainable logistics mean? Why ever more logistics companies are taking into account the issue of sustainability?  Is it a consequence of ecological willing, more restrictive environmental rules or is it a question of competitiveness?

Answer

First of all let me make clear a common misunderstanding: most of us think that the term ‘Green Logistics’ and ‘Sustainable Logistics’ have the same meaning. That is not necessary true! logistics is sustainable when it is environmentally, social and economically sustainable. And all these three elements are strongly connected.

1) Economic sustainability of logistics: most statistics prove that Logistics represents a very important element of economy: it makes up between 8% and 22% of the Gross Domestic Product (GDP) in many countries around the world (and this share is increasing ever more). But it’s not just a question of GDP share! The way logistics is managed strongly affects the competitiveness of companies, the overall productivity of a nation, and consumer prices. All that means that logistics is a strategic sector in the economy of countries.

2) Environmental sustainability of logistics. Logistics activities use resources and produce greenhouse emissions; they make a pressure on the environment, but most of the companies are not sufficiently sensitive to this issue and few improvements have been made so far. Now let me say that being ‘greener’ is not just an ecological matter, it is an economic and social matter too: when a company becomes more efficient and reduces its energy consumption, its costs of production decreases too, while its punctuality increases; the company become more competitive and consumers are quite satisfied: the overall wellness increases.

 3) Social sustainability of logistics. Here there are three main aspects to take into consideration: a) occupation, b) good working conditions and c) good services. Starting with occupation, many people are employed in the logistics system, but many of them, especially those working in the road transportation (e.g. truck drivers) and warehousing sectors, suffer from poor working conditions. Here improvements must be done in ensuring a stable occupation base, as well as better working conditions.  Social sustainability is not limited to the matter of occupation: the quality of logistics services is important too.  Nowadays, more than in the past, people are asking for better services at lower prices to both e-commerce and traditional retailers deliveries. Improving delivery services, reducing the time and all the inefficiencies in the process of delivery of goods and services will benefit the overall wellness of the society. With such improvements, less material and energy are wasted: social sustainability also means environmental sustainability.

 

Question 5: Ok. Now it’s time to talk about the ‘Big Change’ you mentioned before.  In what consists such a Big Change in the logistics system?

Answer

In many of my articles I focus on the idea of reaching an ‘open supply network.’ The Big Change I’m calling for is just moving from a ‘closed supply system’ (where each operator works according to its own logic, with a low collaborative culture and a limited number of vertical and horizontal partnerships) to an ‘open supply network’ (where all operators openly share assets and consolidate flows using shared digital platforms, protocols, logistics facilities and transportation means).

 

Question 6: So a new culture in the logistics model is needed (from closeness to openness). Could you explain more in detail in what consist such an ‘open supply network?’

Answer

Such an open supply network is built upon a global, highly efficient and strongly distributed logistics model that we call the Physical Internet. To better understand what that means we need to know precisely where efficiencies can be gained along all the supply chain... Here I will focus on three levels where efficiencies can be reached: transportation, distribution and production.

Let’s start with transportation. Here the question is what is more efficient and faster: the conventional point-to-point and hub-and-spoke transport or a new model based on distributed, multi-segment, intermodal transport? Our observations prove that the latter one pays off... But let’s explain how such a distributed, multi-segment system works: There is a first driver who might deliver the shipment to a hub close by, then pick up another trailer and shipment and head back home. A second driver would pick up the shipment and deliver it to the next hub down the line, whether it be at a truck port, railyard, or airport, until the entire shipment arrived at the destination. It has been calculated (and explained in my numerous articles) that such a system can get the modular containers to the final destination in half the time of the traditional point to point model.

It’s not just a question of transportation. Efficiency gains are also possible in the distribution activities. In the current logistics system, most private companies own one or a few warehouses or distribution centers (rarely more than 20), and independent warehouses or distribution centers usually contract exclusively with one private enterprise. As a result, private firms can rely on just a few warehouses or distribution centers, limiting their operations in storing and moving goods across continents. But what if any enterprise could use the services of many more distributed centers belonging and operated by numerous companies? Their products can be more distributed around the world and dynamically deployed nearer to the market of destination.

Finally, there is production. What if we apply the logic of a widespread distribution system to production? What if a company can rely on a more distributed production system, with specialized factories (able to guarantee quality and standard of production) near the markets of exportation? In such a system, the gain in efficiencies will be even more…The movement of goods is minimized, and so the waste of energy and the emissions of carbon dioxide; the delivery of goods will be more punctual and less will be the loss of goods during the transportation phase.

What are the consequences for logistics companies?

What will happen if such a distributed system, the Physical Internet, is actually realized? What will be the fate of logistics companies? Will they disappear? Nothing of that…It will simply mean a change in their business model and their operative model. Now, many logistics companies (I’m talking for example about those operating in the transportation and warehousing sectors) work according to the point-to-point logic. They need to adapt to the new system and redefine their value added in this new supply chain logic. For example, a transportation service company focused on point-to-point transportation will be challenged to get engaged in inter-hub relay transportation; there will be business opportunities for businesses offering on-demand storage services through a vast network of warehouses and distribution centers; and there will be room for companies offering logistics-focused digital platforms enabling their clients to be highly efficient in exploiting hyperconnected logistics..    

 

Question 7: How can technologies help to achieve a greener and more sustainable Logistics?

Answer

Technologies play a key role in making the ‘big change’ I described above. Technologies can help enabling the Physical Internet in many ways, notably the following three ways:

1)Transportation, handling and storage Technology: here we talk about the potentials of smart modular containers and the handling and storage equipment/devices designed to exploit such containers. Smart clean vehicles are a key part of this evolution: fuel-efficient engines; electrical vehicles; solar energy; design of vehicles. All these innovations (and others) will bring a reduction in the emissions of carbon dioxide. Environmentally talking, logistics becomes more sustainable.

2)Information Technology: over the past decade a new disrupting concept has emerged, something that is going to change profoundly the ways we think our daily and economic activities: ‘the Internet of Things.’ In laymen words the Internet of things means owning ‘connected devices’ and getting ‘real time access to information.’ Now apply this to logistics! Equipped with smart tags and sensors, all the assets used in logistics (trucks, modular containers, lots of goods and so on) can be easily detached at any point of the supply chain, with full visibility and traceability. With the internet of things, the distribution centers can better manage their stock of products and the whole Logistics system will become more hyper-connected and efficient. 

3)3D printing: this is a totally new way of production; with the right materials and appropriate softwares, 3D printing can create specific kinds of products. Over the past decades, 3D printing technology has improved. Ever more sophisticated and cheaper 3D printers have been developed and many of them can have a large use in diverse manufacturing sectors. What if these manufacturing companies decide to establish affiliates in other parts of the world and produce locally (with the aids of 3D printing technologies) their products or semi-products? Again efficiency improvements in the delivery of goods are impressive! 

 

Question 8: Very exhaustive, Prof. Montreuil…But now let’s talk about countries’ progress in logistics. What are the most advanced and efficient countries in the logistics sector?

Answer

Several countries in the world give logistics a strategic role in their policies for social and economic development… The Netherlands has a very efficient logistics system. It has been playing a significant role in world trade for many centuries and has gained extensive experience in transport and logistics. In order to maintain its leadership in the logistics sector, the Netherlands is trying to improve the efficiencies of its services through the implementation of the  National Innovation Programme for logistics aimed at developing the so called ‘Smart Logistics.’ Germany, France and Austria are other European countries which are working a lot on the improvement of logistics. On the other side of the Atlantic, the USA is also investing much in Logistics. In Asia, Singapore is one of the most advanced countries in the sector, while China is investing a lot in order to improve its Logistics infrastructure.

Are these the countries that are also investing more in ‘Green Logistics?’

All the countries mentioned above are working very hard in making Logistics greener. Some are already a step ahead, like northern European countries; other are following. Panama is also making lots of efforts on ‘Green Logistics.’ Much of the initiatives in the greening of shipping operations are taken by ports. An example is given by the port of Los Angeles which has set particularly ambitious targets for cutting ship related emissions; another example comes from Europe: the European Sea Port Organization has published a Green Guide, towards excellence in port environmental management and sustainability. In China, the Green Freight China Initiative was set up in 2012. Green freight initiatives are also under way in India and Mexico.

 

Question 9: Which of the following factors is most important in making logistics greener: green vehicles and infrastructures (fueled by renewable energy) or a more efficient organization of the logistics system?

Answer

Green vehicles are surely an important factor in reducing greenhouse emissions, especially when we talk about people mobility, but when we talk about the logistics system, at least for the moment, green engines and, more generally renewable sources, are not the primary concern. As I said before, the priority here is the organization of the system that exploits on a massive scale the physical, digital, operational, business and legal interconnectivity to increase efficiencies in the supply chain.

 

Question 10: Finally, what are the main troubles and what the main enablers of sustainable logistics?

Answer

Let’s start with the enabling factors. What I wonder is:  what can help reduce the product-miles (the distance between the factory and the consumer of goods)? What can help optimize the distribution of products of a company around the world? What can help reduce the distance between distribution centers and consumers? What can help make transport of goods more efficient? The answer can be found in one thing: ‘Technology improvements…’

Technology improvements is the first enabler of sustainable Logistics. As for production, here 3D printing and advanced communication system can help companies delocalize their production (reducing product-miles). With regards to distribution, again ITC is making long-distance partnership easier to manage (optimizing the distribution of products). Finally, with reference to transportation, the Internet of Things is essential to make transportation of goods more efficient, moving from a point-to-point system to a multi-segment one. Yet innovation must be multifaceted if the Physical Internet is to become a reality: on one side technological, process and infrastructural innovations; on the other side cultural, business model and legal innovation.

The Physical Internet challenges the existing dominant paradigms, mental models and business models. Lack of innovation along these cultural and business model facets can seriously slowdown improvements in the logistics system. For example, several businesses wonder  will an hyper-connected logistics system pay off? Will they benefit from investments in the Physical Internet? How do their have to transform their offers, their value proposition? There are often companies that thrive on the current inefficient state of logistics, so they may want the system to remain the same. That’s the wrong entrepreneurial approach! Companies that are open-minded are more prone to succeed in the future. These are the companies that will match the emerging societal needs, being in the frontline in the development of a more efficient logistics system.  

 

 
 

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