Country focus: Sustainable trade in Germany
Global business giants UPS, DB Schenker, and Robert Bosch discuss their sustainable approaches to business in Germany and worldwide.
The German economy is the world’s fourth largest and accounts for more than one-fifth of the European Union’s gross domestic product (GDP). In Annual Economic Report published by the German Federal Ministry for Economic Affairs and Ministry for 2018, the German economy is experiencing a robust cyclical expansion. GDP grew by 2.2% (price-adjusted) in 2017, with the federal government expecting a further rise of 2.4% in 2018.
According to a recent report by Research and Markets, titled Transportation and Logistics Market Insights– Germany, Germany’s logistics market is projected to contribute 21% of the national growth by 2025, when compared to its current 8%, with intralogistics being a key driver. Innovative logistics solutions, automation in material handling, electromobility, digitalisation of chemicals logistics, yard management, and real-time control at refineries are some of the key transformational trends shaping the German logistics market.
Logistics providers for FMCG goods are expanding warehouse space to accommodate just-in-time deliveries. Investments in technologies will have a significant impact on logistics. Truck platooning, semi-autonomous trucks, and digitised cranes will transform freight transport.
“Digitalisation is revolutionising our economy and the world of work,” remarks Brigitte Zypries, Federal Minister for Economic Affairs and Energy, in the annual report. “Efficient, nation-wide infrastructure is required if use is to be made of the opportunities offered by digitalisation.”
UPS is a global leader in logistics, offering a broad range of solutions, including the transportation of packages and freight, the facilitation of international trade, and the deployment of advanced technology to more efficiently manage the world of business. With its wide array of services to more than 220 countries and territories, UPS delivers 20 million packages every day. Global revenue for 2017 was $66bn on a total annual volume of 5.1 billion packages and documents.
UPS first entered Europe in 1976, when it established domestic operations in Germany. UPS has since developed a comprehensive European service portfolio, combining local expertise in each market with UPS’ international strength and high-quality standards.
“Germany’s central geographical position within Europe and its highly developed industries make it a force in European and global trade and one of the key markets for UPS,” says Thomas Zeller, marketing director for UPS Germany. “Germany was UPS’ first market outside North America. We began offering domestic small package service there in 1976. Today, Germany is UPS’ largest single market outside of the US and accounts for a significant portion of our volume in Europe.”
In part due to Germany’s strong exporting economy, UPS has experienced significant growth here and in 2017, growing export volume in Germany by more than 15% compared to the previous year.
Through the European air hub situated at the Cologne/Bonn airport, Germany also serves as the location from where UPS is able to connect Europe to Europe, and Europe to the rest of the world.
Originally established in Stuttgart in 1886 by Robert Bosch, the Bosch Group is a leading global supplier of technology and services, employing roughly 400,500 associates worldwide. Their operations are divided into four key business sectors: mobility solutions, industrial technology, consumer goods, and energy and building technology.
“For years, we have known Germany – our home country – to have a recognised past in terms of trade, culture and history,” comments Volker Bischoff, general manager and vice president, Robert Bosch Middle East. “Germany is known for aspects such as efficiency and effectiveness. The fact that Germany is the largest manufacturing economy in Europe, and one of the largest in the world, presents us with great opportunities.
“The country is also responsible for approximately one quarter of all European B2C ecommerce turnover. With offices in more than 80 locations across the country, we are able to ensure our work is of the highest degree, creating products and services that spark our enthusiasm.”
The sustainability factor
Supply chain sustainability is increasingly recognised as a key component of corporate responsibility. Global companies are today turning to sustainable business practices, especially when it comes to the supply chain.
“We have the general issue of global (out-)sourcing, which shifts service obligations to external providers,” says Andrea Dorothea Schoen, senior manager Carbon Controlling and Consulting, DB Schenker in Essen. “However, responsibility cannot be shifted in the same way as the sourcing company is still the beneficiary of the purchased service. The public and the capital market is sensitive to companies’ responsible behaviour, making sustainability a core subject of business success in terms of risks and opportunities.”
Schoen highlights that Schenker Germany consults its customers on climate issues and helps them to reduce their carbon footprint. Currently, a central sustainability program is on the verge to be rolled out to which Schenker Germany will also contribute significantly. Further, DB Schenker recently announced a truck platooning project that they’ve launched with MAN Truck & Bus. Two connected trucks were tested on the A9 freeway between Nuremberg and Munich. While recent months have been occupied with producing the test vehicles and equipping them with the additional technical components required for deploying platooning, the focus is now on intensive training of the drivers for their tasks in the project and ultimately on facilitating integration with DB Schenker’s logistics operations. This will also be the first time that professional truck drivers from DB Schenker will replace test drivers at the wheel. To begin with, the trucks will be operating without any cargo to investigate driving conditions in the daily flow of traffic, and to train the drivers involved in the project in operating the vehicles. The drivers will receive intensive theoretical and practical training from the specialists at MAN ProfiDrive and will practice on a driving simulator.
Once the intensive training phase has been completed, there will be weekly, and then daily test runs. These will be extended to include regular operations with actual cargo during the course of 2018. The platoons will then be deployed up to three times daily between DB Schenker logistics centers in Munich and Nuremberg.
“It is supposed to show the fuel reduction impact but even more so the innovative milestone of this new technology,” adds Schoen.
“The public and the capital market is sensitive to companies’ responsible behaviour, making sustainability a core subject of business success in terms of risks and opportunities.”
It has become obvious that the need of the hour is to do your bit for the planet, and more and more companies are extending their commitment to responsible business practices to their value chains, from subsidiaries to suppliers.
Zeller explains how UPS believes that as a global logistics provider, they have a responsibility to conduct business and operations with consideration for their environmental impact.
“What we’re seeing is that everyone up and down today’s supply chain, whether they are customers or providers, is recognising the importance of sustainability,” remarks Zeller. “Players in our industry need to develop and implement business strategies that meet the needs of their enterprise and their stakeholders, while protecting and enhancing the human and natural resources that will be needed in the future. And this should happen not just to remain competitive, but also because it’s the right thing to do. That’s sustainability.”
Zeller adds that since their operations depend on vehicles and aircraft to a considerable extent, their focus is strongly on making the transportation network as efficient and environmentally sound as possible.
One of the key trends in today’s supply chain is the phenomenal growth in e-commerce around the world. E-commerce shipments today already comprise around 50% of UPS’ global package volume, with peaks in business-to-consumer deliveries during major holiday seasons like Christmas and Thanksgiving (in the US). This is a great opportunity, observes Zeller, but it is also a challenge for the transportation and logistics industry to make e-commerce shipping more sustainable.
“This (sustainable practices) should happen not just to remain competitive, but also because it’s the right thing to do. That’s sustainability.”
“The increasing percentage of residential deliveries means that fewer packages per stop are being delivered, and that can mean more fuel and emissions per package delivered. To address this challenge, we continue to develop new ideas to make our operations more efficient, reduce our kilometers driven and create customer solutions to ship more with less impact.” Some of UPS’ key solutions include UPS Access Point network, which provides a consolidated delivery point – such as a nearby convenience store or gas station – for multiple customers in the same neighborhood. Currently UPS has more than 3,000 such points in Germany and 27,000 such locations across Europe and North America. This service aims to address the challenge of urban logistics by making deliveries more efficient and reducing the need for a driver to make return visits when customers are not at home. By consolidating a number of packages and delivering them to one location, drivers reduce the number of return deliveries and the number of stops they make during their rounds. A study done by the Flanders Institute for Logistics has shown that the collection point model is more sustainable than the home delivery model and can reduce carbon emissions of a package by 60% if consumers retrieve their parcel by car, and by 81% if they retrieve their parcel on foot.
ORION system is another solution in deployment by UPS, currently being used in operations across the US, and is a result of a technology that improves productivity without eliminating jobs.
“Reducing kilometers driven was the primary goal,” explains Zeller. “ORION uses telematics and advanced algorithms to gather and calculate countless amounts of data to provide UPS drivers with optimised routes.”
The technology helps UPS drivers to determine the optimal way to deliver and pick-up packages within a set of stops defined by start time, commit time, pick-up windows, and special customer needs. ORION enables UPS to reduce kilometers driven by more than 160 million kilometers annually and a reduction of just one mile per driver per day over one year can save UPS up to $50mn.
“Our operations in Germany have actually been an early testing ground for many of our sustainable technological solutions in recent years,” notes Zeller. “One of our greatest success stories has been combining human and electric power by deploying tricycles (conventional and electrically assisted Cargo Cruisers and Cyclo Cargos) in several cities in Germany, following the original pilot project in Hamburg in 2012, and we’re now rolling out this concept in other European cities. These tricycles deliver from a container, which is placed at a pre-agreed location in the middle of the delivery area in the city. As such, they replace a local P80 delivery truck, reduce congestion, and they can even operate in pedestrianised zones.”
UPS has also been converting end-of-life diesel vehicles into electric trucks for deployment in Germany and other European cities. UPS currently uses over 70 fully-electric vehicles in Germany. These are predominantly 7.5 tonne category vehicles that have been converted from diesel to fully-electric. And this conversion is done in Germany.
Electromobility and alternative technology vehicles are a priority for UPS. With over 9,000 vehicles worldwide operating using alternative propulsion methods, UPS possesses one of the largest private and most diverse alternative fuel and advanced technology fleets in the entire logistics industry.
The Bosch Group’s strategic objective, comments Bischoff, is to create solutions for a connected life, and to improve the quality of life worldwide with its products and services.
“Our “invented for life” ethos not only applies to our core business, but also extends to the topic of sustainability. We at Bosch aim to make energy use more efficient, mobility even safer and more economical, while being eco-friendly.”
For Bosch, sustainability includes social-wellbeing, and in line with the United Nations’ Sustainable Development Goals, they pursue a broad range of these 17 global goals.
“For the Bosch Group, sustainability means securing the company’s long-term success while at the same time protecting the natural environment for future generations,” continues Bischoff. “In Germany, we are committed to sustainable mobility, particularly within the mobility solutions business sector, as we pursue the vision of low-carbon forms of mobility that is independent of long-term dependence on fossil fuels.”
Bosch is pushing to minimise the environmental impact of both product development and manufacturing activities and are continuously improving environmental protection. For this purpose, Bosch introduced an environmental management system in accordance with ISO 14001 at all 242 locations worldwide.
Regular audits ensure that the environmental protection measures implemented at the locations are effective and help to achieve the defined targets: By 2020, Bosch aims to reduce their CO₂ emissions (relative to added-value) by 35% compared to 2007.
As part of the Bosch eXchange program, used car components are industrially remanufactured. Reconditioned starters, alternators, and ignition distributors, for example, are used in vehicle repairs, and are up to 40% cheaper than the equivalent new parts. Around 2.5 million components are re-installed every year. Compared to production of new parts, this generates 23,000 tonnes less CO₂.
The machine tools used in industrial production at Bosch are equipped with variable-speed pump drives. Unlike standard pumps, these recognise part load operations and break times, for example, and adapt their speeds flexibly to suit the current requirements. This saves drive power from the outset, and also reduces heat build-up— many machines no longer require their own cooling system.
Another of their own developments is the IndraLogic PLC lighting system. This ensures that the light in the production halls regulates itself — dependent on daylight and whether there are people present. This innovative system reduces the energy required for lighting by up to 60%.
UPS has a long history with electric vehicles, having first introduced them into its fleet in the US in the 1930s, and reintroduced modern EVs in 2001. Currently, UPS has more than 300 electric vehicles deployed in Europe and the US, and nearly 700 hybrid electric vehicles.
Recently, UPS announced plans to deploy 50 plug-in electric delivery trucks in the US that will be comparable in acquisition cost to conventional-fueled trucks – an industry first that is breaking a key barrier to large scale fleet adoption. The company is collaborating with Workhorse Group, Inc. to design the vehicles from the ground up, with zero tailpipe emissions. And, last December, UPS ordered 125 new fully-electric semi-tractors to be built by Tesla in 2019, the largest pre-order to date.
Since 2009, UPS has invested over $750mn in alternative fuel and advanced technology vehicles. And, in 2016, a full year earlier than expected, UPS achieved its self-set goal of covering 1.6 billion kilometers (1 billion miles) using its fleet of alternative fuel and advanced technology vehicles.