Sustainable every step of the way 

Tight regulation on emissions in Europe means all major carmakers are committed to making only electric vehicles by 2035 but, as Abigail Williams reports, they also have to ensure the inbound supply of parts and materials is as clean as the vehicles being manufactured

In the ongoing quest to improve environmental performance and reduce emissions, a growing number of automotive OEMs are emerging as pioneers in the pursuit of sustainable supply chains.

One of the frontrunners is Volvo Cars, which is looking at a number of areas for improvement, including localisation, transparency and sustainable transport modes. As Sean Bricknell, head of global inbound logistics and packaging at Volvo Cars, explains, the company has the ambition to “build where it sells and source where it builds”. He says the most important way to reduce transport is in the localisation of suppliers.

At this year’s COP26 conference in Glasgow, Scotland, Volvo Cars became the first vehicle maker to announce the introduction of internal carbon pricing. As part of this initiative, Volvo has set its internal carbon price at $110.5 for every tonne of carbon emitted across its complete value chain, a price that Bricknell observes is significantly higher than what is recommended by organisations such as the International Energy Agency (IEA).

“Carbon pricing is applied to the lifecycle of each car model and will be a steering tool to further ensure that we apply the most sustainable solutions from a full value chain perspective, including CO2 emissions from transport, sourcing and manufacturing,” he says.

Digital transparency 
Next to shortening the supply chain, Bricknell says the cubic metre transported is also a key focus area, with the transparency achieved through digitalisation and continuous measurement driving performance to an improved global transport equipment fill rate.

“A key success factor in this work is a close collaboration between our inbound and packaging teams,” says Bricknell.

“End-to-end transparency is also key to achieve optimal value chain efficiency,” he continues. “Our digital business intelligence tools allow us to measure continuously and frequently, using real-time data, which enables faster problem solving and improvement work. The system development started based on our ambition to follow-up on CO2 emissions from transport, and now we are including additional supply chain metrics,” he adds.

As part of a shift to more sustainable transport modes, Volvo has also implemented several solutions to increase the use of rail transport. This includes a cross dock in the Czech Republic, which consolidates goods from suppliers, before sending them by rail through Germany and by short-sea from there to Sweden. The last leg by truck to the Volvo plant in Gothenburg uses 100% renewable fuel. According to Bricknell, the total CO2 reduction compared with a conventional network set-up is more than 50% and the system is also more cost efficient.

Sustainable logistics is central to VW's supply of batteries into the Zwickau EV plant in Germany 

Logistics levers
VW Group is also moving forward with its sustainability strategy. The carmaker has set itself the goal of being CO2-neutral by 2050. According to a spokesperson at Volkswagen Group Logistics, the company’s decarbonisation strategy is based on three key principles: avoiding and reducing CO2, converting energy supplies to renewable energy sources along the entire value chain, and compensating for any unavoidable emissions through certified climate protection projects.

As part of its goTOzero environmental strategy VW is implementing a programme dubbed Zero Impact Logistics. It has developed an action plan for 2025 and beyond based on three important levers: network design and optimisation, digitisation, and environmentally friendly and low-emission technologies.

“Trucks are the largest CO2 emitter in our inbound logistics, which is why we are focusing very strongly on a shift from trucks to rail – if possible, with green electricity,” says the spokesperson. “We are also working together with our service providers on the international expansion of the use of renewable electricity in rail transport, currently only available in Germany, Austria and the Netherlands.”

High transport weights mean VW Group is using rail for the transport of battery cells and modules. It is also piloting the use of longer trucks in certain regions.

“In the medium term, the e-truck will play a decisive role in the short- and medium-haul sector, and rail will be important for long-distance transport,” adds the spokesperson.

Other sustainable supply chain initiatives at VW include Discovery BMS – Smart Container Management (for the movement of batteries) and a No Plastic project that aims to eliminate single-use plastic from suppliers' material deliveries to VW Group plants. Like Volvo, VW is also looking to increase the localisation of supply and work toward closer integration with suppliers, including battery makers.

“Volkswagen relies worldwide on regional sourcing, a combination of regionalisation and globalisation,” says VW’s spokesperson. “For example, at the main plant in Wolfsburg the majority of supplied parts are from Germany and Europe.”

VW Group has already announced that it will set up its own battery cell factories and logistics is an integral part of that project. The carmaker’s stated aim is to assemble battery systems very close to its car plants.

Sustainable production network
Also in Germany, Tim Holzmüller, who speaks for the Production Network division at BMW Group, observes that sustainability is at the core of the company’s corporate strategy. He stresses that the BMW Group is committed to reducing carbon emissions along the entire process of car production and delivery.

“By 2030 the BMW Group will reduce CO2 emissions per vehicle in the supply chain by 20%,” he says. “In terms of resource management and environmental protection, all service providers are also expected to implement a consistent programme for environmental protection and environmental standards, and to continuously minimise resource consumption, as well as its environmental footprint,” he says.

To establish local emission-free logistics for its Munich plant, the BMW Group is testing the use of electric trucks for inbound deliveries moving within city limits.

BMW is also the first carmaker in Switzerland to transport its vehicles with biofuels.

“The goal is to cut CO2 emissions from delivery traffic significantly and boost sustainability along the entire value chain. Up to 85% lower emissions can be achieved from vehicle logistics,” says Holzmüller.

The BMW Group is also planning to transport 16,000 vehicles per year by rail to China.

Hellmann Worldwide Logistics is cutting carbon from its transport through the expansion of rail for deliveries

Intermodal options
As well as OEMs, a growing number of logistics providers are implementing sustainable supply chain strategies. One interesting example is Hellmann Worldwide Logistics, which is cutting carbon from its transport in various ways, including through the expansion of rail transport for deliveries between China and Europe.

“Besides the prominent Silk Road there is also strong demand for European routings,” says Monika Thielemann-Hald, global head of automotive logistics at Hellmann. “At the same time, there are various side elements which are helping to achieve environmentally friendly targets. For example, the trucker and capacity shortage are creating a need to do things differently. The pressure on the industry from different directions is something positive. It is a catalyst that promotes sustainable logistics,” she adds.

In Thielemann-Hald’s view, intermodal options such as the combination of air and sea, also represent an “almost untapped potential” for automotive clients. She observes that combining airfreight with ocean, as opposed to exclusively using flying parts, can cut carbon emissions by 50%.

However, it is not only because of reduced CO2 emissions that intermodal solutions are increasingly in demand from customers, according to Thielemann-Hald.

“In times when ocean freight was reliable and predictable, air-sea, for example, was never an option for our automotive customers,” she says. “Now, as door-to-door turnaround times for ocean freight increase significantly and demand for air freight increases massively, so does the willingness to discuss and implement new solutions.”

According to Thielemann-Hald, a more sustainable supply chain can be achieved by the more efficient use of transport units – often prompting the company to agree on container utilisation as a KPI with its customers.

“To provide optimum support for our customers in the field of packaging, we also have a dedicated team for packaging solutions, and are seeing a massive increase in demand for these consulting services, especially from suppliers who are entering the European market,” she says.

Low carb options
Over at Ceva Logistics, meanwhile, Dave Dudek, executive vice-president and global automotive and tire sector lead, observes that there are sustainability gains to be made at every step within the supply chain industry.

Ceva is developing low-carbon energy options in freight transport, including electric, hydrogen and biofuel-powered vans and trucks, and biofuels and liquified natural gas (LNG) for ocean vessels.

The company is also developing digital carbon tools to cut carbon from supply chain activities, aerodynamic truck and trailer designs to reduce fuel consumption, and vehicle roof solar panels to power vehicle batteries.

Ceva offers customers an eco-calculator on its website and through its MyCeva digital booking platform to estimate the logistics carbon footprint of a shipment via ocean, air or on the ground.

“We then provide multimodal and cross-border solutions, including short sea, barge, rail and truck to deliver the optimal transit required with the lowest CO2 emissions possible,” he says.

Ceva is working with OEMs and a variety of tier suppliers to find the best locations for multi-user storage, distribution and return facilities for battery supply. It offers just-in-time (JIT) and just-in-sequence (JIS) parts collections, a ‘Warehouse on Wheels’ service, and cross-docking strategies to increase customer stock turnover and reduce unnecessary journeys.

Seamless packaging 
Ceva is also cooperating with packaging companies, including with Goodpack, where it has jointly developed savings through the supplier’s pool of reusable steel containers to reduce waste disposal and carbon footprint. Dudek says together the companies are uncovering huge opportunities for further efficiencies throughout the automotive supply chain.

“Our packaging engineers work seamlessly with our clients to optimise existing expendable and returnable packaging design and cube utilisation,” he says. “Through the control of consumables purchases and the segregation of waste, we intend to achieve a recycling rate of 75% neutral cardboard and a circular flow for their reuse.”

Ceva is also using a variety of data-driven internet-of-things (IoT) sensors and telematics to monitor its fleets, measuring driver performance and CO2 emission KPIs. This is helping to improve driving efficiency and dynamic routing to reduce time in traffic and CO2 emissions.

According to Dudek, the company has also launched a number of sustainable warehouse initiatives, including locations equipped with renewable energy, and waste and water management programmes.

“We have designed some warehouses to become electricity neutral, using solar panels, wind power, LED technology and efficient equipment. These initiatives go hand-in-hand with employee awareness concerning energy saving. Some of the facilities are already Breeam certified. Breaam (standing for Building Research Establishment Environmental Assessment Method) is an international scheme that provides independent third-party assessment and certification of a facility’s environmntal performance.

Ceva has also launched the CL Green Project to accelerate all its specific green targets for contract logistics, based on its Reduce, Reuse, Recycle initiative.

Volvo Cars became the first vehicle maker at COP26 to announce the introduction of internal carbon pricing 

Factors limiting adoption
When it comes to factors limiting the adoption of sustainable supply chains, Volkswagen Group Logistics points out that, although more sustainable technologies for logistics are available, they are often not yet economically developed enough. What is needed is legislative incentive.

“What we would like to have is clear legislation and a reliable policy,” says VW’s spokesperson. “This includes a CO2 price, as well as sensible subsidies and investments in sustainable technologies. An example is a fast-charging infrastructure for e-trucks.”

For Dudek, another challenge is that automotive industry still has a JIT mentality, which can lead to the use of expedited and less eco-friendly shipments to keep plants running.

“Due to the current market, most automakers and suppliers are re-assessing their inventory strategies, but at least for the near future there is more demand than supply of critical parts, so we can likely expect to see expedited shipments continue well into 2022,” he says.

Dudek said that in the past customers were mainly driven by optimising transport costs versus lead times.

“Now we see that the carbon footprint of transport chains is becoming an increasingly important decision criteria. Sustainability is thus becoming a decisive competitive factor,” he adds.

Strength in numbers 
Moving forward, Thielemann-Hald confirms that sustainability is at the top of the agenda for Hellmann and highlights several areas where the company can make a difference. One example is through the establishment of sustainable infrastructure facilities such as its recently opened rail terminal in Osnabrück, Germany, which is expected to shift up to 150,000 truckload units per year from road to rail.

“It is also crucial to discuss the issue of sustainability with customers from the very beginning so that infrastructural requirements can be taken into account at an early stage,” she says.

“We are also working on further developing our tools to measure CO2 emissions, taking into account the dynamic of market developments and customers, as well as regulatory requirements,” adds Thielemann-Hald. “In addition to conventional measurement tools, Hellmann has developed its own tools to fine-tune CO2 measurement and make transport chains even more transparent,” she adds.

Dudek confirms that Ceva is committed to working with its customers in the areas of electric truck adoption and increasing shared transport networks via flow consolidation, as well as through digitalisation and the adoption of other technology.

“In addition, we are starting to see more collaboration between OEM and part suppliers on key components, such as semiconductors, and we expect this is also likely to happen for batteries – where OEMs, tier suppliers and logistics providers work very closely together on supply chain synchronisation,” he says.

Electrification is not enough 
Elsewhere, the Volkswagen Group Logistics spokesperson says the company will continue to optimise delivery schedules and improve transparency in the supply chain from supplier to Volkswagen.

“Cloud solutions such as Amazon Web Services or Catena-X make a significant contribution to this. We are further developing the logistics chain and piloting innovative concepts with our transport service providers, such as the use of bio-LNG in truck traffic in Germany,” says the company’s spokesperson.

Meanwhile, Bricknell points out that working with the right partners from a cost, quality and sustainability perspective is of continued importance to Volvo, and he confirms that the company is currently collaborating with logistics service providers to identify and deploy technology that has a good fit with its network. The intention is to reduce Volvo’s supply chain carbon footprint by 25% from 2018 levels by 2025.

“We have one of the most ambitious sustainability agendas in the business, aim to be climate neutral by 2040 and firmly believe in strength in numbers to make real progress. Electrification is not enough; we need to consider the full value chain,” he says.

Carbon pricing is applied to the lifecycle of each car model and will be a steering tool to further ensure that we apply the most sustainable solutions from a full value chain perspective

Trucks are the largest CO2 emitter in our inbound logistics, which is why we are focusing very strongly on a shift from trucks to rail – if possible, with green electricity

spokesperson for VW

The goal is to cut CO2 emissions from delivery traffic significantly and boost sustainability along the entire value chain. Up to 85% lower emissions can be achieved from vehicle logistics

Tim Holzmüller, BMW

To provide optimum support for our customers [we have] a dedicated team for packaging solutions and are seeing a massive increase in demand for these consulting services, especially from suppliers who are entering the European market

Monika Thielemann-Hald, Hellmann Worldwide Logistics

We have designed some warehouses to become electricity neutral, using solar panels, wind power, LED technology and efficient equipment. These initiatives go hand-in-hand with employee awareness concerning energy saving

Dave Dudek, Ceva Logistics

As we continue to add capacity to support our electrification growth plans, we are actively exploring supply chain opportunities, including recycling to ensure stable supply and pricing – spokesperson for Ford