Car makers are serious about their supply chains and turning to circular economies. Shipowners can not get in the way
The growing demands of shippers and manufacturers on the way shipowners conduct their business is a growing point of stress in both the maritime and the manufacturing industries. Referred to as the black sheep of the family or the slowest bear in the woods, the inability of OEMS to have a direct influence on the sustainability of their supply chains is set to change, and shipping is a clear target.
Let’s take the automotive industry for example and the relationship that car makers need to have with operators of car carriers (PCTCs). Car makers have been under pressure to develop cleaner vehicles, and the growth in hybrid and electric car sales shows the impact of government regulations and societal demand.
Sustainability has become a significant part of the branding and identity of many car makers, to a point that companies are working hard to push sustainability across all their business operations -companies like Volvo Cars which has said it intends to have 85% of its product sales electrified in some way, with at least half of its sales t be pure electric vehicles.
Martin Corner is Vice President, Global Supply Chain at Volvo Cars in Gothenburg, Sweden. He is responsible for bringing the company’s sustainability goals, including the goals of decarbonisation and endearing to the principles of a circular economy, into its logistics chains, and that includes shipping.
“In our factories there are clear plans, with them being carbon neutral, using renewable energy and embracing the circular economy,” he says. “Supply chain remains a key issue.”
He says that OEMS, such as his, have set their sustainability agendas, and apply the same commitment when selecting key component suppliers for vehicles. But the one aspect they are only just beginning to get control over is the logistics and supply chains, notable in trucking and ocean freight, pointing to logistics and the supply chain as being the ‘slowest bear in the woods.’
“We do not have zero emission logistics today,” he says, adding that this is a problem. He points specifically to the need for change in the long-term commitment that car makers may have in terms of their manufacturing and says the writing is on the wall to find changes as soon as possible.
The clear implication is that Volvo Cars, and one can assume other car makers too, will be developing a more active relationship with logistics providers such as the car carrier operators.
The global supply chain is changing
As companies embrace circular economies in their manufacturing and distribution so they may redistribute factories and develop stronger return logistics chains. For example, will Volvo still manufacture cars in China, which creates demand for inbound logistics services of components, and then ship the finished vehicles to Europe, and then ship used products back to China?
This is something that Volvo Cars will have to look at according to Corner
Circular economies are a significant part of businesses being sustainable, and this will result in used vehicles, including batteries, being recycled for more efficiently than they have been before. Repurposing vehicle parts into new cars is a clear goal and one that will have additional impacts on shipping lines.
Corner says it will take more than a couple of years to redistribute manufacturing, but he claims that Volvo Cars is trying to be much more aggressive and already looking to move some of its logistics into the “medium term horizon”.
While Corner does not rule out the need for using carbon offsets to deal with supply chain emissions, he says, that Volvo Cars, and one can assume other companies like it, will get more involved in the direct sustainability implications of product logistics and life cycles.
“We have to reduce our carbon emissions in our supply chains, whether at ports, terminals or ships. How we use biofuels, renewable electricity… it will be part of our Request For Quotes process,” he says. And this is where he points to a need for a changing relationship with shipping companies.
“We have got to move to more long-term strategic partnership and this requires more trust from us as a cargo owner to commit to the partnership, but if we look to long term logistics solutions, then we expect a commitment to have real open book costing (from ship operators)”.
This is due he says to the competitive nature and demands of car sales. As car makers look to clean up their supply chains they will use the RFQ process to weed out emissions and waste, meaning that they will begin to look for cleaner vessels, ones emitting less emissions or using biofuels.
UECC and its LNG bet
One of the companies that has already begin doing this is UECC the European PCTC operator owned by NYK in Japan and Wallenius Lines in Sweden. The company already has two LNG dual-fuelled vessels in service, has a trio of hybrid LNG fuelled vessels with battery capacity on order, and has a growing experience using biofuels, having developed a relationship with a Dutch biofuel maker, Good Fuels. Notably these trials were backed by BMW, one of the UECC customers.
Despite the high-level debates on the validity of shipping opting for LNG as a fuel instead of taking to hydrogen or ammonia as soon as possible, UECC has decided not to wait. UECC CEO Glenn Advardsen says the company had to make decisions today.
“It was easy to choose a fuel 15 years ago,” he says with the choice only being fuel oils or diesel. Today there is a growing set of options. “When we decided the fuel to put on these vessels it is not like we used LNG as the fuel of the future, we know that this will change and that we have a fossil fuel. We know we need to find a bridging of the gap to long term sustainable solutions”.
His point is that he does not know whether LNG will be a fuel for the next ten years or not, but the UECC vessels that are using LNG do not need to use them for the entirety of their life he says.
UECC trialled biofuels on one of its older vessels last year, using 6,000 tonnes of biofuel derived from waste, and is rolling our further trials, including the use of bio-LNG on one of its dual-fuelled vessels on a Baltic service.