Logistics veteran Hermann Ude on the industry's impact on climate change and what role digital technologies can play

00:00:00: Hello and welcome to the logistics tribe

00:00:08: I'm boss felgendreher founder of the logistics tribe and today we have a logistics industry veteran on the program,

00:00:13: have a new day is the former CEO of DHL Freight and DHL Global forwarding a former corporate board member of Deutsche Post and now sits on a number of supervisory boards including his role as chairman of the supervisory board at transport on

00:00:26: Hermann has a strong interest in the impact the logistics industry has on the environment and on climate change in particular

00:00:32: he holds some key insights into how the industry has to evolve and what role technology can play to drive down the environmental impact of the logistics sector please enjoy this conversation between Herman and or Logistics tribe host Jonah McIntire

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00:01:11: alright now let's move on to the show with her menudo a hosted by Jonah McIntire enjoy to get a running start at this why don't we give you a chance to introduce yourself to the audience

00:01:23: you've got a amazing background you've been.

00:01:26: Through the industry for a long time and really significant positions what were the highlights for you what are you doing now give us a little bit of background yourself.

00:01:35: Yeah so maybe I don't start with the work but with where I come from and I actually grew up on the Baltic Sea in the.

00:01:42: The Village on a 30 be as 5,000 people small place.

00:01:46: Which which was a was an interesting childhood experience so I had never moved as a child so it was very stable and it was a lot of nature around Little River and things like that so that's why I have always been.

00:01:58: Emotionally pretty attached to normal natured only palm trees and things like that so just what Europe considers as the as the normal posture Landscapes and that has been my bringing and then I studied.

00:02:12: Economic business administration actually and a bit Artistry and then join McKinsey for eight years.

00:02:19: In which time my three kids were born.

00:02:23: And then we moved to bond because I joined the NHL as a group as a in a role that was a bit unspecified because the company intended to build it has his company but in reality only had

00:02:38: male retail outlets in puzzle in Germany and we then acquired some hundred.

00:02:44: 40 160 companies and integrated then at my role sort of was copper architecture really see how this integration works and basically if you look at the four pillars now that was what basically,

00:02:56: structure was that we at that time design.

00:02:59: With the mail and the supply chain Express integrator business and then the forwarding then I let the European wrote rate of the a gel and then ultimately in as a board member the are ocean and Road.

00:03:13: Forwarding business which was market-leading globally I think still is.

00:03:20: And of course a quite a quite a stretch also for me to operate a really Global business so and I think that was a was a fantastic time I think of course.

00:03:32: Well endless highlights if you want I think actually what I really experienced which I thought was a highlight was mentorship.

00:03:40: It I think from an outside perspective it always looks like a great career and somebody has done all the right things.

00:03:46: If I look at my own life it has been three four four times people that actually said.

00:03:52: I trust you and I'll give you support and I remember that my then.

00:03:57: I was not yet in operating Rod fed I really smashed and IT project.

00:04:03: I think it was a four million dollar market that time loss on a project that didn't deliver any value,

00:04:09: and then group Co you ask me he got a report from our auditing Department that this was a mess.

00:04:15: And he asked me up to his office and it was a good sort of shaky.

00:04:21: And he said well I got this report anything you says it why we re mess it up it was wrong it I made mistakes on wrong judgment and so on is hit well and then he finished his head while now invested for million in your education.

00:04:32: And that's why I want to put you on another role which was a bigger one and these white so I think that mental that that wasn't always a highlight when you felt like they're somebody.

00:04:42: That is strengthening you and allowing you to do things and trust in you.

00:04:46: Even if there are mistakes because they're always mistakes happening always make mistakes in the larger organization you oversee things as well so I think that really these experiences were the true highlights and of course a lot of travel nice things and wonderful people I met.

00:05:01: I think that was something that I really would like to highlight and your transition from McKinsey.

00:05:08: Over so at Mackenzie where you were you folk were you sector focused where you focused on was this empty sector Electronics mechanical engineering so my customers were.

00:05:18: They see in their space so I never had a specific supply chain Spike which obviously change them at the HR how is that transition then did somebody also sort of make a.

00:05:30: I bet on you know I think it was it was really actually the reality was it was about General management skills and they said well I think you need the next step and there's this road Freight business and,

00:05:40: at that time it was Heavy D loss-making they need restructuring and many other things most I think 100 million - at that time and,

00:05:48: so they just said well we give you the opportunity to fix it so to say and I know specific growth rate in rods or knowledge.

00:05:58: The position management and business Acumen so I were which is why I also again if you come to is all about teams and then.

00:06:06: I never hired Mackenzie into any of my management teams.

00:06:10: Because that type of thinking in PowerPoint and logic and figures and graphs and whatever that was what I could contribute to the team.

00:06:18: I did what petitioners would operate a road Freight Hub with dispatched a freight shipments who.

00:06:25: Well capable to roll out a software in 800 or whatever you had stations so I think that's perhaps the thing how you create a team that you don't try to copy yourself 15 times and think that this is a great idea so,

00:06:38: but I needed to compliment myself with the people that have the specific skills and they were not the type of Mackenzie skills they were actually then the skills of

00:06:48: practitioners and as a team then you pretty complete as opposed to yeah I could see I could see the temptation to higher in people who are look like you same thing

00:06:57: yeah thinking symmetrically looking like we should be a record it know as wrong I believe it's very wrong yeah and so we're going over it fast but it is quite a incredible

00:07:07: career you had there in your last role you were leading global

00:07:11: ocean and are forwarding say correct and rolled yeah exactly yeah and Road sorry and rhodium point five billion pretty large business

00:07:18: and then we had to actually I mean I left then 11 years ago and the core reason for leaving was a dispute about the way how to digitalize the.

00:07:29: Business and when I left in 11 then I had a I think I had one year gardening leave or whatever could do anything but then I joined my brother who had started a small company.

00:07:39: In digital learning training feared TTS and I joined that

00:07:44: then became also a shell right there was some other partners in one wanted to retire so I very much get close to the IT industry and and then at one point it made a bit click that I saw that actually the transportation said this combination of digitalization transportation is a

00:07:59: an amazing match because all the problems that we that we solve as a forwarder or the.

00:08:06: Many of the challenges the industry has can be resolved with digital solutions that comes from very simple ones like I wish to return a standard like.

00:08:16: Proper routing optimization and these type of things but also as an industry I mean forwarders do nothing else but leverage information I know 50 people who have a load and I know 30 people who have truck and I combine them.

00:08:30: It's implicitly now still although the forward is optimizing that we are 30%

00:08:35: empty capacity on European roads about the same in North America a bit less the end and then again the data problem so let's approach it like a data problem and that's how I came to then transport urine as a chairman and.

00:08:47: And a number of other assets that I'm invested in and that I'm interested in being successful and also at the same time it came out that especially with his empty and you might take.

00:08:58: With the awareness for the problem of of carbon or sustainability in general because we also have the degradation of our,

00:09:09: agricultural grounds we have specie losses in at an enormous Pace we have a.

00:09:16: And we have to CO2 heating up problem which are somehow intertwined I saw more and more the the opportunities that are there using digital solutions to overcome carbon.

00:09:28: Or is it logical challenges and then I think that's also somehow may be leading us to this discussion because I think it's a.

00:09:34: It's a good thing about digital Solutions often is that cost you nothing in terms of real money they create value for a moment one,

00:09:43: if you want to change all trucks into electric I mean that's a I don't know what it is didn't calculate it is 84 yeah investment program in Europe,

00:09:51: which maybe not attract benefactors but it's a massive thing over a short period of time.

00:09:56: But implementing the solution that makes cargo and trucks visible or solution that makes a CO2 emissions visible and doctors have shopped at that is a,

00:10:05: send paper or tissue cents per participant so I think I'm more like that aspect of the thing and I think that's what I try to shape into all the different Ventures I mean well it's true that when people come from the material economy so I.

00:10:20: Maybe have a similar background in some sense where I started in true Supply Chain management material material flows Financial flows and information flows and,

00:10:29: when you make that transition from that Academy in that Focus over 2,

00:10:34: Technologies particularly software so so day to focus technology the economics become quite interesting you look at something that has,

00:10:44: really negligible creation cost I think that what holds us back with creating software is is actually the creative minds that are necessary to create it and the,

00:10:53: change management from leadership which is necessary to implement it but the cost of creation is not the factor there's it's not we're not rate limited by.

00:11:04: By its cost

00:11:05: and even for things which might be quite expensive to create in their in their first sort of moment of being for most of the most of the work that we do in the sector the computation cost essentially the the incremental cost,

00:11:20: are not zero but almost zero so you have this sort of

00:11:24: solving at once May cost something which is a considered a considered investment

00:11:30: but then you've sought you've essentially solved it for from that point on it can be duplicated or reapplied I would maybe invigorate reiterate a bit your thought on the two boundaries but almost obviously and it's change management is a key one.

00:11:45: And I would I would say change management has two Dimensions there one is actually.

00:11:50: We decide for solution and how do we get it option up or how we decide we want to roll out a certain software for for real-time visibility.

00:11:59: And how do we convince drivers and immediately the controllers to check it really and so on and make the customers educated on using that in.

00:12:07: So that's one adoption Challenge and the other challenge that if you look into digital industry I don't know it's not after a fashion,

00:12:16: it's the industry with the highest sales cost right is cream with their Solutions I have seen why I would say I would say there is no argument to implement it tomorrow on a small scale and test it out,

00:12:28: if I was operating the junior level or nessler or somebody like that I look at this and say hey.

00:12:33: This is so cool but still it takes an enormous effort to get this into these large organizations so and I think that that is another change cost yeah so if I have let's say.

00:12:45: Real-time visibility I think the real-time visibility of opportunities so obvious it's an operational level it's

00:12:51: so it and it costs you I don't know 30 cents 40 cents per shipment it's really nothing or maybe you don't roll it out to the whole empire of your whatever 60 billion company in six weeks but.

00:13:03: Why not say test instead of our yes we do it we want it quick we want and and that will reduce the sales cost industry if you look at all these high-growth loss-making companies in the industry and there are many and if you look at that Quest structure.

00:13:17: 43:57 marketing is here to significantly

00:13:20: low cost is an engineering and operating and so we have we have an industry we have a double problem supply chain people tend to be well at least they are not the most Innovative one really grabbing things quickly

00:13:32: different but what I'm wondering is why don't why they don't just test at them just do it and that's why I think they are these to change management does that make us too slow.

00:13:40: To bring Innovation and also support sustainability to the supply chain operations yeah yeah,

00:13:46: there was this moment just as the pandemic was kicking in I felt this moment when the metabolism of large company decision-making.

00:13:56: Raised for a moment there was this there was this probably a six month period where for the first time in decades really I felt that a breakthrough in decision-making where a previously I would meet with large companies and

00:14:10: if everyone wasn't aligned they just didn't make a decision I mean the the inertia the

00:14:16: inertia effect was so large that you really had to kind of push on every single wheel at the same time to move the car forward.

00:14:26: At all and for a really brief period as a pandemic was kicked in so much was changing and in society not just in businesses but in societies,

00:14:36: that you could feel the space of change altering and I think there's leftover artifacts from that things like the remote work movement where the idea that people are going to commute 30 minutes,

00:14:48: to reply to an email.

00:14:50: Or to work on power points at their desk and then drive 30 minutes home that that that that's just not going to be accepted at the same way that it was pre-pandemic but to segue over 2,

00:15:03: climate change unfortunately the nature of sort of the degradation of our environment and climate change is that it hasn't presented us with a.

00:15:12: Pandemic like rupture and so over time we can all see around us the effects of it but we but,

00:15:19: they're not sudden they're not forcing forcing a change upon us and I don't I don't know what how you feel but I don't believe that there will be such a moment come I think it really has to be.

00:15:31: An inward motivation to make change rather than a forced one yeah you never know I mean it's a person I agree and the challenge with that problem is its when we have from climate change driven the moment the.

00:15:45: Spring 20 Corona moment I only write thousands of people died and so on it's too late the problem is right this challenge needs for size,

00:15:54: that's why I live because you if you if when it comes you can't fight it any longer it's like a big wave when you're standing in front of a 20 meter wave in Portugal on the sea,

00:16:02: and you are not go more you're not going to make it it's not yes too late and any movement will just not help you well and and that's again and that's why I'm actually.

00:16:12: Surprise and you I mean that that every individual person leading his her life and so on doesn't see it that way I fully understand.

00:16:22: And we always had a vacation in Mallorca so we fly there are short-term flight and yes somehow we know that if we are doing that as for people.

00:16:32: Is the CO2 footprint of an Egyptian for the whole year.

00:16:36: Just right for two directional light to Mallorca which is visit 1400 kilometers or we move at the I mean if the benefit and we have to so I mean if you compare and see travel.

00:16:47: It's attempt is to 10 times saving on time so you need four days end to end from Hong Kong or from Silas say to a Frankfurt and you need 40 days from Shanghai to Frankfurt if you.

00:17:01: See but from a CO2 point of view it is 14 times 15 times that and if you are a few that CO2 calculated if you look at the CO2,

00:17:10: impact of Air Freight emissions they are three times as impactful like Madonna's is 26 over all the time so three times in reality it is a,

00:17:20: we are trading downtown from 42 for days at a carbon at a climate change impact

00:17:27: that is 60 times people somehow don't get that into their thinking which I believe is surprising I mean they are all if you look at the Business Leaders if you we have a leadership challenge here.

00:17:37: Because leaders are not expected to manage the day but rather to expect it expect to manage with foresight,

00:17:45: and yes some organizations I had two very good I got a very good blog post currently from the CEO of Heidelberg Cement and I was quite impressed how they are doing that cement being one of the big polluters and much smaller than Road Transport

00:17:58: but it's big and he basically calculation of the focus here to into every.

00:18:03: Not only investment but in any operation in the world so that everybody feels the load of the whatever it is I don't know the number 100 euros per ton

00:18:11: and either reduce headcount reduced Transportation costs for users here to in the balance sheet is PL would be the same I thought there was a great

00:18:19: I thought so some people are grabbing it.

00:18:21: But majority let's see and we shouldn't be the first and so on yeah we spoke briefly about this in the past I mean that this sort of goes to one of the things that's close to my heart on this topic which is if climate change really is,

00:18:34: the result of externalized cost which the decision maker doesn't have is not accountable for for example you fly the Mallorca.

00:18:43: There's a some cost on the future of.

00:18:46: You know humanity and and and not just Humanity all that animals and other biosphere but you don't have to pay for that so so this this results in sort of adverse decision making.

00:18:59: That you would if you had did have to pay for it you would alter your own decision making quite naturally and this invisible hand sort of not being able to work its magic on emissions I think is something that's quite.

00:19:13: I really think ultimately that could be one of the ways that we finally take this seriously I know that there are some companies you're mentioning this now there's some companies that are collectively,

00:19:24: internalizing their admission cost yeah I just don't know if they'll actually be the thing that.

00:19:31: It's challenging about this is I don't know if that works I don't know if electively doing it.

00:19:36: From some companies actually has the effect of of making the change broad-scale enough I tell you a story that I told a tonal meetings at DHL which is now as I said 12 years ago.

00:19:47: 11 years ago because you had to motivate people so climate change and also biodiversity losses.

00:19:55: For me is it topic that's very close to my heart but it has a very very clear business business aspect to it because in the long run we will have to pay for CO2 if usually as companies.

00:20:04: And we don't know when it comes and we don't know.

00:20:07: In which magnitude will come but the thing is if you are if you are in for side the typical what would what do people do if they have a problem Financial or economic problem

00:20:18: that that they don't know the probability and they don't know when it's going to hit what do they do it take a picture,

00:20:24: yeah yeah so they take an insurance so I don't know whether my house will burn and when it will burn but I have a fire insurance for my place so very good

00:20:33: and then Joanna and there was the S-Pen you said if I look forward and by the story I told was basically at that time because they were the leaders and said if Barack Obama who Jintao,

00:20:43: then China or president of China and Angela Merkel sit together and they opened the second bottle of bottle of barolo and they just agree.

00:20:51: That they would tax carbon tax.

00:20:54: Jet fuel as diesel is text in Germany that would happen because infiltrator kerosene is a massive coastline.

00:21:02: Right haven't would result in a 30 to 40 percent increase in price.

00:21:07: For Air Cargo and Air Cargo is a product that you've used for Speed against costs and absolutely set voiding so if you are praising the bikini deliver still in August can be sold if the bikini came by ocean Freight in October to May,

00:21:21: have to destroy it because you can't sell it in that season so basically our cheese or Pharmaceuticals or whatever has an observation.

00:21:27: So this calculation changes if the price of the transport goes up and if it was up and we calculated that and if it if you would go up by,

00:21:34: yeah whatever I think it will double actually with a diesel price and then that time and we would have 30% less Air Freight.

00:21:41: In the result and I told my people if that when the if and when that happens I want to be sitting on the 70% business I don't want to be sitting on the thirty percent of the animals.

00:21:50: So that's why we concentrated on for example Pharmaceuticals and other things that we said they are always going to be important enough to be.

00:21:58: For a long time to be flown and get our don't fly stuff around that shouldn't be flown around and then you still attic it's a business you can make money and so on but and I think that's the narrative that any leader should take and say okay if I'm not.

00:22:12: Paying my premium now I'm going to potentially I don't know when and I don't know what magnificent and,

00:22:19: paying a total a hundred percent loss in at a certain point in time this insurance logic I think should lead lead us to really Embrace this topic seriously and I think if you look at the calculator will premium.

00:22:31: From 12 years ago I would have said maybe we can put 5% of our profit into CO2.

00:22:38: And if I would run a very large operation now I would think it's maybe rather ten twelve percent of my business investment I could

00:22:46: take different packaging Solutions and really think it through because paper is not always better than plastic but plastic and he's and so on so really think about that

00:22:53: if you take a company like Amazon with enormous amount of output.

00:22:57: If I was Amazon one of the projects I would start not after the cloud business and after Logistics is a package Global Packaging Network or DHL could rule that the same

00:23:07: this return packaging you know that there are companies that with your pellet and so on why is not something I'm saying I don't want

00:23:15: we will not discuss not sustainable that we are creating these enormous amounts of paper per German 140 kilos paper in a year last egg 70s had a world record holder there's no key not even the u.s. matches that.

00:23:29: Brackets because they use more plastic but and that's not sustainable so let's create a solution let's invest some billion or whatever set it up somewhere in the sector or in the country.

00:23:38: And establish a return system for for that and and I think that's an investment as a insurance premium

00:23:47: so that is sustaining the model of Internet trade stays or Will Survive longer because it has a an element of the sustainability and future costs will be were not required to my company if I operate a more sustainable system and I think that's.

00:24:02: That's something him if you discard considering when you're when you're describing what you did with with DHL it's I can I can see the Mackenzie Roots its Market selection right so there's there's some Market which,

00:24:17: traditionally be looking at this in terms of,

00:24:19: kegger and growth metrics and and what not but you are looking at it as risk exposure to a to a essentially carbon tax one of the things that I find interesting about this is that one of the.

00:24:30: Adverse effects of that is that.

00:24:33: You have less so DHL for example would have been out of the game on some products may be low value for.

00:24:41: As an exam we didn't call them to flower and food for example yeah exactly okay flat flower the flower is great example so so then you go okay so when enough participants do that.

00:24:52: We see this also in investing where certain certain funds won't invest in say tobacco or alcohol or yeah Cole,

00:25:02: and the effect of that is that the.

00:25:06: Return to the investors who do invest in there is higher they face less competition for Capital so in the case of for example Transport Services if there's less people willing to transport flowers.

00:25:17: Price that they are required to pay goes up.

00:25:20: Essentially you can look at it as internalizing the risk factor of being in a market that has carbon tax potential.

00:25:29: In the short term it creates an incentive for somebody to service that sector.

00:25:33: Add a higher profit margin than others and that that's one of the reasons why I find it yeah how about it increased I mean take the flower example which may old or not but in principle,

00:25:44: you are sitting there there's flowers produce in our own Kenya somewhere on the Lake Victoria using which is a very very which is crazy yeah yeah so crazy thing anyway so you have the flowers and you can and they need to be moved out.

00:25:59: If DHL and to Shankar and the kuna would say no sorry we don't move flowers any longer because we think it's an unsustainable business we don't we don't send tracks around we don't send ammunition around we don't send flowers around yeah behind,

00:26:13: every kilo of grapes from South Africa I calculated the ones 4 litres of kerosene yeah I just not it's not what we want.

00:26:20: Okay so we are stepping out of it nobody else has the capacity well that means that the transportation cost for flowers would move up massively because somebody would have to bring in something and specifically build a known flower Flight Network,

00:26:33: which would operate at significantly higher cost than the combined whatever feel the low price type of course so I think you can you can have an impact but not if you are a small little small guy and say I don't do this baby business but if you are a bigger one like DHL over 13 percent at that time.

00:26:48: Global cash and Afraid or so,

00:26:50: that could change it and they could just take the stink decisions on certain businesses not appropriate what Walmart had Walmart and Amazon both actually have had similar effects and their supply chains in the past prior I do.

00:27:02: To some extent Unilever as well yeah that that when you're when you're at that size I know for example one was.

00:27:12: Packaging that's used to transport chickens so live chickens.

00:27:17: It was something Walmart just made a decree that said from now on if you're in our supply chain you have to use this other packaging and Anna massive impact.

00:27:25: And it's stuff like that where you go well that's insane but the power of somebody who is the de facto organizer of the supply chain whether that's because they control the demand in the case of Walmart or in the case of tahl because they control the means of transportation.

00:27:39: Really teach your point that really can

00:27:42: shift the Dynamics of an industry I see that and I think that's why it's the lack of leadership is at one end a politician make policy makers are not supporting it enough but yeah it is I mean is most

00:27:54: all the bad things that happen are at one aspect our leadership challenge or problem and I think the means are there in many many cases they are,

00:28:03: that if you really ask people would you mind if something.

00:28:08: Actually I mean to take one thing with Amazon introduced the same day delivery in Germany for some,

00:28:15: I don't six years ago and what it was from a pollution point of view is a disaster because you really send around the truck was 10 shipments or 11 shipments there yeah so and it's a it's a it's optimizing away from.

00:28:26: If we talk about empty empty km or empty capacity.

00:28:31: It's certainly optimizing away from that and you wonder who wonder what is the economics behind at the economics behind it is that,

00:28:37: the probability that somebody is sending the product back increases significantly by the hour so let's say I'm buying a yellow jumper which would not be very becoming to me with my sort of red hair

00:28:49: I would buy a yellow jumper at an online shop and it won't be there when I bought it the probability that I keep it is.

00:28:57: In double digit percentage is higher than if I receive it only tomorrow evening and that's the economics band so it's in the way it's our greed fueling the systems that.

00:29:06: That overlooked CO2 other things that's why pricing and

00:29:09: taking the insurance View and so on is very important it's really doing that the problem is that if I take my decisions now on a risk I calculate my risk and as let's say 5% of my profit or Revenue could go to investments in this a sustainability,

00:29:24: what I don't calculate is the accumulative effect of CO2.

00:29:28: And I think that's awesome things the system is completely out of sync I look brand new testament and say okay that would be a payback in 10 years it's not right but it's okay I will do it.

00:29:37: But all my garments and be there for 200 binding up until so there's an exponential challenge to that yeah that that's one of the you know it's.

00:29:46: To go back to this and this this example with with same day delivery,

00:29:51: I think is another one where my mind immediately goes to okay if one retailer one e-commerce retailer

00:29:59: does not offer same-day delivery and another offer same-day delivery the motives behind that are kind of irrelevant in many cases for consumers not not all consumers but many consumers say well you know

00:30:11: that guy like I like same day delivery right and so the next thing that goes through my mind as well you've got.

00:30:18: If you had a carbon tax it has to be internalized somewhere in the business the business either has to make.

00:30:24: Better return on other elements of its operation be more efficient in some other way or it has to charge the consumers in which case the consumers is what,

00:30:34: right then they internalize and their decision-making do I really want I guess another option could be to just unilaterally say for example in Germany there is no same-day delivery everything has to be delivered at least.

00:30:47: But you always 24 hours behind you always behind the wave it's not yet this is just not working I mean you remember that you with the big Tata,

00:30:55: announcing that straw straws are not as they are class and what else three products Works were banned from,

00:31:03: plastic I mean for me this always looked like a geek of the Plastic industry because they said MP get can get away for five years at that cheap that's really great now I think the the regulator should not go in on that level the regulator should say we increase the carbon.

00:31:17: We produce a carbon tax we calculate carbon and wanted visible on every product like we do a 380 so really forwarding through all of the different levels here so I produce.

00:31:28: I've produced I might call and that is going into steel and that still goes to Steel factory and then it goes into a car and then and I can and the consumer will see this car has a footprint of x

00:31:40: right now that's the things regulator can do so that's visibility and when I have it visible I can start to influence it and can say okay we are increasing this,

00:31:48: we now we are charging for it we knew it before now we are charging and then we get the action.

00:31:53: I think the regulator would be completely over warded with lobbying and everything if he wanted to inject little little a great ideas into.

00:32:03: System has because all world I mean this is just not these will not yeah I think we should we should go in there that's the pity.

00:32:09: That all the things that we externalizing costs is not not Captain not occur in principle of the capitalistic principal at the Capitol is priceless,

00:32:18: I Bear all the cost and I tried to make profit out of a better product or whatever they are lobbying groups that are there are industries that are living from externalizing significant amount of the cost on the ecological side and they have a

00:32:31: significant Lobby influence.

00:32:34: But as a principal capitalism directs is this strongest social construct to direct energy forces ideas into the right direction

00:32:42: if there was a price signal that's your truth 150 Euros a ton and will be 300 Euros the top entry is like like with no law

00:32:52: the things yeah exactly

00:32:53: yeah yeah exactly this the the price signal works pretty well for all these other scarce to scarcity Dimensions or danger dimensions in our society it

00:33:03: yeah it moves it moves resources onto the problems that the world wants solved I mean it's not perfect obviously but it's.

00:33:11: Pretty good and it's a it's a bit of a shame that it isn't isn't yet applied to the space I think we're kind of discussing a sort of an agenda or a prioritization to get to.

00:33:26: Net zero emissions and in the logistics sector.

00:33:29: One of them is internalizing the cost another one you mentioned which I'm also a big fan of is this.

00:33:37: True sort of reporting mandate on your emissions so that and and Europe has the vet system other countries do as well,

00:33:45: we're we're not so we're not newbies to tracking our contributions to it to a product to a value stream.

00:33:54: Our value chain as it as it moves towards final consumption we have other mechanisms for that with v80.

00:34:01: We could do the same thing with emissions presumably,

00:34:04: to throw another one out there I think the move towards net neutral energy sources is also an important one I think one of the hard things about logistics is most of our.

00:34:15: Emissions comes from transportation and transportation its electric vehicles for short distances but after that it's liquid fuels and that.

00:34:23: That really is the handicapped for if you want to move long distance even if you go even the green options are become liquid fuel things like hydrogen become liquid fuels

00:34:32: now the thing is I mean if you if you really I took a it's not calculated to the ground but I take took the view of saying,

00:34:41: how much can I achieve without changing the vehicles right right and then that starts basically with the.

00:34:49: With looking at the what is the amount now the amount we are normally looking at is the fuel burn what we should add is of transporting let's say Road Transport user adds of course the CO2 load of the truck production,

00:35:01: producing yeah the cake that has said that yeah but actually yeah and what we always completely forget also the car manufacturer everybody forgets is the enormous amount of energy that goes into the road infrastructure which is yeah well as much as the car production,

00:35:14: and together they are as much as this you as the so the tier 2 impact of these two blocks the,

00:35:20: police in the car forcing the road is as big as the fuel burn so these three make it up and now we try to get that down well 2030 Target is pretty clear so so it needs to go to I think a 40 in Europe and.

00:35:35: And then more than 60 in 2014 and then I made the coverage and said what can digital Solutions achieve and I assume we can get out of 50% of the empty running 50% get that down,

00:35:46: we what we have an enormous as a routing Solutions currently work just with digital writing schools currently work in such a way this is your target that's the route you go and you go it was an accident somewhere I might get it.

00:36:00: Rerouting and so on maybe nobody baby but nobody tells me that by the way you're the time window on the ramp has moved 6 hours back you only have to unload tomorrow

00:36:10: hmm the capacity that the three empty palette places that I have in my bank have not come back to the system and say hey he has more hours more time or you can sleep now and,

00:36:19: so we optimizing the system not with real-time intervention and in a super tactical super Dynamic environment like Road trade if you really sit on the truck,

00:36:29: I mean there is a change every two hours yeah we have to get to a point where we are capable to do real-time intervention on routing on capacities.

00:36:39: And availabilities on ABC on empty available so and the moment we get there,

00:36:45: my little calculation that I did and I think I shared that in international sporting meeting at one time is that around 60 to 65% of the

00:36:53: 20:30 Gap could be closed with that hmm and we still are sitting on the same truck there's no other engine but we solved a big part of the problem

00:37:01: and this is this is also driving me very much into this little space supply chain because I believe that these Solutions are much more much stronger,

00:37:10: and they give us the time to start really coming up with better better technology on the on the hardware side on the truck side and so on the next thing

00:37:18: the next thing is that is I'm not talking about the optimization from the shipper tells me I need this palette somewhere.

00:37:25: And here is picking it and delivering it at the right time at the right place now from from my experience,

00:37:31: at operating these businesses there's enormous amount of moves that are not necessary at all so the whole the whole planning

00:37:39: connecting protection with with actually transport needs consolidating them changing so they want to have the warehouse empty every day they contain all the partners we leave here there's a we know already in our booking system that the customer ordered another,

00:37:54: six pallets for the same direction so so we could reduce transport volumes as a whole is significantly I get can I give you a simple example there is a very large Manufacturing Company us Manufacturing Company one of our biggest clients at thr.

00:38:07: And they had they made quarterly results every proper American company and they internally the production organization needed to make Revenue right right they could only do Revenue,

00:38:19: bye if it shipped it if it had shipped and actually if it had arrived in the in the destination so they put the September 28th.

00:38:28: Big machinery stuff on an airplane to move at your chili,

00:38:32: so then it stepped in the warehouse and was booked as Revenue because otherwise the guy wouldn't have met his Target and this is not an exception yeah this is not an exception and so we need to think more real-time intervention wise really.

00:38:46: Purpose oriented when do we need ship what and there there's another optimization there that haven't even looked at so if you think that until 30 to 60 percent we can achieve with or a lot of let's say more than 50% here may be wrong in some.

00:38:58: Some part of the calculation but the 50% can be cheap that's already a lot.

00:39:03: And the costs are yeah it's as I said it's two dollars and whatever it may be is very very little per shipment it's not like

00:39:11: buying a new truck out building a petrol station network for hydrogen or something like that what's interesting about this is they're not just paralyzed like you're describing them in a way that's really

00:39:21: beautiful in the sense that they're paralyzed Isabel we can work on.

00:39:25: Changing the platform of our transport vehicles from internal combustion engines towards,

00:39:32: hydrogen or or electric at the same time as we make these improvements that really just come down to.

00:39:42: Supply chain visibility Optimus inventory optimization and transport routing and Driver assignment optimization.

00:39:51: One of the things I find interesting is that it's not just they're paralyzed double in that way which witch is which is beautiful but it's also that,

00:39:58: for at least one of those platform changes to the vehicles which is the move to hydrogen electric that requires a completely different routing mechanism for.

00:40:09: For the transport planning us sort of do a do a call out to Andrew Cleveland from as one of the leaders at Nestle and supply chain we were talking one time and he said you know.

00:40:21: We want and we want to see more of our product move on these hydrogen trucks that's the that's the best chance we have at,

00:40:30: zero net emissions in the mid mile the mid distances but he said those those Vehicles they have to refuel at it's not like every gas station is going to have hydrogen at they have to refuel it at certain places.

00:40:44: And as far as they know and so far as I know even to this moment there isn't a routing software that's really purpose-built for that.

00:40:54: That task because also even if you were to say well you know it's just you just protect the points like now you have to schedule the stop because that's not like they have they have 50 fueling

00:41:03: hookups just waiting for dry to trucks to come in it's no use you book an appointment to come in so that means that.

00:41:10: The routing software to get this right it's going to have to take consideration of the product move.

00:41:16: The site the pickup appointments the delivery appointments the appointments at the fueling station the route through the filling station and the drivers of the driver hours,

00:41:24: that's again an inefficiency that you have to calculate into your hydro truck yeah you have to see it goes longer distances longer routes the cars also

00:41:33: driving more kilometers or miles and so it depreciation is higher and so I think the whole system it is super complex system,

00:41:41: and I think that's the thing.

00:41:44: Yeah the transport and specifically were also other comes and work in this industry is about good Solutions digital solutions for a number of very small problems.

00:41:55: Yeah the dogs are all it's always in nitty-gritty problem that you solve it in itself is okay.

00:42:01: Okay good okay ten cents I do that but it's an and then but if you combine these things suddenly you come to some some bigger bigger picture but the problem I mean.

00:42:11: My olive oil sea monster started and his friends started transporting what is it 20 years ago

00:42:16: they created a ramp management software this is I mean this is okay Officer to from a supply chain director perspective that

00:42:23: it's tiny but if you it seems like a tiny problem it's a very tiny problem and yes and there's some some dispatchers on the ramp they would say what is shitty life I have and always these trucks and they always sit at the wrong ramp and when I enter.

00:42:37: But this is the style and then you have the second and the third and the fourth and the fifth and yeah so solution and suddenly these things combined,

00:42:44: what I think the the big thing is because there are so many small decisions that truck driver can take that the customer can take that the dispatcher can take that the company can take that,

00:42:53: whatever whoever can take

00:42:54: you need to get to the level of real-time intervention as I said that you need to be able to the truck driver needs to get the command hey you have six hours more time pick something up somewhere else in the meantime or take your break and that's the only way to overcome the complexity of an over

00:43:10: over complex system and if you had your hydro complexity to it and say by the way.

00:43:15: So many driving hours and then so much rest time and the trucks need refueling not only when but also yeah now it's only when

00:43:23: okay mix petrol station and then it says yes when but also at a specific location and in a specific time window this complexity

00:43:30: yeah it overwhelms it overwhelms at most most of the decision-making apparatus has and the industry there really is a,

00:43:38: an angle to compete just on this I mean there are companies one that I particularly like is called a i Fleet in the US but there are multiple things Cloud trucks and there's others that.

00:43:48: This is their angle they simply say yeah we're.

00:43:52: Built a company around the optimization engine rather than most logistics companies were built first as customer service organizations they want to customer and then they sort of figure it out afterwards.

00:44:05: And they added technology step-by-step later to clean it up a little bit to kind of improve the operations a little bit and then,

00:44:13: because new style of companies go the other way they say well actually the core.

00:44:17: Is a tightly planned operation and then we'll do the demand will capture demand that's a good fit for our tight operation.

00:44:28: And grow that way and then we see that I mean the the the the target of ever even if if you look at the Target achieved Target sheet of her supply chain director of a large company if the first thing is always did you get my shit out to the market.

00:44:43: Yeah yeah exactly and then so we always even at these earlier wondering and say why don't they look for better pricing of course generic in the r of T they are on tactical going going a spot Market also,

00:44:56: they were always pretty reluctant because they said you know what this year I'm in my budget.

00:45:01: And I get hit City so I can deliver good quality the production organization of the seasons they will have we always had our.

00:45:09: Whatever product in the market and that's the best thing I can get and if I saved against the budget another 5 million 10 million okay nicely

00:45:16: that's a that's an interesting view they take and and within that framework they just try to optimize so the optimization doesn't really go through yeah we see it I like,

00:45:29: me and my team say it all the time of the cost cost is really not an optimization criteria for most.

00:45:35: With me in the industry we call them shippers right it's a yeah it's a has to be satisfied once you hit the satisfaction level which is which is budget essentially.

00:45:45: Then from that point on the risk-reward trade-off.

00:45:49: Flips like it will yeah of course if I could if you could just for free give me five percent savings I'll take that but if the five percent savings,

00:45:57: poses any risk at all to my operation or if my team has to work any harder or if I have to.

00:46:04: Step on somebody's toes who might I might need their favor from from them in a future date.

00:46:09: I won't do any of that stuff you know but so and there's I think yeah it's again in a way a data problem.

00:46:18: Because you don't let the visibility on what the reward of what the opportunity could be and you really don't have visibility on the on the pain that you made that comes with it,

00:46:27: so that's again why why data is so critical in such a micro.

00:46:31: Micromanaged business and yeah I think that the fact that in the US.

00:46:38: So trucking rates are dropping we all know ocean rates are dropping right now in Europe.

00:46:45: I believe the predictions for recession and that would tend to correlate with trucking rates dropping and get here as well and in these cases I do think the Silver Lining is that,

00:46:56: if you're a procurement organization now is the time when you can.

00:47:00: Start making some sourcing changes where you say well I'm going to switch towards people who either give me lower emissions or just can report their emissions at all you know.

00:47:10: And the reason it's the opportunity as you just mentioned it is.

00:47:15: In fact if you have to give up a bit of savings in a falling rate environment no one really notices and outside.

00:47:22: No one realizes how much is actually possible to get in terms of savings so if your savings go down if your rates go down by 10%.

00:47:30: But you could have gotten 15.

00:47:33: But now you switch to more sustainable or at least transparent emissions have to ask your CFO for approval for that one if you do not have to send you a great guy.

00:47:44: Yeah exactly well I know I think I would agree that is the these moments of change are the moments when you can change more than you actually needed to change but you need to be prepared I think on co2 people are should be prepared I mean it has been.

00:47:58: So many in so many ways I could somebody says I'm a change that's interesting what does that have to do with my

00:48:05: yeah subtraction operation I would Reserve I so I fully agree and it becomes a standard I mean we we talked much lately

00:48:14: Metro all talk was about the the economical side exercise a she.

00:48:19: Now it becomes a compliance topic as well people write thank you and again we get so it has a.

00:48:25: Some even say it's the third dimension next to reliability and cost there comes sustainability.

00:48:32: I think the midterm that will translate into Cash actually because there will be a charge on it and so on.

00:48:38: But getting this little Advantage with your customer base that you say okay we do we do already tracking and we do not only tracking we also do real time Dimension we know which driver needs more or which carrier needs more fuel we.

00:48:50: Have real data and we can we ask beginning to intervene.

00:48:56: And generate savings that is a training that is part of our insurance premium.

00:49:01: The letter carriers get in the long run the carriers with high CO2 Footprints will will lose out anyway I mean it's a question of time of course but.

00:49:12: Yeah or they'll be pressured into change perhaps some will say trying to resist the pressure because they still have a customer that hasn't got it and things like that.

00:49:20: But they will in the end that it's a bit like people who said China was China we don't have to go to China to make successful business we said that the 70s and the 80s and the 90s 2000-2010 they were gone.

00:49:31: So yeah yeah yeah so in closing here are there the one of the questions I'd wanted to ask you and maybe we use this as our closing question is there anybody you think.

00:49:43: Deserves a special call-outs are any interesting technology interesting operators folks who you see are ahead of the curve in this in this area

00:49:51: actually I mean you can say companies that you're involved in to it's okay this is the one is you know at the beginning you need theory about uni people who really

00:50:05: create awareness and I think that's really L mechanic who's the professor at the at the I think it's going to school in Hamburg.

00:50:14: And he really is leading that that people he's not invited a lot and talking a lot about it

00:50:21: understand the Dynamics of CO2 and so and I think that that's it that's a good one can you say the name one more time so people can get and mechanic Elenor Pendragon.

00:50:32: Yeah and so okay well we'll link to it in the show notes so make that shortage and then K Inon and so he's a very he's very really thought leader in that sense and I think that helps a lot in every European spaced on a strong he is and not America,

00:50:47: that's really somebody from a ship a perspective I think it's consumer companies I mean everybody.

00:50:54: Things at gonia who really worked on all dimensions of the system also supply chain I think,

00:51:02: they by taking that series and you need the sense of people who do it on a broad basis and who people who set the example I think that's that's very strong one.

00:51:11: And then there are some.

00:51:13: If you look at the digital space companies there are some companies which have great Solutions you know they might think trucks it was on this on this CO2.

00:51:23: Measurement calculation and then lytx really that you can come to outcomes.

00:51:27: But it's if it's a point solution it's very hard I think it's very hard to sell that's why I think in the end it's the big platform providers like transportaion also they will will.

00:51:38: Pick these Services up because

00:51:39: they have to go they do not only give you the analytics and the data they give you the tool to then intervene and go for another carrier or go for another yeah whatever yeah I mean the nature of the

00:51:50: the agenda the transformation agenda that you and I discussed the nature is decisions must be interrupted.

00:51:57: And the outcome is a different and better decision that's made but it's very difficult to do that with a point solution that for example like the the the tracks.

00:52:07: The tracks capability is very interesting in the sense that you can do you can do large scale digital twin simulations of a fleet yeah that's it for my perspective that's a game-changer in this because,

00:52:19: it's one thing to retrospectively say well when we operated on this Lane we had this level of emissions it's another thing to say.

00:52:26: Our Fleet operating on that lane in simulation simulating the driver and the via the individual Vehicles Etc,

00:52:33: would have this amount of emissions that's amazing but that as you said then that has to be applied to practical decisions decisions like,

00:52:42: how much should I reply to and then RFQ on that lane how many loads do I say I can take do I or do I not.

00:52:49: Listings for new drivers to be hired very concrete how do I get access to additional loads for example to increase a collector and rimy can always say I don't do anything that has a CO2 negative impact but then I may be very limited so how can I.

00:53:03: Leverage capability now I agree and and taxes on this inside part very strong but it needs this real-time intervention.

00:53:12: Peace another one is.

00:53:14: It's a cue that that create something that is basically integrating the real engine data into the reporting but again it's a point it's a very critical information because now most CO2 calculation On Truckin I've done.

00:53:27: On the virtual Assumption of what the truck is and how the driver goes it's a real pillow type of thing and sudden you really get the engine information the real information.

00:53:36: And you could also then intervene and say okay this driver is doing too many heartbreaks which he then restart quickly.

00:53:43: So they've guy needs a driver training but I don't need a driver training 400 drivers because others have other problems and but he has this one alright it's called so again that's a that's a that's a solution and there are these type of people that,

00:53:55: many more as a younger generation and I remember from from DHL which I followed up.

00:54:02: They went at the position when I was there but there's some people who really have a lot of energy Catarina Tom off was then supply chain officer and she really,

00:54:10: change for such a big LSPs significant the way how they thought about sustainability.

00:54:16: And yeah there are these people in the organizations but typically they are.

00:54:21: Below 40 and not yet at the VP level whether maybe need to be to really show how it works in their own way but yeah I think it's a

00:54:30: so interesting space agency fabulous growth opportunities for younger people yeah see it's a huge opportunities and and and it's one of the spaces I think a lot of times people who start Logistics.

00:54:41: Businesses struggle with this.

00:54:44: What do you tell what do you tell your friends and family because no one really understands how big that how big and important this industry is the sector is.

00:54:53: But people get emissions and people get climate change so any advancement in that area gets also the social rewards it's a bit the same I believe the same social effect of people becoming.

00:55:05: Say a doctor or something where there's just people respect you in a way that isn't just well you're earning a lot of money they respect you because you're you're helping people,

00:55:15: that is very true Herman thanks very much for your time today we'll make sure to post a link to the the researcher you mentioned.

00:55:23: And to the also the companies that you mentioned I hope to have you back another time maybe we can maybe we can talk about success stories in a future a future conversation hope very soon.

00:55:35: Yeah okay thank you very much thank you very much have a great day all right that was the logistics try podcast episode with Herman Uday I hope you enjoy today's show if so please make sure to subscribe to the podcast so you don't miss any of the future episodes.

00:55:50: I'm boys felgendreher until next time.