Three steps to electrify and automate shipping in the FMCG industry

The fast-moving consumer goods (FMCG) industry is experiencing unprecedented change. The public voice, according to McKinsey, is urging businesses to go green, retailers are pushing for faster deliveries according to BCG, and advanced technologies such as autonomy are ripe for adoption, according to McKinsey. These changes pressure companies to direct their resources and efforts where it counts. Exploring how to effectively manage sustainable transport operations plays an important role both for financial success and environmental welfare.

The COVID-19 crisis has accelerated production activities according to UN IDO within the FMCG industry as the demand for consumer packaged goods such as food and pharmaceuticals has shot up. Additionally, growing e-commerce following the pandemic means that the world will likely experience an increase in transport needs, but current freight solutions are not sustainable or intelligent enough to meet emission reduction goals. Today road freight transport accounts for over 7% of global CO₂e emissions according to the ITF. By 2050 trucks alone are predicted to contribute to a 15% increase in total global CO₂e emissions according to the ITF. These environmental concerns are posing a distinct challenge for the FMCG industry as sustainability awareness according to Colliers among consumers is heightened. Intense market competition combined with increased pressure according to BCG from retailers is forcing FMCG companies to rapidly innovate their business processes, especially when it comes to freight.

Improving transport capacity while simultaneously emitting less CO₂e has been high up on the agenda among FMCG companies during the last decade according to a CSMP research paper, but the solutions have been few and far between until now. The only way to make the future of road freight cost-competitive and sustainable is through electrification and automation. The transition requires a step-by-step approach including digitizing supply chains and freight activities, preparing transport for cost-competitive electric operations, and setting the foundation for a future of freight that is fully autonomous.

Improving flexibility and efficiency with transport digitalization

The FMCG industry is experiencing a wave of new entrants to the market increasing the competitive tension according to Colliers. At the same time, consumers are changing their product preferences faster than ever before. Missed delivery windows lead to retailer fine saccording to BCG, making secured transport capacity a continuous priority among FMCG companies. This pressures companies to improve operational efficiency in their transport activities as well as improve sustainability through electrification, something that can only be achieved with an intelligent freight mobility platform.

A freight mobility platform works as a fundamental enabler for realizing electric autonomous transport systems while improving efficiency. By tracking and analyzing historic routes, distances driven and shipping volumes a platform can achieve both significant emission reductions and cost competitiveness throughout entire freight networks. Unpredictability in demand can be handled by investing in forecasting systems. However, once a company has attained 75-80% forecast accuracy according to McKinsey, it is smarter to then invest in reactive capabilities. A freight mobility platform allows for increased flexibility by tracking factors such as the weight of transported goods, variations in topography, and traffic conditions, among countless other factors.

The digitalize phase is essential for getting the necessary digital infrastructure in place for electric trucks. An intelligent operating system can suggest customized recommendations on where in the supply chain electrification would have the greatest impact, and how to effectively implement an EV charging infrastructure. Besides setting the basis for electrification, the long term goal of a freight mobility platform is to improve the business case exponentially through automation.

Decreasing environmental impact with intelligent electrification

Electrification provides a competitive advantage for FMCG companies, as consumers are increasingly using sustainability as a purchasing criterion. Consequently, the big FMCG players will need to trumpet green initiatives, as new entrants to the market are positioning themselves as increasingly trendy local producers, a strategy that particularly appeals to millennials according to McKinsey. As consumers are beginning to inspect the entire supply chain according to EY, ensuring sustainable transport therefore creates positive customer associations which results in stronger sale figures.

Before implementing electric trucks, companies must consider the availability of current electric charging infrastructure near FMCG production sites, as well as how to operate electric transport for maximum efficiency and cost-effectiveness. Since electrified trucks will not be effective if treated as a direct replacement for diesel trucks, an intelligent system is necessary to identify where electrification will make the most impact in the transportation network, as well as account for specific considerations such as the toll refrigeration takes on estimated electric vehicle range.

As variations in FMCG product assortment will only increase in the future as a result of fragmented customer demands according to Colliers, operating electric trucks becomes relevant because of the need for smaller and more frequent transports. Employing these transports will not only mean advancing beyond the breakeven point for the upfront investment in electric transport in a short amount of time, it will also make room for greater shipping flexibility, especially considering impending restrictions or bans on diesel vehicles in many major urban areas according to Bloomberg. Through coordinated planning and execution tailored to individual supply chains, electric trucks cannot only reduce emissions significantly at the source, but also remain cost-competitive compared to diesel freight. While transport electrification coordinated by a freight mobility platform has more immediate benefits, the implementation of autonomous vehicles improves the business and sustainability case exponentially.

Eliminating emissions and reducing freight costs through automation

In order to stay on top of demand FMCG companies must adopt an agile approach according to McKinsey, implementing state of the art technologies such as autonomy. As many transports occur within fenced areas where public road legislation seldomly applies, this helps actualize AET for widespread use even sooner. By utilizing the combination of platform and electric infrastructure, AET can substantially reduce both emissions and transport costs.

Logistics costs are a top concern among leaders in the industry, as FMCG companies bear 60% of the costs from production to retail according to BCG. Implementing AET will enable much needed cost savings. This is in part because AET solutions are excepted from hours-of-service regulations that determine how long a truck driver shift can be. Combining AET with increasingly autonomous production activities also means that both production and transport operations will effectively be able to run continuously, leading to improved efficiency and ability to meet growing demand.

Today AET solutions like the Einride autonomous vehicle are being operated at FMCG sites in Sweden, leading to increased scheduling rates and improved optimization, ultimately enabling faster supply chains and essential cost reductions. With a tiered approach to implementation, the autonomous vehicle can be operated autonomously in more controlled environments, but also piloted remotely in situations that are more complicated, such as a busy urban area or loading dock. AET also addresses the ongoing global truck driver shortage addressed by the American Trucking Association. Full scale AET solutions will not only eliminate the need for a driver onboard every vehicle, it will also create new job opportunities and transform existing roles, easing anxiety around the future of work

How to get started

While the FMCG industry is constantly evolving and innovating, current transport solutions have lagged far behind, and will not be able to keep up with sustainability goals and demand without significant change in the form of AET. The transition to a more sustainable and cost-effective world of freight is a step-by-step process. With deep insights into industry-specific challenges Einride offers functional solutions customized to suit individual transport networks, and has already implemented these technologies at customer sites. The future of freight mobility is already here.

‍