Logistics Infrastructure in India has been transforming at a rapid pace to make supply chain seamless and cost competitive. Whilst there is a continuous pursuit to reduce logistics costs, we are also witnessing other radical changes evolving. A visit to a client’s office till few years back would mean discussions primarily on (a) fastest transit time, and (b) most economical freight. However, over the years these two aspects of transportation are taken care by Data Analytics. Thanks to Artificial Intelligence and other magical tools, within a few seconds the client can view multiple transportation options between origin and destinations, suggesting the fastest and the most economical options, by the computers. Shippers don’t need logistics players like us to guide on their shipment when it comes to factor in only time and freight. 

Shippers in present times reckon other aspects also when deciding logistics mode. Major criteria has been: Carbon footprints, types of fuels used, minimising wastage and shorter haulages to minimise emissions.

For EXIM trade, ocean transportation is the most important leg of supply chain and when it comes to restricting carbon emissions, the maritime industry has undergone far more changes in past one decade then it witnessed in the previous six decades. Post World War 2, there was major technological advances in manufacturing ship engines which started using heavy oil. This happened as oil was readily available with oil refineries sprouting across the world and oil was far more efficient in more speed and mileage for ships. Hence, there was a gradual shift from steam engines to heavy fuel oil and diesel engines and that’s the norm for almost the entire shipping fleet of the world. Over 99% of current world cargo fleet runs on heavy oil. 

Global warming has become a major concern for our planet and Governments and Environmentalists are insisting on each industry to take corrective steps in reducing Green House Gas (GHG) emissions. Various nations have been working actively under the United Nations and there are regular Conference of Parties happening, with the last one COP 27 held in November 2022. The logistics industry has been impacted by the same too, and the maritime industry has set itself the following targets for emissions by ships:

• 20% reduction in emissions by 2030
• 70% reduction in emissions by 2040
• Net zero emissions by 2050

The reduction in 2030 and 2040 is as compared to 2008 levels. 

Achieving these targets is quite an uphill task with almost 99% of world shipping fleet burning heavy oil, which have high carbon emissions. However, signs of this scenario changing is quite imminent as almost 28% of ships on order are going to use alternatives fuels. These ships are being built with newer engines which would use either the new types of fuels or have dual engines for having capability to use multiple fuel types. That’s quite a quantum shift as more and more shipowners are getting convinced to build ships which would use cleaner source of energy. It is expected that over the next five years, there would be more orders for ships using alternate fuels than ships which would use the traditional fuels as bunkers.  

New alternate fuels are many and still evolving. Till now there are only two types of bunkers used by commercial ships – heavy oil / very low sulphur oil, and LNG. However there are other new alternatives being worked upon and new ships today have the option of using the conventional fuel or LNG or hydrogen or ammonia or methanol or electricity even.

Whist LNG is a cleaner fuel than heavy oil and has evolved as a preferred alternative, it still remains a fossil fuel. Hence the pursuit for newer alternatives goes on and as of now, few alternatives have emerged. Hydrogen is supposed to be the best alternative as the only emission it would have it water. Rapid progress has been made in using hydrogen fuel cells as a source of energy not only on ships, but also in vehicles and other equipment. In India, the government has come up with a policy document and is encouraging companies to set up establishments for supply of hydrogen to various industries and various geographies. Despite inherent advantages of hydrogen, the shipping industry is still finding it a challenge to store and supply hydrogen in large volumes. Apart from the huge storage spacehHydrogen would require on ships, keeping the hydrogen molecule in an inactive stage is a big challenge for ships going on long voyages.  

Similarly, there are multiple projects working on making ammonia and methanol as the future fuel for ships. Whilst each have multiple advantages, generating those commercially and making it available to the world merchant fleet would take many years. Presently, there are hardly any commercial ships using hydrogen or ammonia or methanol. There have been few experimental voyages and studies have shown these can replace heavy oils in the future. Maritime industry around the world has been very enthusiastic and many shipping companies have allocated huge funds to these studies. That’s how rapid progress is there month after month and there are clear signs of the way things are moving the in the world of bunkers for ships. 

The maritime industry is rapidly cruising towards reducing carbon emissions for its shippers. Already, many shipping companies publish the carbon emissions each voyage would have thus enabling shippers to know emissions per container on various ships and various routes, and thus opt for the best option with minimal emissions. While this is prevalent in ocean transportation, we would soon see such trends in other part of the supply chain.  

While the shipping segment is getting Green, we are also witnessing emergence of Green Ports. Emerging trends from Indian ports to go green has been (a) Major equipment e.g. gantries, reach stackers, cargo conveyor belts, etc to run on electricity (b) Supply electricity to ships when alongside, thus enabling ships to not use gensets onboard which use oil as fuel (c) Tug boats used for vessel movements to run on electricity (d) Generate such electricity through wind energy / Solar energy. Many of these practises are already prevalent in few ports around the world and its early days in India before the technological transformations take place totally. However, there are early signs already and many Indian ports have already switched over their gantries and such port equipment to electricity. Other milestones of this green ports initiatives would also be achieved over the next few years.

Another change witnessed in supply chain is usage of Electric Vehicles (EV) for transportation of goods/containers. The world has witnessed a surge in demand for EV vehicles as consumers are preferring options to reduce burning fossil fuels. The demand for EV is also increasing owing to increasing number of charging stations in various cities. While passenger car segment has witnessed this rapid change recently, the goods vehicles segment would soon follow suit. It has been lagging in this switch as commercial trailers have to generally cover long distances and there may not be charging points available at intermittent intervals during the journey. However, to start off vehicles ferrying containers / cargo over short distances e.g. CFS to Port and such movements can start using electric vehicles. For the port it is thus natural to provide charging points for electric trailers moving in and out of port. 

Thus the entire supply chain in getting green and this is happening at a very rapid pace. Operators in each segment i.e. road, ports and ships have to rework their strategy to meet this challenge set by shippers who want to minimise their carbon emissions. This perhaps is going to be the most radical change in logistics in the next decade or so.