In the discussion about the energy transition towards zero-emission transportation, the transportation procurement officer at shippers has been missing so far. This should not be the case. Transportation procurement should make a thorough assessment based on knowledge and facts. Smarter procurement is necessary for decarbonizing road transport in collaboration with logistics partners.
More and more shippers, as transportation companies’ clients, want to adopt electric transport to reduce their CO2 emissions by decarbonizing transport. As a CPO, you need to understand the cost structure of electric transportation and the associated investments. Do you have the expertise to work with transporters to make decarbonizing road transport successful?
Choosing electric vehicles in tenders
At last year’s end, I attended a conference on sustainable, zero-emission, bio-based, circular, and industrial construction logistics. Contractors in construction opt for electric road transport because it gives them a better score in tenders based on sustainability. During the conference, one of the contractors mentioned paying rates 2.5 times higher for transportation now due to the 2.5 times higher costs of electric trucks and charging infrastructure. This led to an exciting discussion about the composition of transportation costs, rates, market dynamics, and the future of transportation procurement.
Closing the TCO gap
Although supply and demand determine transportation rates in our ‘free market,’ it is wise for transportation procurers to gain more insight into the cost structure of the transporter (the TCO – Total Cost of Ownership) and the investments that a transporter must make in electric vehicles and charging infrastructure. The advantages for the transporter, such as subsidies and the like, should also be considered. This way, it becomes clear that the costs of diesel and electric vehicles are not so far apart, and they are certainly not a factor of 2.5.
Not all transport companies will survive the energy transition
Understanding the cost structure is essential to discuss with the transporter the implementation of electric vehicles; the more efficient, the better. Additionally, both parties can consider alternative modalities (such as water transport), regional hubs, optimal charging locations, and consolidating freight with other shippers. Sometimes, it is necessary to part ways with a trusted transporter, as not every transport company will survive the energy transition.
Know-how
With diesel trucks, the procurer only needed to pit the transporters against each other. But procuring electric transportation is anything but a straight or modified rebuy. This is a new task for the procurement team. Do you have the expertise for this? Electric road transport has a completely different and uneven playing field. Only in solid collaboration can you figure it out together.
Walther Ploos van Amstel.