The optimisation of distribution logistics offers significant potential for cement producers to lower their CO2 emissions in the race to net-zero.
GC: What are the major changes you have observed in terms of how the cement sector ‘does logistics’ during your career to date?
TB: When I entered the sector in 1991, logistics and transport planning moved from ‘pen and paper’ to Excel spreadsheet tools. For some years there was little change, but from 2000 to 2005 a series of important improvements came into play.
First came a major increase in the availability of data, which, for any given distributor, now doubles every 30 - 36 months in our industry. Alongside this, affordable computing power came on the scene. This enabled logistics algorithms to break out of the ‘computer nerd zone’ and transport planning software powered by algorithms became accessible to dispatchers, plant operators and senior management. Additionally, in the 1990s, cement producers were preoccupied with process efficiency at the plant, with distribution applied as an afterthought. Now distribution is an integral part of the process.
GC: Where did this trend first take hold in the cement sector?
TB: The early adopters were in Europe, particularly in the east, which was stretched to maximum capacity in the mid-2000s. Suddenly the critical gains that could be made were no longer at the plant, but in ensuring the product reached the client in a timely and cost-effective manner. Typical projects that Inform was involved with at the time included maximising loading facilities for greater output instead of clients investing in extra ones.
Today Inform receives enquiries from cement producers all over the world. Anywhere that service quality needs to be high, cost reduction is important or where the environmental footprint needs to be reduced, producers should be focused on distribution. And it’s not only in regions with overcapacity. Almost everywhere at the moment, we see finance directors cutting down on the number of distributors they use and optimising that smaller business opportunity. Less adept financial directors will try to satisfy all of their previous hauliers and share out the work evenly. This is not optimal for any party and the producer will end up wasting money.
GC: How is the technology changing at present?
TB: Up to around 2015, transport planning systems powered by algorithms and AI could optimise the tactical plan for the following shifts or days, plus in real-time on the day of execution. Now in the 2020s, we have entered a new phase. There is historical data available that allow machine learning algorithms to make predictions about the future.
For example, how can we predict future order growth? Past transport data may offer insights that we can overlay on external data, e.g. economy growth forecasts, changes to government policies, whether your plant is reliant on a particular sub-sector of the economy and so on. However, even the best data cannot model all future events, for example the effects of further Covid-19 lockdowns or the potential for an investment bubble to pop up.
At the same time, I would like to highlight that the relationship between cement producers and software companies is changing too at the moment. Big cement players increasingly invest directly in software firms, notably the recent investment by HeidelbergCement. The connection between ‘bits and bytes’ and ‘big mills’ is getting closer and closer.
GC: How are cement sector enquiries changing at present?
TB: I would say that we have two types of enquiries. There are those that have done a lot of research and know exactly what they want out of the system. These kinds of clients are fantastic to work with. Then, we have some clients that get ‘blindsided by the shiny stuff.’ They are like a hungry person at an ‘all-you-can-eat-buffet’ who wants to try all of the different dishes and will feel like they have missed out if they don’t have a bit of everything. Like in real life, they end up biting off more than they can chew. They all too often invest in marginal components that, for their business, will bring fairly small gains.
As Inform, we always ask these kinds of clients, ‘Why do you want this component? It contributes very little to your business case.’ Often they say ‘because my competitor has it!’ This is the wrong answer. Just because the component in question contributed something to a competitor’s business does not necessarily mean it is good for you. Inform wants to help its clients to make a good return on investment and will point out pitfalls, even if that means the client has to look hard at the project and reassess its goals. Inform may not be the cheapest option and we will ask difficult questions, but our process approach provides effective solutions and, with them, the high returns on investment that the client seeks.
GC: What are Inform’s expectations for the cement sector in 2022?
TB: We expect a continued recovery in terms of demand and, on the logistics side, that customers will increase their requests for solutions that help them on the journey towards net-zero CO2 emissions. I really hope that there will be a realisation that distribution is also an important part of the CO2 puzzle - one that cannot be ignored. And it is a low-hanging fruit compared to carbon reduction efforts on the production side. Personally, I’m really excited to open up this opportunity for our industry!
In the longer term, the metric we have to look at is energy consumption, not per tonne of cementitious material, but per tonne of cementitious material delivered. And delivery is not just the truck, train or ship, but also how it is loaded, how it was unloaded, whether or not the loading / unloading process affects other trucks, trains or ships, etc.
When we consider factors like this, some interesting questions creep in. Among the most fundamental is ‘Does that plant need to be there?’ Lots of people don’t seem to want to consider this, but how about closing a plant that is too far from the market and / or switching to a localised grinding model with imported clinker? On the other hand, the producer may find out that it is more sustainable to ramp up production at an efficient plant that is actually quite far from the market. The CO2 saved on production might be more than that emitted by the trucks.
In the future, more and more producers are going to have to start looking at these kinds of questions. It may shape the sector in interesting ways. There are various CCS projects at the moment. If, for example, the HyNet project takes off at Hanson Padeswood in UK, why not ramp up production there and supply all of the UK’s clinker from that single site?
GC: How else could cement sector logistics look different in 10 - 20 years?
TB: Without a doubt we will see electric and hydrogen vehicles take hold. At the same time, we will see progress on the road to self-driving trucks that will require considerably less input from the driver. These things will be very visible and something that companies will enjoy showing off. Autonomous trucks can help increase road safety and EV or hydrogen trucks can be a major contributor to net-zero, provided they are powered by truly renewable resources. But these efforts should not hold back our industry from investing into the ‘digital groundwork.’ By this I mean, implementing algorithms in their transport planning and other ‘under the surface’ process transformation.
GC: How will CO2 trading schemes and other emissions taxes affect Inform’s activities in the next 10 - 25 years?
TB: ETSs are here to stay and, with additional factors like the EU Carbon Border Ajustment Mechanism (CBAM) coming in, their influence will only spread. Cement producers and logistics companies should not fight this. It is like fighting the weather.
Inform is already responding. The next release of our software will include Global Logistics Emissions Council (GLEC) compliant CO2 reporting capabilities. The GLEC framework is the only globally recognised methodology for harmonised calculation and reporting of logistics greenhouse gas emissions across multi-modal supply chains. This will mean that users have this information at their fingertips rather than having to retrieve it ‘by hand.’ As they say, what gets measured, gets managed, so this should also improve the sustainability of fleet operations. It will also help clients to demonstrate their efficiency to their customers, who increasingly request green solutions.
Additionally, coming later down the line will be factors like, how do we navigate our trucks best in Ultra Low Emissions Zones? Then... How will electric trucks work within the sector? At present they have a range issue and our optimisation algorithms will need to take into account charging times. The elevation profile of the route to the customer is also important, as electric vehicles are more efficient in flat areas than in mountains. Where should you place charging points? We will look at this with clients and help them to work out the best solution.
GC: How will the software itself change?
TB: There are two main elements. One trend is green coding, i.e.: lowering the energy consumption of the software itself. This is seen across all software development right now. For example, to power a business laptop for one year takes roughly 100kWh, the equivalent of 10L of petrol. What if we could reduce that to 7 - 8L of petrol? That may not sound like a lot, but scale it up to the huge server racks used by big corporations and we are talking about millions of fuel canisters every hour. Any savings we can make through green coding are a big win.
The other is transparency of coding. Most users know that the algorithm ‘does something’ but few understand what’s really going on. We need to make computer decisions more understandable to humans. An area that many can relate to is credit scoring. We know that doing certain things may or may not affect our credit score. But ask a member of the public to describe exactly how much doing ‘X’ will affect the score and for how long, and they will wave their hands in an exasperated fashion and say ‘I don’t really know!’
Software companies like Inform don’t want that uneasy relationship to exist between their clients and their software, so transparency of why the software has suggested a strategy and what led to that decision needs to be better understood. We know that greater understanding will enable clients to make better use of the software.
GC: Do you think cement producers will still use clinker, as we know it today in 2047?
TB: My personal view is that we will always need a certain quantity of the ‘grey stuff.’ However, we will need a lot less of it. Of course, in 2047 clinker will be produced entirely with waste-derived fuels, hydrogen, renewable power, waste heat recovery systems and so on. And on the face of it, less clinker production may not seem good for Inform. However, as long as there are customers that need to load and distribute materials to serve their clients, there will be opportunities for logsitics experts, including my younger colleagues, to 2047 and beyond.
GC: Thomas Bergmans, thank you for a very interesting discussion.
TB: Thank you very much indeed - and congratulations to Global Cement on its 25th Anniversary!