Prime Movers Lab Webinar Recap: The Future of Supply Chain

Packaging, air cargo transport, and food supply chain experts dissect challenges and solutions for supply chain issues

Supply chains are complex. For a great illustration, check out the “Journey of a Burger” — specifically the Big Mac — and its more than 30 ingredients (not counting the ingredients in the secret sauce)! Getting raw materials from the right sources to the right places involves a lot of moving parts, networks, infrastructure, and technology.

We could dissect the topic of supply chains into two categories: the classic “transport” category (trucks, trains, ships, and last-mile delivery services via autos, drones, and bikes) and the “network of systems” for production (raw material sourcing, inventory, warehouse automation, packaging, tracking, etc.)

In our limited hour, Prime Movers Lab Partner and Head of Manufacturing Bryan Bauw and I were fortunate to have experts lead us into both categories while using the food supply chain as our use case across the system, addressing waste and sustainability along the way. You can catch the full discussion on our YouTube channel. Now I’ll share a few key takeaways!

Challenges

Transparency. Food “loss” or waste is driven by a lack of transparency and traceability (e.g. we didn’t know it was sitting on a tarmac for 2 hours in a metal box, in the blazing sun) and over-centralization (the average food item travels 1500 miles from farm to plate). We have optimized for cost efficiency, but not quality or resiliency.

Inefficient use of capacity. Cargo aircraft are not topping out at weight. They are “cubing out.” In other words, there is wasted capacity to transport cargo because of the lack of cargo volume. Since the birth of e-commerce, and especially given consumers’ appetite for quick turn delivery (love me some Amazon Prime!), cargo density [1] has dropped immensely. (Think of opening your Amazon package and seeing a bunch of packaged air). With costs moving to a density model (versus cost per weight), cost-effective packaging improvement will be the next challenge. And you won’t do that with hands-on labor.

Labor shortages. In the past few years, there has been a tremendous drop in available labor, accelerated by COVID-19 [2], which is pushing out delivery schedules. This is changing behaviors in how businesses respond to customer requests — rather than looking at how to price the labor, the question is how to automate. The schedule is further threatened by the lack of availability in robotic systems due to the increased demand to automate. Automation also allows businesses to combat waste, which brings us to…

Sustainability. Addressing sustainability is becoming more critical — not just to appease customers and fight climate change — but to lower costs. Better demand planning is required to purchase the right amount of material reducing obsolete inventory. Better processes and monitoring are required to minimize scrap.

Solutions

Package on demand. We are starting to see there are more technologies out there that are letting us produce differently, to save money, but also to drive more sustainable solutions. E.g packaging on-demand systems where packaging is the exact amount, for the exact quantity, and the exact size.

Tech to reduce food waste. In the food and ag supply chain, we are at an inflection point where tech capabilities can be incorporated to address consumer demand for sustainability and a company’s bottom line. An example is Clean Crop Technologies using cold plasma technology to reduce aflatoxin (various poisonous carcinogens and mutagens that are produced by certain molds)and food-borne pathogens. These account for 10% loss in yields. There are practices in place to try and address those but cold plasma technology improves upon that by reducing up to 90% of the contamination at a cost that is up to 80% cheaper and uses 20 times less energy.

Hydrogen and sustainable aviation fuel. Opportunities in aviation exist to bridge the huge gap between cost and sustainability. An inflection point could be coming as countries consider carbon taxes on aviation.[3] One challenge will be updating the infrastructure. Production of green hydrogen is nowhere near sufficient (see our Hydrogen Webinar Recap for more on this topic). Same is true for sustainable aviation fuels (SAF). At our pre-pandemic height, commercial aviation consumed over a billion gallons of fuel per year [4]. Current SAF production is less than 0.5 percent of that [5].

Transparency tech is not just tracking. Transparency is critical for the food supply chain and also other perishable, sensitive, and/or high-value assets. The network of distribution systems is disparate, relatively opaque, and difficult to connect efficiently. Solutions go beyond tracking devices. Examples include better knowledge about local resources (rather than sourcing out-of-area), which may eliminate some cost and schedule in sourcing while increasing quality. Smart packaging is another opportunity, like yogurt crates that change color to indicate when food temperatures exceed particular limits. From the food and agriculture perspective, small to medium-sized producers and distributors make up 93% of the market, and 97% still use antiquated methodologies like paper tracking and manual input. Digitizing their operations may help them identify more inefficiencies to target with tech.

Autonomous airfreight. For large-scale freighters, autonomous airplanes are not necessarily about reducing costs but addressing labor shortages caused by a shortage of pilots and the time to scale to meet increasing global pilot demand [6]. The public acceptance of “no pilot in the cockpit?” may still be far away, but not for cargo. And demonstrating reliable cargo services may accelerate the adoption of passenger aviation!

Other Opportunities

Clearing Customs Quickly. International freight needs to be cleared by the U.S. Customs and Border Protection. Though air cargo can reach its destination in a day, it may take up to 2 additional days to clear. (Ocean freight can take 3–5 days. Sounds long but still impressive given that more than 11 million containers arrive at our seaports each year [7].)

Global Strategy for Satisfying Regulations. The load on U.S. ports demonstrates that the supply chain reach is global, with regulations across many different countries and territories. The challenge is that these regulations are different, e.g. around greenhouse emissions and other Environmental, Social, and Governance (ESG) targets. This puts pressure internally on corporations to comply with regulations that may be more ambitious than here at home in North America. This may drive systems to help efficiently navigate the different regulations, and early adoption of new technology to comply. Everyone is on their own journey to sustainability. Europe is further along; China is more focused on price per pound or timely delivery. Following the more rigorous ESG type regulations may initially strain supply chains more (for example, cause some non-compliant airplanes to not be flown, reducing transport capacity).

Bottom Line.

People are conflicted. They want sustainable and local products. But the future of the supply chain will still have to bend to the huge demand for convenience, fast delivery and low prices.

Another huge heartfelt thank you to our panelists, whose bios are linked below.

• Alicemarie Geoffrion is President of Packaging in DHL Supply Chain North America, responsible for primary and secondary packaging including engineering and design through to distribution. She also is a member of the World Economic Forum. Previously she was Vice President of Omnicom responsible for new business development in supply chains.
• Aleksey Matyushev is CEO and Co-founder of Natilus, reinventing freight transportation through innovation and advanced technologies, to make air freight costs competitive to cargo shipping and dramatically improve delivery times. Aleksey is a serial entrepreneur and fellow aerospace engineer!
• Pete Oberle is a Managing Partner at Trailhead Capital, an investment firm that promotes regenerative agriculture. There, Pete’s focus is on the agriculture and food supply chain. He has 23 years of finance and investing experience. Since 2014, he has been an angel investor in agricultural, food, renewable energy, environmental and human health spaces.

Prime Movers Lab invests in breakthrough scientific startups founded by Prime Movers, the inventors who transform billions of lives. We invest in companies reinventing energy, transportation, infrastructure, manufacturing, human augmentation, and agriculture.

Sign up here if you are not already subscribed to our blog.

References

[1] The Law Dictionary, What is DENSITY OF CARGO, TheLawDictionary.org, n.d., <https://thelawdictionary.org/density-of-cargo/ >, accessed 18 March 2022

[2] Dilip Bhattacharjee, Felipe Bustamante, Andrew Curley, and Fernando Perez, “Navigating the labor mismatch in US logistics and supply chains”, McKinsey & Company, 10 December 2021, <https://www.mckinsey.com/business-functions/operations/our-insights/navigating-the-labor-mismatch-in-us-logistics-and-supply-chains>, accessed 18 March 2022

[3] Olivia Lai, “What Countries Have A Carbon Tax?”, Earth.Org, 10 September 2021, <https://earth.org/what-countries-have-a-carbon-tax/>, accessed 18 March 2022

[4] Bureau of Transportation Statistics, “U.S. Airlines June 2021 Fuel Use Up 8.1% from May But Still Down 23.8% from June 2019”, Department of Transportation, 4 August 2021, <https://www.bts.gov/newsroom/us-airlines-june-2021-fuel-use-81-may-still-down-238-june-2019> accessed 18 March 2022

[5] The White House, “FACT SHEET: Biden Administration Advances the Future of Sustainable Fuels in American Aviation”, 9 September 2021, <https://www.whitehouse.gov/briefing-room/statements-releases/2021/09/09/fact-sheet-biden-administration-advances-the-future-of-sustainable-fuels-in-american-aviation/#:~:text=Current%20levels%20of%20domestic%20SAF,driving%20domestic%20innovation%20and%20deployment>, accessed 18 March 2022

[6] Thomas Pallini, “US airlines are combating the pilot shortage by raising pay, lowering requirements, and hiring from Australia”, Business Insider, 17 January 2022, <https://www.businessinsider.com/airlines-respond-to-pilot-shortage-higher-pay-lower-requirements-2022-1>, accessed 18 March 2022

[7] U.S. Customs and Border Protection, Cargo Security and Examinations, Department of Homeland Security, 25 October 2019, <ttps://www.cbp.gov/border-security/ports-entry/cargo-security>, accessed 18 March 2022.