Saving Green by Going Green: The Financial Impacts of Lowering Emissions Through Optimized Routing
Businesses make decisions driven by financial motivations, as their main purpose is to create value. While this often equates to profits, value creation can come in other forms. Sustainability and environmental responsibility, in particular, are areas where businesses might see value as separate from profitability. However, sustainability initiatives not only benefit the environment and ensure compliance with regulatory requirements, but they can also align with financial benefits.
Perhaps the main motivation behind sustainability should be altruistic, but when shippers get into the details, particularly surrounding their Scope 3 carbon emissions, they can discover how decarbonization efforts can actually help in reducing costs for increased profits. Similarly, when vessel owners can uncover ways to make their routing more efficient, they benefit from reduced operating costs on top of lower emissions.
Why is the Perception that Sustainability Costs More?
The idea that sustainability is more expensive may originate at the consumer level. Eco-friendly products are often priced higher than their traditional counterparts, but for businesses’ Scope 3 emissions—from activities outsourced to other companies—it’s not the same situation. With consumer products, it might be a matter of using alternative materials that come at a higher price due to scarcity, but shipping and logistics is a service, one that can be performed more economically.
There is indeed the consideration of an initial investment in the necessary equipment or technology to make shipping more environmentally friendly. Still, this investment is not directly on the business customers. For example, vessel owners would experience an initial investment to retrofit ships and invest in fuel efficiency upgrades that reduce fuel consumption. However, the shipper wouldn’t see this cost directly. It might result in higher rates, but there is also the factor of vessel owners striving to remain competitive.
Essentially, industry-wide rates might increase due to regulations, but when shippers are making decisions by comparing the costs of one service to another, those that are significantly more expensive will be eliminated. By being well-informed on their decisions, both the costs and carbon emission outputs, shippers can find opportunities to improve their sustainability without paying more.
Vessel owners must then seek ways to keep their costs down through efficient routing, helping their own operating expenses and keeping them competitive for their shipping customers.
In a High-Stakes Logistics Landscape, Cost Optimization is Key
The fact is that logistics often play a central role in determining a company’s success. We only need to consider the Amazon effect to see this—what’s important to customers is how well a business can compete with the most optimized competitors. This is not simply about shipping speed; cost optimization in this area is also critical.
With cost-optimized logistics, companies are better positioned to offer competitive pricing for their customers. In industries with thin margins, even slight savings in logistics can significantly affect profitability. At the same time, cost-effective practices can also help companies manage logistics volatility and vulnerability within their supply chain. They are more in tune with the data behind their decisions and can adjust their strategies quickly.
As the past few years have been a reminder of the unpredictability of global events, cost-efficiency helps companies navigate present challenges and ensure they are prepared for whatever the future may bring. One of these future areas is likely to be increased environmental regulations. When shippers and vessel owners are prepared to align with new regulatory standards, they get the benefits of increased agility, plus the ability to appeal to their customers concerned with eco-friendly practices.
Low-Quality Routing Comes at a High Cost
Sustainability is all about the principle of utilizing resources—whether materials, energy, or time—in the most effective manner to minimize waste and reduce negative impacts on the environment. This optimal use of resources naturally leads to cost savings for businesses.
Routing can give us a clear visual metaphor for this concept. The shortest distance between two points is a straight line; any detours from the shortest path result in wasted emissions. Of course, the actual route taken by vessels must consider traffic separation schemes, SECA/ECA zones, piracy zones, canals, and port entries.
For shippers, ocean freight shipping also works much less like a chauffeur service and more like a pooled car-share. (This itself helps keep total emissions low.) Services are determined by overall demand. If many shippers are causing certain ports to be in high demand, then any shipments on the vessel requiring a different port will have to wait until the vessel makes its rounds.
Inefficient procurement decisions for those shipments, plus inefficient routing by the vessel owner, contribute to longer transit times and increased fuel consumption. This means higher operational costs for the vessel and higher rates for the shipper.
Optimizing Routes for Cost Savings with Searoutes’ Routing API for Vessel Owners
Searoutes provides the data shippers need to find the greenest procurement option for any shipment.
Searoutes also provides a Routing API to help vessel owners achieve the most accurate distances for predicting arrival times, monitoring fuel consumption, estimating CO2 emissions, and computing deviation costs, for point-to-point, port-to-point, and port-to-port sea routes and sea distances.
To navigate emissions control areas, vessel owners can decide whether to travel in SECA/ECA zones. They can know the shortest route around these zones or the distances traveled within these zones, which helps in better monitoring of fuel consumption. For special zones, like piracy zones, territorial zones, and canals, vessel owners can bypass specific areas, zones, or even an array of areas based on their requirements.
A vessel’s specifications, such as its maximum draft or dimensions, are also factors in determining its route. With Searoutes’ Routing API, vessel owners can know the safest and shortest passages suitable for their specific vessel. By inputting their departure date and time, vessel owners get visibility into the Estimated Time of Arrival, factoring in the vessel’s maximum service speed.
Ultimately, these features result in the following benefits for vessel owners, which they can use to serve their customers better.
1. Fuel Efficiency and Cost Optimization
Searoutes’ Routing API taps into real-time data and employs advanced algorithms to optimize routes, considering factors like vessel-specific fuel efficiencies and suggesting optimal speeds. Avoiding congested routes and taking the most fuel-efficient paths helps reduce overall fuel consumption, leading to cost savings in fuel expenses.
2. Reduced Transit Times and Operational Efficiency
Searoutes provides valuable insights into the most efficient routes, helping vessel owners plan journeys that minimize transit times. This efficiency extends to port calls, loading/unloading times, and overall logistics operations, effectively reducing idle time and enhancing operational productivity. The result is faster deliveries, improved operational efficiency, and potential avoidance of added fees for delayed shipments, all contributing to cost savings and increased customer satisfaction.
3. Avoidance of Congested or High-Cost Areas
Searoutes’ Routing API takes into account real-time traffic, port fees, congestion data, and other relevant factors to suggest alternative routes that help vessels avoid areas incurring high costs or experiencing heavy congestion. By rerouting to more cost-effective and efficient pathways, vessels can reduce added charges, toll fees, port expenses, and other surcharges.
Discover Searoutes’ APIs for Cost-Efficient Decision-Making
With the global shipping industry being a major emitter of greenhouse gasses, plus the growing regulatory requirements and increased demand for sustainability from consumers, companies have reason to invest in sustainable solutions. But on top of this, they can also cut their costs. More efficient shipping leads to reduced costs, which means sustainability is not truly a sacrifice in the long term.
With Searoutes’ data and resources, shippers and vessel owners are fully informed on the carbon emission impacts of each decision and find the answers that benefit both the environment and their business. To learn more about Searoutes, get started by booking a demo.