?? Sustainability: From ambitious activity to authentic achievement.

Case Study – Sustainability within Siemens Smart Infrastructure Supply Chain - Logistics

The supply chain of the future does not only consider robust elements, but also focuses on the environment and customer. This requires smart, digitally supported decisions, especially in our dynamic world.

The digital transformation helps us to do more with less, being more sustainable in our actions.?

Sustainatunity = Sustainability + Opportunity?

READI..... for sustainable supply chains??

From ambitious activity to authentic achievement – the transformation into our supply chain sustainability ecosystem. Reduce, Avoid and Compensate is the direction for us.??

Sven Markert & Christian von der Schulenburg ??

Sustainability has taken over the critical path influencing our daily business life. Design, Plan, Source, Make and Deliver are requested to shape an ecosystem fulfilling the global needs.??

In SIEMENS there is a dedicated framework, named DEGREE, that holistically focuses on sustainability.??

DEGREE is a strategic framework for environment, social and governance (ESG) which defines its environment, social and governance (ESG) targets. A holistic approach is followed with six fields of action:??

1. decarbonization,??
2. ethics,??
3. governance,??
4. resource efficiency,??
5. equity??
6. employability???

In Smart Infrastructure Supply Chain Logistics the key objectives for sustainability are decarbonization and resource efficiency.??

Having a clear picture of a green, clean, sustainable supply chain in mind in a world full of trees, with fresh air and drinkable water directly from the creek.?

We do not want that our logistics, our supply chain considered as a source of waste, dirt, dust, and noise. No one should see mountains of packaging material or being confronted with loud and noisy dirty diesel trucks??

Challenge:?

The following questions arise:??

• How can we as the Smart Infrastructure Supply Chain Logistics department tackle the key objective???
• How can we implement effective sustainable change??
• How can we manage uncertainties???
• How can we effectively foster engagement within the organization???

It is essential to set clear directions to ensure the organization is focussing on the right things, as we all are restricted in resources, time and money. Directions create freedom and empower our teams to develop ideas and implement them bottom up.?

We ensure the impact by making our selected activities:?

• easy to understand,??
• easy to measure,??
• easy to scale up?

Our approach?

Starting with a dedicated Smart Infrastructure Supply Chain & Logistics Sustainability Charter, reflecting our understanding and role in decarbonization and resource efficiency we invest in three main action fields reduce, avoid and compensate (RAC).??

Our overall Smart Infrastructure Supply Chain & Logistics Strategy (READI) does not only support these fields, but actively motivates the community as caring for the environment is part of our vision.??

Our Sustainability Charter:?

We understand the nature of our business, which requires hardware transport from A to B, and thus the consumption of resources and the generation of CO2 emissions. Therefore, we acknowledge our responsibility to actively support the company-wide DEGREE strategy by reducing CO2 emissions, minimizing landfill waste, and adhering to ESG (environmental, social, governance) regulations.?

We drive these goals within our area of responsibility and collaborate across the end2end supply chain. As experts in warehouse, transport, supply and order management, we will not only strive for more knowledge in this new area, but also become experts in decarbonization and in similar fields.??

We anticipate changes in regulations, market requirements, and cost structures and aim to drive the supply chain towards the respective DEGREE targets along the supply chain. Within our arm’s length, we advocate for these changes and confidently believe that we will create impact beyond our mandate.”?

With our partners in the internal and external networks, we develop adjustable solutions to transform the supply chain towards decarbonization and resource efficiency.??

Throughout our organization, we can find activities to improve our performance towards our sustainability goals. As the main CO2 reduction will come from the material flow, it became evident to start with transport and warehousing.??

Improvements will happen in a 3-level layer model - from an individual case via a network optimization to a supply chain design/ redesign approach.??

Transformation into sustainable eco system?

In order to get some insights on how we tackle the challenges, we will share two examples from Siemens Smart Infrastructure Supply Chain Logistics.??

Example 1: E2E CO2 Bridge?

We developed our end-to-end CO2 Bridge. A comprehensive overview using and recalculating existing data in source, make and deliver and connecting them into one picture. This report generates an understanding of the key drivers of emissions and is the baseline to set the right activities for decarbonization within the organization.? It concentrates with the available data on the measurement of the CO2 Footprint. ?

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For Scope 1, we are able in this to automatically upload the data for all emissions per type and location. These data is already collected since many years and available for download.??

Scope 2 is also available for production locations, managed by Siemens and its affiliates.??

For upstream and downstream, we need different data to calculate the emissions.?

For downstream Siemens Smart Infrastructure Logistics decided to use its own transport data, to calculate the emission. As most of our transports are managed and paid by ourselves, the different transports are transparent, with regard to the transport-mode used to supply products & solutions to the customer.?

Based on Data of EcoTransIT, a renowned institute for CO2 calculation, we can calculate the emissions based on an approved approach, taking into consideration 260 different kind of airplanes, 40 different truck types as well as 32 different rail types, also being able, to calculate multimodal transports??

On the upstream side, the calculation on transport is more complex, as not all suppliers provide the data for their transport. To have a harmonized reporting on supply side, we use as a data base the Siemens Carbon Web Assessment (CWA), that every supplier needs to accomplish.?

The Siemens CWA is in general based on the following methodology:??

→ The basis is the model calculation of our external partner, which divides our suppliers into product and service categories and country of origin and assigns an industry average for CO2.??

→ Supplieres are asked to provide detailed information via the CWA. Based on their answers, a calculatuion is performed. ?

The information is received through data harmonized imports from the different data sources, then aggregated in our Snowflake Data warehouse, harmonized, and finally visualized with our frontend application, in this specific case with Qlik-Sense Dashboard. It provides a good transparency to our Supply Chain Partners & stakeholders.?

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The transparency about the carbon footprint for source, make and deliver (CO2 Bridge) has been rolled out. Now we upscale and redirect to combine bottom up and top down approaches, reflecting the Macrotrend: Progress on Broader Sustainability Agenda.?

Real activities out of these transparency efforst happen when we apply the RAC concept:??

R means Reduce and stands for activities to find an optimization of ratio of cost and emission impact as well as cost out and cut emissions in one?

A stands for Avoidance of emissions e.g. through the mode shift from air to road/sea/rail, as well as route optimization and space consolidation.?

C represents Compensate and focuses on broad and comprehensive view on e2e supply chain activities and measurement of CO2 relevant optimizations for Scope 3 emissions.?

This is not only limited to transport but also valid for warehousing, as well as packaging.?

The authentic achievement is for us in Smart Infrastructure Supply Chain Logistics the creation of a “Sustainability Ecosystem”.?

As a complex network / interconnected system, it is our vision of interconnected levels from individual optimization, connect the results to scale. A key part of the sustainability ecosystem are also universities.?

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Example 2: Outside-in view Academic research for network optimization?

1. One Co-creation project with “TU Berlin”. We successfully completed an ideation project in warehousing with the Technical University (TU) of Berlin. We successfully combined the operations of warehousing, transportation, and packaging in one network to amplify the effectiveness of our endeavours and to minimize our environmental impact. The students conducted three comparative analyses, comparing plastic and cardboard filling material, one-way pallets and pallet cages, as well as one-way wood boxes and metal boxes. Calculating CO2 emissions and comparing the warehousing, transportation and packaging effects, the collaboration resulted in solid recommendations for implementation.??
2. Ongoing Competence Centers “Push Sustainability” Prof. Dr. Matthias Fifka and "Supply Chain Design" Prof. Dr.-Ing. Evi Hartmann with the Friedrich-Alexander University (FAU) Erlangen. The aim is to get an academic outside/in view from the next generation of leaders. We for example established a seminar that targets sustainable solutions in the area of transportation, warehousing, and packaging to reduce, avoid or compensate on a network view. We receive knowledge from the international Masters cohort at the FAU and could share this within our organization, furthermore we created an environment which fosters diverse discussions supporting us in creating our sustainable ecosystem. We asked questions like: What are the current state of the art solutions in regard to green supply chains? How can we implement environmentally friendly processes in our supply chain? What needs to be done to achieve our goals and painting the picture of a green supply chain? What does academic research state and what are future sustainable possibilities to invest in????

Addressing the following fields and creating measures:?

• innovative solutions to sustainable packaging, as well as ideas for repurposing and upcycling inbound material.?
• "greener" warehouses by comparing the warehouse network concepts regarding traditional criteria like timely delivery, storage and transportation costs as well as ecological criteria, in particular emissions from logistics and building operations (LEED).?
• extending the view in transport logistics with energy consumption of our material handling equipment (MHE) as well as the prospects of new technologies in the future.??????????

Living Ecosystem??

The presented examples are an important part of our transformation to a sustainable supply chain.??

Managing transformation requires key performance indicators (KPI). For our ecosystem we selected/ created the following KPIs:?

• Tons of air shipment in relation to total shipment. This measurement is done, as 10% of the transports (Air) is responsible for 80% of the CO2 emissions.?
• Number of alternative transport routings introduced (E-Trucks, Cargo-bikes for last miles transport, LNG Trucks, H2 Trucks) in order to show the progress initiated by our organization.?
• Number of warehouses assessed according to a newly developed sustainability assessment, with the target, to have the Warehouses completely Carbon neutral.?
• Number of external warehouses fulfilling our decarbonization and resource efficiency requirements (e.g. LEED), in relation to the total number of external warehouses.??
• Number of 3PL suppliers within the CWA, in order to get a better database for our improvement measures?

?The ecosystem understanding guides us to a connection to the various share- / stakeholder?

• We collaborate with our suppliers, to improve our common CO2 Footprint.??
• We co-create solutions with our forwarders to improve route-planning and to optimize space in our transport network.??
• We use the knowledge of our 3PL to optimize operations in Warehousing.??
• We ask experts to support us in the execution of carbon reduction programs.?
• And, we cooperate with universities and research institutes to integrate the latest results from research into our carbon reduction execution plans.?

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Conclusion?

• Siemens strategic framework DEGREE provides a central guidance on company level, sparking projects and accelerating activities aimed at enhancing sustainability in our supply chains with focus on decarbonization and resource efficiency
• Our dedicated sustainability charter gives a clear commitment and direction?
• Transformation to a sustainability ecosystem with holistic approach?is key?

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