In this episode, listen in as Lucy Fishwick, Vice President of Logistics, Diageo and Stephan Schablinski, Vice President, GoGreen, North America, DHL Supply Chain, discuss our path to zero emissions, EV trucks, SmartWays and our partnership with Diageo.
In this episode, listen in as Lucy Fishwick, Vice President of Logistics, Diageo and Stephan Schablinski, Vice President, GoGreen, North America, DHL Supply Chain, discuss our path to zero emissions, EV trucks, SmartWays and our partnership with Diageo.
Speaker 1 (00:10):
Welcome to All Business Know Boundaries, a collection of supply chain stories by DHL Supply Chain, the North American leader in contract logistics. I'm your host, Will Heywood. This is a place for in-depth discussions on the supply chain, challenges keeping you up at night. We're breaking beyond the boundaries that are limiting your supply chain. Today's episode is decarbonizing the supply chain [00:00:30] with Diageo Path to zero emissions. Our guests are Lucy Fishwick, vice President of logistics at Diageo and Stefan Linsky, vice President go Green, north America for DHL Supply Chain. Let's dive in.
Speaker 2 (00:47):
Well welcome both of you. Great to be with you here. We're in Las Vegas at Manifest Conference on day one and you guys are hot off the stage from your industry panel. It was one of the first events and I was telling somebody in the hall this event [00:01:00] generally starts a little more sleepy than it has today. There are a lot of people here and we had a really good turnout for your panel session. So what I'd like to do is just kind of start with self introductions. Your name, who you work for, what your role is there and how long you've been at it. And Lucy, can you lead us off?
Speaker 3 (01:15):
So Lucy Fishwick, I am president of Logistics for Diageo North America. Hopefully got enjoyed our brand. Diageo is one of world's largest premium drinks company. We've got 132 manufacturing sites and [00:01:30] we sell our liquor across 180 different countries globally. I look after our logistics operations. I've been with Diageo 10 years, predominantly most of the time back home in London, but I moved over at the end of March to take operations Rob I previously being in procurement and led our great fast sustainability team.
Speaker 2 (01:51):
Great. Well welcome. Thanks for being with us today. Hi Stephan.
Speaker 4 (01:54):
Yeah, my name is Stephan Schablinski. I'm the vice president of GOG Green at DHS Supply Chain in North America. [00:02:00] GOG Green stands for our decarbonization program and this is my 24th year with the company and I spent the last 15 years in our decarbonization arena. Most of the time I spent in Europe and Asia, but since 2021 and my focus has shifted to North America.
Speaker 2 (02:14):
Good. So we have two imports to North America with both of you and I want to talk about sort of geography effect and how the markets are different and kind of what you're bringing from a perspective having been overseas in other parts of your career. But first, Lucy, you had talked about at Diageo [00:02:30] there are like many other companies you have set carbon targets
Speaker 3 (02:34):
Course. Diageo's ESG program is called Spirit or Progress 30 20 30. So we've grown quite a broad program that focuses around three core pillars. The first pillar is all about cost of drinking. It's really our license to operate. So it's about promoting positive drinking and A DHL who participated in our drink awareness program. The second pillar is all about testing diversity inclusion, and then the final about [00:03:00] ING are green to sustainability. From a carbon perspective, I think it'd be fair to say we've got pretty bullish targets on ambitions, so from a one two, so that is the carbon within our own footprint. We're looking to be net zero by 2030 and then we'll be looking scope three with which is the carbon emissions which stick within our supply chain. We're looking for an absolute 50% reduction by 2030. When you take into growth that we've had enjoyed in the first four years, this decade, that's actually going to be more like a 75% [00:03:30] reduction in real
Speaker 2 (03:31):
Debt. And you had mentioned there were sort of three components of the supply chain side.
Speaker 3 (03:37):
So we've got the decarbonization, which obviously I just shared the goals there. Then the second program is water by preserving water as water is the most and water key raw material for us in our alcohol production. And then the final area is all about circularity and recycled content.
Speaker 2 (03:55):
So Stefan sort of a 1 0 1 on sustainability. Real quickly, what are scope one, [00:04:00] two and three?
Speaker 4 (04:01):
So on scope one carbon emissions are emissions that stem from diesel, gasoline, electricity. So these are scope one emissions, scope two emissions are emissions that come from electricity and power, power plants and scope three emissions, which are the hardest to measure and also to reduce our emissions that come for our transport and supply chain burdens like subcontractors and carriers.
Speaker 2 (04:22):
Okay, and so is that complexity why the target is 50% instead of say a hundred? Yeah,
Speaker 3 (04:27):
Yeah. Well really within our own four [00:04:30] walls of manufacturing we've got a little bit all control, but once we start looking into our supply chain, it's going to be, well, we could collaborate with the VARIS partners that we've got with them, our supply chain to unlock these carbon S. So I think the 50 planet is still quite efficient. It feels like we've got quite a long way to go.
Speaker 2 (04:48):
Okay. So that's a good segue into DHL and Diageo. What's the historical relationship been and then what are you guys working on today? Maybe [00:05:00] where have we started to partner up to address some of these targets that you guys play out?
Speaker 4 (05:06):
Yeah, that's a long standing partnership between the two companies that goes back many years and spans across all scopes. Scope one to scope three. I remember when we take the time machine back to the year 2014, we discuss the deployment of electric guard trucks and if we go back and travel back in time to this year, that was a technology that was not really available and yet we felt we need to do [00:05:30] something new, we need to be innovative and invest into a clean technology. And we partnered up and we figured out that electric yacht trucks is something that's feasible and we gave it a goal. We partnered up with the company Orange V, who was the first in North America to come up with this technology and we were the very first companies to deploy this technology in the real world operational scenario. And I remember that back then we were wondering for how long [00:06:00] we are able to operate this scale chart because we didn't dream that this is something that can operate over many years.
(06:06):
It was really set up as a first trial as a test and we thought after a year we just shutted down take the findings and figure out what next to do. And it's amazing to see that Sparky One, which is the name that we gave, this very first electric garage truck is still working hard day and night at the Diageo distribution center and Peter Illinois. And it was not only the perfect customer to pilot this new technology with but also [00:06:30] the perfect operation because it's heavy duty, it has somewhat extreme climate conditions in the summer and the winter. So it was the perfect operations to test this technology and it proved to be feasible. Also not,
Speaker 3 (06:43):
I think the irony of it is we took a diesel truck that got converted into an electric vehicle, so the battery is still running Sparky one Spark are very much still in operation of nine years later, but the truck itself is rusting and pulling decreases around us what the battery [00:07:00] chain and the underlying technology is still working. That's definitely been a learning for the future
Speaker 2 (07:04):
For our nons supply chain listeners. What is a yard truck but is up there?
Speaker 4 (07:10):
So a yard truck is a heavy duty vehicle that typically operates within the yard property and it moves trailers around the yard and is a quite critical equipment that allows the flow of products and goods inside into the warehouse and outside of the warehouse.
Speaker 3 (07:28):
So I think there are probably even more critical [00:07:30] in our manufacturing site of ville because we actually have no warehousing on site. So they are moving all the packaging materials to the lines and then they have to clear the line instantly because we got the one store on the site and then we ship it down the road to our warehouse. So it's a real critical bit of kit that keeps the trainer three big ride.
Speaker 2 (07:49):
And so it's sort of 10 years into the pilot. Yeah. You talked on the panel about the notion of piloting and how it's been important for the [00:08:00] sustainability agenda overall. How does Diageo think about that and how did you identify yard trucks as a potential area?
Speaker 3 (08:09):
I think what we've really found as we've been and going on this state, this journey is when the technology comes out, it is first prohibit as a corporate that has shareholders and stakeholders to report to. It's really critical that we are continuing to expand our margins to develop our productivity pipeline. But one of the ways that we've found that we have [00:08:30] had some success with both DHL and a couple of other partners is doing that pilot skit. So we invested in Sparky one and we invested in AR two at the time they were significantly more than a used truck, but we had those two trucks in our business for the last nine years. We've got a huge amount of understanding and learning the advantages and coming and electric, the I track that's it. Traditional diesel one, probably one of the biggest ones, but it's maybe somewhat of a surprise, is how much more the drivers operating the electric truck.
(09:00):
[00:09:00] You don't have the noise, you don't have the vibration, you have the Uber ride, less wear and tear. So what we've had in these two trucks in our operation for the last nine years, we are now actually looking at how do we replace all our yard vehicles from electric trucks and nine years later that price is almost garity to diesel. But what we have is now the experience, what do you need being considering? Don't put them in all needle vehicles, the battery will the truck, but we've got that experience, we've got the confidence that the technology's [00:09:30] going to work and it's way for us to be able to try different innovations with a little bit less risk and a less financial commitment.
Speaker 2 (09:37):
Right. So how many yard trucks do you have total in your fleet would you guess?
Speaker 3 (09:42):
I think we've got another 12 to prove that.
Speaker 4 (09:43):
Yes, 12 that are currently in the process of getting converted to electric.
Speaker 2 (09:48):
I mean it's interesting when you think about the size of the company, Diageo and then you think about one truck, it seems like small, right? But the piloting concept does seem to make sense and I mean I think you had a good consumer example in the panel [00:10:00] of something that I was skeptical about as a consumer whenever that legislation came down. You want to talk about that LED,
Speaker 4 (10:07):
What's really mind blowing if you go and see this technology in real life and compare them next to each other if you see the diesel truck and the electric truck, but there's this one example that I always refer to lighting and we all used to use these conventional light bulbs in the past that you weren't able to touch after 10 seconds this light bulb being pushed on because [00:10:30] it was just too hot and that means it was not creating any light but also heat that you don't want to have in the light bulb. So it was just wasting a lot of energy and nowadays we're only using LED light bulbs and if you go to a store and would only see LED light bulbs, and I remember in the early days people were complaining about the LED. Now the color of the light, it was not as nice, you couldn't di it.
(10:52):
But technology evolved, prices come down the lifetime of these light bulbs. LED light times is five to 10 times longer [00:11:00] than the conventional light bulb and you only consumer a fraction of the energy for the same light, for the same output so to speak. And we just see the same now with these EV trucks. They consume considerably less energy, less maintenance, the drivers are super happy, there's no exhaust, no emissions. And in hindsight when I look at these EV trucks, it's almost like in the early days when we all learned how to swim, we learned how to swim at a pool and it was the same environment [00:11:30] and there's always the edge of the pool. If you get into trouble, there's always someone to help you. And it's the same with these EVI trucks because the charger of the EV truck is always close by and we learned how to swim in the yard with EVR trucks and that gave us the confidence over the past nine years now to take it to the beach.
(11:49):
In our case it means take it to the road and invest into class eight road tracks. And if it wasn't this example with the Diageo, we wouldn't be at a place right now [00:12:00] to understand how to deploy electric vehicles on the roads that go like a hundred, 200 miles and they don't see a charger until they come home at night. So that was really a great example, how to take a pilot from being a pilot is something really that helps us to bring this technology but also an adjacent technology to scale over the next three years.
Speaker 2 (12:22):
What were the factors that went into your thinking around where to put the yard trucks? Diageo has multiple facilities around the CA and the globe.
Speaker 3 (12:30):
[00:12:30] So theme builders our biggest manufacturing site in North America and it's often an area that we're going to pilot for thing, we want to do it in a site that we've got two in. If you test on the biggest quarters works, right? If it works in theme build, which would be ride our bigger the manufacturing site, you have competency, you need to that out to any of our sites.
Speaker 2 (12:52):
Yeah, okay, good. Stefan, you talked a little bit about the class eight trucks, which are probably behind in the [00:13:00] evolutionary curve from the yard trucks. As you think about piloting those and putting those into the fleet, what factors are in your mind about where you're deploying those? It
Speaker 4 (13:10):
Follows a similar approach that we took for the EVR trucks. We do not only want to put these trucks where they work best, where the climate, the weather, the range is just perfect for this technology, but we want to push them to their limit, which is why we decided to deploy these electric of the road trucks across the country [00:13:30] from California all the way to the east coast. And we use them for different types of operations with different payloads, with different operational profiles and the different weather conditions to really figure out, okay, what are the differences between the diesel with the electric and how does the electric behave in different environments?
Speaker 2 (13:49):
Okay, good. We talked at the beginning and you guys are both not from the United States. I wondered if you could talk a little bit about what the sustainability environment [00:14:00] looks like in your home country and compare contrast to what you found in the states and how that kind of factors into your business decisions as you're trying to drive these agendas for Aurora.
Speaker 4 (14:12):
That's a different question to answer because we have seen these different geographies in different times so to speak. I've seen Europe in the early two thousands. I've seen Asia in the 2010 and I've seen Europe again in 2015, 16, and now I see North America and I think overall [00:14:30] everyone progressed and that's probably the biggest learning that I've made on the last 10 years or so that the topic of sustainability in the decarbonization has gone mainstream. It's on the media, it's in the news, it's in the boardrooms, it's something that no one is shy talking about anymore because we all see the criticality and the importance of it. And I think this is the biggest accomplishment that I've seen in the past years, that it's not only with a few scientists and experts, but it's a topic that is discussed broadly and [00:15:00] invites so many more stakeholders into the conversation from sales to find its controlling everyone's on board.
(15:07):
And this is important because sustainability people are not the best at finals or the best at sales. So by teaming up we are able to make this a financially appealing and a proper concept that we can present to customer and it's no longer a boutique concept so to speak, but it's a product that we can offer to our customers and that I think makes this [00:15:30] journey of decarbonizing your fleet so much more powerful than it ever has been in the past. So it wouldn't make a big difference between geographies necessarily, but I would say that overall we have just matured a lot over the last 10 years or so.
Speaker 3 (15:46):
Yeah, I think it's an interesting one. I'll step away from logistics for a moment, but I used to buy glass for Diageo. We are one of the world's biggest glass buyers because a huge part of our portfolio is sort fast bottles and [00:16:00] it's really interesting to see where the different regions are from main glass decarbonization. So in the UK we have a great partner, well we have a couple of great golf partners, but one is announced that they will be investing into a hydro lettuce. So really cutting edge, obviously glass, you're heating the sand to 18 tiger with degrees Celsius. Sorry, can't do my American. That's alright, that's alright. But hot. So it is incredibly energy intensive. So they have invested in hydrogen, [00:16:30] they'll be bringing a hydrogen credit online in 2025, which is going to be really revolution for the industry. Well then you look over to India, we talk a lot about how do we unlock the circular economy and how do we get into retainable packaging. In India, 40% of our bottles are secondhand bottles. So there is a whole sub-industry that will go around, collect bottles, wash them, and then resell them back to the original bread. So they will deliver us back our portfolio guards [00:17:00] bottles, second land, but we haven't been able to unlock circularity in the uk. So it is really interesting to see in different reader and different environments, whether it be the complexity, maybe ity of demand, et cetera, that already adapted and you're seeing different routes to fundamentally say blo, but trying to be deep up like that.
Speaker 2 (17:21):
Interesting. So from your vantage point in your role, you're able to see all of those different developments happening globally? That's got to be pretty
Speaker 3 (17:29):
Interesting. In my [00:17:30] old role now I'm North America logistics.
Speaker 2 (17:32):
Okay. Okay.
Speaker 4 (17:33):
Back to the topic of electric vehicles, which I find interesting is that when the concept in North America really caught on, suddenly we see so many OEMs coming to the table. I think we have more OEMs with an electric vehicle product in the United States than we have in Europe, which is interesting. And we also see when we talk about the next generation of electric vehicles that don't rely on the big battery anymore, but on the fuel cell, [00:18:00] again in North America we have more OEMs that are taking the step to bring a fuel cell electric truck to the market in the next two to three years. And that's something I find very interesting. So
Speaker 2 (18:14):
Explain how does a fuel cell work versus a battery?
Speaker 4 (18:17):
So maybe we start with why we need a fuel cell truck. The electric truck at the moment relies on the battery and the battery has a finite capacity, which means that the battery electric truck can only go with certain mileage [00:18:30] before it needs to be recharged. Even though there are some manufacturers that provide a distance of 250 up to 300 miles or maybe one provider up to 500 in the future, it's still not enough or the majority of the work and the majority of the fleet. So the fuel cell electric truck is still an electric truck, but it doesn't rely on the battery on board, but it has a fuel cell on board that turns hydrogen into electricity on board. So basically the truck produces the amount of electricity that it needs to [00:19:00] run the motor so to speak. And that gives us a higher mileage. And since the batteries are heavy and the fuel cell truck doesn't need these heavy batteries, it also gives us a higher payload, which in many applications where we haul heavy freight is important like liquor, like liquor especially where we go a high distance or high mileage. So we need a technology that gives us both of the mileage and the payment.
Speaker 3 (19:23):
And I think in a very real example, so we're working through at the moment, obviously we've got the electric yard trucks, but we've also got a dedicated [00:19:30] fleet that DHL managed product. And we are looking at in that dedicated fleet, do we want to invest into electric or hydrogen? And we're kind of one of the real harm units for us was an electric vehicle will not be able to do a full shift for a driver. So then you'll have that cleared or out of action between three hours whilst the charger, whilst pipe RA would be able to be refilled in 10, 15 minutes. So it's that how do we get the right operational efficiency when as I said, we've got to keep the light cleared at manfield. So [00:20:00] really maximizing that utilization of the trucks three years ago.
Speaker 4 (20:04):
And again, I think this is where the partnership is so critical to advance this early kind of technology. Like with the yard trucks, we were the first to embark on this technology together with the partner Orange B. And I think it helped them tremendously to advance that product up to a stage where it can be offered to the mass market I would say. And now it's a standard product for us. We only deploy electric vehicles. [00:20:30] We try to avoid diesel when possible. And I think this partnership across the value chain from supplier to DHL to all the way to our customers is not only nice, but it's so critical for the market to advance their products and bring them to scale and to market.
Speaker 3 (20:47):
I'd say 95% of my volume boost isn't with the W fee or electric yard trucks. We have other carriers outside of it. We need to go and test it so we can have the conversations [00:21:00] with our remaining carrier base and understand what they're doing. It's something that we can collaborate on and share those findings.
Speaker 2 (21:06):
Yeah, yeah. Interesting. I mean I gather there's a bit of a supply problem in terms of equipment in any of these new technologies. How do you guys team up to address those constraints?
Speaker 4 (21:18):
I think what's really fruitful and important in our partnership is that we both try to understand the in and outs of this technology to manage each other's expectations. [00:21:30] And now it's a technology that takes time to deploy. It's a technology that takes time to train the drivers operations. So everything is different and we don't have the expectation to push the button and everything works perfectly from day one. I think both of us are aware this is an early technology and we have to work jointly on getting this right. And this is what's important. If we were to work with a customer, we have the expectation to have a perfect new technology working on day one, this wouldn't work because [00:22:00] then we would kind of, and I'll not be honest that we try to make this work instead of just pushing the button and having it work from day one.
Speaker 2 (22:08):
Yeah, so two hazard are better than one.
Speaker 3 (22:10):
I think also what's being quite interesting is the level of I'm going to ship probably from both teams. They're excited to this technology, there's a real spend said we want to make it work and how do we work together to unlock back and sets the pride in Sparky Wild and Sparky too in some of the innovations that we've done together.
Speaker 4 (22:29):
But apart from technologies, [00:22:30] and when we touch on Scope three, I said at the beginning we worked together with Diageo and Diageo with us across these three scoped. And again, when I think about North America and will you ask earlier what are the difference between the regions? I think pragmatism, the US is very pragmatic and we try to track this scope three problem, collect data from our carriers or carbon accounting on the reducing CO2. And that was in the US with [00:23:00] the US EPA SmartWay program. They have started to collect all this data in the early two thousands, and I think it was the first time that together with Diageo we tried to use this data and in our fee process where we in our talk to our carriers and said, Hey, are you a smart way carrier? And if yes, what's your score? And we use these scores not only for our common reporting together with Diageo to get our score three data, but also in the way we select our carriers. And that's the perfect [00:23:30] kind of circle of using the data for your accounting but also for your carbon reduction. And that's something that is kind of unique when you look across the globe, so to speak, how you manage for three with the US EPA swap rate program. It's really something that's extremely powerful working not only with the carriers who are part of this program, but also then with your customers and shippers to use this data effectively to kind of try to select carriers not only on price service but also based on carbon emissions
Speaker 3 (23:59):
And [00:24:00] carrier diagnostic
Speaker 4 (24:01):
And diverse products.
Speaker 2 (24:03):
What do you mean by diversity?
Speaker 3 (24:05):
So working in collaboration with our transport management company, we have ambitions to increase the amount spend that we have within another supply chain. So be it. So what we have is total visibility when we do the RFP of what is the cost benefit or increase of each scenario, what is the carbon impact and then what's our percentage of spend and that's with a diverse carry.
Speaker 2 (24:28):
Okay, great. Thank you. Lucy, [00:24:30] you were at customer club this fall. We talked a little bit about this topic and I think my reader of the room was the majority of people there said, in essence, my company really is committed to environmental targets and improving, but when push comes to shove on cost, they had a hard time. So I wondered if you could comment what's Diageo's view on that and then what would you advise your colleagues who were there about how to kind of navigate that puzzle?
Speaker 3 (25:00):
[00:25:00] It's the forever challenge. We are corporate that have shareholders that we have to deliver our margin in enhancements to. And for me, sometimes you get a uniform and you get a project that's going to reduce your miles on the road and hedge your costs and have a beneficial sustainability impact. And I would say logistics is one of the categories with that it's more often than not is the case because the more efficient that we are, the less MLS that we have that anyone spent their money on. [00:25:30] So there's a lot of benefits in sustainability projects with logistics, but also I think we can't get away from the ad that some of this green technology might have a cost premium of 30 or 40%. And that's why the kind of piloting ski has been really helpful for us because you can make a small financial commitment whilst you go and build your productivity agenda L square, make that investment into the technology, understand technology. And then hopefully by the time you get to scale, [00:26:00] you've actually had the commercialization and it starts to come more possible compar with traditional technology.
Speaker 4 (26:07):
But I would also say that we should not only look at cost and cost being the reason for not investing, because I'm looking at this like I'm not a video gamer, but I remember I played Super Mario Brothers where you go from level to level and cost is just one level. When I talk to some customers, I tell 'em, okay, let's pretend cost is not the issue. Let's talk about all the other [00:26:30] issues that we might run into and let's find a way to solve them first. And now is this technology the right one in the first place? And if not, is there a better one? And then tackle the cost issue maybe in a second step, but find a solution for the challenge that you have, which is to decarbonize. And then let's get back to the cost question after this and see now if there's a solution for this. But in some cases I've seen we got funding and cost was no longer the issue, but there was something else that kept us growing from investing. [00:27:00] So don't put everything on cost that you don't get too focused on cost, but look at the broader scheme of the issues that you all need to solve and make it work
Speaker 2 (27:10):
Good. Well it sounds like having a good partner in that exercise is important.
Speaker 4 (27:14):
Yeah, definitely. We don't leave any stone unturned. We look at all the stones and try to figure out, okay, what it is that we can do together? What is at the panel? You mentioned the abatement cost. What is the cost for carbon? A ton of carbon that we can reduce. And then let's start with some [00:27:30] of those that are easier and cheaper to decarbonize and set. Set some project that looks at the harder to decarbonize and see what we can do together as partners to make them work in the future. So that's how we approach it to build.
Speaker 2 (27:44):
Well, thank you both for being here today. I liked the panel and I really enjoyed this private conversation with you. Good luck for many more years of partnership and progress on this front. So thank you both and enjoy the rest of the conference.
Speaker 4 (27:59):
Thank you. Thank you. Thanks for having us.
Speaker 1 (28:00):
[00:28:00] If you enjoyed today's episode, be sure to rate us and subscribe to us on Apple Podcasts, Spotify, or wherever you get your podcast. You can also re-listen to our entire library of episodes on our website, dhl.com/a BNB podcast. See you next time.