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ETS2 and its Impact on European Supply Chains and Industry
Published
10 mois agoon
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In 2027, the European Union will expand its Emissions Trading System through a new phase known as ETS2. For the first time, emissions from road transport and building heat will be covered by a carbon price. This change turns carbon from an environmental issue into a direct operating cost that affects every part of the European economy.
Under ETS2, fuel distributors will buy carbon allowances and pass those costs through the supply chain. Analysts expect prices near €45 to €50 per ton of CO₂, which would add 10 to 15 eurocents per liter to fuel costs and raise heating expenses by about 20 to 25 percent. The EU’s Social Climate Fund, worth around €86 billion, will help offset the burden for lower-income households, but energy and transportation costs will still rise for most businesses and consumers.
The policy’s effect will extend across freight, warehousing, and manufacturing. ETS2 integrates carbon pricing into the cost base of logistics and supply chains, linking emissions directly to financial performance.
Carbon impact on consumers
Consumers will see immediate cost increases as fuel and heating expenses rise. Higher household energy costs will translate into higher prices for goods and services, since transportation and building operations are now subject to allowance pricing.
Energy markets are expected to experience greater volatility as carbon prices fluctuate, introducing a new variable for logistics and industrial planning. While the Social Climate Fund will provide temporary relief, the overall trajectory is toward higher and less predictable operating costs.
Effects on transport and logistics
ETS2 will directly influence the cost and structure of European transport networks. Road freight operators, which depend heavily on diesel fuel, will face the largest impact.
Industry estimates suggest total freight costs could rise by 3 to 8 percent, depending on fleet efficiency, route structure, and regional energy mixes. Carriers will likely pass these increases to shippers through new fuel surcharges or contract adjustments.
Companies are already planning mitigation measures. These include electrifying or hybridizing fleets, shifting more freight to rail and inland waterways, and using data analytics and telematics to optimize routing and reduce idle time. Because carbon allowances are traded in open markets, transport pricing will include a carbon volatility premium.
CFOs and logistics planners will need to integrate carbon-cost modeling into financial systems alongside traditional fuel forecasts. Compliance obligations will expand as companies are required to report verified emissions data and provide Scope 3 information to customers and regulators.
Effects on industrial operations
ETS2 will also raise production costs for energy-intensive sectors such as steel, cement, chemicals, and automotive manufacturing. These industries already face higher energy prices compared with global competitors, and the addition of a carbon price on fuel and heating compounds that disadvantage.
Without improvements in efficiency or cleaner energy inputs, some plants may reduce output or relocate production to lower-cost regions. Others may use the regulation as justification to invest in hydrogen systems, electrified heat, and renewable power, improving long-term competitiveness.
Industrial activity is expected to consolidate around areas with abundant and affordable renewable energy. Central Europe may continue to specialize in automotive and advanced components, Iberia could benefit from low-cost solar energy, and the Nordic countries are well-positioned to expand production of low-carbon metals and materials.
Industry relocation and global competition
ETS2 may encourage relocation toward India, China, and Southeast Asia, where energy remains less expensive and environmental regulation is lighter. Low-margin producers and basic material industries are most likely to shift operations in search of cost advantages.
However, several factors will limit this movement. The Carbon Border Adjustment Mechanism (CBAM) will impose tariffs on carbon-intensive imports, reducing the economic benefit of offshoring. In addition, supply chain strategies developed after the pandemic now emphasize resilience and proximity, making distant production less attractive. Automation and renewable energy investments are also reducing the importance of cheap labor and fossil fuel costs in total production expense.
The likely result is a mixed pattern: basic manufacturing migrating abroad, while advanced, low-emission manufacturing consolidates inside Europe. The region’s competitiveness will depend increasingly on data integration, energy efficiency, and digital control of emissions.
Role of digital product passports
The upcoming Digital Product Passport (DPP) initiative will play a key role alongside ETS2. DPPs will store verified information about a product’s materials, origin, energy use, repairability, and carbon footprint.
This data will enable precise tracking of embedded emissions across production and transport networks. Integrated into ERP, procurement, and logistics systems, DPPs will improve accuracy in Scope 3 reporting, support compliance with CBAM, and enhance supplier evaluation.
Over time, DPPs will also help companies identify circular-economy opportunities, such as parts reuse and recycling. By linking emissions and material data, they make it possible to measure environmental performance at the level of individual products and shipments.
Benefits
ETS2 introduces measurable carbon accountability across supply chains. It will accelerate investment in low-emission technologies, improve the quality and traceability of sustainability data, and encourage the development of regional logistics networks supported by renewable energy.
For logistics and supply chain executives, ETS2 provides a consistent framework for comparing emissions performance and cost across carriers, facilities, and sourcing regions.
Costs and risks
ETS2 will raise operating costs for transport, warehousing, and manufacturing. Companies that rely heavily on fossil fuels will experience margin compression until alternative energy sources become more available. Smaller operators may face financial and administrative strain from the added reporting and compliance requirements.
Volatility in carbon allowance markets will make budgeting more complex, while infrastructure for electric fleets and renewable power generation may take several years to scale. The adjustment period is likely to be uneven across sectors and regions.
Strategic outlook
ETS2 embeds carbon pricing into the financial structure of supply chains. Carbon will now function as a standard input cost, alongside energy, labor, and raw materials.
To adapt, organizations will need to integrate emissions data into procurement systems, transport management tools, and corporate finance processes. Advanced analytics, AI-based control towers, and DPP-linked data streams will support real-time modeling of carbon exposure and efficiency performance.
The key operational metric will shift toward output per kilogram of CO₂ emitted, reflecting both cost control and environmental compliance.
Conclusion
ETS2 will increase short-term costs across Europe’s logistics and manufacturing sectors, but it will also standardize how emissions are measured, priced, and managed.
For supply chain leaders, the central challenge is operational—integrating carbon data into day-to-day planning, optimizing transport efficiency, and investing in low-emission infrastructure.
The result will likely be a more transparent and efficient logistics network, built around renewable energy and digital monitoring. ETS2 marks a transition to an economy where carbon cost management becomes a core element of supply chain strategy and competitiveness.
The post ETS2 and its Impact on European Supply Chains and Industry appeared first on Logistics Viewpoints.
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The Enterprise Workflow Is Becoming More Important Than the Enterprise Application
Published
3 heures agoon
18 août 2026By
Enterprise software has traditionally been organized around applications. Companies buy an ERP to manage transactions, a WMS to run the warehouse, a TMS to manage transportation, planning applications to build forecasts and plans, and procurement systems to manage sourcing and suppliers. That architecture reflects real functional expertise, but the most important supply chain problems increasingly occur in the workflow that crosses those applications rather than inside any one of them.
The need for an execution architecture makes this shift easier to see. Once the enterprise begins designing the path from signal to decision to action, the unit of analysis is no longer the application; it is the end-to-end workflow. AI strengthens this transition because agents can potentially follow a problem across several systems in a way traditional application-centric automation rarely could.
Operational Problems Ignore Software Boundaries
A supplier failure does not remain a procurement event. It changes inventory exposure, affects production schedules, alters transportation requirements, threatens customer commitments, and may create financial consequences. A late customer order can similarly cross order management, inventory allocation, warehouse execution, transportation, and customer service before it is resolved.
The applications involved may all be performing correctly while the overall process is poor. This is also why I argued that real-time visibility may stop being a standalone market: once visibility becomes embedded in broader workflows, its value increasingly comes from what happens next. That is one reason the move from functional software to decision architectures is important: the enterprise outcome depends on the sequence of decisions across systems, not just the quality of each individual application. Application excellence remains necessary, but it is no longer sufficient.
The Workflow Is Where Context Accumulates
An individual system sees only part of the situation. The TMS may know freight options, the WMS knows inventory and labor, the planning system understands forecast and supply implications, and the ERP contains financial and transactional context. The cross-application workflow is where these perspectives can be combined into a decision that reflects the business rather than one function.
This helps explain the rise of an intelligence layer above ERP, TMS, and WMS platforms. The strategic value of such a layer is not that it replaces those systems, but that it can assemble context and coordinate work across them. AI agents are particularly well suited to this role when they have governed access to enterprise data and tools.
Platforms Gain an Advantage, but Not a Monopoly
The trend also helps explain why supply chain platforms and networks are becoming more strategically important. A platform that already spans planning, execution, visibility, and transactions can reduce the friction involved in moving context across the workflow. That can be a powerful architectural advantage as more decisions become cross-functional.
It does not automatically settle the best-of-breed versus platform argument. A specialized application can still be superior when depth of functionality matters, and many enterprises will continue to operate heterogeneous technology estates. The winning architecture may therefore be a governed hybrid in which specialized applications participate in common workflows rather than behave as isolated destinations.
Standards Matter Because Workflows Need Reach
Emerging approaches such as MCP, A2A, and graph-enhanced AI matter in this context because cross-application workflows require agents to discover tools, exchange information, and understand relationships among entities. Standardized access reduces the bespoke integration burden that has historically made cross-system automation expensive. Graph structures can also help preserve the relationships among orders, inventory, suppliers, customers, facilities, and transportation movements that give an operational event meaning.
However, technical reach does not guarantee operational quality. The workflow still needs business logic, guardrails, escalation paths, and a clear enterprise objective. Technology can make it possible for an agent to touch ten systems, but management has to decide what the agent should accomplish across them.
Workflow Ownership Becomes a Management Issue
This creates an organizational question that many companies have not fully addressed: who owns the cross-functional workflow? Functional leaders own their systems and KPIs, while IT owns much of the integration infrastructure. Yet a disruption-resolution workflow may cut across procurement, planning, transportation, warehouse operations, finance, and customer service without having a single natural owner.
As AI automates more of these paths, workflow ownership will become more important. Someone has to define the objective, resolve competing priorities, determine what can be automated, and measure whether the end-to-end process improves. That responsibility may sit in a control tower, an operations excellence function, a transformation office, or a new type of process owner, but it cannot remain implicit.
From Application Portfolios to Operating Flows
The shift does not mean enterprise applications disappear. It means companies should evaluate them partly by how effectively they participate in operating flows. APIs, event models, permissions, configurability, semantic consistency, and agent access become as important as the features visible inside the user interface because those characteristics determine whether the application can participate in automated decision and execution loops.
The sequence is now becoming clear. The coordination premium explains why enterprise objectives matter, the cross-functional agent problem explains why local optimization is dangerous, and the execution architecture defines the path from intelligence to action. Once the workflow becomes the unit of execution, the next question is economic: how much value is created when that workflow operates faster? That leads directly to decision latency.
The post The Enterprise Workflow Is Becoming More Important Than the Enterprise Application appeared first on Logistics Viewpoints.
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Automated Storage & Retrieval Systems — Orlando
Published
22 heures agoon
17 août 2026By
Warehouse automation is moving quickly from a specialized investment to a core component of modern distribution strategy. Automated storage and retrieval systems, or AS/RS, are increasingly central to that transition, helping companies increase storage density, improve throughput, reduce manual travel, and make better use of increasingly expensive warehouse space.
In this Logistics Viewpoints video, recorded in Orlando, we discuss the evolution of automated storage and retrieval systems and what these technologies mean for warehouse and distribution operations.
The conversation looks beyond the equipment itself. As warehouses become more automated, companies increasingly need to think about how storage, material movement, software, labor, and broader fulfillment processes operate as an integrated system.
For supply chain leaders evaluating warehouse automation, AS/RS is becoming part of a much larger question: what should the warehouse of the next decade look like, and where does automation create the greatest operational value?
Watch the full Logistics Viewpoints discussion below.
The post Automated Storage & Retrieval Systems — Orlando appeared first on Logistics Viewpoints.
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ARC Forum – What Is the Forum and How Do I Get Involved?
Published
22 heures agoon
17 août 2026By
The ARC Industry Forum brings together executives, technology suppliers, manufacturers, infrastructure operators, analysts, and other industry leaders to examine how technology is changing industrial operations.
But the Forum is more than a conference. It is an opportunity for the industrial technology community to compare strategies, understand emerging technologies, hear directly from practitioners, and discuss the operational challenges shaping the next generation of manufacturing, supply chain, energy, infrastructure, and automation.
In this video, we discuss what the ARC Forum is, the role it plays within the broader ARC Advisory Group community, and how companies and individuals can become involved.
For Logistics Viewpoints readers, the Forum is particularly relevant because the boundaries between traditional supply chain technology and the broader industrial technology environment continue to disappear. AI, robotics, automation, connected operations, digital twins, autonomous systems, and intelligent infrastructure increasingly span both worlds.
The ARC Forum provides a place to understand those changes directly from the companies and practitioners implementing them.
Watch the video below to learn more about the Forum and how to get involved.
The post ARC Forum – What Is the Forum and How Do I Get Involved? appeared first on Logistics Viewpoints.
The Enterprise Workflow Is Becoming More Important Than the Enterprise Application
Automated Storage & Retrieval Systems — Orlando
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