What is the Logistics Efficiency Act? Explaining the roles of target companies and CLOs and key points for responding

Introduction: The revised Logistics Efficiency Act, which protects the future of logistics, is launched

Logistics is an important social infrastructure that supports our daily lives and economic activity. However, the logistics industry is currently facing a major Issue known as the "2024 Problem." It has been pointed out that if no measures are taken, there may be a shortage of transportation capacity in the future, leading to a situation where essential goods cannot be delivered.

In response to this critical situation, the Logistics Efficiency Act (officially known as the Act on the Efficiency of Goods Distribution) was revised and promulgated on May 15, 2024. This article provides a clear and thorough explanation of the overview of the revised Logistics Efficiency Act, the companies that it applies to, and the specific efforts that are required.

Why is legal reform necessary now? The "Logistics Problem of 2024" behind it

The background to this legal reform is a structural Issue that has been called the "2024 logistics problem."
This is an issue that has been pointed out as limiting the transportation capacity of the entire logistics industry, following the application of the Work Style Reform Act, which will set a cap of 960 hours of overtime work per year for truck drivers from April 2024.

If sufficient measures are not taken during the process of reviewing the system,There will be a transportation capacity shortfall of approximately 14% by fiscal 2024 and approximately 34% by fiscal 2030.We have presented our estimates as follows:
In fact, even now, as fiscal 2024 passes, Issue such as driver shortages and long waiting times for cargo have not been resolved, and concerns about the sustainability of logistics remain high.

In order to address these structural Issue, all parties involved, including shippers, logistics companies, and even consumers, must work together to reassess the state of logistics. The revised Logistics Efficiency Act provides a concrete framework for this.

overview of the revised Logistics Efficiency Act: Two goals to aim for

The revised Logistics Efficiency Act has been renamed the "Act on the Promotion of Integration and Efficiency in Distribution Operations" to the "Act on the Efficiency of Distribution of Goods." The Act sets out two specific goals that the entire country should strive for in order to achieve sustainable logistics.

• Goal 1: Reduce working hours per truck driver by 125 hours per year (e.g., limit waiting time for each delivery to less than one hour)

• Goal 2: Increase loading efficiency to 44% for all vehicles (achieving a loading efficiency of 50% for 50% of vehicles, etc.)

To achieve these goals, cooperation from all parties involved is required.

Who is eligible? Check if your company is eligible.

The revised Logistics Efficiency Act targets many businesses involved in logistics. Targeted parties can be broadly divided into two groups depending on the Contents of the imposition.

"Obligation to make efforts" imposed on all businesses

In principle, all businesses involved in logistics are required to make efforts to improve logistics efficiency. Specifically, the following businesses are subject to this law:

• Shipper: Both the "shipper" who sends the cargo and the "receiver" who receives it

• Chained operator: Franchise chain "headquarters" etc.

• Logistics operator: Trucking, warehousing, port transport, air transport, railway operators, etc.

"Obligations" imposed on specified businesses

Of the above businesses, those above a certain size that have a particularly large impact on logistics will be designated as "specified businesses" and will be subject to legal obligations such as formulating medium- to long-term plans and submitting regular reports. The designation criteria are as follows:

[Important] Classification of shippers: What are "Class 1 shippers" and "Class 2 shippers"?

This new law categorizes shippers into two types depending on their role. It is important to correctly understand which category your company falls into.

• First class shipper: A person who "concludes a transportation contract" directly with a transportation company regarding their own business.

• Second class shipper: A party that does not enter into a contract of carriage but "receives" or "delivers" cargo from a driver in connection with its own business.

For example, if a manufacturer (Business A) contracts with a shipping Company(Business C) to deliver goods to a customer (Business B), the Company will need to directlyA contract of carriage has been concludedManufacturer A becomes a "first class shipper" and sends the cargo toreceiveCustomer B is a "Class 2 shipper."

What exactly should we do? Three initiatives required

The law outlines the following three pillars as specific efforts that all businesses should make:

Initiative 1: Improving loading efficiency

These measures aim to fundamentally optimize transportation resources by increasing transport density per truck and reducing the number of trips required.

• Guaranteed lead time: By allowing ample time between ordering and delivery, it becomes easier for transport companies to secure joint deliveries and return shipments.

• Optimizing shipping and receiving volumes by consolidating delivery dates: We will optimize truck loads by reviewing small-volume, high-frequency deliveries and consolidating delivery dates.

• Optimizing operation plans by implementing a vehicle dispatch system: We utilize digital tools to create the most efficient vehicle dispatch plans and routes.

Initiative 2: Reducing waiting times

The aim is to reduce the time drivers spend waiting for cargo, which is considered to be particularly unproductive, and maximize the time they can spend on actual transportation.

• Introduction and utilization of truck reservation reception system: By reserving and coordinating truck arrival times in advance, we can prevent vehicles from concentrating at specific times.

• Specify delivery time to avoid peak hours: Taking into consideration the congestion status of logistics location and stores, delivery dates and times will be Settings during less crowded times.

Initiative 3: Reducing loading and unloading times

Loading and unloading work places a great physical burden on drivers, which is one of the reasons why they spend so much time on the job. These efforts aim to improve the efficiency and labor-saving aspects of the work, and to increase vehicle turnover at location.

• Introduction of pallets and other transportation equipment: We will switch from bulk loading and unloading, where cardboard boxes and other items are carried one by one by hand, to loading and unloading using pallets and basket carts.

• Improved inspection efficiency: By utilizing ASN (advance shipping information) and introducing barcodes, we can speed up inspection work at the time of delivery.

• Proper allocation of forklifts and personnel: We will properly allocate the necessary equipment and personnel for loading and unloading work, and create a system that does not place a burden on drivers.

Obligations of Specified Business Operators and the Role of the Chief Logistics administrator(CLO)

"Specified businesses" that are above a certain size, such as those that handle more than 90,000 tons of cargo per year, are subject to the following obligations in addition to the obligation to make best efforts.

Create of mid- to long-term plans and regular reporting

Specified businesses are required to Create mid- to long-term plans to achieve logistics efficiency and report their progress to the government every year. If the implementation of the plan is insufficient, they may receive recommendations or orders from the government.

Appointment of Chief Logistics administrator(CLO)

Among specified businesses, specified shippers (both Type 1 and Type 2) and specified chain businesses are required to appoint a Chief Logistics administrator(CLO). This CLO is not just a person in charge, but"A person in a managerial position who participates in important decisions regarding business operations"They must be selected from among the officers.

This requirement is evidence that the government is seeking to position logistics not simply as a cost department, but as an important function integrated into management strategy. The aim of requiring the appointment of an executive-level CLO is to enable cross-departmental reforms and capital investment as a management decision.

Main Contents of a CLO

The CLO plays an important role in overseeing the company's logistics strategy from a management perspective. The main Contents of the CLO are as follows:

• Create of mid- to long-term plans and regular reports

• Create business management policies and establishing management systems to reduce the burden on drivers

• Create, implementation, and evaluation of business plans for capital investment and digitalization to improve logistics efficiency and standardization of logistics

When does the revised law come into effect?

The revised Logistics Efficiency Act is being implemented in stages. The main schedule is as follows:

April 1, 2025 (enforced)
A basic policy has been established, and obligations to make efforts and criteria for judgment have been put into effect for all businesses.

April 2026 (scheduled to come into effect)
The new regulations will include the designation of specific businesses, the obligation to develop and submit medium- to long-term plans, and the obligation to appoint a Chief Logistics administrator(CLO).

End of October 2026 (first year only)
This is the deadline for the initial submission of medium- to long-term plans by specified businesses.

* Details regarding system operation and detailed submission deadlines may be supplemented or changed in future notifications.

Summary and future actions

The revised Logistics Efficiency Act is an important system for ensuring the sustainability of logistics in the context of the 2024 problem. However, its essence is not that it simply adds new obligations.

The efforts required by this law, such as improving loading rates, shortening waiting times for cargo, and improving transportation efficiency, are allAre data showing the actual state of logistics correctly understood and utilized across departments?will determine success or failure.

Such logistics data is not only used to comply with the Logistics Efficiency Act, but also as a means of sustainability disclosure.Scope 3 emission amount(Category 4, particularly related to transportation and delivery)Calculation ofEnergy usage management based on the Energy Conservation ActIt is also closely related to.

Rather than viewing the Logistics Efficiency Act as a standalone legal requirement, by organizing it together with Scope 3 calculations and compliance with the Energy Conservation Act, it will be possible to reduce the burden of data collection and internal coordination while leading to more effective improvements.

The following article provides a detailed explanation of how to promote cross-system data utilization and departmental collaboration, starting with the Logistics Efficiency Act.

・Next steps for Scope 3 Category 4 | Data strategy to simultaneously comply with the Logistics Efficiency Act, Energy Conservation Act, and SSBJ

1) Ministry of Economy, Industry and Industry Logistics Efficiency Act
https://www.meti.go.jp/policy/economy/distribution/butsuryu-kouritsuka.html

2) Portal site to promote understanding of the Logistics Efficiency Act
https://www.revised-logistics-act-portal.mlit.go.jp/