Green Logistics. Drivers, Paradoxes and Optimization

AGENDA

1. Introduction

2. What is green Logistics

3. Drivers Of Green Logistics

4. The Paradoxes of Green Logistics

5. Environmental issue and measures of green logistics
5.1 Network optimization
5.2 Packaging reduction
5.3 Warehouse layout optimization
5.4 Sustainable procurement

6. Green IT Solutions and their benefits

7. Use of green logistics in practice: DHL

8. Conlcusion

SOURCES

1. INTRODUCTION

As environmental consciousness is rising all over the world, companies have to take more into account the external costs of logistics related to the environment issues like climate change, air quality, noise, land use according to vibrations and accidents and waste.

Globalization, increasing environmental compliance requirements, and supply chain cost pressures are driving the need for improved sustainability and Corporate Social Responsibility (CSR) programs and solutions in all areas of supply chain management. From environmentally friendly packaging to carbon- footprint reducing network design and logistics, "going green" has moved beyond buzzword status to become a business imperative that can lower costs and provide a competitive advantage in the marketplace.

This project examines different aspects about Green Logistics. First of all the project’s topic is defined to receive a first impression what it is about. This is followed by the drivers of Green Logistics and its paradoxes. Afterwards the environmental issue and the measures of Green Logistics are explained. Furthermore the subject of Green IT Solutions is pointed out. As last aspect there is an example of the use of Green Logistics of the company DHL. To complete the project in the conclusion there are some challenges described that Green Logistics may have to face.

2. WHAT IS GREEN LOGISTICS

As mentioned before, the environmental consciousness is rising all over the world. It represents one of the struggles of the 21st century. Green Logistics is the answer to this struggle, the balance between business and sustainability. That’s why companies have to take into account this issue and it is beneficial for them to improve their environmental impact. But what does this mean? This means that companies have to undertake the effort to practice Green Logistics from manufacturing to distribution to consumption. The focus of Green Logistics is on the handling of materials, the management of waste, packaging and transport.

Reverse Logistics is a term that refers to the recycling and reuse of materials after they are successfully distributed to their destination and this term is used interchangeably with Green Logistics.

At the moment there are some companies using Green Logistics like Shiply, DHL and FedEx. There are many easy steps that companies can take at the beginning toward an environmentally friendly business that saves money and appeals to customers who want to support sustainability.

Green Logistics not only helps to save money and gain market advantages, it also helps to anticipate future environmental regulations. Furthermore, the most important thing is that it helps to “create a sustainable business that will thrive in our ever-changing world”.¹

3. DRIVERS OF GREEN LOGISTICS

Over the last years companies had to face changing framework condition. Apart from increasing diversity and dynamics, the society is focusing more and more on environmental issues. Therefore many businesses today are seeking to implement green logistics - which means smart ways to reduce supply chain waste and carbon impact. Over the next several years, the following trends could transform logistics operations.

Growing awareness in the society. Consumers are becoming more aware of product-specific carbon footprints. The society prefers green products and packaging that is friendly to the environment and it is even willing to pay more for environmentally friendly products. For a companies’ business, this emerging awareness offers the possibility to gain competitive advantage through implementing green logistics.

Environmental concerns. Another reason why more and more companies are attracted by the concept of green logistics is that various serious environmental issues emerged from the world economic growth. These include the depletion of the ozone layer, the rapid disappearance of rain forests, the pollution of air and water, and the scarcity of landfills. Especially transportation as part of logistic operations has a significant impact on the environment. Also the CO2 that is produced by the transportation vehicles represents a huge contribution to the global warming effect which is seriously threatening the world.

Mounting energy costs. Power and fuel costs were increasing over the last time and the cost of related raw materials used in infrastructure building and functioning has led to chances for seeking green alternatives that can significantly lead to reduction in the price. For developing a bottom line in business financial sheets, the reduction in power consumed by IT apparatus, energy efficient lighting and cooling, substitutive energy sources and recycling and tele-presence is crucial.

Emerging markets and infrastructure. Emerging markets will experience significant improvements in ports, roads, and railways. Southeast Asia is becoming cleaner, and more efficient trucking through better roads, quicker delivery, higher quality, lower environmental impact, and increased fleet regulation. Also in the Middle East, there can be seen a trend toward lower emission and more fuel- efficient vehicles.

4. THE PARADOXES OF GREEN LOGISTICS

If we analyze the main characteristics of a logistical system, we can see several basic paradoxes that are discussed below.

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Figure 1: Paradoxes of Green Logistics , Author's own figure.

Costs. The main purpose of logistics is to reduce costs, especially transport costs. Further objectives are improvements in service reliability, including flexibility. However, the cost-saving strategies pursued by logistic operators are often at variance with environmental considerations. Most of the environmental costs are externalized. That means that final consumers have to absorb these costs (e.g. environmental tax). Yet the society in general, and also many individuals in particular, are becoming less willing to accept these costs, and pressure on governments and corporations to include greater environmental considerations in their activities is growing.

Time/Speed. In Logistics, time is essential. Therefore it is necessary to reduce the time of flows as well as the speed of the distribution systems, and consequently, its efficiency. But this can only be achieved by using the most polluting and least energy efficient transportation modes. The result of time constraints imposed by logistical activities is a significant increase of air freight and trucking. Flexibility in logistics and industrial production is mainly represented by two principal concepts: Door-To-Door (DTD) services, mostly coupled with Just-In-Time (JIT) strategies. This leads to a vicious circle (figure3). The more physical distribution through logistics is efficient, the less production, distribution and retailing activities are constrained by distance. In turn, this structure involves a higher usage of logistics and more ton-km of freight transported. So the more DTD and JIT strategies are applied, the further the negative environmental consequences of the traffic it creates.

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Figure 2: Environmental vicious circle of Logistics , Author's own figure.

Reliability. The importance of service reliability depicts the center of logistics. The aim is to deliver freight on time with the least risk of breakage or damage.

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¹ Article in SupplyTimes by Bryant Henry