Authors: Dr. Jean-Paul Rodrigue, Dr. Brian Slack and Dr. Claude Comtois

1. Greenness and Logistics

Most considerations in sustainable transportation focus on passengers, leaving freight issues somewhat marginalized. Logistics are at the heart of the operation of modern transport systems and implies a degree organization and control over freight movements that only modern technology could have brought into being. It has become one of the most important developments in the transportation industry. Greenness has become a code word for a range of environmental concerns and is usually considered positively. It is employed to suggest compatibility with the environment, and thus, like logistics, it is perceived as beneficial. When put together, the two words suggest an environmentally friendly and efficient transport and distribution system.

Green Logistics. Supply chain management practices and strategies that reduce the environmental and energy footprint of freight distribution. It focuses on material handling, waste management, packaging, and transport.

The loosely defined term covers several dimensions related to production planning, materials management, and physical distribution. It opens the door to a wide array of potential applications of environmentally friendly strategies along supply chains. This implies that different stakeholders could be applying different strategies, all of which are labeled as green logistics. One corporation could be focusing on product packaging while another on alternative fuel vehicles; both are undertaking green logistics. However, a closer look at the concept and its applications, a great many paradoxes and inconsistencies arise, which suggests that its application may be more difficult than what might have been expected in the first place. Although there has been much debate about what green logistics truly entails, the transportation industry has developed very narrow and specific interests about the issue. If transportation costs are reduced, and assets such as vehicles, terminals, and distribution centers are better utilized, the assumption is that green logistics strategies are being implemented.

In common with many other areas of human endeavor, greenness became a catchword in the transportation industry. It grew out of the emerging awareness of environmental problems and negative externalities which started in the 1950s when the fast growth of trucking impacted urban communities. Factors such as truck size, emissions, noise became public concerns, leading to the first legislations focusing on pollutant and noise emissions and road access conditions. In a more recent context, well-publicized issues such as sustainability, energy, waste disposal, and climate change have contributed to establishing green logistics as a formal field of inquiry and mitigation. Environmental concepts, such as material flows or the carbon cycle, became readily applicable to supply chain management. The World Commission on Environment and Development Report (1987) established environmental sustainability as a goal for international action, which gave green issues a significant boost in political and economic arenas. The transportation industry was recognized as a major contributor to environmental issues through its modes, infrastructures, and flows. The developing field of logistics was seen as an opportunity for the transportation industry to become more environmentally friendly. Yet, environmental perspectives and transportation sustainability issues remain predominantly focused on passenger transportation.

Logistics Activities and their Green Dimensions

Material flows cycle

Circular economy and supply chains

Interest in the environment by the logistics industry manifested itself most clearly in terms of exploiting new market opportunities. While traditional logistics seeks to organize forward distribution, that is the transport, warehousing, packaging, and inventory management from the producer to the consumer, environmental considerations opened up markets for recycling and disposal and led to an entire new sub-sector; reverse logistics. This reverse distribution involves the transport of waste and the movement of used materials. Even if the term reverse logistics is widely used, other names have been applied, such as reverse distribution, reverse-flow logistics, and even green logistics. A more recent framework is that of the circular economy, which is inserting logistics into reuse, remanufacturing, recycling, and the disposal of waste into a feedback loop. It is becoming an emerging approach that takes into consideration the full extent of logistics, which is the greening of both the forward and reverse segments of supply chains.

2. Green Logistics and its Paradoxes

An overview of the standard characteristics of logistical systems reveals several inconsistencies with regards to the mitigation of environmental externalities. They take the form of five basic paradoxes.

a. Costs

The purpose of logistics is to reduce costs, notably transport costs. While the former remains the most salient logistics cost, inventory carrying costs come second. In addition, economies of time and improvements in service reliability, including flexibility, are further objectives. Corporations involved in the physical distribution of freight are highly supportive of strategies that enable them to cut transport costs in a competitive setting. Economies of scale in transportation, as well as higher load densities, are common cost-saving strategies that concomitantly lead to environmental benefits in terms of lower fuel consumption per ton-km. On some occasions, the cost-saving strategies pursued by logistic operators can be at variance with environmental considerations that become externalized. This means that the benefits of logistics are realized by the users and eventually to the consumer if the benefits are shared along the supply chain.

However, the environment assumes a wide variety of burdens and costs, which form a hierarchy ranging from costs internal to the supply chain to externalized costs. Society is becoming less willing to accept these costs, and pressure is increasingly being put on governments and corporations to include greater environmental considerations in their activities. A salient example concerns food supply chains that have been impacted by lower transport costs, enabling diversification of the suppliers and longer transport chains. The concept of food-miles has been developed as an attempt to capture the full costs of food distribution by using the distance food is carried as a proxy. Such measures are controversial since sourcing can vary substantially for a product based on changing input costs and seasonality.

b. Time

In logistics, time is often the essence. By reducing the time of flows, the velocity of the distribution system is increased, and consequently, its efficiency. This is mainly achieved by using the most polluting and least energy-efficient transportation modes. The significant increase of air freight and trucking is partially the result of time constraints imposed by logistical activities. The time constraints are themselves the result of increasing flexibility of industrial production systems and of the retailing sector. Logistics offers door-to-door (DTD) services, mostly coupled with just-in-time (JIT) strategies. Other modes cannot satisfy the requirements such a situation creates as effectively. This leads to a vicious circle; the more DTD and JIT strategies are applied, the further the negative environmental consequences of the traffic it creates. The slow steaming strategy pursued by maritime shipping companies is further challenging time management within long-distance supply chains.

c. Reliability

At the heart of logistics is the overriding importance of service reliability. Its success is based upon the ability to deliver freight on time with the least breakage or damage. Logistics providers often realize these objectives by utilizing the modes that are perceived as being the most reliable. The least polluting modes are generally regarded as being the least reliable in terms of on-time delivery, lack of breakage, and safety.

Ships and railways have inherited a reputation for poor customer satisfaction. For instance, the schedule reliability of container shipping is around 50%, implying that about half the time a container ship will not arrive at a port terminal on the scheduled day. Lower reliability levels are linked with lower levels of asset utilization and higher inventory levels, which is wasteful and indirectly damaging to the environment. The reliability of the logistics industry is built around air and truck shipments which are the two least environmentally-friendly modes.

d. Warehousing

Logistics is an important factor in promoting globalization and international flows of commerce. Modern logistics systems economies are based on the reduction of inventories, as the speed and reliability of deliveries removes the need to store and stockpile. Consequently, a reduction in warehousing demands is one of the advantages of logistics. This means, however, that inventories have been transferred to a certain degree to the transport system, especially to roads but also to terminals. Inventories are actually in transit, contributing still further to congestion and pollution. The environment and society, not the logistical operators, are assuming the external costs. Not all sectors exhibit this trend, however.

In some industrial sectors, computers, for example, there is a growing trend for vertical disintegration of the manufacturing process, in which extra links are added to the supply chain. Intermediate plants where some assembly is undertaken have been added between the manufacturer and consumer. While facilitating the customizing of the product for the consumer, it adds an additional external movement of products in the production line.

e. Information Technologies

Information technologies have led to new dimensions in retailing. One of the most dynamic markets is e-commerce. This is made possible by an integrated supply chain with data interchange between suppliers, assembly lines, and freight forwarders. Even if for the online customers there is an appearance of a movement-free transaction, the distribution online transactions create may consume more energy than other retail activities. The distribution activities that have benefited the most from e-commerce are parcel-shipping companies rely solely on trucking and air transportation. Information technologies related to e-commerce applied to logistics can obviously have positive impacts. So once again, the situation may be seen as paradoxical.

Composition of Logistics Cost

The Food-mile: Yogurt Supply Chain, Germany

Environmental Vicious Circle of Logistics

Retail Logsitics and E- commerce

It can be argued that the paradoxes of green logistics make it challenging for the logistics industry to become significantly greener. The internal inconsistencies between the goal of environmental sustainability and an industry that gives undue preference to road and air transport can be seen as being irreconcilable. Yet internal and external pressures promoting a more environmentally-friendly logistics industry appear to be inexorable. How the logistics industry has responded to the environmental imperatives is not unexpected, given its commercial and economic imperatives, particularly in view of the paradoxes it is facing.

3. A Blueprint for Green Logistics

Environmental pressures in many economic sectors are already manifest and for the logistics industry, it is latent but quickly emerging. The matter is how these pressures are going to take shape and which actors are going to be the most proactive. Over the later three scenarios are possible, but they are not mutually exclusive:

• A top-down approach where environmental standards are imposed on the logistic industry by government policies through regulations;
• A bottom-up approach where environmental improvements are coming from the industry itself through the adoption of best practices through innovative firms;
• A compromise between the government and industry, notably through certification schemes leading to accreditation to desirable environmental standards.

First is that government action will force a green agenda on the industry, in a top-down approach. Although this is the least desirable outcome for the logistics industry, it is already evident that government intervention and legislation are reaching ever more directly over environmental issues. In Europe, there is a growing interest in charging for external costs, as the EU moves towards a ‘fair and efficient’ pricing policy. A sharp increase in costs could have a more serious impact than a more gradual, phased-in tax. In North America, there is a growing interest in road pricing, with the re-appearance of tolls on new highways and bridges built by the private sector, and by congestion pricing, especially in metropolitan areas.

Pricing is only one aspect of government intervention. Legislations controlling the movement of hazardous goods, reducing packaging waste, stipulating the recycled content of products, the mandatory collection, and recycling of products are already evident in most jurisdictions. Indeed, it is such legislation that has given rise to the reverse logistics industry. Truck safety, driver education, limits on driver’s time at the wheel, are among many types of government action with a potential to impact the logistics industry.

A difficulty with government intervention is that the outcomes are often unpredictable, and in an industry as complex as logistics, many could lead to unintended consequences. Environmentally-inspired policies may impact on freight and passenger traffic differently, just as different modes may experience widely variable results of a common regulation. Issues concerning the greenness of logistics extend beyond transport regulations. The sitting of terminals and warehouses are crucial to moving the industry towards the goal of sustainability, yet these are often under the land use and zoning control of lower levels of government whose environmental interests may be at variance with national and international bodies. A positive trend has been the joint planning and sitting of logistics zones and intermodal terminals as co-located facilities.

If a top-down approach appears inevitable, in some respects at least, a bottom-up solution would be the industry preference. Its leaders oppose leaving the future direction to be shaped by government action. There are several ways a bottom-up approach might come about. As with reverse logistics, these occur when the business interests of the industry match the imperatives of the environment. One such match is the concern of the logistics industry with empty movements, which ranges from empty trucking backhauls for regional freight distribution to the repositioning of empty containers across oceans. With the growing sophistication of fleet management and IT control over scheduling and routing, further gains are achievable. Another match involves fine-tuning the routing and operations of freight transport systems with higher energy prices. The adoption of slow steaming strategies by maritime shipping companies is using the rationale of environmentalism to reduce fuel consumption and improve the utilization of their ship assets.

Potential Impact of High Oil Price on Transportation

Fuel Consumption by Container ship size and speed

Less predictable, but with a much greater potential impact on the greenness of the industry, are possible attitudinal changes within logistics and without. These changes are comparable to that which has already occurred in recycling. There has emerged striking public support for domestic recycling. This has been extended by some firms in successfully marketing their compliance and adoption of green strategies. Firms have found that by advertising their friendliness towards the environment and their compliance with environmental standards, they can obtain an edge in the marketplace over their competitors. Traditionally, price and quality characteristics formed the basis of choice, but because environment preservation is seen as desirable in general, greenness can become a competitive advantage. Ultimately, pressure from within the industry can lead to greater environmental awareness. Corporations that stand apart will lose out because purchasers will demand environmental compliance.

The compromise appears to be the most desirable option with the industry following up through with the implementation of environmental management systems (EMS). Although governments are involved in varying degrees, a number of voluntary systems are in place, notably ISO 14001 and EMAS (Environmental Management and Audit System). In these systems, firms receive a certification on the basis of establishing an environmental quality control tailored to that firm, and the setting up of environmental monitoring and accounting procedures. Obtaining certification is seen as evidence of the firm’s commitment to the environment, and is frequently used as a public relations, marketing, and government relations advantage. This represents a fundamental commitment of the corporation to engage in environmental assessment and audits that represent a significant modification of traditional practices, in which efficiency, quality, and cost evaluations prevailed. The challenges of certification schemes include:

• Certification can be biased to represent or protect the interests of specific stakeholders and markets.
• Attaining compliance can be a costly endeavor in terms of time and resources in regard to the uncertainty of the benefits. Figures vary and it can take from 6 months to two years to go through the certification process. This can be a negative factor for smaller firms or developing economies. Thus, certification can create barriers to entry, effectively protecting the market advantage of the compliant firms.
• Once a certification has been achieved, auditing and review can continue to be time and resources intensive as they can take place every three years. They can also relapse, implying that the certified firm may not consistently adhere to the standards they have been certified for.

Of the three possible directions by which a greener logistics industry may emerge, it is realistic to consider that they will concomitantly help shape the industry of the future. Although there is a clear trend in policy guidelines to make the users pay the full costs of using the infrastructures, logistical activities have largely escaped these initiatives. The focus of much environmental policy is on private cars (e.g. emission controls, gas mixtures, and pricing). While there are increasingly strict regulations being applied to air transport (noise and emissions), the degree of control over trucking, rail, and maritime modes is less. For example, diesel fuel is significantly cheaper than gasoline in many jurisdictions, despite the negative environmental implications of the diesel engine. Yet trucks contribute on average 7 times more per vehicle-km to nitrogen oxides emissions than cars and 17 times more for particulate matter. The trucking industry has been able to avoid the bulk of environmental externalities it creates, notably in North America.

4. Applying Green Logistics to Supply Chains

Although in the past the environment was not a major preoccupation or priority in the industry itself, the last decades have shown a remarkable change as green logistics became increasingly part of the supply chain management discourse and practices. The standard themes of materials management and physical distribution can be expanded with an additional focus on strategies able to mitigate the paradoxical nature of green logistics:

• Product design and production planning. The conventional focus of product design and development is the improvement of its commercial and competitive attributes such as price, quality, features, and performance. There is also planned obsolescence in product design with the expectation that it will be discarded after a certain amount of time or uses. This process is common for electronic goods as each new generation of a product (computers, phones, televisions) is quantitatively and qualitatively better. Products are increasingly being considered from a supply chain perspective, namely their sourcing and distribution where the concern is about designing or redesigning supply chains that are more environmentally friendly. This can involve the physical characteristics of the product itself, such as its material intensity, (lighter, alternative materials) or production processes that allow for a higher transport density of parts. Suppliers that are closer (near sourcing) may be considered even if they may be more expensive so that transportation costs can be reduced. A decision can also be made to preferably contract suppliers that have demonstrated that the parts and resources they provide have been procured in a sustainable manner.
• Physical distribution. Concerned about strategies to reduce the environmental impacts of physical distribution, namely the transportation and warehousing processes. It could involve the usage of facilities that have been certified as environmentally efficient (Leadership in Energy & Environmental Design – LEED – is a globally recognized certification scheme) as well as carriers abiding by environmentally friendly principles. Preferences could also be placed on delaying shipments until a sufficient load factor is reached. The usage of alternative modes and fuels is increasingly applied, particularly for city logistics. For long-distance travel a modal shift to rail and economies of scale on maritime shipping are considered strategies that may lead to greener supply chains.
• Materials management. Concerned about reducing the environmental impacts related to the manufacturing of goods in all their stages of production along a supply chain. A salient strategy involves better packing and packaging to increase the load density as well as to reduce materials consumption and waste. Low impact materials, particularly recycled resources, can be preferred as industrial inputs. As products, or their components, tend to be increasingly recyclable, waste management strategies are being pursued to ensure that the end products are either discarded properly or, preferably, being recycled to other uses.
• Reverse distribution. Concerned about activities and movements related to taking back consumed goods as well as waste to be recycled or discarded. It has opened up new market opportunities over specific aspects of materials management (mostly recycling and waste disposal) and physical distribution (collection channels). Here the environmental benefits are derived rather than direct. The transportation industry itself does not necessarily present a greener face, indeed in a literal sense reverse logistics adds further to the traffic load and facilities required to handle them. The manufacturers and domestic waste producers are the ones achieving environmental credit.

Applying green logistics to supply chains must also consider the network and spatial footprint of freight distribution. The hub structures supporting many logistical systems result in a land take that is exceptional. Airports, seaports, and rail terminals are among the largest consumers of land in urban areas. For many airports and seaports, the costs of development are so large that they require subsidies from local, regional, and national governments. The dredging of channels in ports, the provision of sites, and operating expenses are rarely completely reflected in user costs. In the United States, for example, local dredging costs were nominally to come out of a harbor improvement tax but this has been ruled unconstitutional and channel maintenance remains under the authority of the US Corps of Army Engineers. In Europe, national and regional government subsidies are used to assist infrastructure and superstructure provision.

The trend in logistics towards hub formation is clearly not green as it incites the convergence of traffic flows and their externalities within a well-defined area. On the positive side, this confers opportunities to mitigate these environmental externalities since they are focused and clearly identifiable.

Packed Memory Foam Mattresses

Weight and Packaging Improvements: Ipad 1 versus Ipad 2

Hub and Spoke Network and Externalities

Taxonomy of Logistics cluster

 

 Land Requirements for Freight Distribution

UPS Chicago Area Consolidation Hub