Green Logistics - Network Optimization

Global sourcing & distribution practices are creating large and complex logistics networks.  Consequently, long distance product movements and inter-related shipment flows are resulting in high energy costs and increased CO₂ emissions. On the other hand in the name of expediting orders or just-in-time (JIT) practices, multiple direct and repeated small shipments are adding to traffic congestion, further aggravating fuel costs and CHG emissions.  Besides, emissions per mile also increase with the level of congestion as vehicles move at unproductive speeds. In this way, most of the companies have become liable for increased carbon footprints in the environment.

Studies have shown that, supply chain network optimization can cut cost by eleven percent and reduce CO₂ emissions by ten percent.  A well designed supply chain network with an aim to reduce length of product movements can minimize both costs and environmental impacts.  As a result, shipping distances shrink lowering fuel consumption, distribution costs and carbon emissions.  Further, supply chain risks such as volatile fuel prices and long lead times will lessen. Therefore, network optimization should be the key strategic objective to realize additional cost and green benefits.

Best network-related decisions regarding facility locations and flows should be made using scientific and advanced network design methods. While network optimization is one way to protect environment, companies also can rethink their supply or sourcing strategies.  Shifting to local sourcing though increases material cost, product movement can be curtailed considerably. Additional costs due to local sourcing can be easily offset through savings in shipping and distribution.

Towards Green Logistics Practice

Environmental protection is one of the major concerns of this decade. Goods shipment is estimated to account for about eight per cent of energy-related carbon dioxide emissions globally. Warehousing and freight related emissions add another three per cent. In view of this, there has been a significant pressure on firms to take steps towards reducing environmental impact due to their logistics operations. Sustainable logistics require reducing carbon emissions drastically. Both logistics costs and environmental impact can be reduced significantly through green supply chain practices. Besides complying with environmental regulations, firms can benefit from financial gains. It is a win-win situation for both environment and industries.

Shifting to more efficient freight transportation modes is expected to reduce CO₂ emissions by at least forty per cent according to one of the IEA publications.  Studies have shown that, supply chain network optimization can result in cost cutting by eleven percent and a ten percent reduction in CO₂ emission. Green packaging practices like packaging elimination, light-weighting and use of alternative or recyclable material help companies to have an overall cost reduction. Estimates say that, atleast 50 % of power can be conserved in warehouses through daylight dimming and use of motion sensors.  Purchase departments can also save significant cost through sustainable initiatives.  Above all, firms can improve their public image.  

Corporate policies should now aim at reducing their impact on environment and gain from sustainable practices.  According to New 'Green Transportation & Logistics' report, 94% of supply chain professionals rate green issues as a business priority. Industries like CPG, Food & Beverages, Heavy Engineering, Automobile, Pharma, etc., should motivate and empower their logistics & supply chain professionals towards green logistics initiatives.  Executives involved in product development, purchase and logistics management should understand: (1) Ways to measure the impact of their transportation and logistics on the environment (Environmental Footprint Measurement) and how corporate can gain from footprint reduction; (2) How to develop an action blueprint for each mode and their vertical, to reduce environmental footprint; (3) Best practices like sustainable procurement, network optimization, green packaging, layout optimization, etc., and (4) Corporate Sustainability Reporting, and benchmarking with the industry.