1. LOG 408: Global Logistics Management
Lecture 12: Supply Chain Sustainability

2. Key Points of Lessons in Last Week
Some supply chain security initiatives after 911 event
Overview of supply chain risk management with related concepts such as robustness and resilience.
Three types of risk sources, known-known, known unknown, and unknown-unknown.
Three approaches to unknown-unknown risks: redundancy, sensing & responding, adaptive SC community
Three strategies to manage controllable risks: speculative, hedge, and flexible strategy
A structured framework for the identification and management of supply chain risk and resilience

3. Sustainability
Sustainable logistics is concerned with reducing the environmental and other disbenefits associated with the movement of freight
Sustainability seeks to ensure that decisions made today do not have an adverse impact upon future generations
Sustainable supply chains seek to reduce these disbenefits by inter alia redesigning sourcing and distribution systems so as to eliminate any inefficiencies and unnecessary freight movements

5. The Green Revolution
The international Kyoto Protocol has called for a 60% reduction in carbon emissions by 2050
Carbon footprint: the environmental disbenefits associated with economic activities such as the movement of freight
Food miles: the distance by which the various components of a particular food item have to travel before final consumption

6. Measuring the Carbon Footprint
Greenhouse Gas (GHG) emissions are those that contribute to climate change, with most (approximately 95%) being in the form of carbon dioxide (CO2) which results from, among other activities, the burning of fossil fuels. Various entities have developed guides on how to measure and report GHG emissions.

7. Measuring the Carbon Footprint
In the UK defra (the UK Government department responsible for the environment, food and rural affairs) has given detailed guidelines and look-up tables online but in essence the calculation comprises:
(Fuel used) x (The appropriate emission factor for the type of fuel used) = kgCO2eq*
* eq refers to equivalent as this also captures other gases such as methane and nitrous oxide.

9. Improving sustainability of logistics and Supply chain systems
Redesigning supply chains
Using scale to reduce the negative environmental effects of logistics activities (i.e. by moving freight in larger single loads, thus cutting down on both unit costs and disbenefits)
Similarly promoting various efficiency solutions (by transporting and handling freight more effectively

10. Supply Chain Redesign Largely about forward planning
Over 80% of carbon savings are only achievable at the supply chain design stage, e.g.:
deciding where to locate warehouses and distribution centres
deciding which transport modes to use
reconfiguring distribution networks so as replace small deliveries direct to all end customers with centralised deliveries to a hub from where end customers retrieve their goods
Localization may not be the best strategy

11. The link between economic growth and transport growth
There is an inexorable link between economic growth and transport
i.e. as economies grow, more transport is required to move the freight that economic growth inevitably generates
A core issue for policy makers is to endeavour to decouple economic growth and transport growth
i.e. to find ways of allowing economic growth without comparable growth in transport (e.g., moving to more environmental friendly transport modes)
A recent UK study partially supported the decoupling in the UK economy

12. The role of ‘scale’ in logistics and SCM
If all the containers in the world were lined up, it would create a container wall with a length of 108,000 kilometers
i.e.2.7 times around the earth at the equator
The volume of freight that can be held in one standard forty foot container is quite significant: 200 dishwashers, 350 bicycles or 5,000 pairs of jeans
The shipping cost per unit is thus quite low: Maersk estimate for freight coming from Asia to Europe it costs £9 per dishwasher, £5 per bicycle and just £0.35 per pair of jeans
Large ships are more environmental friendly in energy efficiency and environmental costs
Maersk’s Emma can carry TEUs.

13. The role of ‘scale’ in logistics and SCM
Only certain ports can handle ultra large vessels
There is growing traffic concentration at certain other ports
Increasingly, many mid-sized ports are playing a feeder role to the very large ports as hub and spoke networks
In these networks the larger vessels ply between the major transhipment hubs
The prosperity of the smaller ports is increasingly dependent on the route strategies of the major shipping lines

14. Efficiency Solutions
In addition to looking to increased scale, many logistics operators are also seeking efficiencies with how they move and store freight so as to reduce the environmental impact of their activities.
Port centric logistics is one example
Promote a “green” culture in the company
IKEA gave employees a bicycle as a Christmas present
Use electronic logistics markets for better usage of freight capacity (reducing the empty running)

15. Port Centric Logistics
Some ports are actively encouraging companies to locate distribution centres at ports rather than in their traditional locations which tend to be in geographically central, inland locations
Current patterns of (inland) distribution centre location ignore the fact that most of the freight that passes through these distribution centres first transits through a port
Therefore it is logical (and often easier in terms of land cost, lack of congestion, etc) to site such distribution centres at ports

16. Port Centric Logistics
One advantage of port centric logistics is that it cuts down on the number of empty (return) containers on roads by ‘stripping’ (i.e. emptying) imported containers at the port.
It allows faster repositioning of containers to another port where they are required
Containers can be filled to full capacity

18. Efficiency Solutions
In transportation, it is not just the road haulage sector that is seeking to reduce its environmental footprint. With the growth of air travel, spurred on in particular by rapid growth in the so called low fares category of air travel, many commentators are looking towards the air transport sector to reduce its impact on the environment.
e.g., new generation aircrafts
Efficiency solutions are not just restricted to transportation. Green warehouse design is also growing in popularity.
Many warehouses’ environmental footprints can be reduced by for example more efficient lighting and heating /refrigeration systems.

19. Questions to think
What are the pertinent sustainability issues in the context of logistics and SCM?
What is meant by the term ‘port-centric logistics’?
How might we ‘decouple’ economic growth and transport growth?
What is meant by the term ‘carbon footprint’?