A look at green and sustainable

technologies that can be used in supply

chain management
uieen
Logistics in
SCN
A look at BBL initiatives
towaius sustainable logistics
Student Name: Jaiganesh Ravindra Babu

Student ID: 42245

Subject: Supply Chain Management

Lecturer: Mr. Bismark Akoi

MBA Innovative Management

Submission Date: 1
st
April 2011
1

Acknowledgement

My special thanks to a great many people who helped and supported me during the
writing oI this coursework.

My deepest thanks to Lecturer, BISMARKT.AKOI Ior appropriate guidance that
was provided and hints towards completing this work. My special thanks to my
college library staIIs who guided me to the required source without any hesitation.

This report is based on a number oI popular textbooks and websites and the same has
been acknowledged in bibliography.

I would also thank my Institution and my Iaculty members without whom this project
would have been a distant reality. I also extend my heartIelt thanks to my Iamily and
well-wishers.

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Contents
Supply Chain Management and Logistics ................................................................... 3
Role oI Logistics in Sustainability .............................................................................. 4
Motives Ior Sustainable Logistics Model - Why acting sustainably make business
sense .......................................................................................................................... 5
Behavioural Trends and Major ShiIts Expected-Changes are already on their way ..... 6
Rise oI Demand Ior Low-Carbon Logistics ................................................................ 6
How Logistics Industry will change to Sustainability ................................................. 6
Economic Value oI Going Green ................................................................................ 7
Towards a More Sustainable Logistics Conceptual and Operational Solutions ......... 7
Conclusion ............................................................................................................... 11
Bibliography ............................................................................................................ 12


3

a\\ Cbain Management and Logistics
James Morton oI CapGemini, during the annual 3PL study presentation
denoted that reducing carbon emissions will always results in reducing the operating
costs in logistics which will translate to a better business Ior SCM organisations.

The sentence above clearly demarcates the need and the necessity Ior green
initiatives Ior business. Is the claim really up to its mark or not is the intent oI this
paper. Supply Chain Management (SCM) according to Tom McGuIIog is adding
value and and reducing total cost across the entire business process through Iocusing
on speed and certainty oI response to the market. Globalization and ICT has resulted
in SCM becoming a tool Ior organisations to compete eIIectively either at a local level
or in the global arena. SCM has become a necessity tool Ior manuIacturing industry
when it comes to delivering products at a competitive cost and at a higher quality than
their competitors (Sovereign, 2008)

With the growing necessity Ior organisations to project or place themselves as
carers oI society and with increasing trends oI go-green` mentality oI various
customers, organisations that are involved in the logistics chain have also taken up
various measures to become greener in that sense. One oI the world renowned
providers oI logistics supplier Deutsche Post DHL is no stranger to this bug. As the
leading provider oI logistics support Ior various businesses DHL has taken a number
oI steps to Iurther reiterate the Iact that a company can take up the initiative to go
green and still remain competitive and be responsible to the environment.

The world is hugged by Deutsche post DHL. With a network oI almost halI a
million employees, DHL spans the globe, reaching nearly every nook and corner oI
our planet. As a global logistics company they are a vehicle Ior market and trade
growth Irom Asia to the Americas, Irom Europe to AIrica. DHL inIluences and
aIIects the world in which it operates but it is also equally inIluenced and aIIected by
trends and developments around the globe, be they economic, political or societal in
nature. This is one oI the prime reasons why DHL understands and addresses Iactors
that Iorm the Iuture trend in green logistics.

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The culture Ior going green did not initiate itselI. DHL at the initial stages
Iaced a lot oI hurdles both internal and external beIore it was able to embark on a Go-
green initiative and at present is successIully and the only company to have a clearly
set target and transparent process to check Ior compliance in the world. Post the
muddle that DHL Iaced with respect to its Iailure on the green Iront, the organisation
aIter a successIul implementation oI change within its process has emerged as a leader
with prooI to show the world that it has the initiative to remain in the IoreIront oI
logistics and yet remain green.

But why, should the Iocus be on green logistics? Recent research has shown
that climate change is a concern oI high prominence Ior citizens around the globe, in
short sustainability and green initiative matters a lot to a lot oI people. It is so
important that almost all organisations have integrated the process into their corporate
initiatives. Under the Go-Green label` DHL was the Iirst logistics company to
promote carbon-neutral shipping services and to publicly communicate clear-cut
carbon eIIiciency goal.
oe of Logistics in astainabiit
In a world that is highly interconnected where the latest trendy product or a
new business is just a click away the transport and logistics company play an
important part in ensuring the smooth Ilow oI products Irom the manuIacturer to the
intended user. Logistics is a key driver oI global economy and job creation
accounting to a whopping 9 oI total global GDP (Logistics Today 2010). Having
contributed to the global prosperity and employability, logistics business should also
understand its responsibility Ior the environmental impact. Just as logistics provides
Ior economic growth it should also look at providing logistic solution that has
ecological sustainability at its core value. The option to ignore the ecological impact
is not an option as the negative impact oI unplanned logistics has been clearly pegged
at 5 oI global GDP by Nicholas Stern (2007).

Posted below are the Iigures that compare various sources oI GHG emissions
with individual GHG signature Ior various logistics activities.

5




CO2 Emissions in megatons per year Source: WEF 2009

Motives for astainabe Logistics Mode - Wb acting sastainab
make basiness sense
Many developing trends show that most business needs to take a long-term view
on their business with regards to sustainability vis-a-vis
1. Customers will place a higher emphasis on sustainability Iactor. A key Iactor
will be the need to measure and reduce the carbon Iootprint.
8esldenLlal
Commerclal
8ulldlngs 790
1ransporL 1310
AgrlculLure
1330
WasLe
WasLewaLer
280
Lnergy Supply
2390
lndusLry 1940
loresLry 1740
GnG Lm|ss|ons |n 2004 |n terms of CC2
0
300
1000
1300
2000
2300
3000
8oad lrelghL Ccean lrelghL Alr lrelghL 8all lrelghL LoglsLlc
8ulldlngs
GnG Lm|ss|on of Log|st|c Act|v|t|es
6

2. Investors will expect business to adopt a more sustainable business models by
demonstration and integration risk management methods with respect to
climate changes.
3. Employees will be incentivised to transIer their sustainable practises to
workplaces.
4. There will be increasing political and legislative support Ior sustainability
work processes started by business.
5. Industry alliances will be Iormed to set standards and promote/put in new way
oI thinking on a green and sustainable way.
ebavioara Trends and Ma|or bifts Ex\ected-Cbanges are
aread on tbeir wa
Lately, people around the world are not only concerned about climate change,
but are increasingly assertive towards taking action in Iavouring more
environmentally-Iriendly behaviour. The most common eIIorts, as proved by the
Green Trends Survey were to separate waste, to reduce consumption oI disposable
items, to choose an environmentally Iriendly mode oI transport or recycling.
ise of Demand for Low-Carbon Logistics
The Iact that in UK retail sales volumes oI Iair-trade products increased Irom
GBP 21.8 million in 1999 to GBP 799 million in 2009(Fairtrade.org) underlines the
importance that business Iix on green initiatives. Data Irom both research and market
analysis prove that demand Ior green logistics oIIerings is increasing. Customers are
willing to Iavour a company with green transport/shipping over a cheaper non-green
process business.
How Logistics Indastr wi cbange to astainabiit
1. Logistics as a strategy: Logistics will not only be a catalyst to global trade and
a deIining component towards value creation it will also assume strategic
importance towards low-carbon economy.
2. Technological change will be achieved with group collaboration between
various businesses and government initiatives. This is equally important
because oI higher price tag and long-term sustainability.
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3. Increasing collaboration, as carbon emission reduction becomes a priority to
business due to increasing consumer requirements.
4. Change in Business models due to sustainable innovations.
5. CO2 labelling will be widespread and quite common to ascertain carbon
Iootprint.
6. Price tagging Ior carbon emission will be a normal rather than a catch word in
media.
7. A more stringent regulator measure due to carbon pricing is only a matter oI
time.
Economic Vaae of Coing Creen
Green Trends Survey points out that green logistics is or will be important Ior
'intangible reasons like company reputation and Ior cost savings making more
business sense.
1. Growing Customer demand Ior green products producing more sales.
2. Growing importance oI 'Responsible Investments


Source: DHL Annual Report 2009
Towards a More astainabe Logistics - Conce\taa and
U\erationa oations
The rule so Iar in logistics has been cost and speed, lately an additional
dimension begs importance, namely sustainability. We shall now look into
conceptual and operational solutions with respect to DHL and their impact on a
sustainable logistics solution that not only makes business sense but also has
sustainability at its core.
8


onceptual Solutions
Measures like green distribution design or optimal route management are
important strategies to minimise CO2 emissions.
Sourcinq Stroteqies: No Business is able to produce a product by its own process.
In Iact, more parts are nowadays sourced Ior production. As any Iorm oI transport
leads to CO2 emission, this is one good way at looking at reducing emission. The
global source method Ior parts made sense during the 80s and 90s era due to a steady
crude oil prices, this no longer hold true. A locally sourced product part not only
reduces cost but also reduces the transport CO2 emissions involved.
Honufocturinq Cbonqes: Forward stocking has been used and has shown to be an
eIIective means oI meeting consumer demand without any large scale reduction in
eIIiciency and can be looked into. With the increasing use oI online purchases it only
makes prudent sense to part assemble a part Ior transport and then complete the
assembly locally.
Bistribution Cbonqe: Optimising a network design such that nodes and
interrelated routes are taken into consideration may cause a minimal delay but works
great Ior reducing emissions. A common way to make this happen is Ior similar
organisations to come together to share their logistical resources Ior maximal and
energy eIIicient use.
HoJol Hix Alterotion: Planes have a comparatively high CO2 Iootprint when
compared to ships and so on. Choosing the best mode oI transport also makes sense.
DHL recently undertook a modal mix alteration strategy Ior a pharmacy company in
Europe. Following an eIIectively chosen distribution change and modal mix model,
the companies warehouse were reduced to 15 Irom present 40 and road transport was
adopted that was proven to reduce emissions by 40. The outcome oI the study
proved that GoGreen initiative by DHL is not only cost saving but also sustainable
and makes business sense.
Route Honoqement: A vast majority oI transportation oI products is undertaken
on roads. An eIIectively managed route will not only reduce time and save money on
wages but also have a good green signature. This system does require a complex
dynamic routing planner to be put in place.
Proper Copocity Honoqement: A properly planned capacity cuts down under
utilisation oI resources. In 2008, DHL Freight Euronet implemented proper capacity
9

management tools to improve CO2 eIIiciency Irom 100 to 70g CO2 per revenue ton
kilometre.
oilure ree Belivery: Another area that DHL concentrated is Iailed delivery. A
very good initiative by DHL in this area is the DHL Packstation Initiative. This
allowed customers to receive their packages at secure stations with 24/7 access. This
not only ensured that packages are delivered to the customers but also at their
convenient time. The savings Irom such initiatives are substantial, Irom Packstation
alone, 40000 kms oI trip was saved and this resulted in a CO2 emission reduction oI
11 tons.

Operational Solutions
While changes to design oI networking and mode oI transport reduces CO2
emissions, DHL will not be become a low carbon company unless operational
changes, especially newer technologies are implemented. We will look into a Iew
cases where DHL can make more changes to its operational structure to reduce its
carbon Iootprint.
RooJ reiqbt: At present there is no technology that can completely reduce CO2
emissions but there are a Iew models that have a lower CO2 Iootprint which can be
used Ior the purpose.
EybriJ vebicles: These combine a conventional engine with a high voltage electric
motor supporting the combustion engine. For DHL, hybrid powertrain systems are
more suitable Ior smaller trucks (7.5-12 tons), in this instance the expected gain in
eIIiciency is in the range oI 15 to 25 a much larger value when compared to line
haul traIIic or heavy-duty trucks. DHL may implement this at a larger scale to reap
beneIits on a longer term.

Flectric vebicles: will have a major impact on the logistics industry. First oI all
they will have an advantage oI nigh-time delivery due to less noise produced.
Additionally, they will also clear congestion due to nigh time service. They can also
become part oI the country`s intelligent energy inIrastructure by serving as source oI
energy during times oI dire requirement. However, the main hurdle Ior logistics
company such as DHL will be the exorbitant initial setup cost such projects
command.
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oJywork Besiqn: A vehicle`s size; mass has signiIicant impact on its overall
eIIiciency, Iuel consumption, and gas emission. A recent research by Bandivadekar et
al, 2008 has shown that vehicle weight reduction oI up to 15 is possible with
substantial improvement in Iuel eIIiciency.
AeroJynomics: Air drag is considered to be a major source oI wasted energy and
DHL has initiated major changes in the aerodynamics oI its Ileet to ensure that air
drag is reduced. Studies have shown that an optimally shaped vehicle can have a 15
higher eIIiciency compared to a normal vehicle. DHL has also tried to improve the
shape to utilise the space to maximum load capacity.



Source: DHL Annual Report 2009
Fco-Brivinq Systems: It is a well-known Iactor that driving style is the single
greatest Iactor on Iuel eIIiciency. Eco-driving enables/quips the driver on his driving
behaviour. For example
O Display Iuel consumption or emission levels is sometimes enough to alert the
driver oI his driving style.
O Start-stop assistants remind the driver oI optimal turn oII points to save idling
Iuel wastage.
O Gear-shiIt indicators to suggest the gears to improve Iuel eIIiciency.

The above methods can lead to a long term reduction oI 7 oI Iuel consumption
(KompIner & Reinhardt, 2008)

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Fmployee Fmpowerment: DHL has involved its employees to push Ior a greener
Iuture. With a programme christened 'Go-Green Dialog Map employees Irom local
Iacilities brainstorm and evaluate easy-to-implement ways to save energy, water and
paper, and to reduce waste. They nominate a person to be the green champion to
implement their ideas with an emphasis on independent things and genuine ideas
being rewarded.
Concasion
Being an industry leader DHL is not only a Iacilitator oI global business but
also is an inIluencer oI industry practises. The company at the same time understands
its responsibility towards sustainability and has taken a number oI initiatives to
maintain and grow a business that has sustainability as a core value with both
economic and ecological sense.

Changes will happen and while there is no exact blueprint Ior 'carbon-Iree
logistics a sustainable, low carbon logistics solution is within reach and can be
implemented iI only companies have a long term view. While there is no silver bullet
that will transIorm the logistics into a carbon Iree industry overnight a number oI
Iactors will speed on the revolution. The Green Trends Survey clear points to a clear
desire to have sustainability at the core oI business, this clearly point to the Iact that
economic necessity, customer requirements/demands and regulatory measurements
will drive the change.

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ibiogra\b
1. Razamith Sovereign 2008, Importance of Supply Chain Management in
Modern Businesses.
2. Study Towards Sustainable Logistics, December 2010
3. Carbon Trust (2007), nergy fficiency Best Practise Programme (BPP)
Technology Overview.
4. Klaus, P, Kile, C (2008/2009), The Top 100 of Logistics, DVV Media Group,
Hamburg
5. McKinnon, A. (2010), reen Logistics. The Carbon Agenda.
http://www.logistics.pl/pliki/McKinnon.pdI
6. Wyatt, K (2007), Taking Light Steps to Cut Carbon missions, UKWA,
August [online], Available at http://www.ukwa.org.uk
7. L Annual Report 2009