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The environmental impact of changing logistics structures
˚ Hakan Aronsson and Maria Huge Brodin
Department of Management and Economics, Institute of Technology, ¨ Linkoping, Sweden
Purpose – This paper seeks to address how ﬁrms may contribute to environmental improvement through structural changes of their logistics systems. Design/methodology/approach – A comprehensive literature review discloses the low interest that has been directed to environmental issues in logistics, and ﬁndings relevant for structural issues at a ﬁrm level are described. Three cases where ﬁrms have implemented different types of structural changes to their logistics systems support the analysis. Findings – A range of different measures to succeed in environmental as well as logistics performance are presented, comprising types of consolidation, logistics standardisation, and IS/IT solutions allowing a vast restructuring of logistics systems. Originality/value – The discussion about logistics and the environment has mostly revolved around more environmental friendly technological solutions, concerning single ﬁrms as well as governmental support for technology development. The structural, more organisational issues, have been addressed on a societal level, where solutions concern infrastructure. There is a need to reduce the amount of transport in general. The paper discusses how logistics systems’ environmental performance can be improved simultaneously with a non-reduction of logistics performance in terms of costs and delivery service. Keywords Supply chain management, Distribution management, Decision making, Corporate strategy Paper type Research paper
The International Journal of Logistics Management Vol. 17 No. 3, 2006 pp. 394-415 q Emerald Group Publishing Limited 0957-4093 DOI 10.1108/09574090610717545
Introduction Environmental problems have received an increasing attention during the last decade. One of the major sources of environmental problems is transportation, which is expected to increase even faster than the general growth of GNP in the industrialised world. EU emphasises that there is an absolute need for a decoupling between the increase in GNP and in the total transportation volumes, since the transportation volumes have increased more than GNP during the last 15 years (European Commission, 2001). This development cannot continue and it is pointed out that EU will increase its involvement in trying to decrease the total emissions from the transportation sector (European Commission, 2001). Companies worldwide are continuously looking for a competitive edge. In the intensiﬁed hunt for operational effectiveness, with a focus on lower costs and shorter lead times, environmental issues are often put aside. In effect, environmental aspects are at risk of becoming a future burden if their effects cannot be identiﬁed and quantiﬁed in the same manner as time and costs. According to Wu and Dunn (1995),
The authors want to thank Ericsson AB and Vinnova, Sweden, for providing funding for the research on which this paper is based.
the challenge of today’s logistics managers is to determine how to incorporate environmental management principles into their daily decision-making process. These observations are not new to managers or scholars. However, the role that the logistics system can play in reducing the environmental impact of industries has not been extensively researched. It is especially important to understand the relationship between operational effectiveness and environmental aspects. Both result from a number of decisions taken within the ﬁrm concerning both strategic and operative levels. The objective of this paper is to link logistics decision making to environmental impact. Explicitly the analysis recognizes a decision hierarchy of strategic, tactical, and operational choices and is based on three case studies. A second objective is to identify and explain situations where both the environment and the operational effectiveness are improved.
Changing logistics structures 395
Different approaches to addressing the logistics vs environment dilemma Environmental issues in general have received an increased attention during the last decade. There are two main domains of different actors, which can be elaborated for achieving environmental improvements; one is the macro domain (actions taken by governments and legislative authorities) and one is the micro domain (actions taken by companies). In the macro domain, it has been recognised for many years that the transport sector is one of the main sources of pressure on the environment, particularly regarding air pollution and noise. Numerous measures have been taken in the past, such as encouraging the use of environmentally friendly fuels through lower taxation; it is true that notably road vehicles and aircraft today are substantially more energy-efﬁcient and pollute less than they did 10 or 20 years ago. In most contexts, however, environmental measures failed to keep pace with growing transport volumes. The transport sector accounted for 32 percent of the total energy consumption in the EU in 2001 (Eurostat, 2003). With regards to CO2 emissions generated from the combustion of fossil fuels, it is responsible for a volume of 910 million tonnes for that same year. This represents 44 percent of the total CO2 emissions from fossil fuels. Compared to 1991, this represents an increase of over 22 percent, even though the overall CO2 emissions from fossil fuels increased by 4 percent. In fact, the other economic sectors have signiﬁcantly decreased their emission over the last decade (Eurostat, 2003). Improving the sustainability of the transport sector clearly requires a more comprehensive and integrated transport and environment policy approach, combining legislation and economic instruments in a transparent way, and across all transport modes. There is a need for better integration of environmental concerns into transport policies and decision-making. This integration has been given a high political priority following the Treaty of Amsterdam (Eurostat, 2003). The European Commission (2001) states in their White paper (European transport policy for 2010), that logistics can contribute to the objectives through: . contributing to mode shift (from road to other modes); . reducing the demand for transport (de-coupling); and
less handling. 96). There are signiﬁcant possibilities for reduction of emissions in the lowest level of the logistics hierarchy but the main potential for reducing transportation-volumes in production and distribution are linked to higher organisational levels.3 . that “greening” of ﬁrms’ logistical operations at a more fundamental level will require nothing short of a change in management culture and strategic priorities. or to organise logistics in a different way. The need for changes in the industrial processes is also pointed out in the guidelines as important: However. in a different direction.g. which for goods transport and logistics has proven to be insufﬁcient. The second is to rely on companies to restructure their processes. Purchasing and distribution have a central role in inﬂuencing the environmental impact of the company. In the logistics literature (the micro perspective) two methods to reduce the environmental impact of industry are to either introduce more energy efﬁcient technology. Two general approaches for reducing the environmental impact can be identiﬁed. They mean that environmental friendly logistics structures are characterised by fewer movements. . Wu and Dunn (1995) reason in a similar fashion when they say that companies must re-evaluate where facilities are located. 2001. however. which most of the time means increased costs for companies. since the mere trading of goods is one of the main reasons why there is transport at all. whom they cooperate with. more energy efﬁcient technology. 2001). There is an agreement in literature that decisions on different organisational levels have different impact on operative efﬁciency. from strategic decisions of how to source . it is not enough to introduce new technology to stop the development. shorter transportation distances. towards options for increasing the efﬁciency in transport and logistics systems leading to both positive environmental effects as well as decreased costs for industry. p. to include: economic policy and changes in the production process that inﬂuence demand for transport (European Commission. To be able to make more environmental friendly decisions there is a need for knowledge on how strategic and tactical decisions inﬂuence the operational outcome. e. more direct shipping routes and better utilisation. It must be part of an overall strategy integrating sustainable development. The third bullet above points. .g. Cooper et al.IJLM 17. what technology is used. and the whole logistics structure. more energy efﬁcient engines. 396 EU emphasises that there is an absolute need for a decoupling between the increase in GNP and in the total transportation volumes. reducing the environmental impact of transport (e. The ﬁrst is to rely on new. since the transportation volumes have increased more than GNP during the last 15 years (European Commission. (1991) suggest speciﬁcally that the only way to structurally reduce the emissions caused by one company is to decentralise warehousing and use fewer and larger vehicles. the common transport policy alone will not provide all the answers. The methods often suggested in inﬂuencing the decision makers in industry are taxation and legislation. There is a need for larger structural changes in sourcing and distribution. McKinnon (1995) points out: . However. improved vehicle utilisation).
including both macro and micro perspectives . however. Important areas relating directly or indirectly to emissions. However.. It is argued (McKinnon. products are sourced over a greater distance.infrastructure. On the micro level ﬁrms see a need to develop new technologies. larger and fewer shipments of goods.fuel efficient technology if it saves money . Modern logistics solutions are often moving in the opposite direction. Regarding structures. e. affects the travel distances (Wandel et al. The direction of research funding also inﬂuences the development of technologies.Fleet/structure utilisation .g road network. 1991) that local sourcing. railways. Warehousing and production are more centralised today.g. Technological solutions to the emission problems exist both on the macro and on the micro level. which has a direct inﬂuence on their environmental impact. thus escaping punitive taxation and reach demanding customer groups (e. 1995.material to operational decisions of what truck to use for a speciﬁc transport (Abrahamsson and Aronsson. and what those decisions really will lead to regarding environmental impact.g. e. What is also missing. There is also an agreement that strategic decisions should have a larger impact on emissions than operative decisions. the automotive industry). are strategic decisions that will decrease the environmental impact. and support for modal shift towards increased use of modes with less environmental impact. The clear and direct association of such measures and their effects is still missing. There is. 1992).reducing the demand for transport Changing logistics structures 397 Macro perspectrive Micro perspective . and through taxation punish the use of less environmentally friendly technology. The infrastructure. On a macro level.g.Econ of scale & scope . governments and authorities can encourage the use of alternative fuels. a disagreement on what speciﬁc decisions have the largest impact. is a discussion of whether it is Important areas relating to emissions Technology -More energy technology efficient -Reduce usage of fuels with high emmsions e. airports . goods are ordered in smaller quantities but more often and so forth. e. But there is also an opportunity in beating the competition towards better technologies. Wu and Dunn.Education . infrastructure development. 1999). the micro perspective for structural issues is still poorly researched in terms of empirical investigations and calculations. the development of new technologies constitutes business opportunities for new actors. the scope of the changes discussed (technological vs structural) and the problem domains (macro vs micro) are structured as a matrix.g fossil fuels Structure . and local warehousing. The listed examples in Figure 1 are different types of cost-saving measures that are believed to also reduce the environmental impact.reduce transport costs .saving energy for heating or cooling if it saves money . Finally.. 1995.reduce overall logistics costs Figure 1. the macro perspective includes. based on governmental actions. Cooper et al. The missing piece in the puzzle In Figure 1. which is even more so regarding environmental issues. networks of roads and railways.modal shift .
In this paper. The cases are presented. The paper will begin with a framework model. Only 45 research articles out of 2026 published in the journals in Table I addressed environmental or/and recycling related issues. 1995-2004. (2) We knew about. In the ﬁrst phase. a considerable restructuring of their distribution system. Journals were included in the search if we had found them to publish articles in the area in the general search phase. if they were frequently referred to in those articles. Although most of the companies studied have vast activities outside Europe. The selection was based on previously identiﬁed major journals (Fawcett and Fawcett. and further analysed regarding the decisions taken regarding characteristics of speciﬁc interest. The articles noted as environmental logistics articles either have a clear contribution to that area. Cases This research builds on studies of six major change cases in large Swedish multinational companies. we will illustrate our discussions through three speciﬁc cases. to reach the total goal of sustainable development through both reducing environmental impact and improved (or at least not reduced) business proﬁtability.3 398 possible. The study has primarily focused on the companies’ distribution systems in Europe. or were going through. Method Literature The literature review was conducted in two phases. If the logistics community wants to inﬂuence the direction taken by the European community and other government agencies it is essential to be able to present such knowledge. and on decision making for logistics systems.IJLM 17. then present a review of existing literature in the area of logistics and its environmental impact. or addresses reverse logistics for end-of-life products. The two last journals are the same journal changing names). speciﬁcally regarding emerging demands on short delivery times. and these are presented in Table II. The companies were chosen based on two main criteria: (1) They had been through. The case study companies have a large market share in their respective markets. In the next phase. a general search was conducted. An exception is FoodComp (Table II) where the study is focused on the Swedish market. all articles from 1995 to 2004 were reviewed (observe that some journals did not exist then hence the different starting dates in column two in the table. we have focused on the European distribution. Very little was written on environmental issues during this period. and considered recommendations from other companies that judged them as being in the forefront in their respective markets regarding environmental impact reduction in general. where the items logistics and environment were search keys. Stock. or because they are considered as major logistics journals. and speciﬁcally on their high volume distribution from Sweden to the European continent. managerial/practical implications and suggestions for further research. 1997). . and in which case how. The concluding paragraph includes the main results. 1995.
g.Journal International Journal of Physical Distribution & Logistics Management Journal of Business Logistics International Journal of Logistics – Research and Application Logistics Information Management International Journal of Logistics Management Supply Chain Management. 2003). An International Journal Transportation Research Part D. In the broader corporate framework within which logistics operates the decisions are often discussed in terms of strategic. Transport and the Environment Transportation Research Part E. e. Logistics and Transport Review European Journal of Purchasing & Supply Management Journal of Purchasing & Supply Management In sum Years included in the search Number of research articles in all Number of articles addressing logistics with clear environmental contribution including logistics for end-of-life products Changing logistics structures 399 1995-2004 1995-2004 1999-2004 1995-2003 1995-2004 1996-2004 1996-2004 1997-2004 1994. ¨ Abukhader and Jonsson. At the other end. CO2 caused by the use transport vehicles (Wu and Dunn. Journals included in the literature study FoodComp Products Grocery distribution Market/case Supply and distribution in Sweden FurniComp Furniture Supply and distribution in Europe PaperComp Paper products Distribution to Western Europe Table II. 2003.026 10 5 3 3 3 11 1 6 3 0 45 Table I. 1995). Case companies The need to relate environmental impact to company decision – our conceptual framework At one end of the spectrum of the literature concerning environmental impact the discussion is in terms of measurements of emissions of. and operational decisions: . 1996-2002 2003-2004 386 204 114 285 158 245 232 188 168 46 2. the impact of strategic logistics decisions and their impact on emissions are discussed (McKinnon. tactical.
Our proposed framework model.g. illustrates how decisions at different levels both create opportunities and sets limitations for decisions made on another level. These can all be split into different parts. meaning that decisions regarding the physical structure of a logistical system in part determine what can be done regarding the pattern of sourcing and distribution. There is a need therefore for companies to take a more holistic view of the effects of their activities on freight transport and related externalities (McKinnon. McKinnon (1995) suggests that logistical factors can be classiﬁed at different levels. One level has been added Choices concerning product design Choices concerning logistics structures / organisational forms Choices concerning planning/ management Choices concerning the operative work Creates opportunities and sets limitations for Concerns all products Concerns whole supply chain Concerns one market or one large client Concerns a single shipment Figure 2.IJLM 17. There is an interaction between the different levels but the levels follow a hierarchy. tactical and operational choices. 2003). . Abrahamsson and Aronsson (1999) state that there are three main steps to consider when designing a new logistics structure: (1) calculate the total cost and delivery service of the existing structure. all of these ranging from what we deﬁne as strategic to operational. pattern of sourcing and distribution. physical structure of the logistical system. Similarly. JIT. We have chosen to use four levels of hierarchy that correspond to the earlier discussion of strategic.3 A company’s demands for transports are a complex interaction between these different levels . (2) make calculations for alternative structures. shown in Figure 2. scheduling of freight ﬂows. e. 400 McKinnon here stresses the need not only to identify the different strategic. . tactical and operational decisions inﬂuencing the environment but also to relate them to each other ¨ to be able to foresee the consequences on the environment. and management of transport resources. postponement and centralisation. and (3) make calculations on dimensions and size of facilities. Abukhader and Jonsson (2003) point to the need to evaluate traditional logistics concepts and strategies. and decisions on each part affect “lower-level” aspects and decisions. Framework model describing different logistics decision levels and their funnel-like relationships Environmental consequenses . whereas the ﬁnal step has more the character of being tactical or operational. The ﬁrst two steps are of a structural character.
Step by step as decisions are made the possibilities are reduced. One step down in the decision hierarchy are decisions primarily concerning planning and management. and development of computing tools for improved trafﬁc ﬂows. This will be illustrated in the next section.g. An example of a structural decision is whether there should be both central and regional storage of a product. and they are identiﬁed also through which measures are taken to reach more environmental logistics solutions. improvement of conventional vehicles. in order to reach the full potential in reducing for instance air pollution. based on three case studies on companies that can be said to have gone through/are going through a structural change. i. Once the product is designed. tolls.e. the degree of freedom of choice is decreased the further down the funnel one gets. The model points out two aspects of decision making as important. Further. and how environmental performance of logistics systems is assessed. limiting the power of light and commercial vehicles. local.g. changed pricing of infrastructure. Operational decisions are the day-to-day decisions of how to handle the delivery of incoming orders and single shipments. planning measures on different levels. The decision has both strategic and tactic similarities.g. warehouse is established in that market. one market might be distant enough so that it is not possible to service the market with only one central warehouse. the weight and volume of the product is known. it illustrates that since decisions made at higher levels provide opportunities and set limitations for subsequent levels. they concern one market or one large customer. Firstly. The logic is that from the beginning. Many of these measures are still highly interesting for improving the environmental effects Changing logistics structures 401 . and in part also on behavioural aspects. when the focus in limiting emissions from road transport was basically on technical solutions. it suggests that environmental issues should be considered in the same manner as time and cost. e. when no decisions have been made there are a vast amount of possibilities. the scope of the change (one market) indicates that it is a tactical decision and the type of decision (structural) indicates that it is a strategic decision. policy development. which include taxation of different types. This review concentrates on what these characteristics are. and compliance with speed limits. a structural change is not limited to just being of a physical character. e. an exception is made and another.compared with the earlier discussion and that is product design. Secondly. rather it may also constitute a change in a company’s governance and control systems and the associated information systems. Those characteristics then provide opportunities and set limitations as to how the overall logistics system can be designed. there will be an impact on the environment. at all levels. Common measures were. Desey and Dobias (1992) describe the development of environmental consideration of transport during the 1980s and the early 1990s. Other measures suggested are those relating to structures. but on a macro-level (Figure 1). Typical for such strategic decisions are that they concern the whole supply chain. alternative fuels. Once the operational decisions are implemented. Literature review A number of characteristics of logistics systems are discussed when environmental aspects of logistics are the focus. e. Typically. There is not always a clear distinction between strategic/structural and tactic/management decisions.
Beamon (1999) lists some environmental beneﬁts from integrating the supply chain. which ﬁnally lead to emissions. and for reduced environmental hazards she recommends that a fully integrated extended supply chain should be environmentally assessed according to emissions. (2003) discuss modal choice decisions. and also safety. Table III gathers some frequently suggested characteristics. due to the heavy impact from transport on the environment. Wu and Dunn make a conceptual contribution through listing areas and activities with potential environmental impact. odour. which inﬂuences the environmental impact. McIntyre et al. At present. time. and delivery safety. vehicles. Wu and Dunn (1995) offer the most comprehensive collection of characteristics. and logistics as a function plays a large role in this. performance measures such as emission rates and energy efﬁciency per material would be appropriate. 1995). The most important. they mostly concern technology development and political governance. noise. 1995): pollution (water. Transport distances are. and conservation of natural resources (energy conservation. container and package sizes. Some of these characteristics of logistics systems have direct. If direct environmental impact can be assessed and characterized in terms of emissions. i. Vannieuwenhuyse et al. Although somewhat restricted. in a case survey. however. while others have indirect impact on the environment. logistics managers have the ability to inﬂuence the following important environmental aspects (Murphy and Poist. solid). All authors mention freight consolidation as an important decision for the environmental performance of a logistics system. a causal chain ending with the direct impact characteristic emissions. Wu and Dunn (1995) also state emissions as important. but also land use and noise.IJLM 17. were cost. the trend towards more environmental – and social responsibility in business practice suggests multiple options for corporations to improve their “sustainable” performance. visual). efﬁcient land usage) Transport is the most important source of environmental hazards in the logistics system (Wu and Dunn. and there is still a need to develop them. waste disposal (hazardous. the indirect characteristics are those. air. A commonly suggested performance measure of logistics systems’ environmental performance is emissions. as mentioned by different authors. some elements appear to be more frequent than others. other authors. . part of or including the logistics system. and modal choice is a concrete example of a decision. However. according to the respondents. congestion. while the corporate perspective and corporate governance (whether single ﬁrms or supply chains) is missing. Van Hoek (1999) suggests that on a supply chain level. while Van Hoek (1999) and Beamon (1999) discuss different extensions of the supply chain and its performance. However.) was considerably less important in modal choice decisions than more traditional logistics criteria. (1998) describe a business case (Xerox). as consolidation of freight concerns ﬂeet size. Vannieuwenhuyse et al. and also indirectly.e.3 402 from trafﬁc. Modal choice and distribution network design are both central to logistics decision-making. and to some extent address the environmental consequences. The authors in the review describe partly different systems. based on empirical research support the same. Based on the list of characteristics detailed by Wu and Dunn (1995). etc. reliability. ﬂexibility. This aspect is central to logistics systems on many levels. (2003) have found that the image criteria (the only criteria including environment.
Raw materials acquisition and product recovery are important to the environmental performance of a logistics system.g. previously taken decisions impose restrictions. Although they take the provider perspective while our research concerns the . Packaging issues to some extent fall within the category of freight consolidation. As we focus on distribution to different markets. McIntyre et al. those issues are outside the current research. We described above the “funnel model” and literature on decision making in general in logistics systems are in line with this model. What. the literature on logistics system characteristics and their environmental impact does not provide any clues as to how the decisions are linked to each other. However. are the relationships between the different decision areas described in literature? Naturally. ECR support systems) is also stressed as an important enabler of environmental logistics management (Wu and Dunn. (2003) Changing logistics structures 403 X X X X X X X X X X X X X X X X X X X Table III. we choose to consider this level as a given regarding logistics decisions. Stank and Goldsby (2000) describe transportation decision making in an integrated supply chain. where the performance is traditionally assessed in terms of cost and service. Information management (e. Characteristics of logistics systems driving environmental impact although not frequently mentioned. Product strategies and product design are depicted as the highest decision level in the funnel model (Figure 2). 1995. then. however. perhaps the most direct driver of emissions from logistics systems. 1998). the issue of package choice is considered a design issue. they are dependent on each other. while any decision places restrictions on later decisions. (1998) Van Hoek (1999) Beamon (1999) Vannieuwenhuyse et al. Nevertheless.Author Facility location Raw materials acquisition (suppliers) Modal choice Product strategies and design Distribution network design After sales activities Freight consolidation Carrier selection Materials handling operations Network design Planning and management Fuel Trafﬁc context Fleet. maintenance and disposal Package consolidation and reduction Transport distances Product recovery Information management Wu and Dunn (1995) X X X X X X X X X X X X X X X X X X McIntyre et al. however. For a certain decision. they are left out of further discussions in this paper..
we ﬁnd this model interesting. operational and demand variables. which enabled more effective ﬂow control as well as cost savings. Network design decisions (conﬁguration of suppliers and distribution networks) as well as plans (volume. As different types of food must be stored in different temperature zones. while the environmental performance of the transport system is omitted. Wanke and Zinn (2004) further state. FurniComp introduced a new distribution system speciﬁcally for bulk transports to a central warehouse in Europe. distribution network design. and they will be addressed as structural decisions. and shipments for a central warehouse can now be partly unloaded on their way. The routing of the transports also became the object of dynamic planning. other measures were taken. the system enabled dynamic planning in many dimensions. In their model the authors consider the more traditional performance parameters (customer service and costs). Speciﬁcally. frequency. which resulted in highly improved visibility of the physical ﬂows. Such strategic decisions complete the funnel model. as it became possible to better utilize the resources. In relation to our model. In FoodComp. although the authors suggest that transportation decisions on a strategic level should inﬂuence total network design decisions. The characteristics chosen from the literature review for further analysis (freight consolidation. Structural decisions and their environmental impact Three company cases will illustrate our discussion. the system enabled a centralization of the planning of physical ﬂows. This centralisation of governance structure had positive effects on both costs and environmental impact. the structural change was physical to some extent. physical characteristics and special handling requirements) are seen as input to the transportation decisions. changes in their distribution structures. which Stank and Goldsby view as given. The whole system involved a consolidation of the material . their model of transportation speciﬁes in more detail the lower levels. that those strategic decisions take into consideration product variables. Wanke and Zinn (2004) depict three strategic level decisions for logistics managers: make to order vs make to stock: push vs pull inventory deployment logic: inventory centralization vs decentralization. All three companies have undergone different. although to some extent similar. and based on earlier analyses of the correlations between environmental impact and costs in the distribution system it was assessed that emissions had decreased. The higher resource utilisation involved transport resources (consolidation of truck loads) and scale effects from centralised warehouses. but focused more on the governance structure. At the same time. What is missing is the strategic part of the structural decisions.IJLM 17. The cost reductions were measured and calculated. as transportation is part of the logistics function as a whole. seasonality. should they pass a distribution centre. modal choice. The deﬁnition of which products should be stored centrally as opposed to locally changes over time for the many seasonal products. As a consequence. fewer and larger warehouses meant considerable energy savings. We highlight these distribution changes in Table IV. which indicates the complexity of decisions and their relatedness. and the central warehouses were enlarged to be able to play a more important role. transport distances and information management) ﬁt well into this model of transportation management.3 404 shipper perspective. A new information system was introduced. Delivery service was differentiated for different products. In addressing strategic level logistics decision making.
Cost reductions Fast transports High delivery accuracy FurniComp PaperComp Consolidation of ﬂows Changes of transport mode Standardised load carriers Fixed system always available capacity.FoodComp Consolidation of ﬂows to Europe Change of transport mode for bulk transport Larger warehouses Standardised load carriers Standardised vehicles Product design for packaging Differentiated delivery service on product level Reduced emissions. fewer warehouses (nodes) All nodes have all functions (cross-docking. centralisation of planning. Increased visibility Changes Cost reductions Balanced capacity Higher delivery frequency. The companies and their respective changes in distribution structures and so-far reached effects . central and local storage) Introduction of new information system. Dynamic storage. Cost reductions in transport and warehouses Energy savings in warehouses Better planning. Higher reliability in customer perceived lead-times Transparent booking Reduction of emissions Changing logistics structures 405 Table IV. bookings (administration) avoided New distribution structure. product speciﬁc routing Vehicles allowing two-level loading Increased pallet utilization Effects/results Reduced emissions.
IJLM 17. planning. as transports were carried out by train. the delivery times were greatly reduced – the average speed of transport from Sweden to the continent increased from below 20 km/h to about 65 km/h. The new system meant the introduction of collection by train in Sweden. which meant a consolidation of bulk ﬂows and a change of transport modes. such as vehicles and load carriers. Finally. Another common feature is the standardisation of logistics resources. In the companies studied consolidation on an operational and tactical level meant decreased environmental stress. the changes also included a change of transport modes and increased consolidation of goods.3 406 ﬂows. as discussed above. a ferry leaves Gothenburg once a day six days a week. Congestion on the railroads through northern Europe is a known problem area. Another important governance structure feature is the understanding of whether the goods are considered as stock or as being transported. which departed once a day. To utilise the system resources. and high costs due to the company’s bargaining position vis-a-vis the rail companies. in The Netherlands. Through this speed increase and the change of transport mode. Changing transport modes and consolidation were in turn enabled through the centralisation of warehousing. Before. however. PaperComp introduced a new transport and distribution system. The change of system also meant a considerable decrease in the total costs. the load carriers as well as the vehicles were standardised. These features can be referred to as changes concerned with the physical structure. The transport time through the system is about the same. From those cases. A main structural change feature is that of consolidation. As the transport volumes are very high. so that they ﬁt into the trains as well as onto the ferry. Hence. while at the same time. Costs were cut. Structural consolidation (in our cases centralisation of warehousing) showed a positive change for the environmental performance. Instead of shipping the goods by means of numerous trucks. This transport system caused problems such as long and unpredictable lead times to the local companies in Europe. the goods ﬂow was transferred in bulk train deliveries on a special train. and a change of transport mode. which can occur on several levels. Standardisation resulted in higher consolidation. A number of advantages were gained. the change of transport mode has highly reduced the environmental impacts from the transport of paper from Sweden to sales companies in Europe. so the load factor is further increased. Information visibility. and onward transport to local companies by train. which affected the effectiveness and efﬁciency of the transport system. structural. the emissions from the bulk transports decreased. the control over the transport increased as did delivery accuracy. doing this. Higher resource efﬁciency through better utilisation is a key to this. bulk sea transport from Gothenburg to Zeebrugge. standardisation contributed indirectly to decreased environmental stress. (the system is run on behalf of the goods owner) the delivery accuracy in the system has increased considerably. however. but also in an overall decrease in tied-up resources. enabling better control and planning are features associated with the governance structure. with no coordination between shipments. through the increased control. we can extract two types of structural changes. The one-system solution has also implied a standardization of load carriers. These are adapted to the product. as the tracking and tracing of vehicles has reduced the total number required in the system and hence the load factor in the system has increased. a low degree of control over the ﬂows in ` the system. transport from Sweden to the continent were carried out by train. vehicles and load carriers. How all these features are concerned with .
the changes described in the previous section will be related to levels of decision-making and scope of impact. from trucks to rail transport. Structural consolidation enables higher frequencies of transport. and change the location of warehouses. At a strategic level. On the operational level the changes at both the strategic and tactical levels makes it possible to achieve a higher ﬁll rate in the transport. and of PaperComp.decisions on different levels in the funnel model which will be further discussed in the next section. changes made to increase ﬁll rates were to increase the size of warehouses. The effects of the changes were an increased ﬁll rate and decreased transport work. The other factors from the literature review are all part of the cases studied. Another tactical decision which affected vehicle ﬁll rates was to coordinate transports with other suppliers who supply the same or similar customers in areas with few customers. centralized ﬂow from the area of production to a central spot in the distribution area. As expected from the literature review. which we found to be more important or more closely speciﬁed. i. These types of changes are tactical in their nature because they target parts of one market. These shifts in transport modes are towards environmentally better transport modes. The characteristics and their relationship with each other and to decisions in a logistics system are summarised. These changes all contribute to increased ﬁll rates of vehicles and thus a decrease in vehicle kilometres and fuel consumption. and to minimise the number of deliveries. Another method to increase ﬁll rate was to work more actively with vehicle routing (all cases). Such consolidations often involve changes of transportation modes – as in the cases of FurniComp. The complexity of logistics decisions and environmental effects Below. reduce the number of warehouses. was the importance of increasing the ﬁll rate in transportation. Increase ﬁll rate (consolidation) One of the key factors pointed out across the cases and also in the literature. and enabled a stable service level while environmental performance was enhanced. and the analysis address how to assign environmental effects to the different characteristics. without the ﬁnal customer experiencing any decrease in delivery service. although we choose to stress some other factors. In our discussionn the physical characteristics consolidation and standardisation are followed by the governance characteristics visibility and virtual warehousing. is another concrete example of structural consolidation. centralise distribution. Some deliveries can be postponed until the next transport occasion. main ﬂow consolidation. which in turn enables smaller changes to delivery plans due to attempts to ﬁll the transport. There were also other types of changes that can be made independently of other decisions.e. according to the funnel model presented earlier. such as the ﬁnal repacking of goods by FoodComp done in such a way as to reduce the size of the goods. Changing logistics structures 407 . from rail to sea transport. The restructuring of ﬂows into one main. which in some instances meant increasing leadtimes. consolidation was in all cases identiﬁed as an important driver of both efﬁciency and environmental performance. In all our cases increased ﬁll rates meant less environmental stress. to change storage strategies on a regular basis (FurniComp). which can all be described as changes to the logistics infrastructure.
which reduces costs as well as delivery times. the decision to standardize the systems highly inﬂuences the effects on a tactical level. In the new setting for FurniComp. in this case. .IJLM 17. This change provided environmental improvement basically from modal change and also centralization.000 km and is expected to take 14 h.3 408 In the case of FurniComp increased and centralised volumes made it possible to change mode of transportation. A standardized load carrier also means that the loading and handling equipment can be standardized. Further. It also improves the manageability of the system. The speed is essential because the ﬁxed costs of buying a train set are high. and changed from rail transport to ferry. However. an average speed of 65 km per hour to be compared with an average speed for freight trains of 17 km per hour. and this was also a main incentive for PaperComp to change their transportation mode. In this respect both PaperComp and FurniComp shared the same experience. the move was geographically larger as they consolidated the ﬂow of their goods and moved the ﬂow from the continent to the North Sea. resulting in a streamlining of the activities on an operational level. which was not the case before the structural change. This involvement included decisions on a strategic level. transportation vehicles and load carriers. Once taken. Yet another important feature of standardized load carriers is that it decreases the total volume of carriers in the system. on an operational level standardization implies easier handling procedures. as the planning procedures are facilitated. The changes. as well as increased performance in terms of costs and delivery service. they can be discussed on different levels. The load carriers can be loaded onto the vehicles in ways. For both PaperComp and FurniComp their new systems meant high involvement of the goods owners in the setting up of the new systems. These two system levels are naturally intertwined. also reduced uncertainties. Standardisation (physical) Standardizations in the physical system concern mainly two levels in our cases. in terms of vehicle-km. as any carrier coming back can be used for the next load. Higher standardization in itself contributes to opportunities to increase the ﬁll rates (as discussed above). although the systems were run by other parties. which in turn affected the delivery ` accuracy vis-a-vis the customers. A prerequisite for rail to be an alternative is that it is possible to buy a ﬁxed timetable so that the train can run non-stop between the destinations. In PaperComp. the distance between the two nodes of transportation is 1. cost considerations and the environmental impact are important. and thus reduces the environmental impact. which make full use of the vehicle capacity. However. The ﬁrst connection to be established was between two of their main facilities in Europe. A higher ﬁll rate lessens the need for transport. as the load carriers have to ﬁt the vehicles. Another important reason is that congestion on the roads in central Europe is expected to grow. the load carriers had to be standardized in order to ﬁt both the train system and the ferry. This has been and still is difﬁcult to do. With a higher speed the train can be better utilized. especially when the destinations are in different countries. but also the increased volumes of goods due to the increasing establishment of new stores. There were several reasons for moving to rail.
which is about 20 percent of the volume of the goods. A new IT-system makes it possible to let a warehouse fulﬁl several different functions. this had a positive environmental impact. which in turn leads to more even goods ﬂows. In PaperComp the new distribution system was accompanied by a centralization of the IT-system and the introduction of a control tower. The reduction in distance each product is transported directly reduces the emissions from the logistics system.g. increased ﬁll rates. and new management principles were introduced. This is necessary for economical and technological reasons from the perspective of the production units. and ﬁnally distributed to the stores. but which are mainly achieved through different planning measures. the distribution structure of FoodComp was changed and the number of warehouses was reduced. where 30 percent of the products stay. together with the standardization. Taken together. The products were rerouted so that all transport from the supplier ﬁrst stop at the mid-way warehouse. central warehouse. e. distributed to the regional warehouses. respectively. this means that the distribution structure can be used more efﬁciently and. and to move a product from being stored in one location to another location. The product is stored in the central warehouse 100 km outside Stockholm. Changing logistics structures 409 . Another effect is that the control of the ﬂows becomes stronger and supply from paper mills can be organised at much earlier stages than before. A typical example is a product that is produced in southern Sweden. At the same time. but it also increases the utilization rate of the distribution system. Central warehouses for a speciﬁc product can be moved from one location to another depending on geographical demand patterns. It also makes it possible to change how each product is managed over time. The goal is to reduce the distance each product is transported by using direct transport when it is possible. Some products have a highly seasonal demand. regional warehouses. as a result. In the new structure. If successful.The importance of information for managing the supply chain (visibility) Several of the changes made by the companies are aimed at increasing the collection and use of information. The products are transported from southern Sweden. About 80 percent of the products are stored centrally. Altogether the different measures taken had clear positive effects in reducing the emissions from transports. When examined more closely it was discovered that 30 percent of the goods were distributed to the regional warehouse in south of Sweden (located between the producer and the central warehouse). the logistics centers can have four different functions. Such products are kept centrally off-season and are moved to the regional warehouses during the high season. These are examples of how IT systems can enable changes that can be considered to be both structural and tactical. barbecue products. The overall goal of the changes was to increase manageability and the possibility of planning ahead. These can in turn be characterized as strategic planning and tactical planning. the rest are sent onto the central warehouse. to the central warehouse in a town in central Sweden. merge centers for incoming goods. In 1998. the total amount of transport work decreased. as a lot of energy could be saved through the scale effect of consolidation speciﬁcally of freezing equipment. This new overview strongly contributes to the reduction in number of load carriers in the system. and distribution centers for outgoing goods. Each year around 700 pallets are bought. with total insight into the distribution system.
Since. but which can be forecasted for a larger region. Today. transport. and each others’ effect. which in turn would reduce the need for express transports. as express deliveries are often carried out by transport modes with higher environmental stress than those for regular transport. This is not at all a new idea per se. probably in more ways than those indicated above. etc. it is then possible to load goods. The ﬁrst example below is from supply rather than distribution. In Figure 3. different decisions taken in a restructuring situation can strengthen each other. in which the clear division between the activities and how they are grouped into functions is erased. This also means that the point where each shipment’s ﬁnal destination is decided is postponed in time.3 410 Virtual warehousing The ﬁnal group of changes concerns how different parts of the system are understood. i. It is also possible to relate different decision levels for each of the characteristics. it is also important to stress that they relate to each other. Summarizing the four characteristics All the changes identiﬁed in the cases can in different ways contribute to reduce the environmental impact of a logistics system. In the project described. It means that about 0. this might be an option for improved ﬂexibility of the transport system. However. However. It is evident that each change individually can drive a change in the environmental performace of the system.IJLM 17. PaperComp changed their distribution structure from direct transport to local companies into centralized transport to the continent. which was extensively discussed as an option in one of our case companies. and concerns supply from overseas. and this is from where the local companies are supplied. which are not yet destined to a speciﬁc area. and thereby considered in the distribution system. To overcome this problem. the environmental effects are difﬁcult to calculate in accurate ﬁgures. handling. The aim for FurniComp was to be able to control the goods after they have left the supplier and are already headed for a main destination area. they inﬂuence each other. The goods could be traced at an article level and in what container it is loaded. What is also clear is that they are interconnected in many ways. and also in general. A speciﬁc function is coupled with a range of characteristics and mechanisms. reduce costs and increase delivery service. the same logic can very well be applied to distribution overseas.5 million cubic meters is in storage on boats. 40 percent of the goods come from Asia and are transported by ship to Europe. This should in general have a high environmental impact. Orders that are a couple of days late could very well be made through redirected shipments. But based on previous experience and knowledge it can be expected to reduce the environmental impact. the characteristics and their interrelatedness are illustrated. However. a more holistic view of the logistics functions can be applied.e. Although today PaperComp do not make use of this opportunity. The system makes it possible to manage and reroute the goods being transported. the lead-time of sea transport is comparably long. many companies apply this postponement strategy already. It is also important to note that other decisions and factors might counteract the . classifying logistics strictly into speciﬁc functions (warehousing. Thus.) causes suboptimisation. in this case goods from Asia.
While lead times were somewhat increased as the physical systems were changed.e. Conclusions So far we have discussed different types of changes and related them to decision making and the environment. the companies experienced that they provided an improved delivery service for their customers. to different decision levels and to environmental impact positive effect the factors described above might have.Standardisation Consolidation Flexible warehouse definition Visibility (new & better IS) Strategic structural decisions Changing logistics structures 411 Consolidation Better planning & control Tactical planning decisions Modal shift Less transport work (fewer shipments shorter total vehicle-km) Operational day-to-day decisions Reduced environmental impact Figure 3. All changes led to positive environmental effects as well as to lower costs. only one was able to.g. An important aspect of delivery service is delivery accuracy. as the distribution arrangements were physically consolidated. Changes identiﬁed from the cases. how they relate to each other. delivery accuracy improved since the accuracy of the systems themselves improved. the opinion of everybody interviewed was that cost and the environment impact often pointed in the same direction. complex and important ﬁeld. a solution for . This brief discussion stresses the need for further research into this wide. e. When the companies were asked if they could think of examples where increased environmental responsibility cost money. There were a number of other effects as well that differed from case to case. the goods arrive on time. i. This dimension also improved. If these effects are compared with what can be found in the literature it seems that the effects found in the cases were more positive than expected since all changes were positive concerning both cost and the environment. For the customers. This dimension is also connected to the governance structures. as improved IT-support for visibility and ﬂexible deﬁnitions of ` transports as warehouses enables better control and better ﬂexibility vis-a-vis uncertainties in demand. When it comes to transportation. higher delivery service and increased ﬂexibility.
3 lower cost for transportation almost always reduces pollution as well. Emissions are. . but in one instance it has been positive. Min and Galle (1997) ﬁnd that one of the greatest obstacles to effective green purchasing is the perception of purchasing managers that environmental programs are costly. For instance. but that it is always right to reduce. but together with each other. however.IJLM 17. Therefore. but there are exceptions. Transport have increased when measured in ton-km. it has been possible to lower the environmental impact as well as to reach a lower cost for their supply and distribution. is to speciﬁcally relate any measure taken to speciﬁc environmental effects. however. The common key for reaching a high performance regarding both environmental impact and costs is efﬁcient use of resources. to train and from train to boat. as the measures are not taken one by one. centralisation of warehousing showed a positive change for environmental performance. centralisation included changes in transport modes as well as increased consolidation of goods. primarily related to the number of kilometers trucks driven (vehicle-km) and to a lesser extent to the weight of the goods. FurniComp. The effects of the changes have been measured on an overall structural level. This point might be relevant since most other studies are conceptual and therefore might build on the same perceptions. When it comes to warehousing FoodComp said that it is always less energy consuming to build one large warehouse than two smaller ones because there are scale advantages. increased ﬁll rate reduces the number of vehicle-km but not necessarily the number of ton-km. Most of the time. changes that are made to decrease the energy leakage are cost saving.e. The research of Carter and Jennings (2002) into purchasing managers is one of only a few studies that support our results. Our ﬁndings suggest that in fact the opposite is true. for example. An increased centralization has also led to modal shifts. from our research. It has been possible in the analysis to separate different measures taken in restructuring distribution and supply chain system. by including both strategic and operational decision making. from truck. In all three cases. One explanation is that the ﬁll rate has increased due to more consolidated goods ﬂows. One reason for these results might be that the study takes a holistic perspective on structural changes in Logistics & Supply Chain Management. reduce environmental stress. FoodComp’s products are stored in different temperature zones. i. which means that energy leakage between different zones is a problem. 412 Their experiences from working with resource efﬁcient transport show that environmental effects in transport systems are difﬁcult to measure. and thus they will in the long run become positive for the environment as well. and to relate them to each other. We have also seen several structural changes towards an increased centralization. These speciﬁc changes were in turn enabled through the centralisation of warehousing – the structural change. base their work on the following hypothesis: Long-term cost effective transport must be resource efﬁcient. in different proportions. to strive to increase their resource efﬁciency and thus in the long run. It has not led to increased emissions. What is not possible. standardisation and centralised governance of the logistics system.
has shown to be fruitful. Another is to help increasing knowledge about the relations between decision making in logistics and environmental consequences and help to spread this knowledge. It has made it possible to more clearly describe how different types of decisions are interlinked and how strategic decisions create possibilities as well as limitations to decision making further down in the hierarchy. The government can also make it more feasible for industry to reach the goals set by the European Union of mode shift. Technology and government can create possibilities but it is companies that have to realize the possibilities.Consolidation . The study has implications for companies as well as government . (2) consolidation. by education. and (4) ﬂexible understanding of transportation and warehouses (e. (e. virtual warehousing). (3) visibility support systems for better planning. we have identiﬁed four strategies that seem to lead to both lower emissions and lower costs: (1) standardization. The effects we have seen are greatest when the work is done on all three levels. a tactical and an operational level. see Figure 4.g.To focus on decision making and linking this to environmental outcomes. load carriers) is important as a means to increase the possibility for planning. Standardization of the technology used. The ﬁrst two focus on the physical world and the second two are different means of governance. In this study. de-coupling and improved ﬁll rate by structural means. One such example discussed earlier is to increase the average speed of rail transport.Increased visibility . Changing logistics structures 413 Implications Technology Structure Railway connectivity Macro perspective Standardisation . Both government and industry can help to increase the degree of standardization for transportation.load carriers . for example. both within and between countries.vehicles Creates possibilites for industry Micro perspective Standardisation .Virtual warehousing As means to lower costs and environmental impact Figure 4.vehicles To gain increased possibilites for planning .load carriers .g. with the aim to increase the ﬁll rates of the load carriers in the end.Standardisation . All four strategies can be worked with on a strategic.
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