sustainable supply chains - from theory to practice
TRANSCRIPT
Sustainable Supply Chains
– from theory to practice
Christofer Kohn
+46-(0)70-7686121
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© UnitedLog 2009
Content
Introduction
– Who am I?
– UnitedLog – an overview
Sustainable supply chains – from theory to practice
– What is sustainability?
– Main drivers for change towards more sustainable supply chains
Key issues in designing and managing a sustainable supply chain
– Key issues and practical examples
– Summary and conclusions
© UnitedLog 2009
INTRODUCTION
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© UnitedLog 2009
Who am I?
Christofer Kohn
– UnitedLog (2008-)
– Senior management consultant
and project manager
– CA Manager Distribution
– Ass. Prof. LTH
– PhD, LiU (2002-2008)
– Systemic Minds (2006-2008)
– MSc BA, LiU (1996-2001)
© UnitedLog 2009
Vad är UnitedLog?
UnitedLog är Nordens ledande företag inom Supply Chain
Management och logistik. Vi utvecklar och strömlinjeformar våra
kunders globala flöden av varor, information och kapital.
Vi erbjuder strategi och finanskonsulting inom SCM, specialiserade
mjukvaror för kontrolltorn samt outsourcad drift av logistikprocesser.
UnitedLog har ca 120 medarbetare fördelat på kontor i Stockholm,
Göteborg, Malmö, Norrtälje, Helsingborg, New York, Boston,
Shanghai, Helsingfors, Moskva , Lausanne och Katowice.
Företaget omsätter cirka 25 miljoner euro och ägs av Sjätte AP-
fonden och AB Arvid Svensson.
© UnitedLog 2009
Supply Chain Management
& Finance Consulting
Supply Chain
Software
Supply Chain
Services
Customer
© UnitedLog 2009
Supply Chain
and Finance
Consulting
Process
Development
SCM Strategy
Development
Change
Management
Working
Capital
Management
Range and
Assortment
Planning
Flow Structure
and
Network Design
Finance
Production
Distribution
Sourcing
Consulting Offering
© UnitedLog 2009
Supply Chain Software – Control Tower Software
Manages Inbound and Outbound Logistics
In-Sourced or Outsourced Does Not Matter
Goods Flow Control
Information Flow Control
Financial Control
Operational Tool
Performance Management Tool
Advanced tendering
© UnitedLog 2009
Supply Chain Services
CUSTOMEROutsourcing
Services
Inbound and Outbound
Transport Management
3PL Contracting
Invoice Control
Customs Brokerage
Logistics Trading
© UnitedLog 2009
SUSTAINABLE SUPPLY CHAINS –
FROM THEORY TO PRACTICE
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© UnitedLog 2009
What is sustainability?
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”…development that meets the
needs of the present without
compromising the ability of
future generations to meet their
own needs.”
- Brundtland commission (World Commission on
Environment and Development)
Sustainable
development
EconomyEnvironment
Social
© UnitedLog 2009
Sustainability and SCM/logistics management
Sustainable SCM/logistics management is an extension of the
traditional view of SCM/logistics management in two ways:
– ”Point of origin and point of consumption” has previously been
considered as going between point A and B from a company
perspective. Today, companies employ more of a life cycle perspective.
– ”Customer requirements” previously was all about balancing cost and
service. Today ”customer requirements” also includes environmental
and social issues.
“Logistics management is that part of supply chain
management that plans, implements, and controls the efficient,
effective forward and reverses flow and storage of goods, services
and related information between the point of origin and the point of
consumption in order to meet customers' requirements.”
CSCMP, www.cscmp.org
© UnitedLog 2009
CO2 emissions associated with freight transport is a top priority
The transport sector is the second largest contributor of CO2 emissions and
the only sector where CO2 emissions are increasing
Since 1992 freight transport has grown by 43%, whereas GDP has only
increased by 30%
Road freight amounts to over 80% of total freight volumes in EU-15
countries
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Source: EU Commission
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Energy
sector
Transport
sector
Industry
sector
Households Total CO2
emissions
39%
26%
19%
16%
© UnitedLog 2009
Drivers for greening the supply chain
Rules and regulations are continuously becoming more and more strict
Increasing fuel and energy prices provide an incentive to find more
efficient solutions throughout the supply chain
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1990
France Great Britain
Reduction
100%
25%
Target
2050
1990 Reduction Target
2050
40%
100%75%
60%
© UnitedLog 2009
Drivers for greening the supply chain
Rules and regulations are continuously becoming more and more strict
Increasing fuel and energy prices provide an incentive to find more
efficient solutions throughout the supply chain
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© UnitedLog 2009
Drivers for greening the supply chain (cont.)
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”Who should take the biggest
role in minimizing the carbon
footprint of the products and
service you buy?”
0%5%
10%15%
20%25%
30%35%
40%45%
Source: LEK Consulting
© UnitedLog 2009
Economic growth vs CO2 emissions – Is there a conflict?
According to the IMF, achieving a reduction in carbon emissions by 60% by
the year 2040 will lead to a 2.6% reduction of the global economy,
compared to adopting no emission-control policies
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EE, Russia and C.I.S.
-4.8%
-1.6%
-2.8%
-3.0%
-2.1%
-1.9%
-2.0%
-2.0%
-2.6%
-2.6%
Carbon Tax System
Cap-and-Trade
China
U.S.
Western Europe
World
...on the other hand, the
baseline is an expected
growth of the global
economy to about 2.3 times
between 2007 and 2040!
Source: IMF
© UnitedLog 2009
KEY ISSUES AND PRACTICAL EXAMPLES
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Key issues in achieving sustainable supply chains
If you don’t measure it, you can’t manage it
A holistic view is paramount in order to avoid sub-optimisation
Long-term profitability is achieved through an understanding of the
interplay and dynamics between traditional supply chain efficiency
(cost and service) and CO2 emissions
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© UnitedLog 2009
Key issues in achieving sustainable supply chains
If you don’t measure it, you can’t manage it
A holistic view is paramount in order to avoid sub-optimisation
Long-term profitability is achieved through an understanding of the
interplay and dynamics between traditional supply chain efficiency
(cost and service) and CO2 emissions
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© UnitedLog 2009
Boots’ shampoo footprint
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93%
5% 2%
Consumer use
Material
Distribution
Concept, Disposal, Production and Retail have virtually no impact
Source: www.boots.com
© UnitedLog 2009
Boots’ shampoo footprint
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Source: www.boots.com
© UnitedLog 2009
LCA as a tool for sustainability improvements
Standardised process
– ISO 14040:2006
LCA is not rocket science
– Define your goal and system of
study
– Map
– Analyse
Pareto also applies to LCA
The overall goal is not only a more
sustainable product but also a
better product
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Define
Analyse
Map Interpret
© UnitedLog 2009
An example of environmental declaration – Max
“We are part of the problem
and we also want to be part
of the solution”
Cause 29.000 tonnes of CO2e per
year, where beef accounts for 70%
Examples of initiatives:
– 100 % wind power
– LED for all signs
– Less waiting time in drive thru
– Planting of trees in Africa to CO2
compensate (89.000 trees per year)
© UnitedLog 2009
Other examples of environmental declaration
ECO SCAN EPD KLIMATDEKLARATION
© UnitedLog 2009
Measuring transport-related emissions
Analysis of
transport-
related
emissions
Exampel of tool:
NTM Calc at www.ntm.a.se
Calculate ton km based on:
– Weight of goods
– Flow structure of goods in the
scenario
Calculate emissions/ton km based on:
– Mode of transport
– Type of vehicle
– Type of engine
– Type of fuel/power source
– Fill rate
– Fuel consumption
© UnitedLog 2009
CO2 emissions from various transport modes
CO2 emissions (kg) from different transport modes based on the
assumption that one tonne of goods is transported 500 kilometres
(i.e. transport work = 500 tonnes kilometres).*
Some references:
– A round trip Arlanda-Heathrow = 347 kg CO2.**
– IPCC goal = 1 tonne of CO2 per capita.
Road
(40 ton)
Air
(Airbus
300-B4)
Rail
(T44 diesel)
Rail
(green
elect.)
Sea
(>8,000 dwt)
Exkl. fuel LC 22 720 8,3 0,0015 7,6
Inkl. fuel LC 23 770 8,7 0,034 7,7
*Values from www.ntm.a.se as of November 2009 and use default values for each mode of
transport.
**Värden from www.sas.se as of November 2009 and use default values from SAS.
© UnitedLog 2009
Key issues in achieving sustainable supply chains
If you don’t measure it, you can’t manage it
A holistic view is paramount in order to avoid sub-optimisation
Long-term profitability is achieved through an understanding of the
interplay and dynamics between traditional supply chain efficiency
(cost and service) and CO2 emissions
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© UnitedLog 2009
Examples of SCM/logistics activities that affect the sustainability
of a supply chain
• Choice of forwarder
• Choice of transport
• Material handling
• Warehousing
• Consolidation
• Stock-taking decisions
• Production
• Choice of packaging
and packaging material
• Stock-taking decisions
• Choice of packaging
and packaging material
• Choice of forwarder
• Choice of transport
• Material handling
• Consolidation
• Service level
• Marketing channel
• Spare part handling
• Network for service
• Procurement
• Choice of supplier
• Geographical location
of the supplier
Production DistributionSourcingS
u
p
p
l
i
e
r
s
C
u
s
t
o
m
e
r
s
Input resources, e.g. energy and fuel
Pollutants, e.g. CO2
© UnitedLog 2009
A hierarchical view of actions
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► How should we design our supply
chain/logistics system?
► How can we best utilize
the supply chain/logistics
system?
► How do we get
the goods out?
Strategic
actions
Tactical
actions
Operational
actions
Sco
pe
of
actio
n
Wide
Narrow
© UnitedLog 2009
Last mile deliveries
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Last mile deliveries
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Smartar last mile deliveries
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UPS – results of eliminating left hand turns
Reduction in overall fuel consumption by 11 million liters
Decrease in overall delivery time
Improved driver safety, since trucks no longer need to cut across oncoming
traffic
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© UnitedLog 2009
Examples of measures and their CO2 effect (%)
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Driver training
Speed redction (65 mph 60 mph)
Reduced engine idling
Low friction drive train lubricants
Low friction engine oils
Tare weight reduction
Proper tire inflation
Wide-base tyres
Improved trailed aerodynamics
Improved tractor aerodynamics
0 2 4 6 8
© UnitedLog 2009
A hierarchical view of actions
36
► How should we design our supply
chain/logistics system?
► How can we best utilize
the supply chain/logistics
system?
► How do we get
the goods out?
Strategic
actions
Tactical
actions
Operational
actions
Sco
pe
of
actio
n
Wide
Narrow
© UnitedLog 2009
Centralised distribution – a core concept in SCM
Centralisation of shippers’ distribution systems is recognised as the most
important structural change over the last 15-20 years
When a distribution system is centralised, transport intensity of the system
increases
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© UnitedLog 2009
A practical example – ITT Water & Wastewater
An analysis of the two distribution systems revealed that transport-related
CO2 emissions increased by approximately 40% due to the structural
change. There were to main drivers for this increase:
– The average transport distance increased by approximately 30%
– A shift in primary mode of transport from lorry to ferry for a third of total transport
work
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Source Kohn, C. (2005) Centralisation of distribution systems and its environmental effects, Linköping studies in
technology, Thesis No. 1175.
© UnitedLog 2009
Strategic changes can act as facilitators for tactical and
operational changes
The consolidated flow between a
production unit and a central warehouse
is a main contributor of transport work,
whereby any change in this part of the
system will have a large effect on the
system as a whole
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Decentralised system Centralised system
(actual)
Centralised system
(potential)
100 140 80
Source: Kohn, C. (2005) Centralisation of distribution systems and its environmental effects, Linköping studies in
technology, Thesis No. 1175.
© UnitedLog 2009
Key issues in achieving sustainable supply chains
If you don’t measure it, you can’t manage it
A holistic view is paramount in order to avoid sub-optimisation
Long-term profitability is achieved through an understanding of
the interplay and dynamics between traditional supply chain
efficiency (cost and service) and CO2 emissions
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© UnitedLog 2009
Sustainable supply chains – The challenge
The challenge for logistics managers is to determine how to incorporate
environmental management principles into their daily decision-making
process. Paramount to accomplishing this is understanding the trade-offs
between environmental impact and optimal supply chain efficiency.
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Climate change
Land use
Noise
Growth
Competitiveness
Productivity
Health
Equality
Accessability
© UnitedLog 2009
Production
Transport
Inventory
More advanced
technology
Greener energy
alternatives
Less labor intensive
Sourcing from Europe Sourcing from China
Less advanced technology
More carbon intensive
energy sources
More labor intensive
Shorter transport
distance
Heavy reliance on
unimodal road transport
Longer transport distance
Sea freight is more CO2
efficient, but we need to
consider other emissions
Airfreight is extremely carbon
intensive
Less inventory needed
to cover transport lead-
time
Smaller risk
More inventory needed
to cover transport lead-
time
Larger risk
Examples of trade-off considerations
© UnitedLog 2009
ITT Water & Wastewater revisited
Transport-related CO2 emissions increased by approximately 40%
By centralising the distribution system for the western European market, the
company was able to reduce logistics costs by 25-30% and improve
customer service dramatically
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Source: Kohn, C. (2005) Centralisation of distribution systems and its environmental effects, Linköping studies in
technology, Thesis No. 1175.
© UnitedLog 2009
A shipper that seeks to centralise its distribution system in
a CO2 efficient manner, should aim to…
…identify the number of nodes that minimises the overall increase in
transport work.
…identify those parts of the distribution system where it is possible to shift
to a slower mode of transport, given customer demands on short and
reliable lead-times.
…employ intermodal rail-truck transport or improve the fill rate for laden
trips (unimodal truck transport) for the consolidated flow.
…ensure that centralisation has the desired effect on emergency deliveries.
…impose stricter environmental demands on transport providers.
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© UnitedLog 2009
Customer value is created through integration of customer
demand and Supply Chain efficiency
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© UnitedLog 2009
To summarise
Establish an understanding of what
implications sustainability has for
your company and your supply
chain, i.e. identify the issues that are of
greatest importance for you.
Measure, measure, measure – you will
not be able to achieve a change until
you know how you perform at present
state.
Form an understanding concerning how
traditional supply chain efficiency
(i.e. cost and service issues) is linked
to sustainability issues and how
different decisions throughout the
supply chain affect one another.
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