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Sustainable supply chains -  from theory to practice
Sustainable supply chains -  from theory to practice
Sustainable supply chains -  from theory to practice
Sustainable supply chains -  from theory to practice
Sustainable supply chains -  from theory to practice
Sustainable supply chains -  from theory to practice
Sustainable supply chains -  from theory to practice
Sustainable supply chains -  from theory to practice
Sustainable supply chains -  from theory to practice
Sustainable supply chains -  from theory to practice
Sustainable supply chains -  from theory to practice
Sustainable supply chains -  from theory to practice
Sustainable supply chains -  from theory to practice
Sustainable supply chains -  from theory to practice
Sustainable supply chains -  from theory to practice
Sustainable supply chains -  from theory to practice
Sustainable supply chains -  from theory to practice
Sustainable supply chains -  from theory to practice
Sustainable supply chains -  from theory to practice
Sustainable supply chains -  from theory to practice
Sustainable supply chains -  from theory to practice
Sustainable supply chains -  from theory to practice
Sustainable supply chains -  from theory to practice
Sustainable supply chains -  from theory to practice
Sustainable supply chains -  from theory to practice
Sustainable supply chains -  from theory to practice
Sustainable supply chains -  from theory to practice
Sustainable supply chains -  from theory to practice
Sustainable supply chains -  from theory to practice
Sustainable supply chains -  from theory to practice
Sustainable supply chains -  from theory to practice
Sustainable supply chains -  from theory to practice
Sustainable supply chains -  from theory to practice
Sustainable supply chains -  from theory to practice
Sustainable supply chains -  from theory to practice
Sustainable supply chains -  from theory to practice
Sustainable supply chains -  from theory to practice
Sustainable supply chains -  from theory to practice
Sustainable supply chains -  from theory to practice
Sustainable supply chains -  from theory to practice
Sustainable supply chains -  from theory to practice
Sustainable supply chains -  from theory to practice
Sustainable supply chains -  from theory to practice
Sustainable supply chains -  from theory to practice
Sustainable supply chains -  from theory to practice
Sustainable supply chains -  from theory to practice
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Sustainable supply chains - from theory to practice

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  • 1. Sustainable Supply Chains – from theory to practiceChristofer Kohnchristofer.kohn@unitedlog.com+46-(0)70-7686121 1
  • 2. 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
  • 3. INTRODUCTION© UnitedLog 2009 3
  • 4. 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
  • 5. 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
  • 6. Supply Chain Management & Finance Consulting Customer Supply Chain Supply Chain Services Software© UnitedLog 2009
  • 7. Consulting Offering SCM Strategy Development Process Change Finance Development Management Supply Chain Sourcing and Finance Production Consulting Range and Working Assortment Distribution Capital Planning Management Flow Structure and Network Design© UnitedLog 2009
  • 8. 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
  • 9. Supply Chain Services Inbound and Outbound Transport Management 3PL Contracting Outsourcing Invoice Control CUSTOMER Services Customs Brokerage Logistics Trading© UnitedLog 2009
  • 10. SUSTAINABLE SUPPLY CHAINS – FROM THEORY TO PRACTICE© UnitedLog 2009 10
  • 11. What is sustainability? Social ”…development that meets the needs of the present without compromising the ability of future generations to meet their Sustainable own needs.” development - Brundtland commission (World Commission on Environment and Development) Environment Economy© UnitedLog 2009 11
  • 12. Sustainability and SCM/logistics management “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 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.© UnitedLog 2009
  • 13. 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 100% 90% 19% 80% 70% 16% 60% 50% 26% 40% 30% 20% 39% 10% 0% Energy Transport Industry Households Total CO2 sector sector sector emissionsSource: EU Commission © UnitedLog 2009 13
  • 14. 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 France Great Britain 60% 75% 100% 100% 40% 25% 1990 Reduction Target 1990 Reduction Target 2050 2050© UnitedLog 2009 14
  • 15. 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© UnitedLog 2009 15
  • 16. Drivers for greening the supply chain (cont.) ”Who should take the biggest role in minimizing the carbon 45% footprint of the products and 40% service you buy?” 35% 30% 25% 20% 15% 10% 5% 0%Source: LEK Consulting © UnitedLog 2009 16
  • 17. 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 -4.8% China -1.6% -2.8% EE, Russia and C.I.S. ...on the other hand, the -3.0% baseline is an expected growth of the global -2.1% U.S. economy to about 2.3 times -1.9% between 2007 and 2040! -2.0% Western Europe -2.0% -2.6% World -2.6% Carbon Tax System Cap-and-TradeSource: IMF © UnitedLog 2009 17
  • 18. KEY ISSUES AND PRACTICAL EXAMPLES© UnitedLog 2009 18
  • 19. 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© UnitedLog 2009 19
  • 20. 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© UnitedLog 2009 20
  • 21. Boots’ shampoo footprint 5% 2% Consumer use Material Distribution 93% Concept, Disposal, Production and Retail have virtually no impactSource: www.boots.com © UnitedLog 2009 21
  • 22. Boots’ shampoo footprintSource: www.boots.com © UnitedLog 2009 22
  • 23. LCA as a tool for sustainability improvements Standardised process – ISO 14040:2006 Define LCA is not rocket science – Define your goal and system of study – Map – Analyse Map Interpret Pareto also applies to LCA The overall goal is not only a more sustainable product but also a Analyse better product© UnitedLog 2009 23
  • 24. 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
  • 25. Other examples of environmental declarationECO SCAN EPD KLIMATDEKLARATION© UnitedLog 2009
  • 26. Measuring transport-related emissions Calculate ton km based on: – Weight of goods – Flow structure of goods in the Exampel of tool: scenario NTM Calc at www.ntm.a.se Analysis of transport- related emissions 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
  • 27. 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).* Air Rail Road Rail Sea (Airbus (green (40 ton) (T44 diesel) (>8,000 dwt) 300-B4) elect.) Exkl. fuel LC 22 720 8,3 0,0015 7,6 Inkl. fuel LC 23 770 8,7 0,034 7,7 Some references: – A round trip Arlanda-Heathrow = 347 kg CO2.** – IPCC goal = 1 tonne of CO2 per capita.*Values from www.ntm.a.se as of November 2009 and use default values for each mode oftransport.**Värden from www.sas.se as of November 2009 and use default values from SAS. © UnitedLog 2009
  • 28. 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© UnitedLog 2009 28
  • 29. Examples of SCM/logistics activities that affect the sustainabilityof a supply chain Input resources, e.g. energy and fuelS Sourcing Production Distribution Cu up s • Procurement • Stock-taking decisions • Service levelp • Choice of supplier • Production • Marketing channel tl • Geographical location • Choice of packaging • Spare part handling o of the supplier and packaging material • Network for servicei m • Stock-taking decisionse • Choice of forwarder • Choice of packaging e • Choice of transport and packaging materialr • Material handling r • Choice of forwarders • Warehousing • Choice of transport s • Consolidation • Material handling • Consolidation Pollutants, e.g. CO2© UnitedLog 2009
  • 30. A hierarchical view of actions Wide ► How should we design our supply Strategic chain/logistics system? actions Scope of action Tactical ► How can we best utilize actions the supply chain/logistics system? Operational ► How do we get actions the goods out? Narrow© UnitedLog 2009 30
  • 31. Last mile deliveries© UnitedLog 2009
  • 32. Last mile deliveries© UnitedLog 2009
  • 33. Smartar last mile deliveries© UnitedLog 2009
  • 34. 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© UnitedLog 2009 34
  • 35. Examples of measures and their CO2 effect (%) 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 35
  • 36. A hierarchical view of actions Wide ► How should we design our supply Strategic chain/logistics system? actions Scope of action Tactical ► How can we best utilize actions the supply chain/logistics system? Operational ► How do we get actions the goods out? Narrow© UnitedLog 2009 36
  • 37. 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© UnitedLog 2009 37
  • 38. 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 workSource Kohn, C. (2005) Centralisation of distribution systems and its environmental effects, Linköping studies intechnology, Thesis No. 1175.© UnitedLog 2009 38
  • 39. 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 100 140 80 Decentralised system Centralised system Centralised system (actual) (potential)Source: Kohn, C. (2005) Centralisation of distribution systems and its environmental effects, Linköping studies intechnology, Thesis No. 1175. © UnitedLog 2009 39
  • 40. 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© UnitedLog 2009 40
  • 41. 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. Health Equality Accessability Climate change Growth Land use Competitiveness Noise Productivity© UnitedLog 2009 41
  • 42. Examples of trade-off considerations Sourcing from Europe Sourcing from China Production More advanced Less advanced technology technology More carbon intensive Greener energy energy sources alternatives More labor intensive Less labor intensive Transport Shorter transport Longer transport distance distance Sea freight is more CO2 Heavy reliance on efficient, but we need to unimodal road transport consider other emissions Airfreight is extremely carbon intensive Inventory Less inventory needed More inventory needed to cover transport lead- to cover transport lead- time time Smaller risk Larger risk© UnitedLog 2009
  • 43. 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 Source: Kohn, C. (2005) Centralisation of distribution systems and its environmental effects, Linköping studies in technology, Thesis No. 1175.© UnitedLog 2009 43
  • 44. A shipper that seeks to centralise its distribution system ina 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.© UnitedLog 2009 44
  • 45. Customer value is created through integration of customerdemand and Supply Chain efficiency© UnitedLog 2009 45
  • 46. 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.© UnitedLog 2009 46

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