The document discusses sustainable supply chains from theory to practice. It introduces UnitedLog and defines sustainability in terms of balancing social, environmental and economic needs. Key drivers for more sustainable supply chains include increasing regulations and fuel prices. The document outlines measuring emissions, tools for sustainability improvements, and examples of sustainable initiatives from companies. It emphasizes the need for a holistic view to balance traditional efficiency and emissions reductions for long term profitability.

1. Sustainable Supply Chains
– from theory to practice
Christofer Kohn
christofer.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 emissions
Source: 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-Trade
Source: 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 impact
Source: www.boots.com
© UnitedLog 2009 21

22. Boots’ shampoo footprint
Source: 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 declaration
ECO 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 of
transport.
**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 sustainability
of a supply chain
Input resources, e.g. energy and fuel
S Sourcing Production Distribution C
u u
p s
• Procurement • Stock-taking decisions • Service level
p • Choice of supplier • Production • Marketing channel t
l • Geographical location • Choice of packaging • Spare part handling o
of the supplier and packaging material • Network for service
i m
• Stock-taking decisions
e • Choice of forwarder • Choice of packaging e
• Choice of transport and packaging material
r • Material handling
r
• Choice of forwarder
s • 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
work
Source Kohn, C. (2005) Centralisation of distribution systems and its environmental effects, Linköping studies in
technology, 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 in
technology, 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 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.
© UnitedLog 2009 44

45. Customer value is created through integration of customer
demand 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