Managing Sustainable Logistics
Logistics is the implication which is widely used to illustrate the transport, storage and handling of products when they move from raw materials via the production system to the final point of sale or consumption. However, due to the public and governmental concerns about the environment, companies must overcome those pressures by reducing the environmental impacts during the logistics operations (McKinnon 2010).
The example of company which would be suitable for the sustainable logistics discussion is the logistics service provider named as DB Schenker. There are various reasons of why this company is chosen for the discussion.
The first reason is how DB Schenker deals with the environment. In other words, what methods the company applies to avoid the environmental risks. The second reason is what DB Schenker does to manage its inventory, and what replenishment goals it has. The third reason is what the company does to satisfy its customer needs and wants. The final reason is that what DB Schenker does or what the company is going to do about its economic sustainability.
Logistics systems commonly imply as a source of enhanced emissions as they mainly focus on delivery, logistics cost and tied-up capital. However, there is the innovative way for logistics management called as sustainability. The sustainable logistics include economic, social and environmental aspects that organisations should consider to avoid the governmental and public concerns, for instance (Bjorklund and Forslund 2013). Therefore, green logistics can consider the environmental and social issues within and outside of an organisation.
The green logistics is related to logistics systems plan, control and implementation via consideration of environment and technology, aiming to the pollutant emissions reduction (Jumadi and Zailani 2010). There are some criterions that might affect the green logistics: transport, storage, packing, inventory management, etc. Murphy and Poist (2001; 2003) created a multinational survey to observe the potential relationship between company features and the strategies for managing the environmental concerns (Lin 2011). These researchers have assumed twelve environmental strategies that could make businesses be green: recycling materials, consumption reduction, reusing of materials, education and training enhancement for company personnel, logistics systems redesign, industry’s corporate efforts promotion, environmental issues management by using outside or third parties, suppliers rejection who lack environmental concerns, government regulations encouragement, creating environmental audits and advertise environmental efforts. However, Lin (2011) suggests that most companies apply in the practice only three strategies out of twelve to be environmentally friendly which are recycling materials, reducing consumption and reusing materials.
According to DB Schenker (2016), the company’s success relies on the harmonious balance between economic success, social responsibility and environmental protection. In other words, the company has its own strategy regarding of being as eco-pioneer which it wants to realise fully by 2020. DB Schenker (2016) suggests that by applying the green product portfolio and expertise in eco-consulting the company gains the competitive advantage for itself and for customers. Furthermore, the company is intending to minimise the pollutant emissions such as carbon dioxide. Finally, apart from the carbon emission, DB Schenker is planning to reduce the level of noise which might impact to society’s acceptance increase of the company’s future growth (DB Schenker 2016).
Despite the environmental aspect, there is also economic one that influence organisations. It includes the inventory management, transportation, agility, lean, etc. Sustainable logistics correlates to the innovation. According to Dey et al. (2011), it gives to companies the priority to get the intangible assets such as reputation, image and customer loyalty. However, it is not only about the costs or profits, it is also about the ways companies could use to become sustainable such as training employees. For example, Nike damaged its reputation by exploiting the sweatshop workers, and when the consumers found out about it, they started boycotting the company (Dey et al. 2011). Nike wanted to be agile in production and distribution of its products, but it was not related to the sustainable logistics as the company was unethical to its employees. Therefore, the consequence was that Nike’s brand value dropped by $400 million, and continued sliding down. The next thing is about the transportation of goods. Apart from the carbon emission, there is another concern for companies which is the price of fossil fuel. According to Dey et al. (2011), in 2008 the price of oil per barrel was $147.30, and logistics companies had to find other ways of supplying their goods. Hence, Xerox implemented lean Six Sigma initiatives and replaced large vehicles with smaller which even were fuel efficient and without sacrificing the cargo space.
DB Schenker (2016) suggests that growth and profitability are fundamental for long-term success. With healthy financial foundation and good economic performance, the company is ready to invest in new jobs, employees’ expertise and new businesses, which might give the opportunity to grow. Furthermore, as DB Schenker (2016) suggests, these investments might make further expansion of the company’s market position as the global logistics and supplier organisation. Apart from the profitability and growth, the organisation concentrates on improving the service quality, especially the international transportation network. It has the capability to find the smart ways of combining the methods of transportation in terms of speed, capacity and environmental aspects which gives to the company the competitive advantage. According to DB Schenker (2016), the most developed freight transportation mode the company has is the rail which is already the leading transport in whole Europe. Furthermore, the internationally oriented range of products and services in global and contract logistics enables the company offer to its customers all transportation and logistics solution worldwide from a single source (DB Schenker 2016).
The final aspect that affects the sustainable logistics is social. ‘When a new company provides a new service it needs new organisational structures, personal capabilities or team skills’ (Isaksson and Huge-Brodin 2013). Furthermore, in order to develop and offer innovative services, there is the necessity to let employees perform their new jobs properly. The benefits of sustainability initiatives within the logistics service providers are related to strong managerial attention, which might provide the motivation to employees for environmental practices adoption (Isaksson and Huge-Brodin 2013). Furthermore, the sustainability is positively correlated to the organisational encouragement, the quality of human resources and the green-related knowledge expansion.
DB Schenker is intending to be the top employer not only in Germany, but also in other countries by 2020. The company has already been the top employer in many countries such as Poland, and tries its best to save that state (DB Schenker 2016). Furthermore, the organisation is intending to participate actively in different communities and support social projects by demonstrating the responsible attitude to its obligations. DB Schenker (2016) suggests that employees within the company are the most important asset. The reason is that in DB Schenker there are employees working for this company for many years because the organisation within the recruitment policy focuses on three factors: the customer-oriented approach, the permanent professional growth and the strong corporate culture. Furthermore, in order to set the clear satisfaction goals and regularly evaluate itself, DB Schenker uses worldwide employee surveys (DB Schenker 2016). In addition to successful human resources management, DB Schenker (2016) suggests that a strong corporate culture is also a key prerequisite for motivating and qualifying employees to keep them satisfied over the long term. However, the challenges the company experiences is the difficulty on the various cultures integration and creation of a common identity.
The aim of an effective inventory replenishment system is to support a balance between cost of holding stock and customer service requirements (Rushton et al. 2017: 245). However, there are various challenges of inventory management. The first challenge is regarded to the just-in-time responsibilities because for many firms it is hard to regulate the stock levels and pressures by retailers, for example (Rushton et al. 2017: 245). The second challenge is the customer expectations. The customers regularly demand for the fast and cheap delivery, thus suppliers have to keep higher stocks to avoid the losses. The third challenge is related to the packing as some firms do not reduce the packing waste. The final challenge is related to the warehousing. Some storages emit the carbon dioxide during storing non-environmentally friendly products.
According to Jumadi and Zailani (2010), there are some criterions that could maintain the green logistics regarding to the sustainable inventory management. The first criterion is the green storage. It refers to the mechanised operation in the process of good-storing in order to cut the manpower costs. In addition, the adoption to environmentally friendly products to sterilise the storage goods and the warehousing “hostile” effect reduction to protect the environment. The second criterion is the green packaging. It is related to a commodity package which can be recycled or regenerated to reduce the costs and avoid the environment pollution. Furthermore, the green packaging occupies little land (Jumadi and Zailani 2010). The final criterion is the reverse logistics. It is opposite to the traditional supply chain, which means the recovery or reasonable disposal of the value by planning, controlling and managing of raw materials, middle stock, final products and relative information from consumer to start point (Jumadi and Zailani 2010).
According to Weiler (2012), DB Schenker offers a direct integration between the client’s procurement system and MyMPS (DB Schenker’s online inventory management). The MyMPS is the innovation by which the logistics service provider and customer can communicate. Furthermore, the client can check the updates by receiving the messages after he made the purchase order to a vendor, hence MyMPS helps DB Schenker to implement the agile logistics to let the customer make faster and more precise overview as well as let DB Schenker save time (Weiler 2012). Therefore, this type of integration affects positively the triple bottom line: environmental, social and economic aspects.
The natural environment worsening causes risks and chances for businesses. Some firms react on that by creating and implementing the appropriate strategies. However, the information systems’ role regarding to the sustainable logistics is that it might perform as the source of sharing the knowledge about the environment, customers and organisations (Melville 2010). For example, UPS uses the route planning software and an internet matching system in logistics service process to reduce carbon emission as well as cut the fuel consumption (Jumadi and Zailani 2010).
DB Schenker operates in 130 countries and manages the logistics activity. Proximity has collaborated with the company to design and develop the information system called as eService which could let it communicate internally (employees) and externally (customers) (Proximity n.d). Therefore, the organisation can monitor the performance activities remotely, such as emissions monitoring and management to minimise DB Schenker’s impact on to the environment; ability for customers to follow the updates about the entire transport chain from start and the electronic proof of delivery to final.
For all types of businesses, the environmental sustainability is one of the raising concerns. Within the area of logistics, the main environmental consequence is caused by transport (Evangelista et al. 2013). In addition, the warehousing is also the source of both direct (energy consumption) and indirect (the land usage) environmental affection. Furthermore, companies are pressured by consumers’ demand and government regulations. Therefore, environmental issues have a consequence on several logistics operations as well as supply chains, for example, location, modal selection, transportation planning, etc. (Evangelista et al. 2013).
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